BILL ANALYSIS �
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: AB 889
AUTHOR: Frazier
AMENDED: May 2, 2013
HEARING DATE: June 26, 2013
CONSULTANT: Moreno
SUBJECT : Health care coverage: prescription drugs.
SUMMARY : Permits health care service plans and insurers
(collectively referred to as "carriers"), when there is more
than one drug that is appropriate for the treatment of a medical
condition, to require step therapy. Prohibits a health plan from
requiring an enrollee to try and fail on more than two
medications before allowing the enrollee access to the
medication, or generically equivalent drug, as specified.
Existing law:
1.Provides for regulation of health insurers by the California
Department of Insurance (CDI) under the Insurance Code, and
provides for the regulation of health plans by the Department
of Managed Health Care (DMHC), pursuant to the Knox-Keene
Health Care Service Plan Act of 1975 (Knox-Keene Act).
2.Requires carriers to provide certain benefits, but does not
require carriers to cover prescription drugs. Establishes
various requirements on carriers if they do offer prescription
drug coverage.
3.Prohibits carriers that cover prescription drugs from limiting
or excluding coverage for a drug on the basis that the drug is
prescribed for a use different from the use for which the drug
has been approved by the federal Food and Drug Administration,
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.
4.Establishes the Patient Protection and Affordable Care Act
(ACA), which imposes various requirements, some of which take
effect on January 1, 2014, on states, carriers, employers, and
individuals regarding health care coverage.
Continued---
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5.Requires, under the ACA, carriers that offer coverage in the
small group or individual market to ensure coverage includes
essential health benefits (EHB), as defined. Provides that the
EHB package will be determined by the federal Department of
Health and Human Services (HHS) Secretary and must include, at
a minimum, ambulatory patient services, emergency services,
hospitalizations, and prescription drugs, among other things.
This bill:
1.Permits carriers, when there is more than one drug that is
appropriate for the treatment of a medical condition, to
require step therapy. Prohibits carriers from requiring an
enrollee to try and fail on more than two medications before
allowing the enrollee access to the medication, or generically
equivalent drug, prescribed by the prescribing provider,
unless the FDA-approved label indication, peer-reviewed,
scientific, medical and pharmaceutical evidence, or clinical
research trials focusing on clinical outcomes supports that
more than two prior therapies should be used before using the
requested medication.
2.Requires a carrier that requires step therapy to have an
expeditious process in place to authorize exceptions to step
therapy when medically necessary and to conform effectively
and efficiently with the continuity of care requirements of
this bill and corresponding regulations.
3.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.
4.Prohibits a carrier, in circumstances where an
enrollee/insured is changing to a new carrier, from requiring
the enrollee/insured to repeat step therapy when he/she 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
his/her condition. Prohibits anything in this bill from
precluding the new carrier from imposing a prior authorization
requirement for the continued coverage of a prescription drug
prescribed pursuant to step therapy imposed by the former
carrier, or preclude the prescribing provider from prescribing
another drug covered by the new carrier that is medically
appropriate for the enrollee/insured.
5.Defines a number of terms for the purposes of this bill,
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including that "step therapy" means a protocol that specifies
the sequence in which different prescription drugs for a given
medical condition that are medically appropriate for a
particular patient are to be prescribed.
6.Clarifies that this bill does not prohibit a carrier from
charging a enrollee/insured a copayment, coinsurance, or a
deductible for prescription drug benefits or from setting
forth, by contract, limitations on maximum coverage of
prescription drug benefits, provided that the copayments,
coinsurance, deductibles, or limitations are reported to, and
held unobjectionable and communicated to the enrollee/insured,
as specified.
7.Prohibits anything in this bill from being construed to
require coverage of prescription drugs not in a plan's drug
formulary or to prohibit generically equivalent drugs or
generic drug substitutions.
