Amended in Assembly June 1, 2015

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 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 make these cost-sharing limits applicable only to covered outpatient prescription drugs that constitute essential health benefits, as defined. 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:

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. The cost-sharing limits established by this section
6apply only to outpatient prescription drugs covered by the contract
P3    1that constitute essential health benefits, as defined in Section
21367.005. This section does not apply to Medi-Cal managed care
3contracts.

4(b) (1) A health care service plan that provides coverage for
5outpatient prescription drugs shall cover medically necessary
6prescription drugs.

7(2) A health care service plan that provides coverage for
8outpatient prescription drugs shall cover a medically necessary
9prescription drug for which there is not a therapeutic equivalent.

10(c) Copayments, coinsurance, and other cost sharing for
11outpatient prescription drugs shall be reasonable so as to allow
12access to medically necessary outpatient prescription drugs.begin delete The
13health care service plan shall demonstrate to the director that
14proposed cost sharing for a medically necessary prescription drug
15will not discourage medication adherence.end delete

16(d) Consistent with federal law and guidance, and
17notwithstanding Section 1342.7 and any regulations adopted
18pursuant to that section, a health care service plan that provides
19coverage for outpatient prescription drugs shall demonstrate that
20the formulary or formularies maintained by the health care service
21plan do not discourage the enrollment of individuals with health
22conditions and do not reduce the generosity of the benefit for
23enrollees with a particular condition.

24(1) A health care service plan contract shall cover a single-tablet
25drug regimen that is as effective as a multitablet regimen unless
26the health care service plan is able to demonstrate to the director,
27consistent with clinical guidelines and peer-reviewed scientific
28and medical literature, that the multitablet regimen is clinically
29equally or more effective and more likely to result in adherence
30to a drug regimen. A health care service plan contract shall cover
31an extended release prescription drug that is clinically equally or
32more effective than a nonextended release product unless the health
33care service plan is able to demonstrate to the director, consistent
34with clinical guidelines and peer-reviewed scientific and medical
35literature, that the nonextended release product is clinically equally
36or more effective than the extended release product.

37(2) A health care service plan contract shall not place most or
38all of the prescription medications that treat a specific condition
39on the highest cost tiers of a formulary unless the health care
40service plan can demonstrate that such placement does not reduce
P4    1the generosity of the benefits for enrollees with a particular
2condition. If there is more than one treatment that is the standard
3of care for a specific condition, the health care service plan shall
4not place most or all prescription medications that treat that
5condition on the highest cost tiers. This shall not apply to any
6medication for which there is a therapeutic equivalent available
7on a lower cost tier.

8(3) For coverage offered in the individual market, the health
9care service plan shall demonstrate that the formulary or
10formularies maintained for coverage in the individual market are
11the same or comparable to those maintained for coverage in the
12group market.

13(4) A health care service plan shall demonstrate to the director
14that any limitation or utilization management is consistent with
15and based on clinical guidelines and peer-reviewed scientific and
16medical literature.

17(e) With respect to an individual or group health care service
18plan contract subject to Section 1367.006, the copayment,
19coinsurance, or any other form of cost sharing for a covered
20outpatient prescription drug for an individual prescription shall
21not exceed one-twenty-fourth of the annual out-of-pocket limit
22applicable to individual coverage under Section 1367.006 for a
23supply of up to 30 days.

24(f) (1) If a health care service plan contract maintains a drug
25formulary grouped into tiers, including a fourth tier or specialty
26tier, a health care service plan contract shall use the following
27definitions for each tier of the drug formulary:

28(A) Tier one shall consist of preferred generic drugs and
29preferred brand name drugs if the cost to the health care service
30plan for a preferred brand name drug is comparable to those for
31generic drugs.

32(B) Tier two shall consist of nonpreferred generic drugs,
33preferred brand name drugs, and any other drugs recommended
34by the health care service plan’s pharmaceutical and therapeutics
35committee based on safety and efficacy and not solely based on
36the cost of the prescription drug.

37(C) Tier three shall consist of nonpreferred brand name drugs
38that are recommended by the health care service plan’s
39pharmaceutical and therapeutics committee based on safety and
40efficacy 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
9efficacy, but placement shall not be solely based on the cost of the
10prescription drug.

11(2) This section does not require a health care service plan
12contract to include a fourth tier, but if a health care service plan
13contract includes a fourth tier, the health care service plan contract
14shall comply with this section.

15(3) This section does not require the health care service plan’s
16pharmaceutical and therapeutics committee to consider the cost
17of the prescription drug to the health care service plan.

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

23(h) This section does not require or authorize a health care
24service plan that contracts with the State Department of Health
25Care Services to provide services to Medi-Cal beneficiaries to
26provide coverage for prescription drugs that are not required
27pursuant to those programs or contracts, or to limit or exclude any
28prescription drugs that are required by those programs or contracts.

29

SEC. 2.  

