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; SB 866 Page 2 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. SB 866 Page 3 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. SB 866 Page 4 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. SB 866 Page 5 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. SB 866 Page 6 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 SB 866 Page 7 Osteopathic Physicians & Surgeons of California US Pain Foundation Several Individual Physicians Opposition Express Scripts, Inc. Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097