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 : AB 219| Page 3 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 AB 219| Page 5 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 AB 219 | Page 6 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 AB 219| Page 7 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. AB 219 | Page 8 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 AB 219| Page 9 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 AB 219 | Page 10 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: AB 219| Page 11 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 -- END --