BILL ANALYSIS �
AB 889
Page 1
Date of Hearing: April 30, 2013
ASSEMBLY COMMITTEE ON HEALTH
Richard Pan, Chair
AB 889 (Frazier) - As Amended: April 23, 2013
SUBJECT : Health care coverage: prescription drugs.
SUMMARY : Prohibits a health plan and health insurer that
provides coverage for medications pursuant to step therapy or
fail first protocol from requiring an enrollee or insured to try
and fail more than two medications before allowing the enrollee
or insured access to the medication originally prescribed by
their provider. Requires health plans and health insurers to
have an expeditious process in place for step therapy exceptions
and that the duration of step therapy be consistent with
up-to-date evidence-based outcomes and current published
peer-reviewed medical and pharmaceutical literature.
Specifically, this bill :
1)Prohibits a health care service plan or health insurer from
requiring a patient to try and fail more than two medications
before allowing the patient access to the medication, or
generically equivalent drug, prescribed by the patient's
provider unless the federal Food and Drug Administration (FDA)
approved label indication, peer-reviewed scientific, medical
and pharmaceutical evidence, or clinical research trials
focusing on clinical outcomes support that more than two prior
therapies should be used before the requested medication.
2)Requires the duration of any step therapy or fail first
protocol to be consistent with up-to-date, peer-reviewed
scientific, medical, and pharmaceutical evidence.
3)Requires health care plans and health insurers to have an
expeditious process in place to authorize exceptions to step
therapy, when medically necessary, and to conform effectively
and efficiently to continuity of care.
4)Prohibits a new health care service plan or health insurer, in
circumstances where an enrollee is changing plans, from
requiring the enrollee or insured to repeat step therapy when
that enrollee or insured is already being treated for a
medical condition by a prescription drug, provided that the
drug is appropriately prescribed and is considered safe and
AB 889
Page 2
effective for the enrollee's condition.
5)Provides that nothing in this bill prohibits a health care
service plan or health insurer from charging a subscriber or
enrollee a copayment, coinsurance, or a deductible for
prescription drug benefits or from setting forth, by contract,
limitations on maximum coverage of prescription drug benefits,
as described.
6)Defines prescribing provider and genetically equivalent drug.
7)Prohibits the provisions of this bill from being construed to
require coverage of prescription drugs not in a plan's or
insurer's drug formulary or to prohibit generically equivalent
drugs or generic drug substitutions, as authorized.
8)Excludes from the provisions of this bill, accident-only,
specified disease, hospital indemnity, Medicare supplement,
dental-only, or vision-only health care service plan contracts
or disability policies.
EXISTING LAW :
1)Provides for regulation of health plans by the Department of
Managed Health Care (DMHC) under the Knox-Keene Health Care
Service Plan Act of 1975 (Knox-Keene) and regulation of health
insurers by the California Department of Insurance (CDI) under
the Insurance Code.
2)Governs the procedures that apply to every health care service
plan and health 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, providing
health care services to enrollees or insured.
3)At the Federal level, Medicare limits step therapy to two
trials and failures of formulary alternatives before providing
access to the prescribed medication.
4)Pursuant to DMHC regulations states that a plan may require
step therapy and requires a plan to have an expeditious
process in place to authorize exceptions to step therapy when
medically necessary. Requires in situations where an enrollee
changes plans, the new plan may not require the enrollee to
AB 889
Page 3
repeat step therapy when that enrollee is already being
treated for a medical condition by a prescription drug
provided that the drug is appropriately prescribed and is
considered safe and effective for the enrollee's condition.
5)Requires any health plan disapproval pursuant to 4) above to
provide the enrollee with the reasons for the disapproval and
notify the enrollee of the right to file a grievance and/or
Independent Medical Review (IMR) if the enrollee objects to
the disapproval; including any alternative drug or treatment
offered by the plan.
6)Prohibits health plans that cover prescription drugs from
limiting or excluding coverage for a drug on the basis that
the drug is prescribed for use different from that for which
the drug has been approved by the FDA, provided that specified
conditions have been met, including that the drug is
prescribed by a participating licensed health care
professional for the treatment of a chronic and seriously
debilitating condition, the drug is medically necessary to
treat that condition, and the drug is on the plan formulary.
7)Prohibits health plans that cover prescription drugs from
limiting or excluding coverage for a drug for an enrollee if
the drug was previously approved for coverage by the plan for
a medical condition of the enrollee and the plan's prescribing
provider continues to provide the drug for the medical
condition, provided that it is safe and effective for
treatment.
