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CLSA Wire

2019 State Legislative Year in Review

By Brett Johnson
Oct. 28, 2019

While the 2018 legislative year marked arguably the most successful year ever for CLSA in Sacramento and provided a number of major policy issues on which to focus our energy, the 2019 legislative year was “death by a thousand cuts,” requiring CLSA to spread its attention broadly across a host of issues outside of our traditional areas of focus. Last year, CLSA’s Sacramento team tracked over 100 pieces of legislation and was actively involved in direct lobbying or coalition work on roughly 40 pieces of legislation. This year, the Sacramento team tracked roughly 180 pieces of legislation and engaged in lobbying or coalition work on 60 pieces of legislation, which includes budget proposals. A bulk of the increase was legislation related to privacy and data security in the wake of last year’s California Consumer Privacy Act of 2018 and reintroduced legislative proposals that had been unsuccessful during Governor Jerry Brown’s tenure. The increased volume of legislation coupled with a Democratic supermajority and more progressive governor likely contributed to a decrease in our percentage of desired outcomes achieved on legislative proposals in 2019, which was two-thirds – compared to last year’s three-quarters.

Some of the major issue areas in 2019 were anticipated (e.g., privacy and data security) and others were not (e.g., animal research). Below is a summary of the major issues in which CLSA was involved in 2019 – attached is a breakdown of each bill on which CLSA took a position this year:

FEWER PROPOSALS DIRECTLY TARGETED INDUSTRY THAN IN RECENT YEARS

Assemblymember Jim Wood’s AB 824, which was backed by Attorney General Xavier Becerra and signed into law by Governor Newsom, was this year’s only major piece of legislation taking direct aim at the biopharmaceutical industry, specifically targeting so-called “pay-for-delay” patent settlement agreements between brand and generic drug makers. Though the bill received very few “No” votes throughout the process, a number of key amendments were obtained to make the bill less onerous on life sciences companies still interested in pursuing similar agreements.

From the bill’s introduction, it created a division among CLSA’s State Legislative Committee members – with several members promoting contrasting sets of amendments or communicating that it was not a significant issue for them, as the use of such agreements had subsided. As a result, CLSA’s advocacy on the bill was largely informal, though CLSA submitted letters of concern as the bill reached the second house and requested a veto from Governor Newsom.

We anticipate an uptick in legislation directly targeting our industry next year, as federal price control proposals and perceived shortcomings in California’s current medication price reporting system gain attention. The Legislature will also likely seek a role in the implementation of Governor Newsom’s January executive order on prescription purchasing by the State, which may involve proposals that go beyond the scope of State purchasing.

PRIVACY AND DATA SECURITY CONTINUE TO BE A WORK IN PROGRESS

 The enactment of the California Consumer Privacy Act of 2018 (AB 375) (CCPA) brought sweeping restrictions on the collection and use of consumer information. A clean-up bill that same year, SB 1121 (Dodd), added key exceptions to the CCPA to help protect clinical trials and other biomedical research from unintended consequences, including exceptions for:

  • Medical information governed by the Confidentiality of Medical Information Act (CMIA) or protected health information collected by a covered entity or business associate under the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA);
  • A healthcare provider governed by the CMIA or a covered entity under HIPAA to the extent the provider or covered entity maintains patient information in the same manner as medical information or protected health information; and
  • Information collected as part of a clinical trial subject to the Federal Policy for the Protection of Human Subjects (i.e., the Common Rule), pursuant to good clinical practice guidelines issued by the International Council for Harmonisation or pursuant to the FDA’s human subject protection requirements.

Concerns, however, have remained among several member companies and partner trade associations that key areas of vulnerability may remain for life sciences companies. First, the extent to which the de-identification standards commonly used in biomedical research (e.g., the HIPAA standard) satisfy the de-identification standard of the CCPA remains unclear and could lead to substantial issues for California’s life sciences industry if there is not alignment. Second, the CCPA currently appears to only exempt a business associate of a covered entity under HIPAA where the business associate is the collector of the data. Given the intricacies of many business associate relationships in the life sciences industry, providing a broader exemption for business associate use, maintenance, and disclosure is important to protecting key research relationships. Third, broadening the categories of biomedical research information beyond those currently exempted (e.g., collected under HIPAA or the Common Rule) would help to avoid potential risks to research conducted in California. Such exempted information should include real-world data (RWD) and real-world evidence (RWE), as well as product registration and tracking information collected for federally required compliance purposes.

