BILL ANALYSIS Ó AB 299 Page 1 Date of Hearing: April 30, 2013 ASSEMBLY COMMITTEE ON HEALTH Richard Pan, Chair AB 299 (Holden) - As Amended: April 16, 2013 SUBJECT : Pharmacy. SUMMARY : Prohibits a nonresident pharmacy or a pharmacy located in this state that delivers prescriptions via mail, from entering into, or being a party to, an agreement with a health care service plan or disability insurer that requires a plan enrollee or insured to utilize mail order services or that requires a plan enrollee or insured to opt out of a mail order process. EXISTING LAW : 1)Establishes the California State Board of Pharmacy to regulate pharmacists. 2)Requires health care service plans to be regulated by the Department of Managed Health Care and health insurers to be regulated by the California Department of Insurance. 3)Requires health care plans and health insurers that cover prescription drug benefits to provide notice in the evidence of coverage and disclosure form to enrollees/insureds regarding whether the plan uses a formulary. FISCAL EFFECT : This bill has not yet been analyzed by a fiscal committee. COMMENTS : 1)PURPOSE OF THIS BILL . The California Pharmacists Association is the sponsor of this bill. According to the author, all patients are different and what works for one patient may not work for another. Many patients prefer to receive their prescription drugs from their local pharmacy and others prefer mail order. The Patient Protection and Affordable Care Act has stated that prescription drug benefits are an essential part of all health plans. This essential health benefit should be safeguarded from policies that force patients to abandon relationships with community pharmacists. The role of AB 299 Page 2 a pharmacist is vital to patient care, especially patients who use maintenance medication. This bill will ensure that access to medication and medication adherence is not deterred by policies that claim to save the health plan money. In actuality, there is evidence that mail order pharmacy policies do not always save health plans money. This bill protects patient choice by putting an end to prescription drug benefits that require patients to use a mail order pharmacy for drugs and that require patients to "opt out" of a requirement to use mail order pharmacies. 2)BACKGROUND . a) Anthem's Mail Order Pharmacy . According to articles published in The Los Angeles Times, Anthem Blue Cross (Anthem) required some policyholders to buy their prescription drugs from a single mail-order pharmacy. Anthem notified members with conditions such as HIV/AIDs and cancer that they will be required to buy their medications from the mail-order pharmacy CuraScript or pay full price at a retail drugstore. Other Anthem members, including those with chronic conditions such as diabetes, faced no such requirement. The article points out that Anthem was imposing the new requirement for specialty medications used to treat major illnesses to help keep costs down for patients and businesses. Subsequently, a class action lawsuit was filed by the Consumer Watchdog on behalf of residents who have been prescribed HIV/AIDS-related maintenance medication drugs, alleging, among other causes of action, discriminatory business practice targeting consumers who suffer from HIV/AIDS. In February 2013, Anthem again notified policyholders who use specialty medications explaining they are reversing their policy and members are not required to buy their drugs from CuraScript. b) Pharmacist Dispensing of 90-Day Supply of Drugs . SB 1301 (Ed Hernández), Chapter 455, Statutes of 2012, authorizes a pharmacist to dispense no more than a 90-day supply of a dangerous drug other than a controlled substance pursuant to a valid prescription that specifies an initial quantity of less than a 90-day supply followed by periodic refills of that amount if the following requirements are satisfied: AB 299 Page 3 i) The patient has completed an initial 30-day supply of the dangerous drug; ii) The total quantity of dosage units dispensed does not exceed the total quantity of dosage units authorized by the prescriber on the prescription, including refills; iii) The prescriber has not specified on the prescription that dispensing the prescription in an initial amount followed by periodic refills is medically necessary; and, iv) The pharmacist is exercising his or her professional judgment. c) Pharmacy Benefit Managers (PBMs) . According to the Federal Trade Commission, many health plan sponsors offer their members prescription drug insurance and hire PBMs to manage these pharmacy benefits on their behalf. As part of the management of these benefits, PBMs assemble networks of retail and mail-order pharmacies so that the plan sponsors' members can fill prescriptions easily and in multiple locations. PBMs contract with employers, labor unions, insurance companies, the state, Medicaid (Medi-Cal in California) and Medicare managed care plans, and managed care companies (collectively, "plan sponsors") to manage pharmacy benefits. There are large PBMs (Express Scripts/Medco, and Caremark), small and insurer-owned PBMs (Aetna, Cigna Corporation, Wellpoint Health Networks), retailer-owned (Eckerd Health Systems, PharmaCare Management Services [a subsidiary of CVS Corp]), Walgreens Health Initiative or stand-alone retail pharmacies (CVS Corp, Rite Aid Corporation, Walgreen and Wal-Mart Stores, Inc). d) Medication Adherence . A study provided by the author to the Committee entitled "Adherence to Medication Under Mandatory and Voluntary Mail Benefit Designs," concluded that mandatory mail-order policy appears to cause some members to discontinue therapy