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2013 CHI STATE POLICY AGENDA

Sacramento Overview

The 2013 legislative year looks to be one of the most unpredictable Sacramento has had since term limits began to take effect. The new members joining the legislature this year were elected to possible 12-year terms, from newly drawn districts created by the Citizens Redistricting Commission after competing in an open primary. It is safe to say there are many unknowns about the new class and how they will behave when session starts in January. The Legislature now has a two-thirds majority for a single party, Democrats, for the first time in political memory. Legislators will be focused on remaining relevant with the introduction of 39 new members all of whom will be serving 12-year terms in either the Assembly or the Senate. Many of these new members have self-identified as moderate.

The state will continue to work in earnest to meet the requirements of federal healthcare reform at a time when public healthcare programs are reducing payments to providers and access to care. Given this environment, CHI will focus on the following priorities to promote innovation in the state and CHI’s members’ interests.

State Budget and Tax Issues

The passage of Proposition 30 is a game changer for the budget process this year. The state will receive an infusion of cash allowing the Governor and the Legislature to tackle a significantly smaller deficit ranging from $3.3 to $1.9 billion in June of the 2013-14 budget year and the Legislative Analyst’s Office is currently predicting a continued surplus in future budget cycles if spending remains with current projections.

The Democratic Party now enjoys a super-majority in both houses of the legislature which raises the question of what is on the horizon for tax policy in California. Some members have already expressed a desire to make changes to tax policy in the state both the Vehicle License Fee (VLF) and Prop 13 property tax initiative have been brought up by individual members of the legislature. What was a long held belief that Californians would not allow any changes to Prop 13 has recently been called into question with the passage of this year’s Propositions 30 and 39. The idea of a split roll property tax increase on commercial property has also been gaining support. It is very likely legislation addressing these issues will be seen this cycle. CHI will remain vigilant on issues that may make it more difficult for our members to operate in the state.

In 2013, CHI will:

· Advocate for tax policies that promote biomedical research and biomedical innovation, including protecting the state’s research and development tax credit, and opposing increased taxation and fees on the California biomedical industry.

• Advocate for fiscal policies that promote the expansion of the biomedical industry in California, net-operating loss carryback, and transferability of tax credits among affiliated companies.

• Advocate for state funding for higher education to ensure the state’s colleges and universities can continue to effectively educate the state’s workforce and partner with the industry on research.

Environmental and Business Regulation

California legislators continue to propose and enact some of the most restrictive environmental regulations in the United States. These regulations make it more difficult for California to attract and retain businesses, while at the same time other states are increasing their efforts to attract California-based businesses. In 2012, CHI successfully utilized science-based arguments in opposition to onerous proposals, including legislation and proposed regulations on extended producer responsibility for medical sharps waste, pharmaceuticals in the environment, and mattresses; green chemistry; individual chemical bans; and permissible exposure limits on chemicals in the workplace. We anticipate that legislators will push similar proposals in 2013.

In 2011 the governor and legislative leaders stated their intent to streamline duplicative and unnecessary state regulations. Gov. Brown introduced an executive order that requires state departments and agencies to provide data demonstrating that the work they do is effective and necessary. CHI has introduced legislation to reduce redundant state inspections of California’s drug and medical device manufacturers and was successful in having this legislation enacted into law. CHI will continue to advocate for common sense regulation of our industry.

In 2013, CHI will:

• Reconvene working groups to provide reliable expertise on scientific issues and to credibly educate policymakers on the practical implications of overreaching environmental and other business requirements.

• Provide legislators with a clearer understanding of the existing regulations with which our industry must currently comply and advocate for streamlined state regulations that promote innovation and do not duplicate existing federal or international regulatory requirements.

· Educate legislators and regulators about our industry’s commitment to environmentally sound practices and safe workplaces.

· Continue to be the dominant voice on environmental issues for the biomedical industry with the administration, regulatory agencies, and the Legislature.

Access to Healthcare

The federal Affordable Care Act (ACA) is transforming how Californians obtain and pay for health insurance. After the law is fully implemented in 2014, an estimated 92 percent of Californians will be insured. Recently, California passed legislation to create an insurance exchange, now known as Covered California, which provides coverage options for individuals and small businesses. Along with a powerful coalition of patients and providers, CHI successfully advocated for a benefits package that includes continuity of care and access to life-preserving therapies for the individuals purchasing insurance within the exchange.

At the same time the state builds its exchange to insure millions, California continues to develop policies that reduce the number of Medi-Cal providers available to care for beneficiaries, as well as limit coverage for and access to drugs, devices, and diagnostics. These cuts will negatively impact the state’s planned expansion of Medi-Cal benefits to an additional three million residents.

In 2013, CHI will:

· Oppose efforts, both legislative and regulatory, that will restrict access to care through measures imposing value-based purchasing, improper therapeutic substitution, excessive prior authorizations, denied treatment due to step therapies, or other limitations on care.

· Work with the health care provider community and patients’ rights groups to ensure that Medi-Cal providers are adequately paid in accordance with the Affordable Care Act (ACA), and that there are no additional payment reductions which decrease the number of providers available to care for some of California’s most medically needy patients.

· Work with California’s Department of Health Care Services to guarantee that dual eligible beneficiaries gain access to the highest quality of care as their demonstration projects begin in Alameda, San Mateo, Santa Clara, Los Angeles, Orange, San Diego, Riverside, and San Bernardino.

· Continue to monitor ACA implementation for 2013, which includes:

o Increase Medi-Cal payments (for certain services) for primary care physician services that is no less than 100% of Medicare rates in 2013 and 2014. This increase is fully funded by the federal government.

o Establishing a national pilot program that encourages the health care community to bundle payments, a payment method in which providers are paid a flat rate for an episode of care as opposed to the current process of billing for separate services to Medicare.

o Monitor Covered California (California’s Health Benefit Exchange) as it continues to build the platform for which over 2 million Californians in the individual market and over 3 million individuals eligible for Medi-Cal will enroll for health insurance.

Education and Workforce Development

As California moves forward with federal healthcare reform, it must ensure it has the infrastructure in place to treat patients and develop innovative new treatments for patients. State agencies and departments are undertaking new efforts to expand California’s workforce, assisted by funding made available by the ACA. Decreases in state funding have threatened the state’s community colleges, the UC and CSU upon which our industry relies for an educated, job-and lab-ready workforce. However, the trend by the electorate to support and pass education funding in the form or local bonds and statewide propositions is painting an increasingly optimistic picture.

The state’s basic research institutions partner with commercial biomedical companies to develop therapies and products that treat or cure patients. Company executives cite California’s diverse and well-educated workforce and researchers as a primary reason to do business in the state. Reductions in funding for higher education threaten these institutions and threaten California’s standing as the country’s life sciences hub.

In 2013, CHI will:

• Advocate strongly against further budget cuts to UC, CSU, and California community colleges and work to promote restored funding for higher education.

· Advocate for funding for researchers in state universities that allows them to perform the basic research needed to advance medical science and improve healthcare.

· Advocate against cuts to the Cal-Grant and other student aid programs that enable low-income students to attend and graduate from the state’s universities.

• Advocate for funding for and expansion of training programs needed to develop a workforce able to meet the healthcare system’s and biomedical industry’s needs.

• Educate policymakers about industry’s role in providing well paying jobs to students with math and science degrees.