BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: SB 161
S
AUTHOR: Wright
B
AMENDED: As introduced
HEARING DATE: April 29, 2009
1
REFERRAL: Rules
6
CONSULTANT:
1
Park/cjt
SUBJECT
Health care coverage: chemotherapy treatment
SUMMARY
Requires a health plan contract or health insurance policy
that provides coverage for cancer chemotherapy treatment to
provide coverage for a prescribed, orally administered
cancer medication on a basis no less favorable than
intravenously administered or injected cancer medications.
CHANGES TO EXISTING LAW
Existing law:
Existing law provides for the regulation of health care
service plans (health plans) by the Department of Managed
Health Care (DMHC) and regulation of disability insurers
who sell health insurance (health insurers) by the
California Department of Insurance (CDI).
Existing law requires health care service plan contracts
and health insurance policies to provide coverage for all
generally medically accepted cancer screening tests and
requires those plans and policies to also provide coverage
for the treatment of breast cancer.
Continued---
STAFF ANALYSIS OF SENATE BILL SB 161 (Wright)Page 2
Existing law imposes various requirements on contracts and
policies that cover prescription drug benefits, such as a
requirement to cover "off-label" uses, as specified, and a
requirement to cover previously prescribed drugs, as
specified.
Existing law authorizes DMHC to regulate the provision of
medically necessary prescription drug benefits by a health
care service plan to the extent that the plan provides
coverage for those benefits. Existing regulation requires
health plans providing outpatient prescription drugs to
provide all medically necessary prescription drugs, except
as specified in that regulation.
This bill:
This bill would require a health plan contract or health
insurance policy issued, amended, or renewed on or after
January 1, 2010, that provides coverage for cancer
chemotherapy treatment to provide coverage for a
prescribed, orally administered cancer medication used to
kill or slow the growth of cancerous cells on a basis no
less favorable than intravenously administered or injected
cancer medications covered under the contract or policy.
FISCAL IMPACT
Unknown.
BACKGROUND AND DISCUSSION
Author's statement
According to the author, the emergence of safe, clinically
effective, orally administered anticancer medication has
significantly increased the treatment options for cancer
patients; however, many barriers currently impede the
adoption of orally administered treatment as the main form
of cancer therapy. The author states that one of the most
significant barriers is greater patient out-of-pocket costs
for oral therapies covered under the pharmacy benefit than
intravenous (IV) therapies covered under the medical
benefit. The author states that, where intravenously
administered anticancer medications are typically covered
under a plan's medical benefit, most patients are only
responsible for an office co-payment for each episode of
care and are not required to pay a separate fee for the IV
STAFF ANALYSIS OF SENATE BILL SB 161 (Wright)Page 3
drug. The author posits that, in contrast, orally
administered anticancer medications are typically covered
under a plan's pharmacy benefit, where many of these agents
are placed on a 4th or specialty tier of a prescription
plan's formulary. The author points out that, according to
the Kaiser Family Foundation, the average coinsurance rate
for 4th tier drugs is 28 percent, which, for a $3,000 per
month oral anticancer medication, could expose a patient to
$900 in out-of-pocket spending. The author believes that
this disparity restricts patient access to life-saving oral
cancer therapies.
The author additionally points out that, in 2007, the
Oregon State Senate passed similar legislation (SB 8), and
that, upon enactment of the bill in January 2008, the top
state plans eliminated their high coinsurance rates. Most
established separate oral chemotherapy coverage under their
pharmacy benefit, and patients with no pharmacy benefits
gained access to oral anticancer agents through their
medical benefit. The author further notes that, the Indiana
Legislature passed a similar bill in April, 2008, and this
year several other states have introduced similar oral
chemotherapy parity legislation including: Texas,
Washington, Hawaii, Indiana, and Oklahoma.
California Health Benefits Review Program analysis
Pursuant to provisions of SB 1704 (Kuehl), Chapter 684 of
2006, and AB 1996 (Thomson), Chapter 795 of 2002, which
requests the University of California to assess legislation
proposing or repealing a mandated benefit or service, the
California Health Benefits Review Program (CHBRP) submitted
an analysis of this measure, at the request of this
committee. Highlights from the CHBRP report follow:
Coverage variations
Coverage for anticancer medications can differ in any of a
number of ways, depending on the provision of a person's
contract or policy with a plan or insurer. At a very broad
level, anticancer medications may be covered as pharmacy
plan benefits or as medical plan benefits, and most plans
and insurers depend on the dispensing site to determine
which will be the form of coverage. Intravenous anticancer
medication, which is usually provided in a hospital or a
physician's office, is generally covered as a medical
benefit. Oral anticancer medications (usually pills)
STAFF ANALYSIS OF SENATE BILL SB 161 (Wright)Page 4
dispensed by a pharmacy are usually covered as a pharmacy
benefit. Some injected anticancer medications are
considered "self-injectable," and so are regularly
delivered through a pharmacy and covered as a pharmacy
benefit. In part, these variations are due to the fact that
pharmacy benefits are relatively new for health plans and
policies, having been added in the 1970s and 1980s, long
after hospitalization and physician visits had become
covered medical benefits.
