BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
AB 889 (Frazier) - Health care coverage: prescription drugs.
Amended: May 2, 2013 Policy Vote: Health 7-2
Urgency: No Mandate: Yes
Hearing Date: August 12, 2013
Consultant: Brendan McCarthy
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 889 would prohibit health plans and health
insurers from requiring a patient to try and fail on two
medications before allowing the patient access to the medication
originally prescribed by the patient's medical provider
(commonly referred to as step therapy).
Fiscal Impact:
One-time costs of about $300,000 to adopt regulations and
review compliance by health plans by the Department of
Managed Health Care (Managed Care Fund).
One-time costs of about $100,000 and ongoing costs of about
$50,000 per year for enforcement by the Department of
Managed Health Care (Managed Care Fund).
Minor costs to the Department of Insurance to review
compliance by health insurers (Insurance Fund).
Increased costs to CalPERS of about $2.6 million per year
to provide prescription drug coverage to its members
(General Fund and special funds). CalPERS indicates that one
of its health plans makes use of step therapy with more than
two steps for a variety of prescription drugs. Under the
bill, CalPERS indicates that it will be limited in its
ability to require less costly drugs to be used first,
increasing overall costs.
The California Health Benefits Review Program analysis of
this bill indicated that there are not likely to be
significant cost increases to CalPERS. The California Health
Benefits Review Program indicates that its estimate of costs
to CalPERS health plans is based on those plans'
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proportional share of statewide estimated costs. It may be
the case that one of CalPERS health plans makes more
extensive use of step therapy than is common in the rest of
the market, thus the cost to CalPERS could be higher than
estimated by the California Health Benefits Review Program.
Increased costs to Medi-Cal managed care plans of about $11
million per year to provide prescription drugs to enrollees
(50% General Fund and 50% federal funds), based on
information from the California Health Benefits Review
Program.
No anticipated costs to subsidize benefits in the
California Health Benefit Exchange. See below.
Background: Under current law, health plans are regulated by the
Department of Managed Health Care and health insurers are
regulated by the Department of Insurance. Health plans and
health insurers in the state are not currently required to cover
pharmacy benefits, but they are subject to certain regulatory
requirements if they do offer coverage.
Health plans and insurers (or subcontracted pharmacy benefit
managers) sometimes required patients to use a process known as
"fail first protocol" or "step therapy" for certain drugs. Under
step therapy, before a patient can access a specific medication
prescribed by the provider, the patient must first attempt to
use one or more alternative medications. If those medications do
not have the intended therapeutic effect, the patient progresses
to the next medication. The use of step therapy varies between
health plans and insurers, with different drugs covered by such
protocols and different numbers of steps required.
Proposed Law: AB 889 would limit the ability of health plans and
health insurers to use fail first protocols or step therapy,
when the health plan or insurer provides pharmacy benefits.
Specific provisions of the bill would:
Generally prohibit health plans and insurers from requiring
a patient to try and fail on more than two medications
before the patient can access the medication (or its generic
equivalent) that was initially prescribed by the patient's
medical provider;
Allow more than two steps to be used, provided that the
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FDA-approved label indication, peer review medical evidence,
or clinical research trials indicate that more than two
steps should be used before using a particular drug;
Require health plans and health insurers to have an
expeditious process for authorizing exceptions to step
therapy requirements when medically necessary;
Specifically not prohibit a health plan or insurer from
charging copayments or deductibles or limiting maximum
coverage for pharmacy benefits;
Specifically not require coverage of drugs not on a health
plan or insurer's formulary or prohibit generic drug
substitution for brand name drugs.
Related Legislation:
AB 369 (Huffman, 2012) was similar to this bill. However,
the limitations on step therapy in that bill were limited to
pain medications. AB 369 was vetoed by Governor Brown.
AB 1826 (Huffman, 2010) was substantially similar to AB 369
(Huffman, 2012). That bill was held on this committee's
Suspense File.
AB 219 (Perea) would set maximum cost-sharing amounts for
oral anticancer drugs. That bill will be heard in this
committee.
AB 460 (Ammiano) would add non-discrimination language to
the current mandate to offer infertility treatment. That
bill will be heard in this committee.
AB 912 (Quirk-Silva) would require every health insurance
policy and health plan contract to provide coverage for
medically necessary fertility preservation services when
medical treatment may cause infertility. That bill will be
heard in this committee.
Staff Comments: Under the federal Patient Protection and
Affordable Care Act, health coverage provided in the small group
or individual market (including through health exchanges) must
provide essential health benefits. The Affordable Care Act
specifies the general categories of benefits that must be
provided, which includes prescription drugs. Under federal
guidance, the states will be able to select an essential health
benefits benchmark plan. After 2014, all coverage provided in
the small group and individual markets must provide coverage
equal to or greater than the coverage provided by the benchmark
plan. The state has selected the Kaiser Small Group HMO as the
state's essential health benefits benchmark plan.
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Under federal law, individuals purchasing coverage through
health benefit exchanges will be eligible for subsidies, based
on income, paid by the federal government.
Under federal law, if a state imposes a benefit mandate after
January 1, 2012 that exceeds the benefits provided by the
essential health benefits benchmark plan, the state is
responsible for providing the subsidies for coverage of that
mandated benefit.
While this bill places some constraints on the ability of health
plans and health insurers to use step therapy, the bill does not
mandate health plans or health insurers to provide any
additional benefits to patients. Therefore, this bill does not
impose an additional benefit mandate under the Affordable Care
Act and there would be no obligation on the state to provide
subsidies for coverage through the California Health Benefit
Exchange.
The only costs that may be incurred by a local government under
this bill relate to crimes and infractions. Under the California
Constitution, such costs are not reimbursable by the state.