BILL ANALYSIS Ó
SB 1052
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Date of Hearing: August 6, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 1052 (Torres) - As Amended: August 4, 2014
Policy Committee: HealthVote:14-4
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill requires additional transparency with respect to
pharmaceutical drugs covered by health plans and insurers,
requiring plans and insurers to use a standardized format for
displaying the drugs on their formularies, among other things.
Specifically, this bill:
1)Requires the Department of Managed Health Care (DMHC) and the
California Department of Insurance (CDI) to jointly develop a
standard formulary template, and details specifications of the
template.
2)Requires, for plans and insurers that provide prescription
drug benefits and maintain formularies, to post on their web
sites accessible and searchable versions of the formulary or
formularies for each product, requires updates of any changes
within specified time periods, and requires plans and insurers
to post information using the standard template described in
(1), above, within six months of its development.
3)Requires the California Health Benefits Exchange (Covered
California) to provide on its web site a direct link to the
formulary, or formularies, for each plan offered for sale.
4)Requires the Exchange, by the later of October 1, 2017, or 18
months after the development of a standard formulary template
described in (1), above, to provide on its web site a search
tool that allows potential enrollees to search plans by a
particular drug, and compare coverage and cost-sharing for
that drug.
FISCAL EFFECT
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1)One-time costs estimated at $5 million for Covered California
to add a search function to its website (California Health
Trust Fund; funded by charges assessed on health plans
purchased through the exchange).
2)One-time costs of $250,000 to develop standards and adopt
regulations by CDI (Insurance Fund).
3)One-time costs of $250,000 to develop standards and adopt
regulations by DMHC (Managed Care Fund).
4)Minor ongoing monitoring and enforcement costs to DMHC and CDI
(Managed Care Fund/Insurance Fund) could be incurred, in the
range of $50,000 per year for each department for the first
two years. Costs should not be significant on an ongoing basis
once these requirements are routinized.
COMMENTS
1)Purpose . The author argues this bill will make it easier for
people with serious and chronic conditions to make sure the
health insurance plan they choose covers the prescription
drugs they need. The author further asserts many specialty
drugs can be extremely expensive and individuals living with
chronic conditions cannot obtain the information they need to
confirm that their drugs are covered. The author states a
further purpose of this bill is to create a window-shopping
feature on Covered California's website to allow patients to
search for coverage by prescription drug.
2)Background: Prescription Drug Benefits . Pursuant to the
federal Patient Protection and Affordable Care Act, plans and
insurers in the individual and small-group market are required
to cover prescription drugs as one of ten "essential health
benefits." Most large-group plans offer a drug benefit as
well. Plans and insurers maintain lists of preferred drugs
called formularies, and generally impose utilization controls
on drugs not contained on the formulary. The formulary is the
result of negotiations between plans (or pharmaceutical
benefit managers, to whom drug benefits are often
subcontracted) and drug makers.
Within a formulary, there may be different tiers of coverage.
For example, in a three-tiered prescription drug plan,
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individuals may pay the lowest co-pay for Tier 1 (generic
drugs), the next highest co-pay for Tier 2 (preferred drugs),
and the highest co-pay for Tier 3 (non-preferred or
non-formulary drugs). The use of fourth (or higher)
"specialty tier" pricing has also gained popularity for
specialty and high-cost drugs generally used to treat complex
conditions.
Persons with conditions such as multiple sclerosis or cancer
who require treatment with high-cost drugs report difficulty
comparing the formularies of different plan options, including
whether drugs are on the formulary and what they can expect to
pay as a share of cost. This bill would require a search
option both on the websites of individual plans and on the web
site of the Covered California, essentially allowing consumers
to shop by drug and make easy comparisons between plans. In
addition, formulary displays would be standardized.
3)Related Legislation .
a) AB 2418 (Bonilla), requires health plans and insurers to
allow enrollees to opt out of any mandatory mail order
prescription program, allows for the synchronization of
prescription refills, and permits early refill of topical
ophthalmic medications, effective January 1, 2016. AB 2418
is pending in the Senate Appropriations Committee.
b) AB 1917 (Gordon) limits enrollee cost-sharing, such as
copayments and coinsurance, for outpatient prescription
drugs for health plans and insurance policies that cover
essential health benefits. AB 1917 is pending in the
Senate Appropriations Committee.
1)Support . This bill is sponsored by the American Cancer
Society Action Network, and supported by numerous other
disease-specific advocacy groups as well as drug
manufacturers.
2)Opposition . Health plans and insurers, and pharmaceutical
benefit managers, oppose this bill for a number of reasons,
citing concerns about workability, conflicts with other
requirements related to formularies, unrealistic time frames,
difficulty and cost of providing information in the required
format, and introducing unnecessary administrative complexity.
Further, health plans suggest policymakers should instead
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focus on controlling the underlying cost pressures of
prescription drugs, considering the alarmingly high price tag
of many new specialty drugs.
3)Staff Comments . This bill imposes significant administrative
and information technology costs for a search functionality
for Covered California plans, for which the consumer benefit
appears limited to convenience for certain individuals with
high-cost conditions. Even given the delayed implementation
date, in light of other pressing priorities, including fixing
core eligibility and enrollment functions, and given limited
funds and cost pressure on premiums associated with the
creation of this search functionality, the Committee may wish
to consider whether mandating Covered California to include
the search functionality is prudent at this time.
Analysis Prepared by : Lisa Murawski / APPR. / (916) 319-2081