BILL ANALYSIS                                                                                                                                                                                                    Ó






                             SENATE COMMITTEE ON HEALTH
                          Senator Ed Hernandez, O.D., Chair

          BILL NO:       AB 219
          AUTHOR:        Perea
          AMENDED:       June 19, 2013
          HEARING DATE:  June 26, 2013
          CONSULTANT:    Robinson-Taylor

           SUBJECT  :  Health care coverage: cancer treatment
           
          SUMMARY  :  Requires health plan contracts and health insurance  
          policies that cover prescribed, orally administered anti-cancer  
          medications to limit an enrollee or insured's total cost share  
          to no more than $100 per filled prescription.
          
          Existing federal law 
          1.Establishes the Affordable Care Act (ACA) to make, among other  
            provisions, statutory changes affecting the regulation of, and  
            payment for, certain types of private health insurance and  
            includes coverage for prescription drugs in the categories of  
            10 essential health benefits (EHBs) that all qualified health  
            plans must cover.
          
          Existing state law:
          1.Under the Knox-Keene Health Care Service Plan Act of 1975,  
            regulates and licenses health plans and specialized health  
            plans by the Department of Managed Health Care (DMHC),  
            Provides for the regulation of health insurers by the  
            California Department of Insurance (CDI).

          2.Requires health plan contracts and health insurance policies  
            to provide coverage for all generally medically accepted  
            cancer screening tests and requires those plans and policies  
            to also provide coverage for the treatment of breast cancer.

          3.Imposes various requirements on health plan contracts and  
            health insurance policies that cover prescription drug  
            benefits, such as a requirement to cover "off-label" uses, as  
            specified, and the requirement to cover previously prescribed  
            drugs, as specified.

          4.Authorizes DMHC to regulate the provision of medically  
            necessary prescription drug benefits by a health plan to the  
            extent that the plan provides coverage for those benefits.   
            Existing regulation requires health plans providing outpatient  
                                                         Continued---



          AB 219 | Page 2




            prescription drugs to provide all medically necessary  
            prescription drugs, except as specified in that regulation.

          5.Establishes as California's EHBs the Kaiser Small Group Health  
            Maintenance Organization plan along with the following 10 ACA  
            mandated benefits:

             a.   Ambulatory patient services;
             b.   Emergency services;
             c.   Hospitalization;
             d.   Maternity and newborn care;
             e.   Mental health and substance use disorder services,  
               including behavioral health treatment;
             f.   Prescription drugs;
             g.   Rehabilitative and habilitative services and devices;
             h.   Laboratory services;
             i.   Preventive and wellness services and chronic disease  
               management; and,
             j.   Pediatric services, including oral and vision care.
          
          This bill:
          1.Requires, effective January 1, 2014, large group health plan  
            contracts and insurance policies that cover prescribed, orally  
            administered anti-cancer medications to limit an enrollee or  
            insured's total cost share for these medications to no more  
            than $100 per filled prescription.  

          2.Requires, effective January 1, 2015, individual or small group  
            health plan contracts and insurance policies that cover  
            prescribed, orally administered anti-cancer medications to  
            limit an enrollee or insured's total cost share for these  
            medications to no more than $100 per filled prescription.  

          3.Prohibits the cost sharing limit of $100 per filled  
            prescription from applying to high deductible health plans, as  
            defined, that are eligible for health savings accounts unless  
            the plan deductible is satisfied.

           FISCAL EFFECT  :  According to the Assembly Appropriations  
          Committee analysis, this bill will have a negligible impact on  
          the state because the programs affected CalPERS and Medi-Cal,  
          already provide coverage with cost-sharing below the amounts in  
          this bill.  The Assembly Appropriations analysis also states  
          that there will be minor costs to DMHC and CDI for plan filings.

