BILL ANALYSIS Ó
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: AB 339
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|AUTHOR: |Gordon |
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|VERSION: |July 7, 2015 |
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|HEARING DATE: |July 15, 2015 | | |
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|CONSULTANT: |Teri Boughton |
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SUBJECT : Health care coverage: outpatient prescription drugs
SUMMARY : Requires health plans and health insurers that provide
coverage for outpatient prescription drugs to demonstrate that
their formularies do not discourage the enrollment of
individuals with health conditions. Requires for combination
drug treatments that include antiretrovirals, coverage of a
single-tablet that is as effective as a multitablet regimen
unless a plan or insurer can demonstrate that the multitablet
regimen is clinically equally or more effective and more likely
to result in adherence to a drug regimen. Requires individual
market formulary coverage to be the same or comparable to
formularies maintained in the group market. Places in state
law, federal requirements related to prior authorization
response times, pharmacy and therapeutics committees, access to
in-network retail pharmacies, standardized formulary
requirements. Applies step therapy requirements that are
currently applicable to health plans through state regulations
to health insurers. Places in state law formulary tier
requirements similar but slightly different than those required
of health plans and insurers participating in Covered California
and copayment caps of $250 for a supply of up to 30 days for an
individual prescription, as specified, consistent with those
adopted by Covered California.
Existing law:
1)Regulates health plans through the Department of Managed
Health Care (DMHC) under the Knox-Keene Act and health
insurance policies through the California Department of
Insurance (CDI) under the Insurance Code.
2)Mandates the 10 federally required essential health benefits
AB 339 (Gordon) Page 2 of ?
(EHBs) and establishes Kaiser Small Group health plan as
California's EHB benchmark plan, including prescription drug
benefits, as specified, and incorporates by reference state
law and regulations related to outpatient prescription drug
coverage.
3)Requires, on or after January 1, 2015, for non-grandfathered
health plan contracts or health insurance policies in the
individual and small group markets, limits on annual
out-of-pocket expenses for all covered benefits that meet the
definition of EHB, including out-of-network emergency care, as
specified. For the large group market, requires a
non-grandfathered health plan or health insurer to provide for
a limit on annual out-of-pocket expenses for covered benefits,
including out-of-network emergency care, as specified.
Requires this limit to only apply to EHBs that are covered
under the plan or policy to the extent that this provision
does not conflict with federal law or guidance on
out-of-pocket maximums.
4)Limits, for an individual or group health plan contract or
health insurance policy issued, amended, or renewed on or
after January 1, 2015, that provides coverage for prescribed,
orally administered anticancer medications used to kill or
slow the growth of cancerous cells, the total amount of
copayments and coinsurance an enrollee or insured is required
to pay for orally administered anticancer medications to $200
for an individual prescription of up to a 30-day supply.
5)Establishes Covered California as California's health benefit
exchange where individuals and small employers can purchase
standardized health insurance from selectively contracted
qualified health plans (QHPs) based on bronze, silver, gold
and platinum actuarial level categories.
6)Requires every health plan that provides prescription drug
benefits to maintain an expeditious process by which
prescribing providers may obtain authorization for a medically
necessary nonformulary prescription drug, and requires the
process, and timelines for responding to authorization
requests, including changes to this process to be filed with
DMHC. Requires a written description of this process to be
given to prescribing providers of the plan. Requires any
disapproval from the plan to indicate the reason in a notice
provided to the enrollee, which includes how to file a
AB 339 (Gordon) Page 3 of ?
grievance with the plan.
7)Requires health plans and insurers that provide prescription
drug benefits and maintain drug formularies to post the
formulary or formularies for each product offered by the plan
or insurer on the plan's or insurer's website in a manner that
is accessible and searchable by potential enrollees and
insureds, enrollees, insureds and providers.
8)Requires DMHC and CDI to develop a standard formulary template
that contains specified information by January 1, 2017.
Requires health plans and insurers to use the standard
formulary template within six months of the date the template
is developed by DMHC and CDI.
9)Requires health plans and insurers to update their posted
formularies with any change to those formularies on a monthly
basis.
10)Deems prior authorization granted if a health plan or health
insurer fails to utilize or accept a standardized prior
authorization form, as specified, or fails to respond within
two business days upon receipt of a request from a prescribing
provider.
