BILL ANALYSIS Ó
AB 2418
Page 1
Date of Hearing: April 29, 2014
ASSEMBLY COMMITTEE ON HEALTH
Richard Pan, Chair
AB 2418 (Bonilla and Skinner) - As Amended: April 23, 2014
SUBJECT : Health care coverage: prescription drugs: refills.
SUMMARY : Requires health plan contracts and health insurance
policies issued amended or renewed on or after January 1, 2016,
which cover prescription drugs, to allow enrollees/insureds to
opt out of any mandatory mail order program, allow for the
synchronization of prescription refills, and permit refill of
topical ophthalmic medications at 70% of the predicted days of
use, if specified conditions are met. Specifically, this bill :
1)Requires health plan contracts and health insurance policies
which cover prescription drugs to comply with the following
requirements:
a) Mail order opt out. Establish a process for
enrollees/insureds to opt out of any mandatory mail order
program imposed by the contract or policy providing:
i) The opt out process does not impose conditions or
restrictions, including but not limited to, prescriber
approval or submission of documentation by the
enrollee/insured;
ii) Enrollees/insureds are allowed to opt out and to
revoke the opt out at any time;
iii) Enrollee/insured opt out choices are valid for the
duration of the plan year or until the enrollee revokes
the opt out, whichever occurs first, if the enrollee is
in the same product with the same subscriber or plan
sponsor;
iv) The issuing health plan or insurer provides notice
to the enrollee/insured that they are subject to the
mandatory mail order program, at the time of first fill
of an affected drug, informing them of the right to opt
out, as specified; and,
v) The opt out process does not apply to any drug which
is not available at a network pharmacy due to any of the
following: an industry shortage as determined by the
federal Food and Drug Administration (FDA); a
AB 2418
Page 2
manufacturer's instructions or restrictions; any risk
evaluation and management strategy approved by FDA; or, a
special shortage affecting the plan's pharmacy network.
b) Synchronization of refills. Permit and apply a prorated
daily cost-sharing rate to the refills of prescriptions
dispensed at a network pharmacy for less than the standard
amount in order to synchronize an enrollee/insured's
medications providing:
i) The prescriber or pharmacist indicates the refill
could be in the enrollee/insured's best interest for the
purpose of synchronizing medications;
ii) The prescription is not subject to quantity limits
or other utilization controls inconsistent with
synchronization, including but not limited to,
prescribing and dispensing guidelines for controlled
substances;
iii) The prescription is dispensed by a single network
pharmacy;
iv) The patient has completed at least 90 consecutive
days on the medication and the prescription can be
effectively split, as specified;
v) The prescriber has not indicated orally or in
writing "no change in quantity," or words of similar
meaning, as specified; and
vi) Synchronization does not apply to any drug which is
not available at a network pharmacy due to any of the
following: an industry shortage as determined by the
federal FDA; a manufacturer's instructions or
restrictions; any risk evaluation and management strategy
approved by FDA; or, a special shortage affecting the
plan's pharmacy network.
c) Topical ophthalmics. Allow for refills of covered
ophthalmic products at 70% of the predicted days of use.
2)Specifies that this bill does not establish a new or mandated
benefit or prevent the application of deductibles, copayments
and coinsurance provisions in the contract or policy.
EXISTING LAW :
1)Establishes the Department of Managed Health Care (DMHC) to
regulate health plans and the California Department of
AB 2418
Page 3
Insurance to regulate health insurers.
2)Establishes the California State Board of Pharmacy (Board)
which regulates and licenses pharmacists and issues pharmacy
permits in multiple settings.
3)Imposes requirements on pharmacists and on the dispensing of
prescription medicines, including, but not limited to,
specific notice and labeling requirements related to the
dispensing of prescription drugs and the requirement for a
pharmacist to provide oral consultation to a patient or
patient's agent in all care settings, for new or revised
prescriptions, as specified, unless the patient/agent refuses
consultation. If the patient/agent is not present, the
pharmacist must provide a written notice, as specified, which
must include a telephone number from which the patient can
obtain consultation.
4)Requires health plans and insurers providing health coverage
in the individual and small group markets to cover, at a
minimum, essential health benefits (EHBs), including the ten
EHB benefit categories in the Patient Protection and
Affordable Care Act (ACA), (one of which is prescription
drugs), and consistent with California's EHB benchmark plan,
the Kaiser Foundation Health Plan Small Group HMO 30 plan
(Kaiser benchmark), as specified in state law.
