BILL ANALYSIS
SB 161
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Date of Hearing: July 7, 2009
ASSEMBLY COMMITTEE ON HEALTH
Dave Jones, Chair
SB 161 (Wright) - As Amended: May 21, 2009
SENATE VOTE : 36-0
SUBJECT : Health care coverage: cancer treatment.
SUMMARY : Requires a health care service plan (health plan)
contract or health insurance policy that provides coverage for
anticancer treatment to provide coverage for a prescribed,
orally administered anticancer medication on a basis no less
favorable than intravenously administered or injected anticancer
medications. Specifically, this bill :
1)Requires health plan contracts and health insurance policies
issued, amended, or renewed on or after January 1, 2010, that
provide coverage for anticancer treatment to provide coverage
for a prescribed, orally administered anticancer medication
used to kill or slow the growth of cancerous cells on a basis
"no less favorable" than intravenously administered or
injected anticancer medications covered under the contract.
2)Requires health plan contracts and health insurance policies,
in order to comply with 1) above to review the percentage cost
share for oral anticancer medications and intravenous (IV) or
injected anticancer medications and to apply the lower of the
two as the cost-sharing provision for oral cancer medications.
3)Prohibits health plans and health insurance policies from
increasing enrollee cost sharing for anticancer medications.
4)Defines "cost share" to mean copayment, coinsurance, or
deductible provisions applicable to coverage for oral, IV or
injected anticancer medications.
5)Exempts from this bill health plan contracts or health
insurance policies purchased by the Board of Administration of
the Public Employees' Retirement System (CalPERS) pursuant to
the Public Employees' Medical and Hospital Care Act.
EXISTING LAW :
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1)Provides for the regulation of health plans by the Department
of Managed Health Care (DMHC) and regulation of disability
insurers who sell health insurance by the California
Department of Insurance (CDI).
2)Requires health 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.
3)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.
4)Authorizes DMHC to regulate the provision of medically
necessary prescription drug benefits by a health 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.
FISCAL EFFECT : DMHC and CDI's regulatory activity is supported
by fee revenues in special funds, the Managed Care Fund and the
Insurance Fund, respectively. According to the Senate
Appropriations Committee analysis, depending on the complexity
of any necessary regulations, it could cost DMHC from the
Managed Care Fund $5,000-$10,000 for fiscal years (FYs) 2009-10
and 2010-11 and $50,000-$150,000 for FY 2011-12, to promulgate
regulations to implement this bill.
COMMENTS :
1)PURPOSE OF THIS BILL . 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 maintains that one of the most
significant barriers is greater patient out-of-pocket costs
for oral therapies covered under the pharmacy benefit than IV
therapies covered under the medical benefit. The author
further maintains 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
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required to pay a separate fee for the IV drug. The author
argues 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%, 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 anticancer therapies.
The author additionally points out that, in 2007, the Oregon
State Senate passed similar legislation (S.B. 8 (Courtney),
Chapter 566, 2007 Laws), and that, upon enactment of S.B. 8 in
January 2008, the top state plans eliminated their high
coinsurance rates. Most Oregon plans established separate
oral anticancer therapy 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 anticancer therapy parity legislation
including: Texas, Washington, Hawaii, Indiana, and Oklahoma.
2)CALIFORNIA HEALTH BENEFITS REVIEW PROGRAM . AB 1996 (Thomson),
Chapter 795, Statutes of 2002, requests the University of
California to assess legislation proposing a mandated benefit
or service, and prepare a written analysis with relevant data
on the medical, economic, and public health impacts of
proposed health plan and health insurance benefit mandate
legislation. The California Health Benefits Review Program
(CHBRP) was created in response to AB 1996 and extended for
four additional years in SB 1704 (Kuehl), Chapter 684,
Statutes of 2006. In its analysis of AB 513, CHBRP reports:
a) Overview of Oral Anti-Cancer Medications . CHBRP reports
that, nearly one in two Californians born today will
develop cancer at some point in their lifetime. 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. According to CHBRP,
breast cancer is the most prevalent cancer in California.