For both medical and pharmacy benefits, payers have devised
strategies to promote appropriate utilization and control
of costs. A short list of these strategies includes:
creation of formularies, maximization of manufacturer
rebates, quantity restrictions, use of prior authorization,
development of clinical guidelines, and implementation of
patient cost sharing, such as deductibles, coinsurance, and
copayments. Cost sharing for medications is frequently
complicated by tiered pricing. A plan or insurer may assign
drugs to tiers (generic drugs in the lowest and very
expensive drugs in the highest) and apply varying
copayments and coinsurance rates to different tiers. As
with cost sharing in general, the impact of tiers (if any)
depends on the specifics of a person's contract or policy.
The variety of cost sharing provisions currently used in
California makes it difficult to generalize about the ways
in which a cancer patient may be required to pay out of
pocket for any anticancer medication. Fixed copayments are
a common form of cost sharing for medications delivered
through a pharmacy. However, some plans and polices specify
coinsurance for one or more medications. The terms of
coverage may or may not include a deductible. The coverage
of medications delivered as medical benefits is equally
variable.
Assumptions
For this analysis, CHPRP assumes that current
administration and utilization management strategies for
all anticancer medications (e.g., prior authorization
requirements, formularies, etc.), except cost sharing, are
already generally comparable or "no less favorable" for
oral versus intravenous or injected medications. Cost
sharing provisions vary widely by contract/policy, and the
mandate only requires "coverage no less favorable" within a
given contract or policy, but does not require all
STAFF ANALYSIS OF SENATE BILL SB 161 (Wright)Page 5
contracts or policies to meet any one standard.
For the purposes of this analysis, CHBRP assumes that
health plans and insurers would comply with the mandate in
SB 161 by reviewing the percentage cost share applied to
oral anticancer medications and to intravenous/injected
anticancer medication, then applying the lower of the two
as the cost sharing provision for oral anticancer
medications . In many cases, such a practice would lower
patient out-of-pocket costs for oral anticancer
medications. However, the bill's phrase "no less favorable
than" is vague, and so plans and insurers might comply with
the mandate in ways contrary to the assumptions modeled in
this report. For example, a plan or insurer could issue a
contract or policy in which coinsurance, after any
applicable deductible has been met, is the standard form of
cost sharing for all anticancer medication. Such compliance
would be "no less favorable," but would, in many instances,
increase patient out-of-pocket costs for oral anticancer
medications, which may previously have been subject only to
a fixed-dollar copayment.
The estimates resulting from these assumptions represent an
upper bound in terms of cost for carriers. Alternative
compliance on the part of plans and insurers could lead to
cost, utilization, and public health impacts different from
those shown in this report and it is likely that some mix
of many compliance strategies would be utilized by the
plans and insurers in California.
A number of health insurance benefit mandates that might
have some interaction with compliance to SB 161's mandate
are beyond this report's focus on cost sharing, including
the mandate to cover "off-label" uses of FDA-approved
drugs-uses other than the specific FDA-approved use-in
life-threatening situations and in cases of chronic and
seriously debilitating conditions, when a set of specified
provisions regarding evidence are met.
Cancer and oral anticancer medications
Nearly one in two Californians born today will develop
cancer at some point in their lifetime (CCR, 2008). There
are an estimated 140,000 cases of cancer diagnosed each
year, while approximately 1.2 million Californians alive
today have a history with the disease (CCR, 2008). Breast
cancer is the most prevalent cancer in California.
STAFF ANALYSIS OF SENATE BILL SB 161 (Wright)Page 6
Sixty-five percent of the prescriptions and 33 percent of
the total cost for oral anticancer medications are for
drugs used to treat breast cancer. After breast cancer, the
next three most common cancers in California are
colorectal, prostate, and lung cancer. Non-Hispanic blacks
in California have higher rates of diagnoses of these three
cancers compared to all other racial and ethnic groups.