5)Requires EHB prescription drug coverage offered, sold and
renewed by health plans and insurers after January 1, 2014 to
comply with specified California statutory and regulatory
standards which predated the ACA and applied to health plans
under the jurisdiction of DMHC, including the Kaiser
benchmark.
6)Requires health and 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.
7)Establishes in federal law the ACA which, among other
provisions:
a) Requires issuers of individual and small group coverage
to, at a minimum, cover EHBs in the following ten
categories: Ambulatory patient services, emergency
AB 2418
Page 4
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.
b) Requires states to select a "benchmark plan" to serve as
the minimum coverage standard for EHBs, choosing from among
specified employer plans offered in the state.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . According to information provided by
the author, this bill is aimed at improving patient medication
adherence and health outcomes through streamlining the
medication refill process using the three strategies mandated.
The author states that by creating processes that support and
improve patient access to medications; patients experience
better health outcomes and improved quality of life. Patients
who pick up their medications at their local pharmacy have the
opportunity to talk with the pharmacist about how to properly
take their medications and to understand the positive benefits
of taking their medication. The author points to research
that shows approximately 50% of patients with chronic health
conditions such as heart disease and diabetes do not take
their medications as prescribed and 20-30% of medications are
never filled. Patients that do not take their medications
regularly are at a greater risk of poor health outcomes and
hospitalization.
2)BACKGROUND .
a) California Health Benefits Review Program. The
California Health Benefits Review Program (CHBRP) reviewed
this bill at the request of this committee. CHBRP analyzed
the introduced version of this bill but subsequently
notified the committee that the April 22, 2014 amendments
do not change the substantive findings of their analysis.
The key findings of the CHBRP report are:
AB 2418
Page 5
CHBRP estimates that in 2015, 23.4 million Californians will
be enrolled in state-regulated health insurance and that
23.1 million of these enrollees will have coverage for
outpatient prescription drugs affected by this bill. These
figures include Medi-Cal beneficiaries and CalPERS
enrollees with coverage in health plan contracts and health
insurance policies subject to this bill.
i) Impact on expenditures. Total expenditures are
estimated to increase by $3.3 million (0.003%), due to
this bill;
ii) EHBs. This bill affects terms of benefit coverage
and would not exceed California's definition of EHBs;
iii) Medical effectiveness. CHBRP evaluated the
literature relating to the effect on adherence of the
three provisions in this bill (mandatory mail opt-out
requirement; synchronization; early topical ophthalmic
product refill). CHBRP found insufficient evidence to
determine the effect these provisions may have on
adherence. CHBRP noted that the absence of evidence does
not mean there is no effect. CHBRP did find some
evidence in the literature that pharmacist-based
interventions may increase medication adherence, but
noted that this bill does not mandate such interactions.
iv) Benefit coverage. Post mandate, CHBRP estimates the
following changes: 1.07 million enrollees (who have
mandatory mail order requirements) would gain an opt-out
process for mandatory mail order; 10.28 million enrollees
would gain coverage for synchronization refills; 10.43
enrollees (who had coverage for topical ophthalmic
product refills at 75-85%) would have coverage for
topical ophthalmic product refills at 70% of expected
days of use;
v) Utilization. Post mandate, CHBRP estimates the
following changes: retail pharmacy refills would increase
by 0.26% (with a commensurate decrease in mandatory mail
refills due to switching from mail to retail refills);
topical ophthalmic product refills would increase by
0.12%; and,
vi) Public health. Although this bill would result in a
limited increase in filled prescriptions, CHBRP found
insufficient evidence to estimate any impact on
medication adherence, so the impact on the public's
health from this bill is unknown.