Sixty-five percent of the prescriptions and 33% of the
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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 this bill
reduces out-of-pocket costs for oral anticancer
medications, non-Hispanic black cancer patients could face
a reduced financial burden.
According to CHBRP, oral anticancer medications are used
alone or in combination with other oral, IV, or injected
anticancer medications, depending on the cancer they are
being used to treat. For many oral anticancer medications,
there are no IV 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.
CHBRP states, 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).
CHBRP maintains that oral anticancer medications are being
prescribed more frequently for cancer treatment. Four of
the five most prevalent cancers in California, including
breast, colorectal, prostate, and lung cancers, can be
treated using oral anticancer medications. To date the
federal Food and Drug Administration has approved 38 oral
anticancer medications used to treat 52 different types of
cancer. According to the National Comprehensive Cancer
Network, experts estimate that 400 anticancer medications
are currently under development and an estimated 25% of
anticancer agents currently in development are oral
anticancer treatments.
When compared to IV and injectable anticancer medications,
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oral anticancer medications have both advantages and
disadvantages. According to CHBRP, advantages include 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.
b) Anticancer Medication Coverage . CHBRP reports that
coverage for anticancer medications can differ in any of a
number of ways, depending on provisions of a person's
contract or policy with a health 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. IV
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) 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.
CHBRP indicates 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
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contract or policy.
According to CHBRP, 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.
c) Utilization, Cost and Coverage Impacts . Based on the
results of CHBRP's survey of the six largest plans and
insurers, 100% of enrollees are estimated to have at least
some coverage for inpatient anticancer medications and
outpatient IV and injected anticancer medications, while
97.8% of enrollees are estimated to have at least some
coverage for outpatient oral anticancer medications.
Approximately 472,000 enrollees (2.2%) have no coverage for
outpatient oral anticancer medication. This group includes
persons with coverage from small group or individual market
policies regulated by CDI.
CHBRP states that only 66% of individual market policies
regulated by CDI cover oral anticancer medications, in
comparison to 88% 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% 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% use oral
only, 20.2% use injected or IV only, and 10.3% use a
combination of oral and injected/IV anticancer medications.
According to CHBRP, the greatest impact on premiums will be
in the small group and individual markets regulated by CDI.
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While it is possible that this bill 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 premium increase is 0.025%
- which is less than the 1% threshold at which CHBRP would
estimate a change in the number of persons covered by
insurance.
CHBRP states that this bill would affect the coverage of more
than 21.3 million persons enrolled in group or individual
insurance plans or policies in California with anticancer
therapy coverage. CHBRP maintains that 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 million annually, or 0.0059%, 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%.
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 this bill.
As recently amended, this bill excludes the CalPERS from the
provisions of this bill, therefore reducing costs to the
state.
CHBRP reports that approximately 1.6% 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.
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According to CHBRP, utilization of oral anticancer
medications is not expected to increase as a result of this
bill, as 97.8% 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, according to
CHBRP, the only potential public health impact as a result
of this bill is a reduction in out-of-pocket costs for oral
anticancer medications.
CHBRP states 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.
d) Administrative Costs . According to CHBRP, health plans
and health insurers policies include a component for
administration and profit in their premiums. In estimating
the impact of this mandate on premiums, CHBRP states that,
actuarial analysis assumes that plans and insurers will
apply their existing administration and profit loads to the
increase in health care costs produced by this bill.
Therefore, CHBRP indicates, although there may be
administrative costs associated with the mandate,
administrative costs as a portion of premiums would not
change. In addition, this bill requires that plans and
insurers notify members and applicants of their oral
chemotherapy coverage changes. Health plans and insurers
may also need to increase staff specializing in utilization
management.