8)Clarifies that the prohibition in 7) above does not preclude
the prescribing provider from prescribing another drug that is
covered by the plan and is medically appropriate, nor does it
prohibit generic drug alternatives.
9)Requires health plans that provide prescription drug benefits
and maintain one or more drug formularies to provide to the
public, upon request, a copy of the most current list of
prescription drugs by major therapeutic category, with an
indication of whether any drugs on the list are preferred over
other listed drugs. Requires plans that maintain more than
one formulary to notify the requester that a choice of
formulary lists is available.
10)Requires, in regulations, health plans that cover outpatient
AB 889
Page 4
prescription drug benefits to cover all medically necessary
outpatient prescription drugs, as specified.
11)Establishes as California's essential health benefits (EHBs)
that are required of all nongrandfathered individual and small
group market health plans and insurers including qualified
health plans (QHPs) in Covered California, the Kaiser Small
Group Health Maintenance Organization (HMO) plan along with
the 10 federal Patient Protection and Affordable Care Act
(ACA) mandated benefits below:
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.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . The author asserts that a troubling and
dangerous trend occurring with health care plans is their use
of step therapy or "fail first" protocols which require a
patient to try and fail on up to five other medications before
the health plan covers the medication originally prescribed by
the patient's health care provider. For example, though a
doctor prescribed drug A for a patient, a health plan requires
the patient to first try drugs B, C, D, etc., and only after
the patient fails to respond to these medications will the
health plan approve the use of the initial medication. The
author points out that step therapy or fail first protocols
often take weeks to months to implement. According to the
author, health plans use step therapy as a cost-saving measure
but the research has shown that this policy can actually
increase health care costs due to unnecessary delays in a
patient getting the medication their provider prescribed.
This puts the patient's health at risk, as well as, leads to
AB 889
Page 5
increased health care utilization and time lost from work.
This bill would reduce the number of medications a patient has
to try and fail to no more than two before the original
prescribed medication is allowed by the patient's health plan.
This bill also requires health plans to have an expeditious
process in place for step therapy exceptions and that the
duration of step therapy be consistent with up-to-date,
evidence-based outcomes and current published peer-reviewed
medical and pharmaceutical literature.
2)STEP THERAPY . According to a 2001 report by the California
HealthCare Foundation (CHCF) relating to prescription drug
coverage and formulary use in California, step therapy
requires patients and physicians to follow a particular
sequence of drug treatment. In general, a patient must fail
to respond to a recommended first-line therapy before a
second- or third-line medication is prescribed. Typically,
this means that patients will be required to try medications
that have been on the market for a longer period of time and
are usually less expensive than the newer medications
available to treat a specific condition.
3)AVAILABLE LITERATURE . An October, 2010 survey by the Global
Healthy Living Foundation, a non-profit patient advocacy
group, showed that up to 70% of prescription medications are
changed by health plans, denying patients the drugs their
doctors initially prescribed. In the survey, 48% were
required to "fail first" for 30 to 60 days. In addition, 87%
of survey respondents reported that the "fail first" drug did
not work.
Findings from a study published in the October 2010 issue of the
American Journal of Psychiatry concluded that step therapy may
increase medical use and costs. In the study, researchers
analyzed claims data for antidepressant users enrolled in
employer health plans that implemented antidepressant step
therapy and compared them with antidepressant users enrolled
in plans that did not implement step therapy. In general,
step therapy was associated with an increase in outpatient
office visits, as well as, inpatient hospital admissions.
Step therapy was also associated with a 37% increase in the
number of emergency room visits and grew larger over time.
Specifically, for mental health-related utilization, the
number of mental-health related outpatient visits was 19%
higher, inpatient admissions was 21% higher and emergency room
AB 889
Page 6
visits was 18% higher. Moreover, the study pointed out that
"comprehensive reviews find that antidepressants cannot be
considered identical drugs, and evidence supports differences
with respect to onset of action, side effects, and effects on
health-related quality of life."
According to a 2009 national survey published in Health Affairs,
physicians reported spending an average of three hours weekly
interacting with health plans trying to resolve barriers to
prescription dispensing. Nurses and clerical staff reported
spending 55 hours per week. Converted into dollar amounts,
the national cost of healthcare provider interactions with
health plans is at least $23 billion to $31 billion per year.
The time to navigate prescription refills also involves
patients. One study found that some patients spend at least
four hours trying to resolve medication coverage issues.
4)CALIFORNIA HEALTH BENEFITS REVIEW PROGRAM (CHBRP) ANALYSIS .
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.