           PRIOR VOTES  :  




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          Assembly Health:    15- 2 
          Assembly Appropriations:15-0 
          Assembly Floor:     64- 9 
           
          COMMENTS  :  
           1.Author's statement.  Cancer is the leading cause of death in  
            California, with nearly half of the population battling cancer  
            at some point in their lives and almost one in four dying of  
            cancer.  The emergence of safe, clinically-effective,  
            orally-administered anti-cancer medications has dramatically  
            improved quality of life for cancer patients who take these  
            drugs instead of traditional intravenous (IV) chemotherapy,  
            but patients are routinely charged significantly more  
            out-of-pocket for oral anti-cancer therapies.  This disparity  
            in patient costs between oral and IV anti-cancer treatments  
            comes from health insurance design, not drug price.  IV  
            treatments are covered as medical benefits, where most  
            patients are only responsible for a co-pay for each episode of  
            care and are not required to pay for the IV drug. For a  
            $10,000 per month oral anti-cancer medication, a patient with  
            a 30 percent coinsurance rate must pay $3,000 per month  
            out-of-pocket.  Studies have shown that high out-of-pocket  
            costs cause patients to abandon oral treatment. Most oral  
            anti-cancer drugs do not have an equivalent IV drug, so  
            patients that abandon oral treatment are often giving up their  
            best chance to beat their cancer.  Seventy percent of  
            prescriptions for brand name oral anti-cancer medications are  
            for women with breast cancer. Twenty-three other states have  
            already enacted legislation to make oral anti-cancer  
            treatments more affordable without any significant impact on  
            health insurance premiums.  The author argues that this bill  
            is needed to ensure that cancer patients that are prescribed  
            oral anti-cancer medications to treat their cancer can afford  
            these treatments when they are covered by their health plan or  
            insurance.

          2.Oral anti-cancer medications.  According to the California  
            Health Benefits Review Program (CHBRP), anti-cancer  
            medications may be administered through an IV, by injection,  
            or orally.  Although oral anti-cancer medications have been  
            available for many years, the number of oral anti-cancer  
            medications approved by the federal Food and Drug  
            Administration (FDA) has grown by 108 percent over the past  
            decade.  The FDA approved 28 new oral anti-cancer medications  
            between 2003 and early 2013, which increased the total number  




          AB 219 | Page 4




            of oral anti-cancer medications on the market from 26 to 54  
            medications.  According to CHBRP, this trend is likely to  
            continue.  The National Comprehensive Cancer Network estimates  
            that 400 anti-cancer medications are currently under  
            development, and approximately 25 percent of them are planned  
            to be administered orally.

          Oral anti-cancer medications are used to treat frequently  
            diagnosed cancers, such as breast, lung, prostate, and  
            colorectal cancers.  They are also used for rare cancers, such  
            as cancer of the adrenal gland, skin, and eye.  Oral  
            anti-cancer medications may be used as "first-line" treatments  
            for persons newly diagnosed with cancer or as "second-line"  
            treatments for persons who do not respond to first-line  
            treatments.  According to CHBRP, most oral anti-cancer  
            medications are available only as brand-name (i.e.,  
            non-generic) medications.  Generic equivalents are available  
            for 20 percent of oral anti-cancer medications approved by the  
            FDA (11 of the 54 medications on the market) and account for a  
            large percentage of prescriptions filled for these  
            medications.  CHBRP estimates that tamoxifen, a generic oral  
            anti-cancer medication used to treat breast, endometrial,  
            ovarian, and uterine cancers, accounted for 24.3 percent of  
            prescriptions filled for oral anti-cancer medications and  
            three newer generic oral medications used to treat breast,  
            endometrial, ovarian and uterine cancers accounted for an  
            estimated 26.6 percent of prescriptions filled for oral  
            anti-cancer medications in California in 2012.

