Amended in Assembly May 4, 2015

Amended in Assembly April 7, 2015

California Legislature—2015–16 Regular Session

Assembly BillNo. 339


Introduced by Assembly Member Gordon

(Coauthor: Assembly Member Atkins)

February 13, 2015


An act to add Section 1342.71 to the Health and Safety Code, and to add Section 10123.193 to the Insurance Code, relating to health care coverage.

LEGISLATIVE COUNSEL’S DIGEST

AB 339, as amended, Gordon. Health care coverage: outpatient prescription drugs.

Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care and makes a willful violation of the act a crime. Existing law also provides for the regulation of health insurers by the Department of Insurance. Existing law requires a health care service plan or insurer that provides prescription drug benefits and maintains one or more drug formularies to make specified information regarding the formularies available to the public and other specified entities. Existing law also specifies requirements for those plans and insurers regarding coverage and cost sharing of specified prescription drugs.

This bill would require a health care service plan contract or a health insurance policy that is offered, renewed, or amended on or after January 1, 2016, and that provides coverage for outpatient prescription drugs, to provide coverage for medically necessary prescription drugs, including those for which there is not a therapeutic equivalent. The bill would require copayments, coinsurance, and other cost sharing for these drugs to be reasonable, and would require that the copayment, coinsurance, or any other form of cost sharing for a covered outpatient prescription drug for an individual prescription not exceed 124 of the annual out-of-pocket limit applicable to individual coverage for a supply of up to 30 days. The bill would require a plan contract or policy to cover single-tablet and extended release prescription drug regimens, unless the plan or insurer can demonstrate that multitablet and nonextended release drug regimens, respectively, arebegin insert clinically equally orend insert more effective, as specified. The bill would prohibit, except as specified, a plan contract or policy from placing prescription medications that treat a specific condition on the highest cost tiers of a drug formulary. The bill would require a plan contract or policy to use specified definitions for each tier of a drug formulary.

Because a willful violation of the bill’s requirements relative to health care service plans would be a crime, this bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

P2    1

SECTION 1.  

Section 1342.71 is added to the Health and Safety
2Code
, to read:

3

1342.71.  

(a) A health care service plan contract that is offered,
4amended, or renewed on or after January 1, 2016, shall comply
5with this section. This section shall not apply to Medi-Cal managed
6care contracts.

7(b) (1) A health care service plan that provides coverage for
8outpatient prescription drugs shall cover medically necessary
9prescription drugs.

P3    1(2) A health care service plan that provides coverage for
2outpatient prescription drugs shall cover a medically necessary
3prescription drug for which there is not a therapeutic equivalent.

4(c) Copayments, coinsurance, and other cost sharing for
5outpatient prescription drugs shall be reasonable so as to allow
6access to medically necessary outpatient prescription drugs. The
7health care service plan shall demonstrate to the director that
8proposed cost sharing for a medically necessary prescription drug
9will not discourage medication adherence.

10(d) Consistent with federal law and guidance, and
11notwithstanding Section 1342.7 and any regulations adopted
12pursuant to that section, a health care service plan that provides
13coverage for outpatient prescription drugs shall demonstratebegin delete to the
14satisfaction of the directorend delete
that the formulary or formularies
15maintained by the health care service plan do not discourage the
16enrollment of individuals with health conditions and do not reduce
17the generosity of the benefit for enrollees with a particular
18condition.

19(1) A health care service plan contract shall cover a single-tablet
20drug regimen that is as effective as a multitablet regimen unless
21the health care service plan is able to demonstrate to thebegin delete director
22thatend delete
begin insert director,end insert consistent with clinical guidelines and peer-reviewed
23scientific and medicalbegin delete literatureend deletebegin insert literature,end insert that the multitablet
24regimen is clinicallybegin insert equally orend insert more effective and more likely to
25result in adherence to a drug regimen. A health care service plan
26contract shall cover an extended release prescription drug that is
27clinicallybegin delete asend deletebegin insert equally or moreend insert effectivebegin delete asend deletebegin insert thanend insert a nonextended
28release product unless the health care service plan is able to
29demonstrate to thebegin delete director thatend deletebegin insert director,end insert consistent with clinical
30guidelines and peer-reviewed scientific and medicalbegin delete literatureend delete
31begin insert literature,end insert that the nonextended release product is clinicallybegin insert equally
32orend insert
morebegin delete effective.end deletebegin insert effective than the extended release product.end insert

33(2) A health care service plan contract shall not place most or
34all of the prescription medications that treat a specific condition
35on the highest cost tiers of a formulary unless the health care
36service plan can demonstratebegin delete to the satisfaction of the directorend delete that
37such placement does not reduce the generosity of the benefits for
38enrollees with a particular condition.begin delete In no instance in which there
39is more than one treatment that is the standard of care for a
40condition shall most or all prescription medications to treat that
P4    1condition be placed on the highest cost tiers.end delete
begin insert If there is more than
2one treatment that is the standard of care for a specific condition,
3the health care service plan shall not place most or all prescription
4medications that treat that condition on the highest cost tiers.end insert
This
5shall not apply to any medication for which there is a therapeutic
6equivalent available on a lower cost tier.