Though CLSA began coordinating early in the year with several member companies and our partners at AdvaMed and the International Pharmaceutical & Medical Device Privacy Consortium on a legislative fix to these issues, a number of major CCPA reform efforts occupied the attention of key stakeholders on the issue and made getting additional reform efforts off the ground exceptionally challenging. That being said, a push near the end of the legislative year to obtain some of the aforementioned amendments garnered acceptance from key players before running out of time to complete the necessary steps for legislative action this year. While we remain optimistic, another potential ballot initiative on the issue may complicate matters.

Various versions of an initiative, entitled the California Privacy Rights and Enforcement Act of 2020 (CPREA) and colloquially known as the “Privacy 2.0 Initiative”, have been circulated by Alastair Mactaggart to stakeholders for feedback. CLSA has coordinated with our partner stakeholders to provide input on the initiative language and anticipates a great deal of debate and discussion on the initiative as we approach November 2020. Mactaggart has repeatedly stated that he does not intend to withdraw this initiative based on legislative action, as he did with last year’s initiative that gave rise to the CCPA. He has shared polling of California voters indicating CPREA enjoys 88% favorability to emphasize this point.

Beyond CCPA-related legislation, CLSA helped lead the way in defeating Assemblymember Ed Chau’s successor to last year’s AB 2167 (Chau), which would have required unspecified data security features for digital health feedback systems (e.g., digital pills) and would have created an innovation-chilling source of liability for companies in this space. The bill, AB 384 (Chau), began as exactly the same bill as its predecessor but evolved into a clarifying bill, covering the definition of “personal health record information” and the businesses providing personal health record software or hardware that are subject to California’s Confidentiality of Medical Information Act (CMIA). Through extensive legislator and legislative staff education, which included a tour of a member company facility, and aggressive advocacy, the bill was confined to the Senate Appropriations Committee Suspense File.

FIGHTING FOR BUDGET ITEMS AND PROGRAMS IMPORTANT TO INDUSTRY

CLSA actively supported and helped obtain inclusion of the following budget items in AB 74, the Budget Act of 2019 – these items are also covered in more detail in the attached list:

  • The extension of expenditure authority for the California Initiative to Advance Precision Medicine and the defeat of an effort to restrict that expenditure authority by obtaining one of Governor Newsom’s four line-item vetoes;
  • The authorization of medical school expansion projects for UC-Riverside and UC-Merced, including debt service payments to finance the projects;
  • $15 million to establish the Asthma Mitigation Project, which provides grants to local health departments and providers to offer environmental mitigation, education, and disease-management services to individuals with moderate to severe asthma in higher risk areas of the state;
  • $3 million in ongoing funds to establish and maintain Governor Newsom’s proposed Alzheimer’s Prevention and Preparedness Task Force, which will be chaired by Maria Shriver;
  • $5 million in ongoing funds to provide grants to community-based organizations or local health jurisdictions to provide comprehensive HIV and Hepatitis C prevention and control activities for the most vulnerable and underserved individuals living with, or at high risk for, HIV and Hepatitis C infection; and
  • $15 million in one-time funding to aid the Center for Inherited Blood Disorders in establishing a network of sickle cell disease centers in Alameda, Fresno, Kern, Los Angeles, Sacramento, San Bernardino and San Diego.
  • $5 million in one-time funds to facilitate California’s participation in the U.S. Centers for Disease Control’s Healthy Brain Initiative, enhancing California’s Alzheimer’s disease infrastructure.
  • $40 million in one-time funds to be spent over 4 years to provide grants to local health jurisdictions and tribal communities for the prevention and control of infectious diseases.

FIGHTING FOR AND AGAINST PROPOSALS RELATED TO ANIMALS

One of the biggest surprises of this legislative year was the number of animal-related bills introduced that had a potential impact on the life sciences industry. CLSA defeated several such bills that were introduced or supported by animal rights activists:

  • AB 889 (Maienschein), which would have required persons who keep or use animals for research to submit information to the State for publication annually, including the number of animals kept during the previous year in various pain and distress categories and the purposes for which animals were used;
  • AB 1586 (Kalra), which would have prohibited a pupil in any California private or public school in kindergarten through grade 12, from performing animal dissections; and
  • AB 1788 (Bloom), which would have expanded second-generation anticoagulant rodenticides prohibitions from use in wildlife habitat areas to the entire state, eliminating more than half of the rodenticides available for California’s life sciences facilities to prevent or eliminate dangerous rodent infestations.

Unfortunately, efforts to delay the effective date of impending California prohibitions on the commercial importation of crocodiles or alligators, including any part or product thereof, were also unsuccessful. Such prohibitions would adversely affect member companies that conduct research on and develop medicines for crocodiles and alligators, as well as companies that must use crocodile or alligator biological products (e.g., blood) to calibrate diagnostic devices. The bills, AB 527 (Voepel) and AB 719 (Rubio), were met with staunch opposition from animal rights groups and both failed to progress beyond the Assembly Appropriations Committee.