          3.Medical and pharmacy benefit coverage.  According to CHBRP,  
            coverage for anti-cancer medications can differ in a number of  
            ways, depending on provisions of a person's health plan  
            contract or health insurance policy.  Anti-cancer medications  
            may be covered as pharmacy plan benefits or as medical plan  
            benefits, and most plans and insurers depend on the dispensing  
            site to determine which will be the form of coverage.  For  
            example, IV anti-cancer medication, which is usually provided  
            in a hospital or a physician's office, is generally covered as  
            a medical benefit, while oral anti-cancer pills dispensed by a  
            pharmacy are usually covered as a pharmacy benefit.

          CHBRP notes that payers employ a host of strategies to promote  
            appropriate utilization and cost controls for both medical and  
            pharmacy benefits.  These strategies include creation of  
            formularies; maximization of manufacturer rebates; quantity  
            restrictions; use of prior authorization; development of  




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            clinical guidelines; and, implementation of patient cost  
            sharing, such as deductibles, coinsurance, and copayments.   
            Cost sharing for medications is frequently complicated by  
            tiered pricing in which plans and insurers assign drugs to  
            tiers (generic drugs in the lowest and very expensive drugs in  
            the highest) and apply varying copayments and coinsurance  
            rates to different tiers.  As with cost sharing in general,  
            the impact of tiers (if any) depends on the specifics of a  
            person's plan contract or insurance policy. 

          Lastly, CHBRP states that the variety of cost sharing provisions  
            currently used in California makes it difficult to generalize  
            about the ways in which a cancer patient may be required to  
            pay out-of-pocket for any anti-cancer medication.  Fixed  
            copayments are a common form of cost sharing for medications  
            delivered through a pharmacy.  However, some carrier contracts  
            and policies require coinsurance for one or more medications  
            or the terms of coverage may or may not include a deductible.   
            Coverage of medications delivered as medical benefits also  
            varies.
          
          4.EHBs.  Effective 2014, the ACA requires non-grandfathered  
            small-group and individual market health insurance, including  
            those qualified health plans (QHPs) that will be sold in  
            Covered California, to cover 10 specified categories of EHBs.   
            The federal Department of Health and Human Services (HHS) has  
            allowed each state to define its own EHBs for 2014 and 2015 by  
            selecting one of a set of specified benchmark plan options.   
            SBX1 2 (Hernandez), Chapter 2, Statutes of 2013-14, first  
            extraordinary session, and ABX1 2 (Pan), Chapter 1, Statutes  
            of 2013-14 , first extraordinary session selected the Kaiser  
            Foundation Health Plan Small Group Health Maintenance  
            Organization 30 Plan (Kaiser HMO 30 plan) as its benchmark  
            plan.  According to CHBRP, the ACA allows a state to "require  
            that a qualified health plan offered in an exchange to offer  
            benefits in addition to the EHBs."  If the state does so, the  
            state must make payments to defray the cost of those  
            additionally mandated benefits.  According to CHBRP, the ACA  
            and California's EHBs, as defined by the Kaiser HMO 30 plan,  
            required coverage for outpatient prescription drugs which  
            means that QHPs offered through Covered California, as well as  
            non-grandfathered small-group and individual market plans and  
            policies, will also cover prescription drugs.  Therefore,  
            CHBRP maintains, the state would not be required to defray the  
            costs incurred as a result of this bill because the mandate  




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            would not be considered a benefit expansion that exceeds EHBs.

          5.High deductible health plans.  High deductible health plans  
            associated with a health savings account are entitled to  
            certain Internal Revenue Service (IRS) tax advantages that  
            allow health expenses to be paid with pre-tax dollars.   
            According to IRS Publication 969, an individual is eligible  
            for these tax advantages as long as his prescription drug plan  
            does not provide benefits until the minimum annual deductible  
            is met.  This bill prohibits the cost sharing limit of $100  
            per filled prescription from applying to high deductible  
            health plans that are eligible for health savings accounts  
            unless the plan deductible is satisfied in order to avoid  
            conflict with these IRS provisions.
            
