BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 866
                                                                  Page  1

          Date of Hearing:   June 21, 2011

                            ASSEMBLY COMMITTEE ON HEALTH
                              William W. Monning, Chair
                  SB 866 (Ed Hernández) - As Amended:  May 31, 2011

           SENATE VOTE  :  27-10
           
          SUBJECT  :  Health care coverage:  prescription drugs.

           SUMMARY  :  Requires the Department of Managed Health Care (DMHC) 
          and the California Department of Insurance (CDI) to jointly 
          develop an electronic uniform prior authorization form (PA form) 
          for use on or after January 1, 2013 that health care service 
          plans (health plans) and health insurers must accept when 
          prescribing providers seek authorization for prescription drug 
          benefits.  Specifically,  this bill  :   

          1)Requires, on and after January 1, 2013, a health plan or 
            health insurer that provides prescription drug benefits to 
            accept only the PA form when requiring prior authorization for 
            prescription drug benefits, unless financial risk for 
            prescription drugs has been delegated to a physician or 
            physician group that does not use a prior authorization 
            process.

          2)Deems authorization granted if a health plan or health insurer 
            fails to utilize or accept the PA form, or fails to respond 
            within two business days upon receipt of a request from a 
            prescribing provider.  Exempts health plan contracts and 
            insurance policies for enrolled Medi-Cal beneficiaries.

          3)Requires, on or before July 1, 2012, the DMHC and the CDI to 
            jointly develop the PA form.  Requires, on or after January 1, 
            2013, notwithstanding any other provision of law, every 
            prescribing provider to use the PA form to request prior 
            authorization for coverage of prescription drug benefits and 
            every health plan or health insurer to accept the PA form as 
            sufficient to request prior authorization for prescription 
            drug benefits.

          4)Establishes the following criteria for the PA form:

             a)   The PA form may not exceed two pages;









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             b)   The PA form must be available electronically;

             c)   The completed PA form may also be electronically 
               submitted from the prescribing provider to the plan or 
               insurer;

             d)   The PA form must be developed with input from interested 
               parties from at least one public meeting; and,

             e)   Take into consideration existing prior authorization 
               forms established by the federal Centers for Medicare and 
               Medicaid Services and the Department of Health Care 
               Services, and national standards pertaining to electronic 
               prior authorization.

          5)Defines "prescribing provider" to include a provider 
            authorized to write prescriptions pursuant to the Business and 
            Professions Code to treat a medical condition of an enrollee.

           EXISTING LAW  :

          1)Regulates health plans under the Knox-Keene Health Care 
            Service Plan Act of 1975 through the DMHC and regulates health 
            insurers under the Insurance Code through the CDI.

          2)Requires health plans and insurers to respond to requests for 
            authorization within five business days for non-urgent 
            medically necessary health care services, as specified, or 
            within 72 hours for situations when the enrollee or insured's 
            condition is such that he or she faces an imminent and serious 
            threat to his or her health, as specified. 

          3)Requires health plans and insurers to communicate decisions to 
            approve, modify, or deny requests within 24 hours of the 
            decision to the provider, with certain exceptions.  
            Additionally requires health plans and insurers to communicate 
            decisions resulting in the denial, delay, or modification of 
            all or part of the request to the enrollee or insured within 
            two business days.

          4)Requires every health plan that provides prescription drug 
            benefits to maintain an expeditious process by which 
            prescribing providers may obtain authorization for a medically 
            necessary non-formulary prescription drug.  









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          5)Requires every health plan that provides prescription drug 
            benefits to file with the DMHC a description of its process, 
            including timelines, for responding to authorization requests 
            for non-formulary drugs.  Requires any changes to this process 
            to be filed with the DMHC, as specified.  Requires each plan 
            to provide a written description of its most current process, 
            including timelines, to its prescribing providers.  

           FISCAL EFFECT  :  According to the Senate Appropriations 
          Committee, any cost to CDI and DMHC to develop the PA form would 
          be minor and absorbable. DMHC would likely need to promulgate 
          regulations at a cost of up to $75,000 in fiscal year (FY) 
          2011-12 and up to $150,000 in FY 2012-13 for a staff attorney.  
          To the extent this change generates additional complaints to 
          DMHC, there could be help center costs in the low hundreds of 
          thousands of dollars. Since this bill would require the PA form 
          to be developed and used prior to the completion of DMHC's 
          regulatory process, there could be more than $150,000 special 
          fund expenditures in FY 2012-13.

           COMMENTS  :   

           1)PURPOSE OF THIS BILL  .  According to the author, prior 
            authorization is a common cost containment method used by 
            health plans and insurers that significantly delays medication 
            accessibility for patients and imposes high costs that 
            negatively impact operating margins for health care providers. 
             Health plans and insurers require physicians to fill out a 
            prior authorization form when the provider prescribes a 
            medicine or treatment not covered by the plan or insurer's 
            formulary.  Each health plan and insurer has their own forms 
            for prior authorization.  A recent survey by the American 
            Medical Association found nearly two-thirds of physicians wait 
            several days to receive prior authorization from an insurer.  
            More than half of physicians experience difficulty obtaining 
            approval from health plans and insurers.  A survey of 
            pharmacists found that 61% of pharmacists knew of an incident 
            when the requirement for prior authorization adversely 
            affected patient care.  Physicians spend, on average, 20 hours 
            per week handling prior authorizations.  Studies show that 
            navigating the managed care maze cost physicians $23.2-31 
            billion a year.  Pharmacists also find prior authorization 
            time consuming, spending an average of 4.6 hours a week on 
            requests. 
           