8.Exempts accident-only, specified disease, hospital indemnity,
Medicare supplement, dental-only, or vision-only contracts and
policies from the provisions of this bill.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, across almost all sectors of the health insurance
market, insurance premiums would be expected to increase because
step therapy is used to control costs and this bill limits its
use. According to the California Health Benefits Review Program
(CHBRP), the increase to Medi-Cal Managed Care plan expenditures
would be approximately $11 million. At least one California
Public Employees' Retirement System (CalPERS) health plan uses
step therapy, for significant savings, so this bill could also
lead to higher costs, potentially greater than $1 million, for
CalPERS.
PRIOR VOTES :
Assembly Health: 15- 4
Assembly Appropriations: 13- 4
Assembly Floor: 59- 17
COMMENTS :
1.Author's statement. A troubling and dangerous trend occurring
with health plans is frequent denial of coverage to enrollees
for timely and effective medications that their doctors
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prescribe. Many health plans utilize step therapy, or "fail
first", which requires a patient to try and fail on up to five
older, less-effective treatments before they will cover the
treatment originally prescribed by their doctor. Oftentimes,
patients are not aware of the change until he or she arrives
at the pharmacy to pick up their prescription. So even though
a doctor might recommend drug A to treat a patient, a health
plan requires the patient first try drugs B, C, D, etc., and
only after the patient fails to respond to these medications -
or worse yet, their health declines - can they receive the
medicine their doctor prescribed. The author points out that
step therapy can mean days, weeks, or months without the
proper treatment. For Californians living with a host of
serious conditions including cancer, arthritis, multiple
sclerosis, or mental health conditions, this unnecessary delay
in care is not only cruel, but also endangers patient health
and well-being. According to the author, health plans use
step therapy as a cost-saving measure but research has shown
that this policy can actually increase health care costs
because it prevents patients from immediately receiving the
medications their doctors know will work, and often
exacerbates health problems, allowing controllable conditions
to spiral out of control. The result is excessive use of
emergency rooms; unscheduled hospital admissions; missed work,
and even job loss.
2.Chronic pain. According to the National Institute of
Neurological Disorders and Stroke, while acute pain is a
normal sensation triggered in the nervous system to alert you
to possible injury and the need to take care of yourself,
chronic pain persists. Pain signals keep firing in the nervous
system for weeks, months, and even years. There may have been
a triggering event (such as a sprained back or a serious
infection) or there may be an ongoing cause of pain (such as
arthritis, cancer, or ear infection), but some people suffer
chronic pain in the absence of any past injury or evidence of
body damage. Many chronic pain conditions affect older adults.
Common chronic pain complaints include headache, low back
pain, cancer pain, arthritis pain, neurogenic pain (pain
resulting from damage to the peripheral nerves or to the
central nervous system itself), and psychogenic pain (pain not
due to past disease or injury or any visible sign of damage
inside or outside the nervous system). A person may have two
or more co-existing chronic pain conditions. Such conditions
can include chronic fatigue syndrome, endometriosis,
fibromyalgia, inflammatory bowel disease, interstitial
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cystitis, temporomandibular joint dysfunction, and vulvodynia.
It is not known whether these disorders share a common cause.
3.Fail-first protocols. According to CHBRP, step therapy, or
fail-first protocols, may be implemented as methods of
utilization management in a variety of ways and are known by a
number of terms. Step therapy, when implemented by carriers,
requires an enrollee to try a first-line medication (often a
generic alternative) prior to receiving coverage for a
second-line medication (often a brand-name medication). Step
edit is a process by which a prescription, submitted for
payment authorization, is electronically reviewed at
point-of-service for use of a prior, first-line medication.
For either step therapy or step edit, upon decline of coverage
for the prescription, a patient's health care provider may
reissue the prescription for a first-line agent covered by the
patient's health plan contract or policy or appeal the
decision. Alternatively, the patient may purchase the
prescription despite the lack of coverage. A fail-first
protocol may also be the basis for part or all of a
precertification or prior authorization protocol, which may
also require the prescribing provider to confirm to the plan
or insurer that an alternate medication or medications have
been unsuccessfully tried by the patient before the coverage
for the prescribed medication is approved. However, not all
prior authorization protocols have a fail-first component.
Some prior authorization protocols are based on other
criteria, such as intended use to treat a specific medical
problem or diagnosis, or confirmation that the patient meets
other criteria such as age or specified comorbidities.
