BILL ANALYSIS Ó
AB 73
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Date of Hearing: May 20, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
73 (Waldron) - As Amended May 4, 2015
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill establishes the "Prescriber Prevails Act," specifying
access requirements for certain drug classes covered by the
Medi-Cal program and creating an urgent appeal process.
Specifically, this bill:
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1)Requires, if any drug from a specified therapeutic drug class is
prescribed by a Medi-Cal beneficiary's provider, the drug to
be covered in the Medi-Cal program.
2)Specifies the affected drug classes are antiretrovirals for
AIDS/HIV, antipsychotics, anti-rejection drugs, and drugs used
to treat seizures or epilepsy.
3)Requires a Medi-Cal managed care plan to cover a drug in the
named drug classes if prescribed by a beneficiary's provider.
Requires the provider to demonstrate reasonable professional
judgment, the drug is medically necessary, and it is
consistent with the federal Food and Drug Administration (FDA)
labeling and use rules and regulations as described in at
least one of the official compendia named in federal law.
4)Provides that if a Medi-Cal managed care plan chooses not to
cover the specified drugs, the drugs are to be carved out of
the plan and covered on a fee-for-service basis and the plan's
contracted rate shall be reduced accordingly.
5)Requires managed care plans to continue to develop and authorizes
plans to administer formularies and prior authorization
programs for the specified drugs.
FISCAL EFFECT:
1)Unknown costs and potential lost revenues, ranging from zero
cost if this bill had no impact on the provision of
pharmaceuticals in Medi-Cal, to millions of dollars annually
(GF/federal) if the policy was implemented more liberally to
allow greater prescriber control. Cost could vary
dramatically depending on how this policy was operationalized.
Policies and procedures would have to be clarified by DHCS,
and the ease with which prescribed medications are available
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despite their non-preferred status would directly impact
costs.
For example, if stricter limits were placed on a managed care
plan's ability to conduct utilization review for these drug
categories, there would likely be significant cost pressure on
Medi-Cal managed care rates for pharmaceutical benefits. This
bill could lead to increased Medi-Cal costs in several ways:
higher prices for drugs, reduced revenue from federal and
state-negotiated rebates, and reduced revenue from the state's
managed care tax if drugs were carved out of managed care.
The bill specifies the use of formularies and prior
authorization is allowable in managed care, but not in the
fee-for-service (FFS) Medi-Cal. Antiretroviral drugs for
HIV/AIDS and antipsychotics are carved out of managed care and
provided exclusively through FFS Medi-Cal. Restrictions on
prior authorization poses significant fiscal risk as it
appears to allows prescribers to bypass the state's preferred
drug list for FFS Medi-Cal as long as certain criteria are
met.
Finally, the marketplace dynamics for various drug classes,
prescriber behavior, and how pharmaceutical manufacturers
respond to the market conditions created by this bill would
also influence long-term costs.
2)Unknown, likely minor, potential increased administrative
costs for FFS Medi-Cal, and cost pressure to managed care, for
an additional number of appeals.
3)Unknown, likely minor, administrative costs to DHCS to adjust
managed care rates if plans choose not to cover antirejection
and drugs used to treat seizures or epilepsy.
4)Unknown offsetting cost savings, to the extent the bill is
implemented robustly, in individual cases where prescribers'
chosen medication prevents other medical complications. Such
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offsets, if any, would likely be a small percentage of
increased costs.
COMMENTS:
1)Purpose. According to the author, this bill strengthens the
doctor and patient relationship by legislating that a doctor's
professional and reasonable judgment prevails, for purposes of
specific and therapeutic drug classes within the Medi-Cal
program. The author argues new pharmaceuticals and treatments
are emerging rapidly and individuals are losing access to
pharmaceuticals that may best control their condition.
2)Background. Drug benefits are provided through FFS Medi-Cal
delivery system, and through managed care. Managed care
enrollees generally get their drugs through their managed care
plan, which often subcontracts with a pharmaceutical benefits
manager for provision of the drug benefit. Some drugs are
carved out of managed care and only offered through the FFS
system. Both managed care plans and the state maintain
separate lists of preferred drugs, or formularies, and impose
utilization controls on drugs not contained on the formulary.
The most common controls include prior authorization (a
request to a plan for coverage of a drug, which must be
approved in order to fill a prescription) and step therapy
(where the patient must try a different, often less expensive
or more proven, drug before being prescribed the drug of
choice). Utilization controls function in a variety of ways
but are generally designed to impose friction between the
prescribing of a drug and the filling of a prescription,
offering the health plan the ability to examine
cost-effectiveness and clinical appropriateness.
This bill would require FFS Medi-Cal and managed care plans to
cover drugs for which a prescriber prescribes a drug in a
manner consisted with FDA guidelines for use of the drug, and
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for which the prescriber demonstrates reasonable professional
judgment that the drug is medically necessary.
3)Current Protections. Plans, and FFS Medi-Cal, are required to
pay for all drugs deemed medically necessary, regardless of
the formulary. Patients can contest denials of service
through various means, including the state fair
hearing/grievance process and through independent medical
review. 2013 data indicates there were an estimated 550
annual state fair hearings held specific to prescription drug
issues, out of a total of 5.8 million managed care enrollees,
a rate of about one in 10,500 enrollees.