In its review of this bill, CHBRP found in the private market
the most common classes of drugs subject to three or more
fail-first protocol steps are: gastrointestinal agents or
proton pump inhibitors, beta blockers, and bone density
regulators. For Medi-Cal managed care plans the most common
drug classes are: opioid agonists, gastrointestinal agents or
proton pump inhibitors, and serontonin-norepinepherine
reuptake inhibitors. With regard to this bill, CHBRP also
found:
a) Medical Effectiveness .
i) The only study to directly evaluate the impact of
fail-first protocols on a health outcome found that step
therapy for nonsteroidal anti-inflammatory drugs (NSAIDs)
[i.e. aspirin, ibuprofen, naproxen], had no statistically
significant effect on quality of life among persons with
chronic pain;
ii) Although the stated goal of fail-first protocols is
not to prevent persons from receiving prescription
medications, the preponderance of evidence suggests that
this may occur for some persons. Persons may not obtain
AB 889
Page 7
prescription medications because they do not ask their
pharmacist or physician whether they can obtain an
exception to the fail-first protocol, the pharmacist does
not contact their physician to obtain an exception or a
prescription for an alternative medication covered by the
person's plan or policy, or the physician does not submit
the documentation needed to obtain an exception;
iii) Antihypertensives and antipsychotics are the only
classes of prescription medications for which there is
evidence that fail-first protocols are associated with
discontinuation of medication. There is insufficient
evidence to determine whether fail-first protocols are
associated with discontinuation of antidepressants,
NSAIDs, or proton pump inhibitors (long-lasting gastric
acid-reducers);
iv) The generalizability of findings from these studies
to this bill is unknown because none of these studies
assessed fail-first protocols involving more than two
steps and none compared a fail-first protocol with one or
two steps to a fail-first protocol with more than two
steps.
a) Utilization, Cost, and Coverage Impacts . CHBRP
determines that this bill would not result in a change in
the number of enrollees who use a specific medication
subject to three or more steps in a fail-first protocol;
rather, it would allow enrollees to receive access to the
prescribed medication in at least one fewer step (two
steps, instead of three); not result in a change in the
number of enrollees who use a medication in a therapeutic
class subject to three or more steps in a fail-first
protocol; rather, because enrollees would have access to
the prescribed medication more quickly, it would shift
utilization from other medications in the therapeutic class
to the prescribed drug; and, not result in a change in the
number of enrollees who purchase out-of-pocket (i.e., as a
noncovered benefit) a specific medication subject to three
or more steps in a fail-first protocol. Approximately
18.5% of enrollees subject to this bill have outpatient
prescription drug coverage that includes medications that
are subject to three or more steps in a fail-first
protocol, this bill would decrease that number to 0%.
CHBRP used the Milliman 2012 Health Cost Guidelines to
estimate the utilization and costs of medications that are
subject to three or more steps in fail-first protocols.
AB 889
Page 8
CHBRP estimates that 11.1 filled prescriptions per 1,000
enrollees annually are for drugs that are prescribed after
the second step but before the final step in a specific
therapeutic class. Postmandate, CHBRP estimates no change
in the number of enrollees who use a medication that is
currently subject to three or more steps in a fail-first
protocol, but that this bill would enable enrollees to
obtain the prescribed medication more quickly.
Postmandate, CHBRP estimates that with implementation of
this bill, the number of prescriptions filled for
medications that are subject to three or more steps in a
fail-first protocol would increase by 10%, which would be
offset by a decrease in the number of prescriptions filled
for other drugs within these therapeutic classes.
Increases as measured by per member per month (PMPM) premiums
are estimated to range from $0.01 to $0.16. In the
privately funded large-group market, the increase in
premiums is estimated to range from $0.07 PMPM for
DMHC-regulated plans to $0.01 PMPM for CDI-regulated
policies. For enrollees in the privately funded
small-group market, health insurance premiums are estimated
to increase by approximately $0.08 PMPM for DMHC-regulated
plan contracts, with no change for CDI-regulated policies.
For publicly funded DMHC-regulated health plans, CHBRP
estimates that premiums would increase by $0.16 for
Medi-Cal managed care plans. Total net annual health
expenditures are projected to increase by $26 million
(0.0180%). This increase in expenditures is due to a $24.6
million total increase in health insurance premiums and a
$1.4 million increase in enrollee copayments associated
with earlier use of final step medications.
b) Public Health Impact . CHBRP concludes this bill would
have an unknown public health impact.
1)EHB . According to CHBRP, this bill does not require
DMHC-regulated plans and CDI-regulated policies to provide
benefit coverage for prescription drugs. However, the ACA
(through EHBs) requires this expansion for nongrandfathered
plans and policies in the small group and individual markets.