4.Potential effects of the ACA. The ACA requires that,
beginning 2014, states "make payments?to defray the cost of
any additional benefits" required of qualified health plans
(QHPs) sold in the Exchange. According to CHBRP, this bill
does not require coverage of additional benefits as it
specifically indicates, "Nothing in this section shall be
construed to require coverage of prescription drugs not in a
[plan's/insurer's] drug formulary or to prohibit generically
equivalent drugs or generic drug substitutions as authorized
by Section 4073 of the Business and Professions Code." The ACA
provisions related to the Exchange are silent on step therapy
and fail-first protocols. EHBs are directed to include
prescription drugs. To determine whether any additional state
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fiscal liability, as it relates to the Exchange, would be
incurred under this bill, the following factors would need to
be examined:
a. Determination of whether this bill requires additional
benefits in the first place, since the bill does not
mandate coverage of prescription drugs;
b. The scope of prescription drug benefits in the final EHB
package and whether federal guidelines or regulations will
provide any guidance on the utilization management of the
prescription drug benefit for QHPs to be offered in the
Exchange;
c. The number of enrollees in QHPs; and,
d. The methods used to define and calculate the cost of
additional benefits.
5.Essential health benefits and state benefit mandates.
Effective January 1, 2014, federal law requires Medicaid
benchmark and benchmark equivalent plans, plans sold through
the Exchange and the Basic Health Program (if enacted), and
carriers providing coverage to individuals and small employers
to ensure coverage of EHBs, as defined by the HHS Secretary.
HHS is required to ensure that the scope of EHBs is equal to
the scope of benefits provided under a typical employer plan,
as determined by the Secretary. Under federal law, EHBs must
include 10 general categories and the items and services
covered within the categories:
� Ambulatory patient services;
� Emergency services;
� Hospitalization;
� Maternity and newborn care;
� Mental health and substance use disorder services,
including behavioral health treatment;
� Prescription drugs;
� Rehabilitative and habilitative services and devices;
� Laboratory services;
� Preventive and wellness services and chronic disease
management; and,
� Pediatric services, including oral and vision care.
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, designate the Kaiser
Small Group health plan to serve as California's EHB benchmark
plan.
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1.CHBRP analysis. AB 1996 (Thomson), Chapter 795, Statutes of
2002, requests the University of California to assess
legislation proposing a mandated benefit or service and
prepare a written analysis with relevant data on the medical,
economic, and public health impacts of proposed health plan
and health insurance benefit mandate legislation. CHBRP was
created in response to AB 1996, and SB 1704 (Kuehl), Chapter
684, Statutes of 2006, extended CHBRP for four additional
years. Below are major findings of CHBRP's analysis.
a. Medical Effectiveness: CHBRP identified 15 articles
that present findings from 13 studies of the impact of
fail-first protocols. None of the studies identified by
CHBRP examined fail-first protocols that required enrollees
to try and fail more than two other medications before
obtaining the initially prescribed medication, as would be
prohibited under this bill. Most required a trial of only
one other prescription drug. None of the studies compared
the impact of a fail-first protocol involving one or two
steps to a fail-first protocol involving more than two
steps. These studies addressed fail-first protocols for
antidepressants, anti-hypertensives, antipsychotics and
anticonvulsants, non-steroidal anti-inflammatory drugs
(NSAIDs), and proton pump inhibitors (PPIs).
Six of the 13 studies examined effects of fail-first
protocols on persons who had private
health insurance. Seven studies assessed effects on persons
enrolled in Medi-Cal. Five studies were wholly or
partially funded by pharmaceutical companies and three were
conducted by employees of a pharmacy benefit management
company. Sponsorship of studies of medications or medical
devices by manufacturers is associated with results and
conclusions that are more favorable to their products.
Sponsorship may also affect findings from studies of
fail-first protocols aimed at reducing use of a
manufacturer's products.