          6.CHBRP Report.  CHBRP was created in response to AB 1996  
            (Thomson), Chapter 795, Statutes of 2002, which requests the  
            University of California to assess legislation proposing a  
            mandated benefit or service, and prepare a written analysis  
            with relevant data on the public health, medical, and economic  
            impact of proposed health plan and health insurance benefit  
            mandate legislation.  CHBRP's analysis of this bill assumes  
            that because this bill specifies prescribed, orally  
            administered anti-cancer medications, it would only affect  
            drugs specific to the treatment of cancer and not affect other  
            medications, such as anti-pain or anti-nausea medications,  
            that a cancer patient might use during the course of  
            chemotherapy.  Among CHBRP's findings are the following:  

               a.     Medical Effectiveness - CHBRP finds that the  
                 preponderance of evidence from studies of the effect of  
                 cost sharing on the use of anti-cancer medications  
                 suggest that cost sharing has a small effect on the use  
                 of oral anti-cancer medications .  Studies found that  
                 cost sharing has a larger effect on abandonment of and  
                 adherence to oral anti-cancer prescriptions.  Abandonment  
                 occurs when a patient submits a prescription to a  
                 pharmacy but later reverses the claim.  In one study  
                 reviewed, the authors compared persons with seven levels  
                 of cost sharing and found that persons who had cost  
                 sharing greater than $250 per prescription were more  
                 likely to abandon their prescriptions than persons who  
                 had cost sharing of $100 or less.  Studies that examined  
                 the impact of cost sharing on adherence concluded that  
                 patients who had higher cost sharing were less likely to  
                 be adherent to the oral anti-cancer medication  




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                 prescription.

               b.     Benefit Coverage, Utilization, and Cost Impacts -  
                 CHBRP estimates that almost all enrollees with health  
                 insurance subject to this bill have at least some  
                 coverage for anti-cancer medications.  This bill would  
                 affect the health insurance of about 26 million enrollees  
                 whose insurance provides an outpatient prescription drug  
                 benefit.  CHBRP notes that outpatient prescription drug  
                 benefits cover oral anti-cancer medications, though  
                 coverage of specific anti-cancer medications may vary by  
                 health plan or insurer.  CHBRP estimates that 0.54  
                 percent of enrollees with privately purchased health  
                 insurance subject to this bill would use oral anti-cancer  
                 medications during the year following implementation.   
                 CHBRP does not estimate a measurable increase in the  
                 number of enrollees who will require oral anti-cancer  
                 medications nor a measurable increase in the number of  
                 prescriptions per enrollee.

               Increases in insurance premiums as a result of this bill  
                 vary by privately purchased market segment, ranging from  
                 approximately 0.0025 percent (DMHC-regulated large-group  
                 plans) to 0.0047 percent (CDI regulated individual  
                 policies).  Increases as measured by per member per month  
                 payments are estimated to be approximately $0.01 for both  
                 DMHC-regulated large-group plans and CDI-regulated  
                 small-group policies.  This bill would also apply to  
                 Medi-Cal Managed Care.  However, the Department of Health  
                 Care Services, which administers Medi-Cal, would not be  
                 expected to face measurable expenditure or premium  
                 increases, as these plans currently cover oral  
                 anti-cancer medication benefits with minimal or no  
                 cost-sharing requirements.  CHBRP states that the  
                 estimated premium increases would not have a measurable  
                 impact on the number of persons who are uninsured.
               
               c.     Public Health Impact - CHBRP does not project a  
                 measurable increase in utilization of oral anti-cancer  
                 medications as a result of this bill.  Therefore,  
                 according to CHBRP, the only potential public health  
                 impact of this bill is a reduction in out-of-pocket costs  
                 for oral anti-cancer medications.  CHBRP maintains that  
                 this could reduce the financial burden and related health  
                 consequences that cancer patients face.  