This bill, therefore, would build on the ACA's expansion, and
restrict all nongrandfathered small group and individual
market plans and policies from requiring enrollees from trying
and failing more than two medications. The requirement or
AB 889
Page 9
restriction that this bill imposes in the design of the plan,
is not considered a state-required mandate, according to
regulations written by the federal Department of Health and
Human Services. Therefore, this bill would not require the
state to defray any costs for Qualified Health Plans purchased
through Covered California, the state's health insurance
exchange.
2)IMR . The current California IMR process requires an enrollee
or insured to attempt to resolve the dispute through an
internal process before seeking the external IMR. A report by
CHCF on the IMR process identified the following trends: in
56% of the IMRs, the appeal was requested for a female, while
in 44% it was for a male. California's IMR cases increased by
age, peaking in the 41 to 60 year old age bracket. Just over
half of all IMR cases involved one of four diagnosis
categories: orthopedics; neurology; mental health; or, cancer.
The specific treatments and services varied but most commonly
fell into four categories: surgery; pharmacy; diagnostic
imaging; and, durable medical equipment.
3)SUPPORT . Chronic pain advocacy groups, health care
professionals and community organizations support this bill.
The sponsor of this bill, For Grace, writes this bill
addresses the terrible shortcomings of step therapy and is of
special interest to patients in pain because they can tell
immediately whether a pain medication is working or not.
Additionally, medical organizations comment that research has
shown that step therapy can actually increase the direct cost
of health care in the long run due to excessive use of
emergency rooms, unscheduled hospital admissions, time off
work, excessive temporary indemnity benefits, and even job
loss. The California Society of Industrial Medicine and
Surgery, the California Society of Physical Medicine and
Rehabilitation and the California Neurology Society add that
seasoned and highly knowledgeable medical physicians know that
not all drugs are equivalent in terms of onset of efficacy,
dose required to achieve response, side effects, and
interactions with other drugs. They support patient access to
medications chosen by experienced clinicians to give them the
best and quickest chance of response, thus shortening
morbidity and disability. The Congress of California Seniors
state that this bill would change practices that have resulted
in higher long-term health care costs and the unnecessary
physical and emotional suffering caused by step therapy.
AB 889
Page 10
4)OPPOSE UNLESS AMENDED . America's Health Insurance Plans
(AHIP) argues this bill could increase access to potentially
dangerous and addictive pharmaceutical drugs by hindering the
ability of heath plans to promote alternative means of
treatments and limit potentially harmful or fatal drug
prescriptions. AHIP also believes this bill may increase
health care costs. AHIP cites National Health Expenditure
Data which indicate spending on prescription drugs in 2009
increased 5.9% to reach a total of nearly $250 billion. AHIP
requests several amendments which cross reference the
expeditious process in existing law; require duration of step
therapy to be consistent with peer-reviewed scientific,
medical and pharmaceutical evidence, nationally recognized
professional standards, expert opinion or generally accepted
standards of medical practice; and apply this bill to
participating prescribing providers.
5)OPPOSITION . Health plans and health insurers object to this
bill. The California Association of Health Plans raises
concerns that this bill gives noncontracted providers the same
privileges as they give contracted participating providers and
by doing so, this impedes the effectiveness of medical
protocols designed to minimize harmful side effects, if
necessary. Blue Shield of California states that step-therapy
protocols act as a check and balance to the cozy relationships
that exist between many physicians and drug companies.
Protocols directed and overseen by medical doctors and
pharmacists at health plans act as an additional review point
to ensure that patients are receiving the most effective
pharmaceuticals, not just the best marketed. The California
Chamber of Commerce argues this bill cannot be viewed in
isolation. This bill reduces health plan flexibility in
benefit management, increases health care costs and premiums,
thereby reducing employers' ability to offer an affordable
choice of benefit packages to their employees.
6)RELATED LEGISLATION .
a) AB 219 (Perea) requires health plan contracts and health
insurance policies that cover prescribed, orally
administered anticancer medications to limit an enrollee or
insured's total cost share to no more than $100 per filled
prescription. AB 219 passed the Assembly and is currently
in Senate Rules Committee pending referral.