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1)SUPPORT . Carrie's Touch and The American Caner Society,
sponsors of this bill, state that this is an important issue
to address as more and more cancer therapies move toward being
provided through oral anticancer medications. Both
organizations maintain that many of the oral anticancer
treatments do not have IV counterparts, making the need to
ensure access to them critical. Carrie's Touch, an
organization dedicated to addressing the fight against breast
cancer in the African American community, indicates that oral
anticancer treatments improve patients' quality of life,
provide a more convenient and less invasive method of therapy
and could potentially reduce resource utilization and health
care system costs, while improving patient satisfaction.
The California Medical Association and the Association of
Northern California Oncologists (ANCO) also support this bill.
ANCO states that it is the consensus opinion of the ANCO
Board of Directors based on their experience and expertise in
treating people with cancer, that prohibitive higher
out-of-pocket costs for people with cancer needing oral
anticancer medications can result in delayed cancer treatment
or in their receiving IV anticancer treatments that are less
convenient for the patient and more costly to the healthcare
system (with their concomitant administrative and support drug
costs) in total than the originally prescribed oral anticancer
medication.
2)OPPOSITION . Anthem Blue Cross (Anthem), the Association of
California Life and Health Insurance Companies, and Health Net
are opposed to this bill. Health insurers state that this
bill sets a dangerous precedent by requiring a more favorable
coverage of a specific type of medication. Anthem states that
this bill would require health plans to cover all oral
anticancer drugs and completely disregards the current process
to place drugs onto a formulary. According to Anthem, as a
result, pharmaceutical companies would have no incentive to
negotiate in good faith knowing that plans would be mandated
by law to have these specific drugs on their formulary.
Health Net also states that this bill inappropriately limits a
health plan's and insurer's flexibility to design their drug
formularies to determine the relative efficacy of covered
drugs.
The California Department of Managed Health Care, The California
Association of Health Plans (CAHP) and the California Chamber
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of Commerce are also opposed to the bill and state that they
are concerned that this bill could negatively impact
California's already struggling health care market and as a
result, some subscribers, particularly in the price-sensitive
individual and small group markets, could be forced to drop
health coverage altogether. CAHP also states that there have
been a number of benefit mandates that have worked there way
through the Legislature in recent years and new mandates
increase the cost of health care and hinder a plan's ability
to offer a wider range of affordable products. According to
CAHP, this results in higher premiums for individuals and
employers.
3)POLICY ISSUES .
a) From a policy perspective, the recent amendments to
exclude CalPERS from this bill's provisions appear to be
inconsistent with this bill's intent to make oral cancer
medications available to all persons with health coverage.
The author may wish to address the rationale for exempting
CalPERS from this bill.
b) It is unclear what the meaning and impact would be of
the provision in this bill that prohibits health plans and
health insurance policies from increasing enrollee cost
sharing for anti-cancer medications. Does the author
intend to prohibit increases in a contract or policy's
existing cost sharing elements? Increases above those in
effect at the time of the enactment of this bill?
Increases on a year-to-year basis? The author may wish to
clarify what is meant by this provision.
REGISTERED SUPPORT / OPPOSITION :
Support
American Cancer Society (cosponsor)
Carrie's Touch (cosponsor)
Association of Northern California Oncologists
B and S Electric
BayBio
California Breast Cancer Organizations
California Medical Association
California State Conference of the National Association for the
Advancement of Colored People
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De Luz Enterprises
McKay Photography (prior version)
National Patient Advocate Foundation (prior version)
Northern California Cancer Center (prior version)
Public Health Institute (prior version)
Sacramento Breast Cancer Resource Center
St. Andrews African Methodist Episcopal Church
Saint James African Methodist Episcopal Church (prior version)
Susan G. Komen for the Cure, California Affiliate Collaborative
Wright Chapel African Methodist Episcopal Church
Numerous individuals
Opposition
Anthem Blue Cross
Association of California Life & Health Insurance Companies
Blue Shield of California
California Association of Health Plans
California Chamber of Commerce
Department of Managed Health Care
Health Net
Analysis Prepared by : Tanya Robinson-Taylor / HEALTH / (916)
319-2097