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               CHBRP reports that, nearly one in two Californians born  
                 today will develop cancer at some point in their  
                 lifetime.  There are an estimated 145,000 cases of cancer  
                 diagnosed each year, while approximately one million  
                 Californians alive today have a history with the disease.  
                  According to CHBRP, breast cancer is the most prevalent  
                 cancer in California, almost exclusively affecting women.  
                  CHBRP notes that more than 50% of oral anti-cancer  
                 medication prescriptions are for three drugs used to  
                 treat breast cancer.  Therefore, to the extent that this  
                 bill reduces out-of-pocket costs for patients, there is a  
                 potential to reduce the financial burden faced by women  
                 undergoing treatment for breast cancer.

               After breast cancer, according to CHBRP, the next three  
                 most common cancers in California are colorectal,  
                 prostate, and lung cancer.  `-Hispanic blacks in  
                 California have higher rates of diagnoses of all three of  
                 these cancers compared to all other racial and ethnic  
                 groups.  These three cancers may all be treated using  
                 oral anti-cancer medications; therefore, to the extent  
                 that this bill reduces out-of-pocket costs for oral  
                 anti-cancer medications, CHBRP asserts that non-Hispanic  
                 black cancer patients could experience a greater  
                 reduction in financial burden

          7.Related legislation.  SB 639 (Hernandez), implements  
            provisions of the ACA by requiring health plans and carriers  
            to provide for maximum out-of-pocket limits, establishes small  
            group deductibles, and defines the precious metal tiers level  
            of coverage required.  Prohibits any product from being  
            offered other than those with a standardized product design in  
            the individual market.

          8.Prior legislation.
               a.     AB 1000 (Perea) of 2011 would have required a health  
                 plan contract or health insurance policy that provides  
                 coverage for prescription drugs and cancer chemotherapy  
                 treatment to limit enrollee out-of-pocket costs for  
                 prescribed, orally administered anti-cancer medications.   
                 AB 1000 was vetoed by Governor Edmund Brown, Jr. stating  
                 that the bill doesn't distinguish between health plans  
                 and insurers who make these drugs available at a  
                 reasonable cost and those who do not.  The governor  
                 directed the department of managed Health care to work  




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                 with the author and stakeholders to find alternative  
                 approaches to solve this problem.

               b.     SB 961 (Wright) of 2010, which was virtually  
                 identical to AB 1000.  SB 961 (Wright) was vetoed by  
                 Governor Arnold Schwarzenegger, who stated in his veto  
                 message that the bill would have added costs to  
                 increasingly expensive health insurance premiums and it  
                 was unnecessary in light of federal health reform.
               
               c.     SB 161 (Wright) of 2009 would have required a  
                 carrier contract or policy that covers anti-cancer  
                 treatment to provide coverage for a prescribed, orally  
                 administered anti-cancer medication on a basis "no less  
                 favorable" than intravenous or injected anti-cancer  
                 medications.  SB 161 was vetoed by Governor  
                 Schwarzenegger, citing his concerns that the bill limited  
                 a carrier's ability to control both the appropriateness  
                 and cost of the care by requiring immediate coverage of  
                 every medication upon receipt of federal approval,  
                 regardless of the provisions of the carrier's formulary,  
                 and placed carriers at a severe disadvantage when  
                 negotiating prices with drug manufacturers.  The Governor  
                 further stated his belief that oral anti-cancer  
                 medications were more cost-effective and efficacious in  
                 some instances and encouraged the author to collaborate  
                 with his Administration, carriers, and the pharmaceutical  
                 manufacturers to explore whether there were ways to  
                 provide greater access without increasing costs.
               