Section 10123.193 is added to the Insurance Code, to
30read:

31

10123.193.  

(a) A policy of health insurance that is offered,
32amended, or renewed on or after January 1, 2016, shall comply
33with this section. The cost-sharing limits established by this section
34apply only to outpatient prescription drugs covered by the policy
35that constitute essential health benefits, as defined by Section
3610112.27.

37(b) (1) A policy of health insurance that provides coverage for
38outpatient prescription drugs shall cover medically necessary
39prescription 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.begin delete The
7health insurer shall demonstrate to the commissioner that proposed
8cost sharing for a medically necessary prescription drug will not
9discourage medication adherence.end delete

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

16(1) A policy of health insurance shall cover a single-tablet drug
17regimen that is as effective as a multitablet regimen unless the
18health insurer is able to demonstrate to the commissioner,
19consistent with clinical guidelines and peer-reviewed scientific
20and medical literature, that the multitablet regimen is clinically
21equally or more effective and more likely to result in adherence
22to a drug regimen. A policy of health insurance shall cover an
23extended release prescription drug that is clinically equally or more
24effective than a nonextended release product unless the health
25insurer is able to demonstrate to the commissioner, consistent with
26clinical guidelines and peer-reviewed scientific and medical
27 literature, that the nonextended release product is clinically equally
28or more effective than the extended release product.

29(2) A policy of health insurance shall not place most or all of
30the prescription medications that treat a specific condition on the
31highest cost tiers of a formulary unless the health insurer can
32demonstrate that such placement does not reduce the generosity
33of the benefits for insureds with a particular condition. If there is
34more than one treatment that is the standard of care for a specific
35condition, the health insurer shall not place most or all prescription
36medications that treat that condition on the highest cost tiers. This
37shall not apply to any medication for which there is a therapeutic
38equivalent available on a lower cost tier.

39(3) For coverage offered in the individual market, the health
40insurer shall demonstrate that the formulary or formularies
P7    1maintained for coverage in the individual market are the same or
2comparable to those maintained for coverage in the group market.

3(4) A health insurer shall demonstrate to the commissioner that
4any limitation or utilization management is consistent with and
5based on clinical guidelines and peer-reviewed scientific and
6medical literature.

7(e) With respect to an individual or group policy of health
8insurance subject to Section 10112.28, the copayment, coinsurance,
9or any other form of cost sharing for a covered outpatient
10prescription drug for an individual prescription shall not exceed
11 one-twenty-fourth of the annual out-of-pocket limit applicable to
12individual coverage under Section 10112.28 for a supply of up to
1330 days.

14(f) (1) If a policy of health insurance maintains a drug formulary
15grouped into tiers, including a fourth tier or specialty tier, a policy
16of health insurance shall use the following definitions for each tier
17of the drug formulary:

18(A) Tier one shall consist of preferred generic drugs and
19preferred brand name drugs if the cost to the health insurer for a
20preferred brand name drug is comparable to those for generic
21drugs.

22(B) Tier two shall consist of nonpreferred generic drugs,
23preferred brand name drugs, and any other drugs recommended
24by the health insurer’s pharmaceutical and therapeutics committee
25based on safety and efficacy and not solely based on the cost of
26the prescription drug.

27(C) Tier three shall consist of nonpreferred brand name drugs
28that are recommended by the health insurer’s pharmaceutical and
29therapeutics committee based on safety and efficacy and not solely
30based on the cost of the prescription drug.

31(D) Tier four shall consist of specialty drugs that are biologics,
32which, according to the federal Food and Drug Administration or
33the manufacturer, require distribution through a specialty pharmacy
34or the insured to have special training for self-administration or
35special monitoring. Specialty drugs may include prescription drugs
36that cost more than the Medicare Part D threshold if those drugs
37are recommended for Tier four by the health insurer’s
38pharmaceutical and therapeutics committee based on safety and
39efficacy, but placement shall not be solely based on the cost of the
40prescription drug.

P8    1(2) This section does not require a policy of health insurance to
2include a fourth tier, but if a policy of health insurance includes a
3fourth tier, the policy of health insurance shall comply with this
4section.

5(3) This section does not require the health insurer’s
6pharmaceutical and therapeutics committee to consider the cost
7of the prescription drug to the health insurer.

8(g) A policy of health insurance shall ensure that the placement
9of prescription drugs on formulary tiers is not based solely on the
10cost of the prescription drug to the health insurer, but is based on
11clinically indicated, reasonable medical management practices.

12

SEC. 3.  

No reimbursement is required by this act pursuant to
13Section 6 of Article XIII B of the California Constitution because
14the only costs that may be incurred by a local agency or school
15district will be incurred because this act creates a new crime or
16infraction, eliminates a crime or infraction, or changes the penalty
17for a crime or infraction, within the meaning of Section 17556 of
18the Government Code, or changes the definition of a crime within
19the meaning of Section 6 of Article XIII B of the California
20Constitution.



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