AB 2418
Page 6
b) Specialty drugs. New developments in medication therapy
have resulted in break-through treatments for complex
diseases. These advances have created a relatively new
class of prescription medications that is commonly referred
to as biopharmaceuticals - also known as specialty
medications or specialty drugs. According to CHBRP,
prescription drug benefits are a specific type of covered
benefit usually subject to cost-sharing as part of the
medical benefit or a separate outpatient prescription drug
benefit. Some payers use a four-tier system which includes
life-style drugs and specialty drugs in the fourth tier;
typically these are the most costly drugs. The four-tier
design frequently results in greater enrollee out-of-pocket
expenses. CHBRP notes that there is no standard industry
definition of specialty prescription drugs, but it is
generally recognized by many payers as prescription drugs
with an average minimum monthly cost of $1,150. Specialty
medications can cost as much as $200,000 per year and are
costly to ship, store, and administer. Other criteria may
include prescription drugs that treat a rare disease,
require special handling, or have a limited distribution
network. Most of the conditions targeted by specialty
drugs tend to be chronic and progressive in nature and can
impact quality of life, along with morbidity and mortality,
such as growth hormone disorders, rheumatoid arthritis,
asthma, multiple sclerosis, hepatitis C, hemophilia,
cancer, and lupus.
c) Medicare Part D prescription drug program. Medicare
Part D, the Medicare prescription drug benefit, is the
federal program which subsidizes the cost of prescription
drugs for Medicare beneficiaries, enacted as part of the
Medicare Modernization Act of 2003 and effective on January
1, 2006. According to CHBRP, all three of the strategies
required under this bill are in effect for Medicare
beneficiaries. Regulations implementing Medicare Part D
require that Part D sponsors 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 also include "level playing field between
mail-order and network pharmacies" provisions which require
AB 2418
Page 7
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 retail pharmacy to pay higher
cost-sharing applicable for that setting than would
otherwise apply at a mail-order pharmacy.
d) Patient consultation. California pharmacy regulations
require pharmacies to maintain patient medication profiles
and counsel patients regarding their prescription
medication before dispensing. According to information on
the Website of the Board, consultation provides the
pharmacist with the opportunity to educate patients who
present new prescriptions and protect them from potential
problems associated with a new medication by discussing
possible side effects, contraindications and the importance
of following directions. The Board also states
consultation provides the pharmacist one more opportunity
to prevent dispensing errors by inspecting the medication
container's contents to assure that the proper drug is
dispensed.
e) Pharmacist Dispensing of 90-Day Supply of Drugs. SB
1301 (Ed Hernandez), 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 the same amount if the following
requirements are satisfied:
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.
f) Pharmacy Benefit Managers (PBMs). According to the
Federal Trade Commission (FTC), many health plan sponsors
AB 2418
Page 8
offer their members prescription drug insurance and hire
PBMs to manage these pharmacy benefits. 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.).
FTC reports that PBMs engage in many activities to manage
their clients' prescription drug insurance coverage. In
addition to assembling pharmacy networks, PBMs consult with
plan sponsors to decide for which drugs a plan sponsor will
provide insurance coverage to treat each medical condition
(e.g., hypertension, high cholesterol, etc.). The PBM
manages this list of preferred drug products (the
"formulary") for each of its plan sponsor clients.
Consumers with insurance coverage are then provided
incentives, such as low copayments, to use formulary drugs.
Because formulary listing will affect a drug's sales,
pharmaceutical manufacturers compete to ensure that their
products are included on these formularies. They do so by
paying PBMs "formulary payments" to obtain formulary
status, and/or "market-share payments" to encourage PBMs to
dispense their drugs. These payments are based on the
quantity of drugs dispensed under the plans administered by
the PBM. PBMs also often use mail-order pharmacies to
manage prescription drug costs. Many plan sponsors
encourage patients with chronic conditions who require
repeated refills to seek the discounts that 90-day
prescriptions and high-volume mail-order pharmacies can
offer. Many PBMs own their own mail-order pharmacies.
PBMs have suggested that they have greater control over the
drugs dispensed through mail-order pharmacies and,
therefore, can provide greater formulary compliance.
AB 2418
Page 9
a) Anthem mandatory mail opt out settlement. In 2013,
Anthem Blue Cross (Anthem) required policyholders to fill
any prescriptions on an Anthem-developed specialty drug
list via mail order through CuraScript, a specialty
pharmaceutical distribution company wholly owned by Express
Scripts. Anthem notified members with conditions such as
HIV/AIDs and cancer that, for any drug on the list, failure
to get the prescription filled through CuraScript would be
considered an out-of-network service and patients would
have to pay full price at any retail drugstore. Other
Anthem members, including those with chronic conditions
such as diabetes, faced no such requirement. In Los
Angeles Times articles at the time, Anthem stated it was
imposing the new requirement to help keep costs down for
patients and businesses. Subsequently, Consumer Watchdog
filed a class action lawsuit alleging that the Anthem
program illegally targeted members with HIV/AIDS, delaying
the program. In May 2013, parties to the lawsuit reached a
settlement in which Anthem agreed to send a notice to
existing members allowing them to permanently opt out of
the mail order program by calling CuraScript before August
1, 2013, and stating that members who chose initially to
receive their drugs through CuraScript could subsequently
opt out at any time in the same way.