These three cancers are all treated using oral anticancer
medications; therefore, to the extent that SB 161 reduces
out-of-pocket costs for oral anticancer medications,
non-Hispanic black cancer patients could face a reduced
financial burden.
Oral anticancer medications are used alone or in
combination with other oral, intravenous, or injected
anticancer medications, depending on the cancer they are
being used to treat. For many oral anticancer medications,
there are no intravenous or injected substitutes (and vice
versa); there are, however, some important exceptions.
Generally, the manner in which anticancer medications are
administered depends upon the specific medicine.
The most frequently prescribed oral anticancer medications
in California in 2006 were three hormone drugs used to
treat breast, ovarian, endometrial, and uterine cancers.
The most expensive oral anticancer medications prescribed
to Californians are Revlimid (for multiple myeloma and
myelodysplastic syndromes), Sutent (for gastrointestinal
stromal tumors and for kidney, renal cell, and thyroid
cancers), and Nexavar (for hepatocellular, kidney, renal
cell, and thyroid cancers).
Oral anticancer medications are being prescribed more
frequently for cancer treatment. Four of the five most
prevalent cancers in California, such as breast cancer and
colorectal cancer can be treated using oral anticancer
medications. According to the National Comprehensive Cancer
Network, experts estimate that 400 anticancer medications
are currently under development and an estimated 25 percent
of anticancer agents currently in development are oral
cancer treatments. To date the FDA has approved 38 oral
anticancer medications used to treat 52 different types of
cancer.
When compared to intravenous and injectable anticancer
medications, oral anticancer medications have both
STAFF ANALYSIS OF SENATE BILL SB 161 (Wright)Page 7
advantages and disadvantages. Advantages include the facts
that oral anticancer medications may allow administration
of the medication on a daily basis, may be more convenient
for patients, and may reduce the risk of infection or other
infiltration complications. Disadvantages include less
certainty in patient adherence to treatment regimens and a
reduction in interaction between patients and their health
care providers to manage complications of treatment.
Utilization, cost and coverage impacts.
Based on the results of CHBRP's survey of the six largest
plans and insurers, 100 percent of enrollees are estimated
to have at least some coverage for inpatient anticancer
medications and outpatient intravenous and injected
anticancer medications, while 97.8 percent of enrollees are
estimated to have at least some coverage for outpatient
oral anticancer medications. Approximately 472,000
enrollees (2.2 percent) have no coverage for outpatient
oral anticancer medication. This group includes persons
with coverage from small group or individual market
policies regulated by CDI.
Only 66 percent of individual market policies regulated by
CDI cover oral anticancer medications, in comparison to 88
percent of small group policies under CDI. (However, CDI
indicates that oral anticancer medication for breast cancer
is covered under all CDI products, which CHBRP discounted
for this analysis, based on survey results.) One hundred
percent of large group policies under CDI covered oral
anticancer medications, as did all other market segments.
CHBRP estimates that 0.5 percent of people with coverage
subject to the mandate will use oral anticancer medications
during the year following implementation. Of the people
using anticancer medications, CHBRP estimates that 69.5
percent use oral only, 20.2 percent use injected or
intravenous only, and 10.3 percent use a combination of
oral and injected/intravenous anticancer medications.
The greatest impact on premiums will be in the small group
and individual markets regulated by CDI. While it is
possible that SB 161 will have the unintended consequence
of causing small group employers or individuals to drop
health care coverage altogether as a result of an increase
in premiums, CHBRP projects no measurable impact on the
number of persons who are uninsured because the estimated
STAFF ANALYSIS OF SENATE BILL SB 161 (Wright)Page 8
premium increase is 0.025 percent-which is less than the
one percent threshold at which CHBRP would estimate a
change in the number of persons covered by insurance.
SB 161 would affect the coverage of 21,340,000 persons
enrolled in group or individual insurance plans or policies
in California with cancer chemotherapy coverage. It is
expected to increase the premiums paid by both employers
and employees (by almost $19.7 million), and would cause a
decrease in the out-of-pocket costs paid by members using
oral anticancer medications incurred through the cost
sharing provisions of a policy or contract (by almost $14.7
million). Total net annual expenditures are estimated to
increase by $5,007,000 annually, or 0.0059 percent, mainly
due to administrative costs.
