Amended in Assembly May 20, 2015

Amended in Assembly May 4, 2015

Amended in Assembly April 7, 2015

California Legislature—2015–16 Regular Session

Assembly Bill No. 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 1⁄24 of the annual out-of-pocket limit applicable to individual coverage for a supply of up to 30 days. begin insert The bill would make these cost-sharing limits applicable only to covered outpatient prescription drugs that constitute essential health benefits, as defined. end insert 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, are clinically equally or 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:

SECTION 1.  

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

1342.71.  

(a) A health care service plan contract that is offered,
amended, or renewed on or after January 1, 2016, shall comply
with this section. begin insert The cost-sharing limits established by this section
apply only to outpatient prescription drugs covered by the contract
that constitute essential health benefits, as defined in Section
1367.005. end insert This section begin delete shall end delete begin insert does end insert not apply to Medi-Cal managed
care contracts.

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

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

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

(d) Consistent with federal law and guidance, and
notwithstanding Section 1342.7 and any regulations adopted
pursuant to that section, a health care service plan that provides
coverage for outpatient prescription drugs shall demonstrate that
the formulary or formularies maintained by the health care service
plan do not discourage the enrollment of individuals with health
conditions and do not reduce the generosity of the benefit for
enrollees with a particular condition.

(1) A health care service plan contract shall cover a single-tablet
drug regimen that is as effective as a multitablet regimen unless
the health care service plan is able to demonstrate to the director,
consistent with clinical guidelines and peer-reviewed scientific
and medical literature, that the multitablet regimen is clinically
equally or more effective and more likely to result in adherence
to a drug regimen. A health care service plan contract shall cover
an extended release prescription drug that is clinically equally or
more effective than a nonextended release product unless the health
care service plan is able to demonstrate to the director, consistent
with clinical guidelines and peer-reviewed scientific and medical
literature, that the nonextended release product is clinically equally
or more effective than the extended release product.

(2) A health care service plan contract shall not place most or
all of the prescription medications that treat a specific condition
on the highest cost tiers of a formulary unless the health care
service plan can demonstrate that such placement does not reduce
the generosity of the benefits for enrollees with a particular
condition. If there is more than one treatment that is the standard
of care for a specific condition, the health care service plan shall
not place most or all prescription medications that treat that
condition on the highest cost tiers. This shall not apply to any
medication for which there is a therapeutic equivalent available
on a lower cost tier.

(3) For coverage offered in the individual market, the health
care service plan shall demonstrate that the formulary or
formularies maintained for coverage in the individual market are
the same or comparable to those maintained for coverage in the
group market.

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

(e) With respect to an individual or group health care service
plan contract subject to Section 1367.006, the copayment,
coinsurance, or any other form of cost sharing for a covered
outpatient prescription drug for an individual prescription shall
not exceed begin delete end delete begin delete 1⁄24 end delete begin insert one-twenty-fourth end insert of the annual out-of-pocket limit
applicable to individual coverage under Section 1367.006 for a
supply of up to 30 days.

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

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

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

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

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

(2)  begin delete Nothing in this section shall be construed to end delete begin insert This section
does not end insert require a health care service plan contract to include a
fourth tier, but if a health care service plan contract includes a
fourth tier, the health care service plan contract shall comply with
this section.

(3)  begin delete Nothing in this section shall be construed to end delete begin insert This section
does not end insert require the health care service plan’s pharmaceutical and
therapeutics committee to consider the cost of the prescription
drug to the health care service plan.

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

(h)  begin delete Nothing in this section shall be construed to end delete begin insert This section
does not end insert require or authorize a health care service plan that
contracts with the State Department of Health Care Services to
provide services to Medi-Cal beneficiaries to provide coverage
for prescription drugs that are not required pursuant to those
programs or contracts, or to limit or exclude any prescription drugs
that are required by those programs or contracts.

SEC. 2.  

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

10123.193.  

(a) A policy of health insurance that is offered,
amended, or renewed on or after January 1, 2016, shall comply
with this section. begin insert The cost-sharing limits established by this section
apply only to outpatient prescription drugs covered by the policy
that constitute essential health benefits, as defined by Section
10112.27. end insert

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

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

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

(d) Consistent with federal law and guidance, a policy of health
insurance that provides coverage for outpatient prescription drugs
shall demonstrate that the formulary or formularies maintained by
the health insurer do not discourage the enrollment of individuals
with health conditions and do not reduce the generosity of the
benefit for insureds with a particular condition.

(1) A policy of health insurance shall cover a single-tablet drug
regimen that is as effective as a multitablet regimen unless the
health insurer is able to demonstrate to the commissioner,
consistent with clinical guidelines and peer-reviewed scientific
and medical literature, that the multitablet regimen is clinically
equally or more effective and more likely to result in adherence
to a drug regimen. A policy of health insurance shall cover an
extended release prescription drug that is clinically equally or more
effective than a nonextended release product unless the health
insurer is able to demonstrate to the commissioner, consistent with
clinical guidelines and peer-reviewed scientific and medical
literature, that the nonextended release product is clinically equally
or more effective than the extended release product.

(2) A policy of health insurance shall not place most or all of
the prescription medications that treat a specific condition on the
highest cost tiers of a formulary unless the health insurer can
demonstrate that such placement does not reduce the generosity
of the benefits for insureds with a particular condition. If there is
more than one treatment that is the standard of care for a specific
condition, the health insurer shall not place most or all prescription
medications that treat that condition on the highest cost tiers. This
shall not apply to any medication for which there is a therapeutic
equivalent available on a lower cost tier.

(3) For coverage offered in the individual market, the health
insurer shall demonstrate that the formulary or formularies
maintained for coverage in the individual market are the same or
comparable to those maintained for coverage in the group market.

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

(e) With respect to an individual or group policy of health
insurance subject to Section 10112.28, the copayment, coinsurance,
or any other form of cost sharing for a covered outpatient
prescription drug for an individual prescription shall not exceed begin delete
end delete begin delete 1⁄24 end delete begin insert one-twenty-fourth end insert of the annual out-of-pocket limit applicable
to individual coverage under Section 10112.28 for a supply of up
to 30 days.

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

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

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

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

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

(2)  begin delete Nothing in this section shall be construed to end delete begin insert This section
does not end insert require a policy of health insurance to include a fourth
tier, but if a policy of health insurance includes a fourth tier, the
policy of health insurance shall comply with this section.

(3)  begin delete Nothing in this section shall be construed to end delete begin insert This section
does not end insert require the health insurer’s pharmaceutical and
therapeutics committee to consider the cost of the prescription
drug to the health insurer.

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

SEC. 3.  

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