BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                   SB 866|
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                              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

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           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 

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             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 

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          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 

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                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.

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          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 

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          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

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