1)SUPPORT . California Pharmacists Association and California
Healthcare Institute, co-sponsors of this bill, write in
support that lack of medication adherence results in lost
opportunities to treat patients and improving adherence
requires a multi-faceted approach, including the strategies
outlined in this bill. The sponsors state that poor
medication adherence accounts for as much as $290 billion per
year in avoidable medical spending. The sponsors argue that
pharmacists play a key role in helping improve medication
adherence, educating patients about their medications,
including how and when to take them, what side effects to
watch out for, what to expect when taking medication, foods
and other drugs to avoid, and more. Sponsors contend that
hundreds of clinical studies show improvement in medication
adherence and benefits to patient health outcomes when
pharmacists work with other members of the care team on
medication therapy. California Optometric Association (COA)
supports this bill and points out that the provision allowing
early refill of eye drops due to inadvertent spillage in
patient use is especially important for glaucoma patients who
AB 2418
Page 10
are often elderly and may have difficulty dispensing the
proper amount. COA points out that glaucoma is a preventable
cause of blindness if timely and successful treatment is
provided. Patient and consumer advocacy groups support this
bill because it promotes strategies to improve medication
adherence, including synchronization to make it more
convenient for patients to obtain all of their medications in
one visit to the pharmacy. Advocates maintain that allowing
patients to choose between in-person pickup and mail delivery
of medications ensures that patients can obtain important
therapies in the way that best suits their medical needs.
California Pan-Ethnic Health Network argues that requiring
patients to receive their prescriptions by mail could create
confusion, especially among limited English-proficient
populations. The California Hepatitis C (Hep C) Task Force
points out that this bill would help patients avoid the
catastrophic interventions needed to treat liver cancer or
costly liver transplantation which can result from the Hep C
virus by implementing strategies leading health organizations
recommend to increase medication adherence.
2)OPPOSE UNLESS AMENDED . Several organizations write in
opposition to this bill as introduced, unless amended. The
April 22, 2014 amendments appear to be responsive to the
concerns but it is not known if the amendments address some or
all of the concerns. Express Scripts and America's Health
Insurance Plans (AHIP) suggest any alternative process to mail
order pharmacy be available for limited circumstances, such as
for maintenance medications an individual has been taking for
three months, only if the patient is stabilized on a treatment
plan, the patient has privacy concerns or the enrollee's
condition does not permit effective use of mail order.
Express Scripts specifically requests that the alternative
process exclude specialty medications and that the provision
allowing refills at 70% estimated days of use be changed to
five days prior to the next scheduled refill. California
Society of Health System Pharmacists seeks amendments to allow
synchronization only if the prescriber or pharmacist finds it
in the best interest of the patient, the medication can be
effectively split and the medication is not an opioid,
stimulant, sedative or hypnotic medication subject to abuse.
3)OPPOSITION . CSAC Excess Insurance Authority, a joint powers
authority representing public agencies, opposes this bill as
not prudent in controlling health care costs since mail order
AB 2418
Page 11
pharmacies and associated cost containment measures help to
control costs and educate consumers about alternatives.
Health plans, insurers and pharmacy benefit managers oppose
this bill concerned about the costs and administrative
complexity of the proposed changes. Health plans and insurers
view this bill as micromanaging the prescription refile
process. Blue Shield of California (BSC) argues that this
bill will eviscerate the benefits members realize from
mandatory mail order programs and states that most specialty
medications are currently provided through such programs.
According to BSC, specialty drug mail order programs provide
unique patient monitoring and utilization services which
result in higher adherence rates and allow many members to
receive a 2 or 3 month supply for one single 30-day copayment.
Association of California Life and Health Insurance Companies
(ACLHIC) states the synchronization provisions could actually
decrease medication adherence if required for patients that
are not on a comparatively long term, steady and stable
treatment schedule. ACLHIC cites the example of an individual
on blood thinners which the provider wants them to stop or
decrease prior to surgery in which case synchronization would
not be appropriate. Pharmaceutical Care Management
Association (PCMA) is concerned that the synchronization
proposal in this bill over-simplifies what can be potentially
dangerous strategies depending on the underlying health
conditions and the nature of the medicines being prescribed.