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           2)PRIOR AUTHORIZATION  .  Prior authorization is a mechanism 
            health plans and insurance companies use to manage health care 
            costs.  According to the Consumer Health Information 
            Corporation, health plans and insurers typically require 
            prescribing health care providers to obtain prior 
            authorization for brand name medicines that have a generic 
            alternative, expensive medications, medicines with age limits 
            (like acne medication which is considered to be a condition of 
            children and young adults), drugs for cosmetic reasons, drugs 
            prescribed to treat a non-life threatening medical condition, 
            drugs not usually covered but said to be medically necessary 
            by the prescribing physician, and drugs that are usually 
            covered but are being used at a dose higher than normal.

           3)SUPPORT  .  This bill enjoys support from many physicians, 
            provider organizations, and representatives of the life 
            science industry (biotechnology, pharmaceutical, medical 
            device, and diagnostics companies) who report that the current 
            prior authorization process is complex, lacks transparency, 
            and varies significantly among health plans.  Proponents argue 
            that this bill will streamline, simplify and make uniform the 
            process of prescribing medications.  One group, the 
            Association of Northern California Oncologists (ANCO) is 
            pleased to see that a standardized prior authorization form 
            must be electronically available and transmittable.  ANCO 
            writes that widespread adoption and effective implementation 
            of health information technology such as electronic prior 
            authorizations carries with it the promise of optimal patient 
            care, increased cooperation and coordination among health care 
            professionals and reduced health care costs by making patient 
            care more efficient.

           4)OPPOSE UNLESS AMENDED  .  The California Association of Health 
            Plans (CAHP) requests amendments to make the form developed by 
            the providers a model or template that is optional in order 
            for the plan to preserve the ability to ask drug specific 
            information.  CAHP also wants more flexibility in the 
            turn-around time in case a plan needs more information from 
            the provider and the provider doesn't respond in a timely 
            fashion, doesn't use the PA form, or doesn't fully complete 
            the PA form.  Finally, CAHP asks that the implementation date 
            be delayed six months to a year after the regulators complete 
            their work on the PA form in order to give plans and providers 
            time to begin using the PA form. 









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           5)OPPOSITION  .  Express Scripts, Inc., a pharmacy benefit 
            management company, indicates that their clients look to them 
            to manage increasing drug costs while providing value and 
            quality care to patients.  According to Express Scripts, Inc., 
            this bill will require the use of a California-specific form 
            that will likely vary from other states and federal agencies, 
            will increase costs, and is contrary to development of 
            national standards, which is a far preferable approach.

           6)RELATED AND PREVIOUS LEGISLATION  .

             a)   AB 369 (Huffman), among other things, specifies that 
               once a patient has tried and failed on two pain 
               medications, prior authorization is no longer required and 
               the physician may write the prescription for the 
               appropriate pain medication.  It further specifies that a 
               note in the patient's chart that a patient has tried and 
               failed on the health insurer's step therapy or fail first 
               protocol shall suffice as prior authorization from the 
               insurer.  AB 369 was held in Assembly Appropriations 
               Committee.

             b)   SB 625 (Rosenthal), Chapter 69, Statutes of 1998, 
               requires health plans that include prescription drug 
               benefits to maintain an expedited process by which 
               prescribing providers may obtain authorization for a 
               medically necessary non-formulary prescription drug and 
               requires various disclosures and recordkeeping related to 
               plan formularies.

           7)POLICY QUESTIONS  .

             a)   Should prescribing providers be required to submit a 
               completed request, on the required form, prior to the clock 
               starting on the two business day turn-around?  If it is not 
               the author's intent to authorize two-business day deeming 
               when a provider submits an incomplete request, or on a form 
               other than the form developed pursuant to this bill, the 
               author may wish to clarify that the prescribing provider 
               must use the required form and it must be complete in order 
               to trigger the two business day deeming requirement.

             b)   Should health plans and health insurers be provided some 
               time to phase in use of the form in the event the 
               regulators have not developed the form by July 1, 2012.  








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               Should this bill be enacted, the effective date will be 
               January 1, 2012, giving the departments six months to 
               complete their work in order for the health plans, insurers 
               and providers to have six months to prepare for 
               implementation.  The author may wish to amend this bill to 
               allow health plans, insurers and providers six months from 
               the time the form is developed should the regulators 
               complete their work after July 1, 2012.   

           8)TECHNICAL AMENDMENTS  .  

             a)   In the last sentence in subdivision (b) of Health and 
               Safety Code 1367.241 and Insurance Code 10123.191 the term 
               "provision" should be replaced with "subdivision."  

             b)   On page 3, lines 10-15 the references should be replaced 
               with the following:

               The requirements of this subdivision shall not apply to 
               contracts entered into pursuant to Article 2.7 (commencing 
               with Section 14087.3), Article 2.8 (commencing with Section 
               14087.5), Article 2.81 (commencing with Section 14089), or 
               Chapter 8 (commencing with Section 14200).
          
           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          American Academy of Private Physicians
          American Society for Pain Management Nursing
          Association of Northern California Oncologists
          BayBio
          California Academy of Family Physicians
          California Arthritis Foundation Council
          California Association of Joint Powers Authorities
          California Association of Physician Groups
          California Black Health Network
          California Chronic Care Coalition
          California Healthcare Institute
          California NeuroAlliance
          California Psychiatric Association
          California Society of Industrial Medicine and Surgery
          California Society of Physical Medicine and Rehabilitation 
          Los Angeles County Medical Association
          National Multiple Sclerosis Society








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          Osteopathic Physicians & Surgeons of California
          US Pain Foundation
          Several Individual Physicians
           
            Opposition 
           
          Express Scripts, Inc.


           Analysis Prepared by  :    Teri Boughton / HEALTH / (916) 319-2097