11)Requires, pursuant to regulation, a plan that requires step
therapy, to have an expedited process in place to authorize
exceptions to step therapy when medically necessary and to
conform effectively and efficiently to continuity of care
requirements, as specified. Prohibits when an enrollee
changes plans, the new plan from requiring the enrollee to
repeat step therapy when that enrollee is already being
treated for a medical condition by prescription drug that is
appropriately prescribed and that is safe and effective for
the enrollee's condition. This does not prevent the new plan
from imposing a prior authorization requirement. Defines
"step therapy" as a type of protocol that specifies the
sequence in which different prescription drugs for a given
medical condition and medically appropriate for a particular
patient are to be prescribed.
cc - Covered California
regulations
f - Federal
regulations
s - State
AB 339 (Gordon) Page 4 of ?
regulations/law
This bill:
1)States legislative intent to build on existing state and
federal law to ensure that health coverage benefit designs do
not have an unreasonable discriminatory impact on chronically
ill individuals, to ensure affordability of outpatient
prescription drugs, and that assignment of all or most
prescription medications that treat a specific medical
condition to the highest cost tiers of a formulary may
effectively discourage enrollment by chronically ill
individuals.
2)Requires a non-grandfathered group health plan or policy of
health insurance offered, amended, or renewed on or after July
1, 2016, and a non-grandfathered individual health plan or
policy of health insurance offered, amended or renewed on or
after January 1, 2017 to comply with the following, with
respect to plans and policies that cover outpatient
prescription drugs:
a) Demonstrate that the formulary or formularies
do not discourage the enrollment of individuals with
health conditions and do not reduce the generosity of
the benefit for enrollees or insureds with a
particular condition, consistent with federal law and
notwithstanding state law, as specified;
b) Cover for combination drug treatments that
include antiretrovirals, a single-tablet drug regimen
that is as effective as a multitablet regimen unless
the health plan is able to demonstrate to the DMHC
director, or insurer is able to demonstrate to the CDI
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;
c) Permit no more than 50% of drugs approved by
the United States Food and Drug Administration (FDA)
that are in the same drug class to be assigned to the
two highest cost tiers of a drug formulary;
d) Cover at least one drug in the lower cost
tiers if all FDA-approved drugs in the same drug class
would otherwise qualify for the highest cost tiers and
at least three drugs in that class are available as
AB 339 (Gordon) Page 5 of ?
FDA-approved drugs. (cc) Requires the drug or drugs
assigned to the lower cost tiers to be those that were
most often prescribed during the immediately preceding
plan year, based on the health plan's experience;
e) Demonstrate that individual market coverage
formularies are the same or comparable to those in the
group market;
f) Limit the copayment, coinsurance, or any other
form of cost sharing for a covered outpatient
prescription drug for an individual prescription for
up to a 30 day supply to not more than $250, as
specified, except for a product with actuarial value
to bronze coverage, cost sharing for a covered
outpatient prescription drug for an individual
prescription for a supply of up to 30 days to not more
than $500. (cc) Requires for a federally defined high
deductible health plan the limit to apply only after
the enrollee's deductible has been satisfied for the
year;
g) Use defined formulary tier groupings if a plan
contract or insurance policy maintains a drug
formulary grouped into tiers, including a fourth tier
and specialty tier, but does not require the use of a
fourth tier; and,
h) Ensure placement of prescription drugs on
formulary tiers is clinically indicated, reasonable
medical management practices.
3)States that this bill does not require a health plan or health
insurance policy to impose cost sharing for prescription drugs
that state and federal law requires to be provided without
cost sharing and does not require the plan's or insurer's
pharmacy and therapeutics (P&T) committee to consider the cost
of the prescription drug to the health plan or insurer.
4)States that this bill does not require or authorize a Medi-Cal
managed care plan to provide coverage for prescription drugs
that are not required pursuant to program contracts, or to
limit or exclude any prescription drugs that are required by
those programs or contracts.
5)Makes the cost-sharing limits established in 1-3) above
applicable only to outpatient prescription drugs covered by
the contract or policy that constitute EHBs.
AB 339 (Gordon) Page 6 of ?
6)Requires a plan or insurer to provide that the enrollee or
insured, the enrollee's or insured's designee or the
enrollee's or insured's prescribing provider may seek an
authorization for a nonformulary prescription drug for the
duration of a prescription, including refills.
7)Requires each plan or insurer to respond to an authorization
request within 72 hours following receipt of the request for a
nonurgent authorization. Requires, if approved by the plan or
insurer, coverage of the nonformulary drug for the duration of
the prescription, including refills. (f)
8)Requires each plan or insurer to provide that an urgent
authorization may be obtained within 24 hours if an enrollee
or insured suffering from a health condition that may
seriously jeopardize the enrollee's life, health, or ability
to regain maximum function, or if an enrollee or insured is
undergoing a current course of treatment using a nonformulary
prescription drug. Requires a plan or insurer that grants an
exception based on these urgent circumstances to provide
coverage of the nonformulary prescription drug for the
duration of that urgent condition. (f)
9)Requires a plan or insurer to maintain a P&T committee
responsible for developing, maintaining, and overseeing any
drug formulary list, and establishes requirements associated
with the P&T committee that are substantially similar to
federal regulations. (f)
10)Permits a health insurer to impose prior authorization
requirements on prescription drug benefits, consistent with
this bill, and permits step therapy. Prohibits, in
circumstances where an enrollee or insured changes plans or
policies, the new plan or policy from requiring the enrollee
or insured to repeat step therapy where the drug is
appropriately prescribed and safe and effective for the
enrollee's condition. (s)
11)Requires a plan or insurer to provide coverage for the
medically necessary dosage and quantity of the drug prescribed
for the treatment of a medical condition consistent with
professional recognized standards of practice.