SURPRISE VETOES AND A SURPRISE SIGNING PROVIDE INSIGHT ON NEWSOM

When the dust settled on Governor Newsom’s first legislative year, he had vetoed a slightly higher proportion of bills than his predecessor – 16.5% versus Governor Jerry Brown’s 13.5%. While many of the bill signings were anticipated, several CLSA- supported bills were among those to suffer surprising vetoes. A CLSA-opposed bill on the California Chamber of Commerce’s “Job Killer List” was also among the surprise signings of the year.

First, the most significant and surprising veto for CLSA and our partner patient and provider groups was that of Assemblymember Adam Gray’s AB 848, which passed through the Legislature unanimously and would have substantially strengthened Medi-Cal coverage requirements for continuous glucose monitors (CGMs). CLSA has remained a strong supporter of this proposal throughout the years it has been introduced. In 2017, Governor Brown vetoed the bill (AB 447) after it was passed unanimously through the Legislature, stating that it was unnecessary because statutory authority already existed for such Medi-Cal coverage to be expanded administratively. Last year, Medi-Cal CGM coverage was pursued via a budget proposal and was ultimately eliminated as part of a Conference Committee compromise. This year, after again reaching the governor’s desk without a no vote, it was vetoed with the veto message stating that it should be pursued through the annual budget process.

Second, Assemblymember Adrin Nazarian’s AB 993, which also passed out of the Legislature unanimously, would have required insurers and health plans in California to allow patients to designate an HIV specialist as his or her primary care provider. CLSA supported the bill as a means to reduce burdens on vulnerable patients and the healthcare system by eliminating unnecessary specialist referrals. Governor Newsom vetoed the bill stating, “This bill is unnecessary because existing law already permits specialist physicians to serve as primary care physicians.” Governor Brown vetoed a similar bill, AB 1534 (Nazarian), in 2018 with a similar veto message. The AIDS Healthcare Foundation, however, maintained that insurers and health plans do not always recognize HIV specialists as primary care physicians, resulting in circumstances when an HIV specialist cannot order tests, make referrals to other specialists, or a number of other services provided by a primary care physician.

Third, Assemblymember Jay Obernolte’s AB 28, which is the third of these bills to not receive a no vote, would have established the State Seal of STEM to be affixed to high school diplomas of qualified students, recognizing students who have attained a high level of proficiency in the subjects of science, technology, engineering, and mathematics (STEM). CLSA has long supported efforts to increase students’ interest in STEM fields and careers and asserted a diploma seal was a cost-effective means to do so – with ongoing estimated costs of $150,000. In vetoing the bill, Governor Newsom stated that existing diploma seal programs already cover math and science and raised equity concerns on account of “many students lack[ing] access to high-quality STEM coursework and . . . a shortage of qualified instructors.”

Fourth, Senator Hannah-Beth Jackson’s SB 468 would have established the California Tax Expenditure Review Board as an independent advisory body to annually comprehensively assess major tax expenditures, which includes tax credits for California companies, and to make recommendations to the Legislature, which could include, for instance, eliminating or reducing a tax credit. These recommendations would be based upon a comprehensive assessment conducted by the University of California of the major tax expenditures and presented at a public hearing of the board. Governor Newsom vetoed the bill as unnecessary, stating, “The Department of Finance is currently required to publish tax expenditure reports and existing law requires new income tax expenditures to specify goals, performance indicators, and data collection requirements.”

Finally, the most surprising signing of any CLSA-opposed bill was that of AB 51 (Gonzalez), which was the only bill on the California Chamber of Commerce’s “Job Killer List” to be signed into law.  It will prohibit an employer from requiring any applicant for employment or any employee to waive any right, forum, or procedure for a violation of any provision of the California Fair Employment and Housing Act (FEHA) or other specific statutes governing employment as a condition of employment, continued employment, or the receipt of any employment-related benefit. The stated target of this bill was mandatory arbitration clauses, particularly in cases related to sexual harassment and similar offenses. The impact of the bill, however, ended up being much broader. This same bill was vetoed by Governor Brown, stating: “[T]his bill plainly violates federal law.” Furthermore, similar laws in other states, including one California law, have been struck down by federal courts. CLSA remains optimistic that this law will be struck down as well. We assert that, if it goes into effect, it will interfere with the ability to effectively execute severance and retirement agreements in addition to employment contracts.

Questions? Please contact Brett Johnson, Senior Director, Policy & Regulatory Affairs (bjohnson@califesciences.org).