prematurely, particularly those without previous mail service pharmacy experience. In reaching this conclusion, the study sampled employer sponsored pharmacy insurance plans that offered either mandatory or voluntary mail pharmacy benefits managed by CVS Caremark between July 1, 2008 and March 31, 2010. The final study cohort included 27,828 (13,914 mandatory and 13,914 voluntary) participants. The results are as follows: persistence rates were similar through the first AB 299 Page 4 60 days of therapy. The mandatory mail cohort had a notable drop in persistence by day 90, with a more pronounced drop among those without previous mail-service pharmacy use. Median medication possession ratio (the percentage of time a patient has access to medication) and optimal adherence were also lower. Mandatory mail participants were less likely to achieve optimal adherence overall. Participants with no prior use of mail-service pharmacy had significantly lower odds of achieving optimal adherence in all therapeutic classes. e) Community Pharmacy and Mail Order . To investigate the use trends and payment patterns for prescription drugs between mail-order and community pharmacy channels of distribution, a study published in the Journal of Managed Care Pharmacy (2007) entitled, "Community Pharmacy and Mail Order Cost Utilization for 90-Day Maintenance Medication," looked at the difference between mail-order and community pharmacies in: i) payment (cost) per day for the plan sponsor and for the member; ii) generic dispensing ratios for all drugs; and, iii) cost per unit for the top 20 generic drugs dispensed through the mail-order channel. The study analyzed paid pharmacy claims from two state-financed pharmacy programs in Texas for fiscal year 2004 to investigate differences in drug use and expenditure patterns between mail-order and community pharmacy channels of drug distribution. When comparing the cost per day for the top therapeutic categories, the authors found the plan sponsor cost was higher for mail-order than the community pharmacy channel for approximately half of the top therapeutic categories. The member cost was lower for mail-order than for community pharmacy for almost every therapeutic category. For all claims, the generic dispensing ratios were lower in the mail-order channel than in the community pharmacy channel. The cost per unit for the top 20 generic drug products dispensed by mail order was 16.5% lower than community pharmacy for the plan sponsor in Plan A, but 18% higher in Plan B; member costs was 29.9% lower in Plan A for mail order and 34% lower in Plan B. Comparing plan and member costs combined, nine of 20 of the generic prices were higher through mail order in Plan A, and 10 of 20 were higher through mail order in Plan B. The study concluded that overall, savings from lower unit pricing through the mail-order channel benefitted the member and did not translate into significant cost AB 299 Page 5 reductions for the plan sponsor. f) Drug Utilization . A study entitled, "Drug Utilization and Cost in a Medicaid Population: A Simulation Study of Community vs. Mail Order Pharmacy," looked at the potential effects on utilization and costs of the possible extension of mail order services in Medicaid. Pharmacy claims data from the Ohio Medicaid Program from January 2000-September 2004, including 93 million claims were used for the analysis. The results of the study are as follows: the baseline model revealed that the use of mail order vs. community pharmacy would result in a 5.5% increase in drug utilization and a 5.4% cost reduction required in mail-order to become cost neutral. Results from Ohio Medicaid drugs for chronic use revealed a 5.1% in utilization and a 4.8% cost reduction required to become cost neutral in comparison with community pharmacy. The study concluded that mail-order pharmacy increases drug utilization and can also increase drug product cost if the cost per unit is not reduced accordingly. The study pointed out that prior consideration should be given to the patient population, day-supply, disease, therapy, and insurance characteristics to ensure the appropriate use of mail order pharmacy services. g) Medicare Requirements . Medicare Part D, also called the Medicare prescription drug benefit, is a federal program to subsidize the costs of prescription drugs for Medicare beneficiaries. It was enacted as part of the Medicare Modernization Act of 2003 and went into effect on January 1, 2006. Regulations implementing Medicare Part D require that Part D sponsors must have an accessible network of retail pharmacies (specifically, within two miles in urban areas, within five miles in suburban areas, and 15 miles in rural areas). The contracted pharmacy network may be supplemented by non-retail pharmacies, including pharmacies offering home delivery via mail-order and institutional pharmacies, provided certain requirements are met. The regulations include "level playing field between mail-order and network pharmacies" provisions which require a sponsor to permit its plan enrollees to receive benefits, which may include a 90-day supply of covered Part D drugs, at any of its network pharmacies that are retail pharmacies. A sponsor may require an enrollee obtaining a covered drug at a network pharmacy that is a retail AB 299 Page 6 pharmacy to pay any higher cost-sharing applicable to that covered Part D drug at the network pharmacy that is a retail pharmacy instead of the cost-sharing applicable to that covered Part D drug at the network pharmacy that is a mail-order pharmacy. 