12)Requires a plan or insurer that provides EHBs to allow an
enrollee or insured to access prescription drug benefits at an
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in-network retail pharmacy unless the prescription drug is
subject to restricted distribution by the FDA, or requires
special handling, as specified, or patient education, as
specified. Permits the plan or insurer to charge an enrollee
or insured different cost sharing but requires all cost
sharing to count toward the plan's or policies' annual
limitation on cost sharing. (f)
13)Requires if a nonformulary drug is authorized consistent with
this bill, the cost sharing to be the same as for a formulary
drug, as specified.
14)Adds DMHC, CDI, the general public and federal agencies to
those entities permitted to access and search for plan
formularies on the plan's Internet website. (f)
15)Requires plans or insurers to include on the standard
formulary template information on which medications are
covered, including both generic and brand name, and what tier
of the plan's or policies' drug formulary each medication is
in. (f)
16)Requires a health insurance policy that provides coverage for
outpatient prescription drugs to cover medically necessary
prescription drugs, and a medically necessary prescription
drug for which there is not a therapeutic equivalent. (s)
17)Requires copayments, coinsurance and other cost sharing for
prescription drugs to be reasonable so as to allow access to
medically necessary outpatient prescription drugs. (s)
18)Requires every health insurer that provides prescription drug
benefits to maintain an expeditious process by which
prescribing providers may obtain authorization for a medically
necessary nonformulary prescription drug, and on or before
July 1, 2016 file with the commissioner a description of its
process for responding to these requests. (s)
19)Requires the expeditious process pursuant to 18) above,
including timelines for responding to prescribing provider
authorization requests, to be described in evidence of
coverage and disclosure forms, as specified, issued on or
after January 1, 2016. Specifies information to be maintained
and made available to the commissioner upon request. (s)
AB 339 (Gordon) Page 8 of ?
20)Requires, if an insurer imposes step therapy, the insurer to
provide an expeditious process to authorize an exception to
step therapy when medically necessary and to conform
effectively and efficiently with continuity of care
requirements in law and regulations. Requires this process to
be consistent with this bill. (s)
21)Defines "step therapy" to mean a type of protocol that
specifies the sequence in which different prescription drugs
for a given medical condition and medically appropriate for a
particular patient are to be prescribed.(s)
22)Requires the step therapy authorization process to be
provided to its prescribing providers, and provide the reasons
for any request that is not approved. (s)
23)Authorizes a health insurer to impose prior authorization
requirements consistent with this bill. Prohibits an insurer
from requiring an insured to repeat step therapy when changing
policies. (s)
24)Requires an insurer to provide coverage for the medically
necessary dosage and quantity of the drug prescribed
consistent with professionally recognized standards of
practice. (s)
25)Requires the commissioner as part of its market conduct
examination to review the performance of an insurer that
provides prescription drug benefits, in providing those
benefits, as described. Prohibits the commissioner from
publicly disclosing any information reviewed. (s)
26)Defines, for the purposes of the Insurance Code, nonformulary
prescription drugs to include any drugs for which the
insured's copayment or out-of-pocket costs are different than
the copayment for a formulary prescription drug, except as
otherwise provided by law or regulation. (s)
FISCAL
EFFECT : According to the Assembly Appropriations Committee, as
amended June 1, 2015:
1)One-time costs to 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).
AB 339 (Gordon) Page 9 of ?
2)One-time costs to 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 (CHBRP)
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) and Medi-Cal.Increased employer-funded
premium costs in the private insurance market of $162
million.
b) 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 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.
AB 339 (Gordon) Page 10 of ?
PRIOR
VOTES :
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|Assembly Floor: |48 - 30 |
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|Assembly Appropriations Committee: |12 - 5 |
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|Assembly Health Committee: |12 - 5 |
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COMMENTS :
1)Author's statement. According to the author, Californians with
cancer, HIV/AIDS, hepatitis, multiple sclerosis, epilepsy, lupus,
and other serious and chronic conditions need high cost specialty
drugs, which can cost thousands of dollars. These Californians
can often reach their out-of-pocket limit in the first month of
the plan year with only one prescription drug. Many Californians
would find it difficult to pay over $6,000 out-of-pocket for a
single prescription drug, let alone in one month. Too many
patients are forced to choose between paying for their life-saving
drugs and paying for housing, child care, or food. In turn,
failure to access prescription drugs leads to suffering, and even
death, from illnesses that are treatable. AB 339 is designed to
ensure consumer access to vital medications and builds on existing
California law and recent federal guidance to provide basic
consumer protections that take the patient out of the middle of
the negotiations between health plans
and pharmaceutical manufacturers. This bill benefits patients by
reducing cost barriers to those who depend on life-saving
prescription drugs and implements and improves upon concepts from
federal guidance in order to ensure that the anti-discrimination
provisions of the Affordable Care Act (ACA) remain intact.
