BILL ANALYSIS Ó
AB 339
Page 1
ASSEMBLY THIRD READING
AB
339 (Gordon)
As Amended June 1, 2015
Majority vote
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|Committee |Votes |Ayes |Noes |
| | | | |
| | | | |
|----------------+------+----------------------+--------------------|
|Health |12-5 |Bonta, Bonilla, |Maienschein, |
| | |Burke, Chiu, Gomez, |Chávez, Lackey, |
| | |Gonzalez, |Patterson, |
| | | |Steinorth |
| | | | |
| | |Roger Hernández, | |
| | |Nazarian, Rodriguez, | |
| | |Santiago, Thurmond, | |
| | |Wood | |
| | | | |
|----------------+------+----------------------+--------------------|
|Appropriations |12-5 |Gomez, Bonta, |Bigelow, Chang, |
| | |Calderon, Daly, |Gallagher, Jones, |
| | |Eggman, Eduardo |Wagner |
| | |Garcia, Gordon, | |
| | |Holden, Quirk, | |
| | |Rendon, Weber, Wood | |
| | | | |
| | | | |
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AB 339
Page 2
SUMMARY: Restricts cost-sharing, and specifies coverage
requirements for health plans and insurers that cover prescription
drugs, while exempting The California Medical Assistance Program
(Medi-Cal) managed care. Specifically, this bill applies to
covered outpatients prescription drugs, restricts cost-sharing
amounts for a 30-day supply to one-twenty-fourth of the annual
out-of-pocket limit, requires coverage for specified drugs under a
variety of specified circumstances, standardizes tiers for
prescription drug formularies, and restricts the ability of health
plans and insurers to institute cost-sharing and place drugs on
certain cost-sharing tiers, unless specified conditions are met.
FISCAL EFFECT: According to the Assembly Appropriations
Committee:
1)One-time costs to California Department of Managed Health Care
(DMHC) to issue regulations and review plan compliance of $3.7
million over three fiscal years, and $450,000 ongoing to ensure
compliance (Managed Care Fund).
2)One-time costs to California Department of Insurance (CDI) to
issue regulations and review insurance policy compliance in the
low hundreds of thousands, and $80,000 ongoing (Insurance Fund).
3)Since the California Health Benefits Review Program analyzed
this bill, it has been amended to restrict its application to
prescription drugs that constitute essential health benefits.
Therefore, the numbers cited here represent an upper bound on
potential costs associated with the provision to cap
cost-sharing amounts.
a) No impact on state-funded health care programs, including
The California Public Employees' Retirement System (CalPERS)
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and Medi-Cal.
b) Increased employer-funded premium costs in the private
insurance market of $162 million.
c) Increased premium expenditures by employees and
individuals purchasing insurance of $216 million, offset by
reductions in out-of-pocket costs of $65 million for the
approximately 46,000 Californians with high-cost drugs,
working out to a savings of around $1,400 per individual
affected.
4)Unknown, potentially significant fiscal impact on the private
health insurance market for other provisions not quantitatively
analyzed by California Health Benefits Review Program (CHBRP).
CHBRP notes:
a) By requiring coverage of single-tablet regimens and
extended release prescription drugs, carriers lose
negotiating power, leading to unknown higher drug costs. The
bill requires the drugs to be covered but does not explicitly
restrict the use of prior authorization and other utilization
review techniques, so if plans are able to still direct
individuals to lower-cost options, the impact may not be that
large.
b) Some provisions have an unclear impact and the effect
would depend on interpretation and how plans adjust their
formularies to comply with new rules.
COMMENTS: According to the author, the goal of this bill is to
implement and improve upon concepts from federal guidance and
Covered California in order to ensure Californians are better able
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to afford their prescription drugs and that formularies are not
designed in a discriminatory way that discourages enrollment of
individuals with specific health care conditions. The author
asserts that this bill is needed to address the devastating
financial effects of high out-of-pocket prescription expenses.
Some patients exhaust their annual out-of-pocket limit of $6,600
with a single prescription in the first month of the year. Too
many patients are forced to choose between paying for their
life-saving drugs and paying for housing, child care, or food.