Methodological considerations
None of the 13 studies CHBRP identified were randomized
controlled trials (RCTs), most were non-randomized studies
with comparison groups. The most frequently assessed
outcomes were utilization of prescription medications and
other medical services, including hospital admissions,
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emergency department visits, and outpatient visits. Such
changes in utilization may be associated with changes in
health status but CHBRP identified no studies that provided
direct evidence of a change in health outcomes aside from a
small study on the impact of step therapy on quality of
life. Synthesis of findings across studies is difficult
because for most classes of medications
outcomes were not measured consistently across studies.
Findings of included studies
The only study to directly evaluate the impact of
fail-first protocols on a health outcome
found that step therapy for NSAIDs had no statistically
significant effect on quality of life
among persons with chronic pain. 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 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.
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 PPIs. For prescription medications that should be taken
daily, the number of days' supply dispensed can be an
important indicator of adherence to treatment. The
preponderance of evidence suggests that fail-first
protocols are not associated with the number of days'
supply of antidepressant medication dispensed. Findings
from studies of the impact of fail-first protocols on days'
supply of antihypertensive medication are ambiguous. CHBRP
identified no studies of the relationship between
fail-first protocols and days' supply of antipsychotics,
anticonvulsants, NSAIDs, and PPIs.
Findings from studies of the impact of fail-first protocols
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on rates of hospital admissions,
emergency department visits, and outpatient visits are
inconsistent across classes of
prescription medications. CHBRP concluded that 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.
b. Benefit Coverage, Utilization, and Cost Impacts
CHBRP assumes that implementation of AB 889 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 non-covered
benefit) specific medications subject to three or more
steps in a fail-first protocol.
Coverage impacts
CHBRP concluded that 18.5 percent 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. If this bill were enacted,
this would decline to 0 percent.
Utilization impacts
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.
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. Post-mandate, CHBRP estimates no change
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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 implementation of this bill would enable
enrollees to obtain the prescribed medication more quickly.
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 percent, which would be offset by a
decrease in the number of prescriptions filled for other
drugs within these therapeutic classes.
Cost impacts
Increases as measured by per member per month (PMPM)
premiums are estimated to range from $0.01to $0.16. In the
privately funded large-group market, the increase in
premiums is estimated to range from $0.07 PMPM among
DMHC-regulated plans to $0.01 PMPM among 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 among CDI-regulated
policies. CHBRP estimates no change in the privately funded
individual market. 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 $26 million (0.0180 percent). 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.
a. Public Health Impacts
CHBRP concludes that passage of this bill would have an
unknown public health impact, stating that there is
insufficient evidence to determine whether fail-first
protocols, regardless of the number of steps, directly
affect health outcomes. The extent of any racial or ethnic
disparities in the prevalence of the use of more than two
steps in fail-first protocols is unknown due to lack of
evidence. Therefore, the extent to which AB 889 would have
an impact on possible disparities is unknown. There is
insufficient evidence about the impact of fail-first
protocols on premature death, and therefore the impact of
AB 889 is unknown. There is insufficient evidence about the
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impact of fail-first protocols on economic loss, and
therefore the impact of this bill is unknown.
b. Interaction With the Federal Affordable Care Act
This bill does not require DMHC-regulated plans and
CDI-regulated policies to provide benefit coverage for
prescription drugs. However, the ACA (through essential
health benefits) requires this expansion for
non-grandfathered plans and policies in the small group and
individual markets. This bill therefore, would build on the
ACA's expansion, and restrict all non-grandfathered small
group and individual market plans and policies from
requiring enrollees from trying and failing more than two
medications. The requirement-or 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 (QHPs) purchased in
Covered California, the state's health insurance exchange.
1.Prior legislation. AB 369 (Huffman) of 2012 would have
prohibited carriers that restrict medications for the
treatment of pain, pursuant to step therapy or fail-first
protocol, 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, as
defined, prescribed by the prescribing provider, as defined.
AB 369 was vetoed by Governor Brown, who stated:
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.
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AB 1826 (Huffman) of 2010 would have required a carrier 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.
2.Support. Supporters, including the Association of Northern
California Oncologists, the Medical Oncology Association of
Southern California, the Congress of California Seniors, the
California Healthcare Institute, and the California Society of
Physical Medicine and Rehabilitation, the California Neurology
Society, and the California Society of Industrial Medicine and
Surgery, write that this bill would bring California one step
closer to changing practices that have resulted in higher
long-term health care costs and the unnecessary physical and
emotional suffering of patients caused by step therapy.