PCMA also views the refill requirement for ophthalmic
medicines as an intrusion in the commercial health insurance
market imposing a Medicare standard that will not mesh with
existing commercial drug benefit designs. California
Association of Health Plans (CAHP) opposes this bill because
it will do nothing to control the underlying costs of
high-priced drugs and points out that the increases in costs
for specialty drugs stems from the release of newer, more
sophisticated therapies with extremely high price tags being
brought to market. CAHP specifically mentions the new Hep C
treatment, Sovaldi, which costs $1,000 per pill and
approximately $84,000 per treatment cycle making it
unsustainable to cover the medicine in the commercial and
Medi-Cal markets.
4)PREVIOUS LEGISLATION .
a) AB 299 (Holden) of 2013 would have prohibited a health
plan or insurer that provides prescription drug benefits
AB 2418
Page 12
from requiring an enrollee to utilize in-network mail order
pharmacy services for covered prescription drugs available
at an in-network retail pharmacy. AB 299 was held on the
Assembly Appropriations suspense file.
b) SB 1301 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.
c) 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.
5)POLICY COMMENTS .
a) Interaction with Anthem settlement. The 2013 Anthem
settlement resulted in Anthem members being able to
permanently opt out of the mandatory mail order drug
program with no stated timeline on the opt out. This bill
establishes an opt out program "for the plan year" which
would presumably require enrollees to repeat the request
for the opt out on an annual basis. The author may wish to
ensure that this bill does not enact a lesser standard than
the terms of the Anthem settlement;
b) Consumer cost sharing. This bill states that nothing
shall be construed to prevent the application of
copayments, deductibles and coinsurance, but at the same
time, prohibits the imposition of any conditions or
restrictions on the opt out, including but not limited to,
prescriber approval or enrollee documentation. The author
may wish to clarify whether differential copayments, in the
form of financial incentives, where the enrollee's cost
sharing is reduced when they use mail order versus retail
pharmacy, could be employed by health plans and insurers
under the provisions of this bill; and,
c) Suggested clarifying amendments. This bill allows for
synchronization if the prescriber or pharmacists finds it
"could be" in the best interest of the enrollee. Since
this requirement is based on professional judgment,
wouldn't the condition be stated more directly;
AB 2418
Page 13
synchronization "is in the best interests of the enrollee?"
This bill does not specifically state that the purpose of
synchronization is to coordinate refill dates. This bill
also includes terminology used in federal but not
California law. for example, a group "plan sponsor" would
instead be a "subscriber" in the Health and Safety Code and
a "policyholder" in the Insurance Code. Also, use of the
term "network" pharmacy is more often referenced in
California law as a "contracting" or "participating"
provider.
REGISTERED SUPPORT / OPPOSITION :
Support
California Healthcare Institute (cosponsor)
California Pharmacists Association (cosponsor)
ALS Association
American Cancer Society Action Network
American Federation of State, County and Municipal Employees,
AFL-CIO
Association of Northern California Oncologists
BayBio
BioCom
Biotechnology Industry Organization
California Association of Area Agencies on Aging
California Chronic Care Coalition
California Grocers Association
California Health Collaborative
California Hepatitis C Task Force
California IA Urological Association
California Optometric Association
California Pan-Ethnic Health Network
California Senior Advocates League
Herndon Pharmacy
Huntington's Disease Society of America
International Foundation for Autoimmune Arthritis
Latina Breast Cancer Agency
Latinas Contra Cancer
Mental Health Systems
National Association for the Advancement of Colored People,
California State Conference
National Association of Chain Drug Stores
Patterson Family Pharmacy
Pharmaceutical Research and Manufacturers of America
AB 2418
Page 14
Rite Aid
Sacramento Latino Medical Society
Safeway
Spondylitis Association of America
The Wall Las Memorias
TMJ Society of America
United Nurses Association of California/Union of Health Care
Professionals
Walgreens
Oppose unless amended (prior version)
America's Health Insurance Plans
California Society of Health System Pharmacists
Express Scripts
Opposition
CSAC Excess Insurance Authority
Association of California Life and Health Insurance Companies
Blue Shield of California
California Association of Health Plans
Pharmaceutical Care Management Association
Analysis Prepared by : Deborah Kelch / HEALTH / (916) 319-2097