Of the expected premium increase of about $19,674,000,
total premiums for private employers are estimated to
increase by $7,287,000, or 0.0144 percent. Total employer
premiums for California Public Employees' Retirement System
(CalPERS) health maintenance organizations (HMOs) are
estimated to increase by $282,000, or 0.0089 percent, of
which $166,000 would apply to members who are state
employees. Enrollee contributions toward premiums for group
insurance are estimated to increase by $1,704,000, or
0.0126 percent. Total premiums for those with individually
purchased insurance are estimated to increase by
$10,401,000, or 0.175 percent.
The average portion of the premium paid by the employer
would increase between $0.03 and $0.24 per member per month
(PMPM), and the average portion of the premium paid by
employees would increase between $0.01 and $0.04 PMPM.
However, the cost of oral anticancer medications paid by
members due to cost sharing provisions would decrease
between $0.02 and $0.03 PMPM. Premiums paid by purchasers
of individual CDI-regulated products are estimated to
increase $0.80 PMPM, and the cost of oral anticancer
medications paid by members of those plans to decrease by
approximately $0.51 PMPM.
Medi-Cal Managed Care plans and the Healthy Families
program would not be expected to face any expenditure or
premium increases because they currently provide oral
anticancer medication benefits in accordance with the
coverage mandated by the bill.
STAFF ANALYSIS OF SENATE BILL SB 161 (Wright)Page 9
Approximately 1.6 percent of the enrollees who use oral
anticancer medications have out-of-pocket costs for such
medications over $1,000 per year. Post-mandate amounts
shifted from patient to plan/insurer would range from $0 to
$7,800 per user per year. The wide variation is related to
the price of particular oral anticancer medications and the
cost sharing provisions of any one person's contract or
policy.
Utilization of oral anticancer medications is not expected
to increase as a result of SB 161, as 97.8 percent of
enrollees with coverage subject to the mandate already have
some coverage for oral anticancer medications, public and
private assistance programs exist, price elasticity of
demand for anticancer medications is low (as patients will
do whatever they can to comply with prescribed treatments,
given the life-threatening nature of the illness), and
oncologists prescribing behaviors are unlikely to change
materially. Therefore, the only potential public health
impact as a result of SB 161 is a reduction in
out-of-pocket costs for oral anticancer medications.
Longer-term impacts on health care costs as a result of the
mandate are unknown but are likely to increase over time.
It is estimated that a quarter of chemotherapy treatments
in the pipeline are planned as oral medications. According
to a recent pharmaceutical report on cancer medication
development, almost 650 new medications and new indications
for existing cancer medications are in clinical
development. Several other factors may be influential, such
as an increase in the number of patients receiving
long-term treatment with more targeted oral anticancer
medications, continued growth in the use of combination
treatment for various types of cancers, and expanding
indications or off-label use of existing drugs for the
treatment of various cancers.
Arguments in support
The American Cancer Society (ACS), a co-sponsor of this
bill, writes that oral chemotherapy improves the qualify of
life for cancer patients, such as producing milder side
effects, and avoiding the need for transportation back and
forth from chemotherapy appointments. ACS states that many
insurance companies categorize oral chemotherapy as a
prescription drug, not a cancer treatment, which subjects
STAFF ANALYSIS OF SENATE BILL SB 161 (Wright)Page 10
patients who opt to use oral chemotherapy to exorbitant
out-of-pocket costs. ACS believes that this measure would
protect cancer patients from financial hardship or
foregoing the treatment entirely because of barriers
erected by coverage under the pharmacy benefit.
Carrie's Touch, an African American breast cancer
organization and co-sponsor of the measure, states that
studies have shown that, although African American women do
not have the highest diagnosis of breast cancer incidence,
they have the highest death rate of any group, and believes
that several factors lead to an increased death rate
amongst African American women, including barriers to
treatment because of cost. Carrie's Touch states that
intravenously administered chemotherapy has been the
standard cancer treatment for many years; however, with the
advancement of medical technology, oral chemotherapy has
become the standard of care for many types of cancer
diagnosis including certain types of metastatic breast
cancer. The group points out that oral chemotherapy also
offers an alternative for patients who have failed to
respond to other treatments, oral chemotherapy could
potentially reduce resource utilization and health care
system costs, while improving patient satisfaction.