3)SUPPORT . The California Pharmacists Association points out that allowing patients to select the method of receiving their prescription medications that best suit their needs improves adherence to prescribed therapies. Mandatory mail order policies often discriminate against HIV/AIDS patients, elderly enrollees, women, cancer patients and the seriously ill. The AIDS Healthcare Foundation (Foundation) understands the need for cost-savings and is consistently looking for appropriate ways to manage limited health care dollars but this should not jeopardize the health of patients with a chronic life-threatening condition like HIV/AIDS. The Foundation included several reasons on why mail order is not an acceptable alternative to patients with chronic conditions, including interference with patient care because a shipment does not arrive on time or the wrong drug or dosage is sent. The National Association of Chain Drug Stores indicates that some patients need or prefer access to a face-to-face consultation with their local community pharmacist whom they know and trust. This bill ensures that patients continue to have that choice and are not required to utilize a mail order pharmacy without first opting into that relationship. The California Commission on Aging states that obtaining medication through the mail can be complicated and confusing for anyone, but with impaired hearing or vision, the elderly can face greater risk of dangerous medication errors. The City of West Hollywood indicates that many seniors do not have access to the Internet and would not be able to participate in any online ordering of their medications. Seniors also depend on the advice and consultation of their pharmacists to help them administer their medications according to both the doctor's order and the manufacturer's protocol. 4)OPPOSITION . The California Association of Health Plans indicates that this bill removes an essential tool in holding down the escalating cost of medicine which in turn means higher premiums and other expenses for plan enrollees. Mail AB 299 Page 7 order pharmacy programs are often requested by employers because they save money. Mail order also offers many conveniences for consumers including lower costs, longer supply and saved time. Express Scripts points out that its clients, the plan sponsors, design their own pharmacy benefit to meet their needs. The details as to how that benefit is structured, including the pharmacy network, mail service options, and copayment structure are governed by the plan sponsor. This bill eliminates an important cost control tool for our plan sponsors and creates access issues for drugs available only through specialty pharmacies which primarily dispense via home delivery. Anthem Blue Cross states that this bill unnecessarily restricts the freedom of health plans to determine the most effective way of controlling rising prescription drug costs. This bill will result in higher co-pays for enrollees. 5)PREVIOUS LEGISLATION . SB 1301 (Ed Hernández), Chapter 455, Statutes of 2012, authorizes a pharmacist to dispense not more than a 90-day supply of a dangerous drug other than a controlled substance pursuant to a valid prescription, except for psychotropic medication or drugs or controlled substances, as specified. SB 1195 (Price), Chapter 706, Statutes of 2012, requires a contract that is issued, amended, or renewed on or after January 1, 2013, between a pharmacy and a carrier or a PBM to provide pharmacy services to beneficiaries of a health benefit plan to comply with standards and audit requirements. 6)DOUBLE REFERRAL . This bill is double referred, it was heard on April 23, 2013, in the Business, Professions and Consumer Protection Committee and passed out on 8-3 vote. 7)AUTHOR'S AMENDMENTS . The author would like to delete the provisions of this bill and instead add the following provisions in the Health and Safety and Insurance Codes: a) Every health care service plan/health insurer that provides prescription drug benefits shall permit plan enrollees/insureds to receive prescription drug benefits, which may include a 90-day supply of covered drugs, at any in-network community pharmacy. This section shall not apply to specific drugs that are not available in community pharmacies in a sufficient amount to meet network adequacy AB 299 Page 8 requirements. b) Every health care service plan/health insurer that provides prescription drug benefits shall, prior to enrollment in a mail order pharmacy program, permit its enrollees/insured to opt in to obtain covered prescription drugs through mail order. c) A pharmacist that dispenses a 90-day supply of covered drugs must comply with Section 4064.5 of the Business and Professions Code. REGISTERED SUPPORT / OPPOSITION : Support California Pharmacists Association (sponsor) AARP Access NOW AIDS Healthcare Foundation AIDS Services Foundation Orange County BIOCOM Black Women for Wellness California Chronic Care Coalition California Commission on Aging California Healthcare Institute California National Organization for Women California Senior Legislature City of West Hollywood Common Ground Disability Rights California L.A. Gay & Lesbian Center National Association of Chain Drug Stores National Community Pharmacists Association National Multiple Sclerosis Society NCLR/CSULB Center for Latino Community Health Orange County HIV/AIDS Advocacy Team Pharmacy Choice Project Inform Rite Aid Target Walgreens Opposition America's Health Insurance Plans Anthem AB 299 Page 9 Association of California Life & Health Insurance Companies California Association of Health Plans CVS Caremark Express Scripts Health Net Molina Healthcare of California Analysis Prepared by : Rosielyn Pulmano / HEALTH / (916) 319-2097