7(3) For coverage offered in the individual market, the health
8care service plan shall demonstratebegin delete to the satisfaction of the directorend delete
9 that the formulary or formularies maintained for coverage in the
10individual market are the same or comparable to those maintained
11for coverage in the group market.

12(4) A health care service plan shall demonstrate to the director
13that any limitation or utilization management is consistent with
14and based on clinical guidelines and peer-reviewed scientific and
15medical literature.

16(e) With respect to an individual or group health care service
17plan contract subject to Section 1367.006, the copayment,
18coinsurance, or any other form of cost sharing for a covered
19outpatient prescription drug for an individual prescription shall
20not exceed 124 of the annual out-of-pocket limit applicable to
21individual coverage under Section 1367.006 for a supply of up to
2230 days.

23(f) (1) If a health care service plan contract maintains a drug
24formulary grouped into tiers, including a fourth tier or specialty
25tier, a health care service plan contract shall use the following
26definitions for each tier of the drug formulary:

27(A) Tier one shall consist of preferred generic drugs and
28preferred brand name drugs if the cost to the health care service
29plan for a preferred brand name drug is comparable to those for
30generic drugs.

31(B) Tier two shall consist of nonpreferred generic drugs,
32preferred brand name drugs, and any other drugs recommended
33by the health care service plan’s pharmaceutical and therapeutics
34committee based on safety and efficacy and not solely based on
35the cost of the prescription drug.

36(C) Tier three shall consist of nonpreferred brand name drugs
37that are recommended by the health care service plan’s
38pharmaceutical and therapeutics committee based on safety and
39efficacy and not solely based on the cost of the prescription drug.

P5    1(D) Tier four shall consist of specialty drugs that are biologics,
2which, according to the federal Food and Drug Administration or
3the manufacturer, require distribution through a specialty pharmacy
4or the enrollee to have special training for self-administration or
5special monitoring. Specialty drugs may include prescription drugs
6that cost more than the Medicare Part D threshold if those drugs
7are recommended for Tier four by the health care service plan’s
8pharmaceutical and therapeutics committee based on safety and
9 efficacy, but placement shall not be solely based on the cost of the
10prescription drug.

11(2) Nothing in this section shall be construed to require a health
12care service plan contract to include a fourth tier, but if a health
13care service plan contract includes a fourth tier, the health care
14service plan contract shall comply with this section.

begin insert

15(3) Nothing in this section shall be construed to require the
16health care service plan’s pharmaceutical and therapeutics
17committee to consider the cost of the prescription drug to the health
18care service plan.

end insert

19(g) A health care service plan contract shall ensure that the
20placement of prescription drugs on formulary tiers is not based
21solely on the cost of the prescription drug to the health care service
22plan, but is based on clinically indicated, reasonable medical
23management practices.

24(h) Nothing in this section shall be construed to require or
25authorize a health care service plan that contracts with the State
26Department of Health Care Services to provide services to
27Medi-Cal beneficiaries to provide coverage for prescription drugs
28that are not required pursuant to those programs or contracts, or
29to limit or exclude any prescription drugs that are required by those
30programs or contracts.

31

SEC. 2.  

Section 10123.193 is added to the Insurance Code, to
32read:

33

10123.193.  

(a) A policy of health insurance that is offered,
34amended, or renewed on or after January 1, 2016, shall comply
35with this section.

36(b) (1) A policy of health insurance that provides coverage for
37outpatient prescription drugs shall cover medically necessary
38prescription drugs.

P6    1(2) A policy of health insurance that provides coverage for
2outpatient prescription drugs shall cover a medically necessary
3prescription drug for which there is not a therapeutic equivalent.

4(c) Copayments, coinsurance, and other cost sharing for
5outpatient prescription drugs shall be reasonable so as to allow
6access to medically necessary outpatient prescription drugs. The
7health insurer shall demonstrate to the commissioner that proposed
8cost sharing for a medically necessary prescription drug will not
9discourage medication adherence.

10(d) Consistent with federal law and guidance, a policy of health
11insurance that provides coverage for outpatient prescription drugs
12shall demonstratebegin delete to the satisfaction of the commissionerend delete that the
13formulary or formularies maintained by the health insurer do not
14discourage the enrollment of individuals with health conditions
15and do not reduce the generosity of the benefit for insureds with
16a particular condition.