The National Patient Advocate Foundation (NPAF) writes
that, last year, it handled more than 1,000 cases related
to primary access issues to chemotherapy drugs, of which
100 patients specifically lost access to oral chemotherapy
and were moved to intravenous chemotherapy as a direct
result of the cost. NPAF writes that it strongly supports
this bill, but urges the author to address certain issues
that have arisen in Oregon, with the passage of an
identical measure. NPAF notes that, in Oregon, a select
number of insurance plans are bundling oral and IV
chemotherapy benefits under medical benefits, a shift for
patients whose oral chemotherapy was previously covered as
a prescription benefit. NPAF notes that these patients are
burdened with significantly higher out-of-pocket expenses
for their oral chemotherapy treatment. Additionally, NPAF
notes that some insurers in Oregon have reclassified
certain oral chemotherapy drugs as hormone replacement
therapy, such as in the treatment of breast cancer, as a
way to avoid compliance with the law's intent.
BayBio writes that higher out-of-pocket expenses for oral
STAFF ANALYSIS OF SENATE BILL SB 161 (Wright)Page 11
anti-cancer products than
injection or IV infusion treatments results in reduced
insurance coverage and a decrease in needed care for cancer
patients. BayBio believes that a major advantage of oral
therapies is that patients can take oral treatments on a
regular basis without having to visit a clinic or utilize
the limited time of a physician or other healthcare
professional that would be needed for an injection or IV
infusion, and that oral therapies allow for better chronic
disease management.
Many other supporters write that they support this measure
because orally administered anticancer medications are more
convenient and less painful than intravenously administered
anticancer medications.
Arguments in opposition
The California Association of Health Plans (CAHP) writes
that new mandates increase the cost of health care and
hinder a plan's ability to offer a wider range of
affordable products, which results in higher premiums for
individuals and employers. CAHP believes that, in some
cases, mandates can lead to a reduction of coverage, as
individuals and employers drop their insurance due to
premium increases.
The Association of California Life and Health Insurance
Companies writes that requiring all plans to include
specific benefits is counterproductive to efforts to make
health insurance more affordable and available to
Californians. The California Chamber of Commerce likewise
believes that the measure would further exacerbate the
problem of rising health care costs.
COMMENTS
1.Oral versus intravenous methods. Many supporters indicate
the advantages of oral chemotherapy over intravenous
chemotherapy, such as greater convenience, and less pain.
However, it is worth noting that the CHBRP report suggests
that chemotherapy treatments usually come in one form or
another, and the opportunity for switching is limited.
While a great majority, 69.5 percent, of people using
anticancer medications use oral only, 20.2 percent use
intravenous/injectible only, and an additional 10.3 percent
use a combination of oral and intravenous/injected. The
STAFF ANALYSIS OF SENATE BILL SB 161 (Wright)Page 12
report further notes that only five oral anticancer agents
have intravenous alternatives. These five oral anticancer
agents account for about 8 percent of all anticancer
medication prescriptions and 19.5 percent of total costs of
all anticancer medications. Thus, the measure by itself
will not enable all covered individuals to benefit from the
convenience of oral therapies. The option for an oral
therapy will still largely depend on the treatment itself.
2.Implementation of provisions unclear. As noted in the CHBRP
report, the language "no less favorable than" may be
implemented in such a way that some plans and insurers
raise the cost of intravenous anticancer medications, while
others lower the cost of oral anticancer medications to
achieve parity in cost sharing. It is also unclear whether
compliance with this standard could be met by changing the
terms and conditions on a prospective basis (where all
chemotherapy medications are charged a certain coinsurance
or copay, regardless of method of delivery), or a
reconciliation process using claims data that results in a
rebate. In addition to the impact of this language on
coinsurance and copayments, the term "no less favorable"
can apply to maximum lifetime benefits, deductibles, and
utilization controls. The author may wish to consider
whether "no less favorable" might apply only to
cost-sharing requirements, as well as whether the measure
should be more uniformly implemented by plans and insurers
regarding the issue of raising costs versus lowering them.
Staff recommends the author seek technical assistance from
the Department of Managed Health Care and the Department of
Insurance.
POSITIONS
Support: American Cancer Society (co-sponsor)
AstraZeneca
Carries TOUCH (co-sponsor)
California Cancer Registry
California Medical Association
California State Conference of the National
Association for the Advancement of Colored People
McKay Photography
National Coalition of 100 Black Women, Sacramento
Chapter
STAFF ANALYSIS OF SENATE BILL SB 161 (Wright)Page 13
National Patient Advocate Foundation
Northern California Cancer Center
Public Health Institute
Sacramento Breast Cancer Resource Center
Saint James African Methodist Episcopal Church
St. Andrews African Methodist Episcopal Church
Wright Chapel African Methodist Episcopal Church
Several individuals
Oppose: Anthem Blue Cross
Association of California Life and Health
Insurance Companies
California Association of Health Plans
California Chamber of Commerce
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