AB 889
Page 11
b) AB 460 (Ammiano), also pending in the Assembly Health
Committee, requires coverage for the treatment of
infertility to be offered and provided without
discrimination on the basis of age, ancestry, color,
disability, domestic partner status, gender, gender
expression, gender identity, genetic information, marital
status, national origin, race, religion, sex, or sexual
orientation.
c) AB 912 (Quirk-Silva), currently in the Assembly Health
Committee, mandates that health care plan contracts and
health insurance policies that are issued, amended, or
renewed, on and after January 1, 2014, provide coverage for
medically necessary expenses for standard fertility
preservation services when a necessary medical treatment
may cause iatrogenic infertility to an enrollee or insured.
d) SB 126 (Steinberg), currently in the Senate Health
Committee, extends the sunset of the requirement for every
health plan contract that provides hospital, medical, or
surgical coverage and health insurance policy issued,
amended, or renewed on or after July 1, 2012, pursuant to
California's mental health parity law, to provide coverage
for behavioral health therapy for pervasive developmental
disorder or autism from July 1, 2014 to July 1, 2019.
e) SB 189 (Monning), also in the Senate Health Committee,
prohibits a health care service plan or health insurer from
offering a wellness program in connection with a group
health plan contract or group health insurance policy, or
offering an incentive or reward based on adherence to a
wellness program, as specified.
f) SB 320 (Beall) prohibits a health care service plan
contract or a health insurance policy issued, amended,
renewed, or delivered on or after January 1, 2014, from
denying coverage for medically necessary medical or
rehabilitation treatment for an acquired brain injury, as
specified.
g) SB 799 (Ron Calderon) requires a health care service
plan contract or a health insurance policy, except as
specified, that is issued, amended, or renewed on or after
January 1, 2014, to provide coverage for genetic testing
for hereditary nonpolyposis colorectal cancer and screening
AB 889
Page 12
for colorectal cancer under specified circumstances.
7)PREVIOUS LEGISLATION .
a) AB 369 (Huffman) of 2012 would have prohibited health
plans and health insurers that restrict medications for the
treatment of pain from requiring a patient to try and fail
on more than two pain medications before allowing the
patient access to the pain medication, or generically
equivalent drug, prescribed by the provider. AB 369 was
vetoed by the Governor. In his veto message the Governor
said, "While I sympathize with the author's good
intentions, I am not convinced that this bill strikes the
right balance between physician discretion and health plan
or insurer oversight. A doctor's judgment and a health
plan's clinical protocols both have a role in ensuring the
prudent prescribing of pain medications. Independent
medical reviews are available to resolve differences in
clinical judgment when they occur, even on an expedited
basis. If current law does not suffice and I am not
certain that it doesn't, any limitations on the practice of
"step-therapy" should better reflect a health plan or
insurer's legitimate role in determining the allowable
steps."
b) SB 866 (Ed Hernandez), Chapter 648, Statutes of 2011,
requires DMHC and CDI to jointly develop a 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.
c) AB 1826 (Huffman) of 2010 would have required a health
plan or health insurer that covers prescription drug
benefits to provide coverage for a drug that has been
prescribed for the treatment of pain without first
requiring the enrollee or insured to use an alternative
drug or product. AB 1826 died on the Senate Appropriations
Committee Suspense File.
d) AB 1144 (Price) of 2009 would have required health plans
and health insurers to report specified information
relating to chronic pain medication management requirements
for their enrollees or insureds to DMHC and CDI,
respectively. AB 1144 died on the Assembly Appropriations
AB 889
Page 13
Committee Suspense File.
8)AUTHOR'S AMENDMENTS . The author intends to request the
committee adopt clarifying amendments that ensure application
of the continuity of care requirements of Knox-Keene and
regulations to this bill.
REGISTERED SUPPORT / OPPOSITION :
Support
For Grace (sponsor)
American GI Forum of California
American Lung Association
Association of Northern California Oncologists
BIOCOM
California Academy of Family Physicians
California Alliance for Retired Americans
California Arthritis Foundation Council
California Chronic Care Coalition
California Healthcare Institute
California Hepatitis C Task Force
California Neurology Society
California Neurology Society
California Psychological Association
California Rheumatology Alliance
California Society of Anesthesiologists
California Society of Industrial Medicine and Surgery
California Society of Physical Medicine and Rehabilitation
California Urological Association
Combined Health Agencies
Congress of California Seniors
CreakyJoints.org
Familia Unida
Global Health Living Foundation
Healthy African American Families II
Hemophilia Council of California
Medical Oncology Association of Southern California, Inc.
Mental Health America of California
National Multiple Sclerosis Society
Neuropathy Action Foundation
Pharmacist Planning Service Inc.
Power of Pain Foundation
Spondylitis Association of America
U.S. Pain Foundation
Several Individuals
AB 889
Page 14
Opposition
Association of California Life & Health Insurance Companies
Blue Shield of California
California Association of Health Plans
California Chamber of Commerce
Analysis Prepared by : Allen Tong / HEALTH / (916) 319-2097