BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 866| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ UNFINISHED BUSINESS Bill No: SB 866 Author: Hernandez (D) Amended: 8/26/11 Vote: 21 SENATE HEALTH COMMITTEE : 7-0, 4/13/11 AYES: Hernandez, Strickland, Alquist, Anderson, De León, DeSaulnier, Rubio NO VOTE RECORDED: Blakeslee, Wolk SENATE APPROPRIATIONS COMMITTEE : 6-2, 5/26/11 AYES: Kehoe, Alquist, Lieu, Pavley, Price, Steinberg NOES: Walters, Runner NO VOTE RECORDED: Emmerson SENATE FLOOR : 27-10, 6/2/11 AYES: Alquist, Anderson, Calderon, Corbett, Correa, De León, DeSaulnier, Evans, Hancock, Hernandez, Kehoe, Leno, Lieu, Liu, Lowenthal, Negrete McLeod, Padilla, Pavley, Price, Rubio, Simitian, Steinberg, Strickland, Vargas, Wolk, Wright, Yee NOES: Berryhill, Blakeslee, Dutton, Emmerson, Fuller, Gaines, Harman, La Malfa, Walters, Wyland NO VOTE RECORDED: Cannella, Huff, Runner ASSEMBLY FLOOR : Not available SUBJECT : Health care coverage: prescription drugs SOURCE : Author CONTINUED SB 866 Page 2 DIGEST : This bill requires the Department of Managed Health Care and the Department of Insurance to jointly develop an electronic uniform prior authorization 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. Assembly Amendments clarify the timeframe for the authorization form to be developed, and make technical corrections. ANALYSIS : Existing law: 1. Provides for the regulation of health care services plans (health plans) by the Department of Managed Health Care (DMHC), and for the regulation of health insurers by the Department of Insurance (CDI). 2. Imposes various requirements and restrictions on certain procedures, commonly referred to as utilization review, that apply to every health plan and insurer that prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based on medical necessity, requests by providers prior to, retrospectively, or concurrent with, the provision of health care services to enrollees or insureds, as specified. 3. Imposes various requirements and restrictions on health plans and insurers, including, among other things, a prohibition on health plans and insurers that provide prescription drug benefits from excluding or limiting coverage for a drug on the basis that the drug is prescribed for a use that is different from the use for which the drug has been approved for marketing by the federal Food and Drug Administration. 4. Requires health plans and insurers to respond to requests for authorization within five business days for non-urgent medically necessary health care services, as CONTINUED SB 866 Page 3 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. 5. 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. 6. 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. 7. Requires health plans that provide prescription drug benefits to maintain an expeditious process by which prescribing providers, as described, may obtain authorization for a medically necessary nonformulary prescription drug, according to certain procedures. This bill: 1. Deems authorization granted if a health plan or health insurer fails to utilize or accept the completed prior authorization form (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 of an enrollee. Background Prior authorization is a common cost-containment and utilization review method used by health plans, insurers, and some public coverage programs. The practice of prior authorization, also called prior approval or CONTINUED SB 866 Page 4 preauthorization, requires a prescriber to obtain permission from the health plan or insurer to prescribe a medication before prescribing it. Health plans and insurers routinely require physicians to fill out prior authorization forms when the provider prescribes a medicine or treatment not covered by the plan or insurer's formulary. Each plan or insurer has their own prior authorization form, and some plans and insurers may have multiple forms depending on the type of drug requested. Prior authorization is intended to curb abuse and diversion of controlled substances, and has been shown to be effective in controlling prescription drug costs. Medications that commonly require prior authorization include: 1. Brand name medications that have a generic available; 2. Expensive medications; 3. Drugs not usually covered by the insurance company, but said to be medically necessary by the doctor; 4. Drugs usually covered but prescribed at a higher dosage; 5. Drugs used for cosmetic reasons; and 6. Drugs prescribed to treat a non-life threatening medical condition. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes 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 CONTINUED SB 866 Page 5 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. B. Potential for cost impacts in California Public Employees' Retirement System-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. SUPPORT : (Verified 8/25/11) Alliance for Patient Access Alzheimer's Association American Academy of Private Physicians American Cancer Society Association of Northern California Oncologists BayBio BIOCOM California Academy of Family Physicians California Arthritis Foundation Council California Association of Health Plans California Association of Joint Powers Authorities California Association of Physician Groups California Chronic Care Coalition California Council of Community Mental Health Agencies California Healthcare Institute California Medical Association California NeuroAlliance California Optometric Association California Psychiatric Association California Society of Industrial Medicine and Surgery California Society of Physical Medicine and Rehabilitation Corona Mind-Body Institute, Inc. CONTINUED SB 866 Page 6 Department of Insurance Los Angeles County Medical Association Medical Oncology Association of S. California, Inc. Mental Health Association in California National Council of Asian Pacific Islander Physicians National Multiple Sclerosis Society Neuropathy Action Foundation Orange County Medical Association Osteopathic Physicians and Surgeons of California Ovarian Cancer Coalition of Greater California Pharmaceutical Research and Manufacturers of America Power of Pain Foundation US Pain Foundation OPPOSITION : (Verified 8/25/11) California Association of Health Plans Express Scripts, Inc. ARGUMENTS IN SUPPORT : The California Medical Association writes in support, stating that preauthorization policies lead to costly bureaucratic hassles that take time from patient care. The Medical Oncology Association of Southern California, Inc. asserts that the prior authorization process is currently highly complex, lacks transparency, and the criteria and processes vary significantly among health plans. Furthermore, these different requirements create logistical complexity for providers, as well as adding duplicative overhead and staff time. The American Academy of Private Physicians concurs, stating that providers need to be able to get back to the work of patient care and should not be spending needless time trying to figure out which health plan has what protocol and what form. The Alliance for Patient Access supports this bill, citing that health plans and insurers have great incentive to limit a physician's treatment options by using prior authorization as a way to cut costs. Writing in concurrence, the Power of Pain Foundation states that they receive calls regularly from Californians stating that, in the course of the prior authorization process, they are forced to go days and/or weeks before they obtain/continue to get treatments deemed necessary by their provider, and CONTINUED SB 866 Page 7 that they are forced to go through the prior authorization process multiple times a year for the same medication for the same condition. ARGUMENTS IN OPPOSITION : The Californian Association of Health Plans (CAHP) opposes the bill unless amended, citing that health plans use drug specific prior authorization forms because each drug is unique in its requirements for diagnosis, limitations, existing diseases, treatment failures and other clinically relevant information, and that applying a standardized prior authorization form could create even more administrative burdens if the form does not ask the appropriate questions which will subsequently lead to follow-up calls and faxes. CAHP further objects to the provision in the bill that deems approval of a prior authorization request if a plan or insurer does not respond to a prior authorization request within 48 hours or if the plan or insurer fails to use the standard form, and raises concerns that the bill does not address situations where the provider fails to respond to a request for additional information or fails to use the standardized form. In addition, CAHP notes that the implementation date for plans, insurers and providers is unclear. CTW:mw 9/7/11 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED