BILL ANALYSIS Ó SB 866 Page 1 SENATE THIRD READING SB 866 (Ed Hernandez) As Amended August 26, 2011 Majority vote SENATE VOTE :27-10 HEALTH 15-0 APPROPRIATIONS 12-5 ----------------------------------------------------------------- |Ayes:|Monning, Ammiano, Atkins, |Ayes:|Fuentes, Blumenfield, | | |Bonilla, Eng, Gordon, | |Bradford, Charles | | |Hayashi, | |Calderon, Campos, Davis, | | |Roger Hernández, Bonnie | |Gatto, Hall, Hill, Lara, | | |Lowenthal, Mitchell, | |Mitchell, Solorio | | |Nestande, Pan, | | | | |V. Manuel Pérez, Smyth, | | | | |Williams | | | | | | | | |-----+--------------------------+-----+--------------------------| | | |Nays:|Harkey, Donnelly, | | | | |Nielsen, Norby, Wagner | | | | | | ----------------------------------------------------------------- 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 and after January 1, 2013, or six months after the form is developed, that health plans and insurers must accept when prescribing providers seek authorization for prescription drug benefits. Specifically, this bill : 1)Deems authorization granted if a health plan or health insurer fails to utilize or accept the completed 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. 2)Requires, on or before July 1, 2012, the DMHC and the CDI to jointly develop the PA form and establishes criteria for the PA form. 3)Defines "prescribing provider" to include a provider authorized to write prescriptions to treat a medical condition SB 866 Page 2 of an enrollee. FISCAL EFFECT : According to the Assembly Appropriations Committee, 1)One-time costs to DMHC and CDI, combined, of approximately $90,000 for staff time to develop the form, issue regulations, and to review compliance with the new standard form. 2)Depending upon plan, provider, and consumer response to the standardized form, the use of a such a form may have indirect fiscal impacts on the state, including the following: a) Potential for increased costs to DMHC associated with increased complaints to the Help Center and Provider Complaint Unit related to shorter required response times for prior authorization of prescription drugs. Alternatively, the standardized form may reduce complaints and associated workload costs; and, b) Potential for cost impacts in CalPERS-funded plans associated with plans' response to the standardized form and shorter required response times. If the standardized form results in fewer prescriptions approved, there could be lower cost pressure on rates compared to the status quo. Alternatively, if the use of a standardized form leads to a larger number of prescriptions approved, there could be increased cost pressure. The likelihood, magnitude, and direction of these potential indirect costs are unknown. COMMENTS : 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. Prior authorization is a mechanism health plans and insurance companies use to manage health care costs. According to the SB 866 Page 3 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, 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. 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. The California Association of Health Plans indicates that using one standardized form could result in insufficient information to obtain approval for the drug, and that this would lead to follow-up calls and faxes, creating additional administrative burdens. Express Scripts, Inc., a pharmacy benefit management company, indicates, 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. Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097 FN: 0002224 SB 866 Page 4