According to CHBRP, prescription drug benefits are a specific type
of covered benefit usually subject to cost sharing as part of the
medical benefit or a separate outpatient prescription drug
benefit. The separate drug benefit designs can be characterized
by the number of tiers (up to four) into which drug classes and
specific medications are assigned. Each tier has a distinct cost
sharing level and/or form; the lower tiers are less costly to both
the enrollee and to the health plan or insurer. Some payers use a
four-tier system which includes life-style drugs and specialty
drugs in the fourth tier; typically these are the most costly
drugs. The four-tier design frequently results in greater
enrollee out-of-pocket expenses. CHBRP notes that there is no
standard industry definition of specialty prescription drugs, but
it is generally recognized by many payers as prescription drugs
with an average minimum monthly cost of $1,150. Other criteria
may include prescription drugs that treat a rare disease, require
special handling, or have a limited distribution network. Most of
the conditions targeted by these specialty drugs tend to be
chronic and progressive in nature and can impact quality of life,
along with morbidity and mortality. Examples include growth
hormone disorders, rheumatoid arthritis, asthma, multiple
sclerosis, hepatitis C, hemophilia, cancer, and lupus.
Payment for covered health benefits is shared between the payer
(e.g., health plan/insurer or employer) and the enrollee. The
patient cost-share is the portion that must be paid out-of-pocket
directly to the provider, generally at the time of treatment.
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Common cost-sharing mechanisms include copayments (a fixed dollar
amount), coinsurance (a percentage of actual cost), and/or
deductibles (an amount, generally $500 or more, which the patient
must pay for health care before the plan pays anything, subject to
certain exclusions). Health plans and insurers use cost-sharing
to direct patients toward high-value services.
The pharmacy and therapeutics (P&T) committee is a medical staff
advisory group of a hospital, health or insurance plan, or
pharmacy benefit manager that decides which drugs will appear on
that entity's drug formulary. The P&T committee is responsible
for managing the formulary system. It is composed of actively
practicing physicians, other prescribers, pharmacists, nurses,
administrators, quality improvement managers, and other health
care professionals and staff who participate in the medication-use
process. The P&T committee serves in an evaluative, educational,
and advisory capacity to the medical staff and organizational
administration in all matters pertaining to the use of
medications. The P&T committee's primary role is to make clinical
decisions based on scientific evidence, such as peer-reviewed
medical literature, and standards of practice, such as
well-established clinical practice guidelines. Depending on the
size of the entity, the P&T committee may weigh the costs and
benefits of each drug and decide which ones provide the best
efficacy per dollar.
Recent state and federal action has been taken on the issue of
formulary design and cost-sharing. On May 21, 2015, the Covered
California board adopted guidelines for formulary design in health
plans sold through the Exchange. The guidelines standardize
formulary tiers, limit placement of certain types of drugs on
certain tiers, and implement drug cost-sharing caps of $250 for
most plans and $500 for lower-priced bronze plans. A proposed
federal rule released on November 26, 2014, and the final rule,
released on February 27, 2015, cautioned health plans and insurers
that certain examples cited appear discriminatory in their
application when looking at the totality of the circumstances, and
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may be prohibited. Examples included placing most or all drugs
that treat a specific condition on the highest cost tiers, or
refusal to cover a single-tablet drug regimen or extended-release
product, absent an appropriate reason for such refusal. Potential
discrimination in plan design is of heightened interest now. Since
health insurers can no longer deny coverage for a preexisting
condition, discouraging less healthy individuals by strategically
charging high cost-sharing is seen as a way that insurers can
avoid enrolling individuals with higher health care needs.
Health Access California, sponsor of this bill, states that this
bill is would prevent discrimination against consumers with health
conditions by setting standards for cost sharing of prescription
drugs. This bill would put in place consumer protections that are
consistent with federal law and regulations to offer important
consumer protections to Californians with chronic conditions. The
California Academy of Physician Assistants write that if patients
have consistent, affordable access to their medications they are
more likely to adhere to the medications regiment prescribed by
their provider. Medication adherence is essential to improving
health and outcomes for people with chronic conditions. Pricing
specialty medications far out of reach, due to excessively high
co-insurance, often results in an inability of the patient to
adhere to their treatment plan and therefore jeopardizes their
health.
California Association of Health Plans states, in opposition, that
this bill does nothing to control the high underlying cost of
pharmaceuticals, nor does it do anything to encourage the makers
of drugs to be more efficient and lower costs. California
Association of Health Underwriters argues that this bill would
increase costs for all consumers because health plans will be
forced to absorb almost all of the cost of expensive drugs and
then spread that cost across all enrollees. Opponents of this
bill state that restrictions on formulary design are burdensome
and unnecessary, and will not be consistent with Covered
California's broader policies emphasizing cost-savings and access.
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Analysis Prepared by:
Dharia McGrew / HEALTH / (916) 319-2097 FN:
0000702