4)Drug Classes Affected. The specific drug classes to which
this bill would apply are for conditions that are clinically
complex, for which prescribing physicians are often
specialists with advanced knowledge of the conditions being
treated. They are also among the most expensive drugs. The
fact this bill only applies to drugs listed on a compendia
offers some protection, but compendia also include various
grades of evidence. Off-label use may be supported by
compendia. According to individuals with expertise in managing
pharmacy benefits, there are potential concerns about
undermining the ability of health plans or the state to
conduct utilization review for these drug classes. Cost and
clinical concerns for these drug classes are noted below.
a) Anticonvulsants are marketed and often used for
conditions other than epilepsy and seizure disorders. The
bulk of utilization review for anticonvulsants is directed
to off-label use. In addition, a number of new drugs are
in the development pipeline at this time, meaning costs for
this category are projected to grow. This bill does not
specify it applies to anticonvulsants only when used for
treating seizure disorders.
b) Antipsychotics. There are significant concerns about
off-label use. This is a drug class that has benefited
significantly from the availability of generic substitutes.
Generic versions of former "blockbuster drugs" can be
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20-30% or as much as 80%-90% cheaper than drugs with patent
protection. To the extent this bill undermines the ability
to use generic substitutes, significant additional costs
could be incurred.
c) Antiretrovirals. More expensive single-tablet regimens
that are marketed and patent-protected without offering
significant clinical benefit over generic formulations are
of concern in this drug class.
1)Support. Biotechnology firms and the California Chronic Care
Coalition support this bill, noting individuals who require
specific medications are forced to wait while they and their
physicians are forced to wade through red tape and sometimes
are forced to suffer with inadequate or contraindicated
medications
2)Opposition. The California Association of Health Plans (CAHP)
opposes this bill, arguing it minimizes the role of care
coordination plans employ to investigate safer alternatives
and to help identify appropriate and inappropriate
prescribing.
3)Staff Comments. This bill addresses an inherent tension
between the state's interest in cost-effective provision of
health care services and clinical oversight, and a
prescriber's professional judgment on what will be optimal for
each of his or her patients. The essential questions are
whether these opposing concerns are appropriately balanced,
and whether current policies and practices result in patient
harm and the denial of needed care in a timely way.
Under current law, the state, health plans, and pharmaceutical
benefit managers attempt to balance the medical needs of the
patient and prescriber preferences with the provision of
affordable benefits that meet clinical standards of
appropriate care. In so doing, utilization review controls,
such as prior authorization and step therapy, are employed.
Prior authorization, for example, is not only employed to
contain costs, but to allow a clinical review to ensure
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medication is prescribed appropriately and to allow
consideration of safer alternatives. In some instances,
inappropriate prescribing can be identified. Staff notes a
"prescriber prevails" policy may help certain patients in
individual cases, but also has a potential for unintended
consequences that could increase costs without providing a
benefit to patients. For example, it may remove safeguards
that prevent overprescribing or inappropriate prescribing.
The actual operation of a "prescriber prevails" law as it
pertains to the Medi-Cal program is unclear and would likely
have to be clarified through regulation. The ease and
convenience of the process to document medical necessity, and
how much it deviates from the state's current process, would
have a direct impact on drug utilization and costs. For
example, if the very act of prescribing a drug that meets the
FDA's labeling and use requirements is deemed adequate to meet
medical necessity, there would likely be large utilization and
cost impacts. To the extent additional controls are put in,
it would have a lesser effect on utilization and cost.
4)Technical note. This bill essentially allows managed care
plans to choose which drugs they will cover, and requires FFS
Medi-Cal to cover them if the managed care plan doesn't.
However, managed care plans are required to cover drugs that
are medically necessary, subject to certain authorization
procedures. The application of prescriber prevails in these
cases would need to be clarified.
5)Suggested Amendments. The author indicates the bill is simply
intended to speed up the prior authorization review process to
allow more prompt access to prescribed medications. If this
is the case, and if the turnaround time is indeed
unacceptable, staff suggests removing provisions related to
coverage, medical necessity, and provider judgment altogether,
and instead amend the bill to address the state FFS program
and managed care contractual requirements related to timeline
for prior authorization. Since medically necessary drugs are
already covered pursuant to existing law and regulations,
provided the prescriber demonstrates medical necessity in the
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required manner, addressing the timeline should be adequate to
accomplish the intent.
6)Related Legislation.
a) AB 73 (Waldron), also being heard today, is similar to
this bill and applies to four drug classes, including
anticonvulsants.
b) AB 374 (Nazarian), pending on the Suspense File of this
committee, specifies requirements with which health plan
step therapy regimens must comply.
1)Prior Legislation.
a) AB 1814 (Waldron) of 2014 was similar to AB 73 and was
held on this committee's Suspense File.
b) AB 889 (Frazier) of 2013 prohibited 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.
This bill was held on the Senate Appropriations Committee
suspense file.
Analysis Prepared by:Lisa Murawski / APPR. / (916)
319-2081
AB 73
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