17(1) A policy of health insurance shall cover a single-tablet drug
18regimen that is as effective as a multitablet regimen unless the
19health insurer is able to demonstrate to thebegin delete commissioner thatend delete
20begin insert commissioner,end insert consistent with clinical guidelines and
21peer-reviewed scientific and medicalbegin delete literatureend deletebegin insert literature,end insert that the
22multitablet regimen is clinicallybegin insert equally orend insert more effective and
23more likely to result in adherence to a drug regimen. A policy of
24health insurance shall cover an extended release prescription drug
25that is clinicallybegin delete asend deletebegin insert equally or moreend insert effectivebegin delete asend deletebegin insert thanend insert a nonextended
26release product unless the health insurer is able to demonstrate to
27thebegin delete commissioner thatend deletebegin insert commissioner,end insert consistent with clinical
28guidelines and peer-reviewed scientific and medicalbegin delete literatureend delete
29begin insert literature,end insert that the nonextended release product is clinicallybegin insert equally
30orend insert
morebegin delete effective.end deletebegin insert effective than the extended release product.end insert

31(2) A policy of health insurance shall not place most or all of
32the prescription medications that treat a specific condition on the
33highest cost tiers of a formulary unless the health insurer can
34demonstratebegin delete to the satisfaction of the commissionerend delete that such
35placement does not reduce the generosity of the benefits for
36insureds with a particular condition. begin delete In no instance in which there
37is more than one treatment that is the standard of care for a
38condition shall most or all prescription medications to treat that
39condition be placed on the highest cost tiers.end delete
begin insert If there is more than
40one treatment that is the standard of care for a specific condition,
P7    1the health insurer shall not place most or all prescription
2medications that treat that condition on the highest cost tiers.end insert
This
3shall not apply to any medication for which there is a therapeutic
4equivalent available on a lower cost tier.

5(3) For coverage offered in the individual market, the health
6insurer shall demonstratebegin delete to the satisfaction of the commissionerend delete
7 that the formulary or formularies maintained for coverage in the
8individual market are the same or comparable to those maintained
9for coverage in the group market.

10(4) A health insurer shall demonstrate to the commissioner that
11any limitation or utilization management is consistent with and
12based on clinical guidelines and peer-reviewed scientific and
13medical literature.

14(e) With respect to an individual or group policy of health
15insurance subject to Section 10112.28, the copayment, coinsurance,
16or any other form of cost sharing for a covered outpatient
17prescription drug for an individual prescription shall not exceed
18124 of the annual out-of-pocket limit applicable to individual
19 coverage under Section 10112.28 for a supply of up to 30 days.

20(f) (1) If a policy of health insurance maintains a drug formulary
21grouped into tiers, including a fourth tier or specialty tier, a policy
22of health insurance shall use the following definitions for each tier
23of the drug formulary:

24(A) Tier one shall consist of preferred generic drugs and
25preferred brand name drugs if the cost to the health insurer for a
26preferred brand name drug is comparable to those for generic
27drugs.

28(B) Tier two shall consist of nonpreferred generic drugs,
29preferred brand name drugs, and any other drugs recommended
30by the health insurer’s pharmaceutical and therapeutics committee
31based on safety and efficacy and not solely based on the cost of
32the prescription drug.

33(C) Tier three shall consist of nonpreferred brand name drugs
34that are recommended by the health insurer’s pharmaceutical and
35therapeutics committee based on safety and efficacy and not solely
36based on the cost of the prescription drug.

37(D) Tier four shall consist of specialty drugs that are biologics,
38which, according to the federal Food and Drug Administration or
39the manufacturer, require distribution through a specialty pharmacy
40or the insured to have special training for self-administration or
P8    1special monitoring. Specialty drugs may include prescription drugs
2that cost more than the Medicare Part D threshold if those drugs
3are recommended for Tier four by the health insurer’s
4pharmaceutical and therapeutics committee based on safety and
5efficacy, but placement shall not be solely based on the cost of the
6prescription drug.

7(2) Nothing in this section shall be construed to require a policy
8of health insurance to include a fourth tier, but if a policy of health
9insurance includes a fourth tier, the policy of health insurance shall
10comply with this section.

begin insert

11(3) Nothing in this section shall be construed to require the
12health insurer’s pharmaceutical and therapeutics committee to
13consider the cost of the prescription drug to the health insurer.

end insert

14(g) A policy of health insurance shall ensure that the placement
15of prescription drugs on formulary tiers is not based solely on the
16cost of the prescription drug to the health insurer, but is based on
17clinically indicated, reasonable medical management practices.

18

SEC. 3.  

No reimbursement is required by this act pursuant to
19Section 6 of Article XIII B of the California Constitution because
20the only costs that may be incurred by a local agency or school
21district will be incurred because this act creates a new crime or
22infraction, eliminates a crime or infraction, or changes the penalty
23for a crime or infraction, within the meaning of Section 17556 of
24the Government Code, or changes the definition of a crime within
25the meaning of Section 6 of Article XIII B of the California
26Constitution.



O

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