          9.Support.  The sponsors of this bill, Susan B. Komen for the  
            Cure California Affiliates and Carrie's TOUCH, Inc., state  
            that this bill will make oral cancer chemotherapy treatments  
            more affordable and therefore more accessible to cancer  
            patients in California.  Supporters, representing patient  
            advocacy groups, providers, and biomedical research companies,  
            among others, point to research showing that a $100 cap on  
            cost-sharing requirements for orally administered anti-cancer  
            medications per filled prescription increases patient  
            compliance with their doctor prescribed therapy and reduces  
            the likelihood of treatment abandonment that is associated  
            with higher cost-sharing amounts.  The American Cancer Society  
            Cancer Action Network and the Leukemia and Lymphoma Society  
            note in support that, typically, orally administered  
            chemotherapy is covered under a health plan's pharmacy benefit  




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            and oral chemotherapy medications are often classified in the                                                        
            highest tier of a plan's cost-sharing system.  They maintain  
            that this requires patients to pay a high percentage of the  
            drug's cost and potentially results in thousands of dollars in  
            out-of-pocket costs each month.  The Association of Northern  
            California Oncologists writes in support that the emergence of  
            safe, effective, orally administered anti-cancer medications  
            has dramatically improved the quality of life for cancer  
            patients and this bill will make these medicines, which are  
            often more advanced therapies with fewer side effects than  
            traditional chemotherapy, more affordable and accessible.   
            Lastly, biomedical research companies, such as the California  
            Healthcare Institute and BIOCOM, add that remarkable  
            breakthroughs in orally administered cancer treatments are  
            only effective when patients have access to them.
          
          10.Opposition.  The California Chamber of Commerce, health plans  
            and health insurers object to this bill because they argue  
            that it threatens the efforts of all health care stakeholders  
            to provide consumers with meaningful health care choices and  
            affordable coverage options.  America's Health Insurance Plans  
            notes in opposition that cost sharing is a crucial part of  
            controlling health care costs and setting an arbitrary cost  
            sharing limit for those who are using oral chemotherapy  
            medication means more of the cost of these expensive  
            medications will need to be borne by other enrollees and the  
            insured in the form of higher premiums.  The California  
            Association of Health Plans (CAHP) contends that this bill  
            does nothing to control the high underlying cost of  
            pharmaceuticals, nor does it do anything to encourage drug  
            makers to be more efficient and lower costs.  CAHP further  
            believes that the ACA provides a more comprehensive solution  
            to lowering consumer costs without favoring one drug class  
            over another and still allows for appropriate utilization and  
            benefit management by health plans.  Blue Shield of California  
            adds in opposition that this bill attempts to carve out  
            special cost sharing rules for a particular line of  
            pharmaceutical company drugs and will only exacerbate the  
            affordability crisis by giving special treatment to certain  
            drug company products.  

          11.Amendments. The author wishes to take the following  
            clarifying amendment during Committee to properly describe the  
            relationship between a high deductible health plan and a  
            health savings account and avoid compliance concerns:
                




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                a.     On page two delete line 17, on page three delete  
                 lines one and two and insert:

                       The cost sharing limit in this subsection does not  
                      apply to a health care service plan contract if the  
                      plan is a high deductible plan, as defined in 26  
                      U.S.C Section 223 (c)(2), and the plan deductible  
                      has not been satisfied.  
          
           SUPPORT AND OPPOSITION  :
          Support:  Susan G. Komen- For the Cure (sponsor)
                    AiM at Melanoma
                    American Cancer Society Cancer Action Network
                    Association of Northern California Oncologists
                    BAYBIO
                    BIOCOM
                    California Affiliates of Susan G. Komen for the Cure
                    California Healthcare Institute
                    Carrie's Touch- African American Breast Cancer
                    Cancer Legal Resource Center
                    Disability Rights Legal Center
                    Leukemia & Lymphoma Society
                    Medical Oncology Association of Southern California
                    National Brain Tumor Society
                    National Patient Advocate Foundation
                    PADRES Contra El Cancer
                    Parker & Friends

          Oppose:   America's Health Insurance Plans
                    Association of California Life and Health Insurance  
                    Companies
                    Blue Shield of California
                    California Association of Health Plans


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