According to supporters, under step therapy or "fail first",
some patients are required to try up to five individual
medications; leaving the duration up to the health plan, which
can last longer than ninety days. Supporters state that only
after the patient fails to respond to these alternative drugs
will they be allowed to receive the medicine their doctor
originally prescribed. Supporters state that research has
shown that with the current policy, direct costs in health
care can actually increase due in large part to over use of
emergency rooms, unscheduled hospital admissions, time off
from work, and even job loss. The California Arthritis
Foundation Council states that limiting the number of "steps"
to no more than two will be consistent with what the is
already taking place federally in the Medicare program. BIOCOM
states that the patient's wellbeing is sacrificed in the name
of "cost savings", despite the physician's clear wishes. The
California Academy of Physician Assistants writes that this
bill is an important patient protection bill that allows
health care providers and their patients to make decisions
about the most appropriate treatment option rather than being
limited by a health plan or health insurer step-therapy or
fail first protocol.
3.Opposition. According to the California Association of Health
Plans (CAHP), step therapy is a patient safety tool that helps
ensure that medical and cost management work in tandem in the
delivery of appropriate care, which is important. CAHP states
that prescription drug costs represent 16 percent of the
enrollee premium dollar and, according to some estimates, are
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rising faster than the cost of other medical services. CAHP
further states that with addiction to prescription pain
medication an increasing problem, it is an important patient
safety measure. Finally, CAHP states that this bill should be
limited to in-network providers, as those provider must follow
certain consumer protections and it in the plan's ability to
manage the quality and efficacy of services. The California
Chamber of Commerce and the California Manufacturers &
Technology Association write that this bill will eliminate
valuable cost control mechanisms used by health plans and
unravel consumer protections in the use of prescription
medicines by restricting the practice of step therapy. 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, and that it is
well documented that drug company representatives have
unparalleled access to medical offices, which is used to
leverage their products.
4.Oppose unless amended. America's Health Insurance Plans
(AHIP) writes that any expedited or standard process for
obtaining prescription drugs, including pain medications, must
be supported by clinical evidence as currently outlined in
state law, and is available to only contracted prescribing
providers. AHIP states that by limiting this bill to only
contracted providers, health plans and insurers are able to
track prescribing patterns and quickly identify providers that
may engage in outlier prescribing behavior and investigate if
any type of abuse is occurring.
SUPPORT AND OPPOSITION :
Support: For Grace (sponsor)
California Arthritis Foundation (co-sponsor)
American Cancer Society
American GI Forum of California
American Lung Association
Association of Northern California Oncologists
BayBio
BIOCOM
California Academy of Physician Assistants
California Alliance for Retired Americans
California Chapter of the American Association of
Clinical Endocrinologists
California Chronic Care Coalition
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California Healthcare Institute
California Hepatitis C Task Force
California Neurology Society
California Professional Firefighters
California Rheumatology Alliance
California Society of Anesthesiologists
California Society of Industrial Medicine and Surgery
California Society of Physical Medicine and
Rehabilitation
California Urological Association
Capital Medical Society
Coalition of State Rheumatology Organizations
Combined Health Agencies
Congress for California Seniors
Familia Unida
Global Healthy Living Foundation (CreakyJoints.org)
Healthy African American Families
Hemophilia Council of California
Huntington's Disease Society of America
Lung Cancer Alliance
Lupus Foundation of Southern California
Medical Oncology Association of Southern California
Mental Health America of California
National Multiple Sclerosis Society
Neuropathy Action Foundation
Pharmacist Planning Services Inc.
Power of Pain
Spondylitis Association of America
Union of American Physicians and Dentists
U.S. Pain Foundation
Valley Industry and Commerce Association
Oppose: America's Health Insurance Plan (unless amended)
Association of California Life and Health Insurance
Companies
Blue Shield of California
California Association of Health Plans
California Chamber of Commerce
California Manufacturers and Technology Association
-- END --
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