2)Drug Discrimination. Jacobs and Summer describe in a 2015 New
England Journal of Medicine perspectives piece that there is
evidence that insurers are resorting to tactics to dissuade
high-cost patients from enrolling. A formal complaint on this
point was submitted to the Department of Health and Human
Services (HHS) in May 2014 that insurers in the federal exchange
had structured their drug formularies to discourage people with
human immunodeficiency virus (HIV) infection from selecting their
plans. These insurers categorized all HIV drugs, including
AB 339 (Gordon) Page 11 of ?
generics, in the tier with the highest cost sharing. Insurers
have historically used tiered formularies to encourage enrollees
to select generic or preferred brand-name drugs instead of
higher-cost alternatives. Jacobs and Summer write that "adverse
tiering" is not to influence enrollees' drug utilization but
rather to deter certain people from enrolling in the first place.
Findings of a recently published California HealthCare Foundation
study indicate Products used to treat complex chronic conditions,
especially those for autoimmune disorders like rheumatoid
arthritis, were disproportionately placed on the specialty tier
in Covered California plans compared to the selected employer
plans. Comprehensive information on drug coverage and
out-of-pocket costs was difficult to find. This lack of access
could be a barrier to consumers who wish to make informed
purchasing decisions. Additionally, the study found that Covered
California plans were more aggressive than selected employer
plans in managing drug use through administrative controls, such
as prior authorization and step therapy.
3)Knox-Keene Act Regulations on Outpatient Drugs. Standards for
outpatient prescription drug benefit plans are contained under
Title 28 Code of California Regulations section 1300.67.25. The
regulation requires for plans that cover outpatient prescription
drug benefits coverage for all medically necessary outpatient
prescription drugs, except as described in the regulation. The
clinical aspects of a plan's prescription drug benefit must be
developed by qualified medical and pharmacy professionals and
include documentation of the internal process for ongoing
review. Plans seeking to establish limitations or exclusions
must do so consistent with up to date evidence based outcomes
and current published peer-reviewed medical and pharmaceutical
literature. DMHC's approval or disapproval of copayments,
coinsurance, deductibles, limitations, or exclusions may be
based upon a number of factors including the availability of
therapeutic equivalents or other drugs medically necessary for
treatment of health conditions. Copayments must be reasonable
so as to allow access to medically necessary outpatient
prescription drugs. The regulation allows plans to apply
limitations such as prior authorization requirements and step
therapy. Medically necessary dosage and quantity of the drug
prescribed must be consistent with professionally recognized
standards of practice. A plan is not required to provide
coverage for outpatient prescription drugs prescribed for
cosmetic purposes, hair loss, sexual dysfunction, athletic
performance, losing weight (except when medically necessary for
AB 339 (Gordon) Page 12 of ?
the treatment of morbid obesity), and other purposes, as
described.
4)Federal Regulations. Final federal rules and regulations
issued on February 27, 2015 among other provisions update
regulations on the prescription drug benefit associated with
EHBs. The new regulations require health plans and insurers
that offer EHBs to cover at least the greater of one drug in
every United States Pharmacopeia category and class, or the
same number of prescription drugs in each category and class
as the EHB-benchmark plan. For plan years beginning on or
after January 1, 2017, the regulations require plans to use a
P&T committee that meets specified standards related to
conflicts of interest, membership,
meeting frequency and documentation. The regulations require
clinical decisions to be based on the strength of scientific
evidence and standards of practice, including assessing
peer-reviewed medical literature, pharmacoeconomic studies,
outcomes research data, and other such information as
determined appropriate. The regulations also require a health
plan or insurer have the following processes in place that
allow an enrollee, the enrollee's designee,
or the enrollee's prescribing physician (or other prescriber,
as appropriate) to request and gain access to clinically
appropriate drugs not otherwise covered by the health plan or
insurer
(a request for exception). In the event that an exception
request is granted, the plan or insurer must treat the
excepted drug(s) as an EHB, including by counting any
cost-sharing towards the plan's or policies' annual limitation
on cost-sharing and when calculating the plan's and policies'
actuarial value. The regulations require the plan to notify
the enrollee no later 72 hours following receipt of a request.
An expedited review can be requested when exigent
circumstances exist (such as an enrollee is suffering from a
health condition that may seriously jeopardize the enrollee's
life, health, or ability to regain maximum function or when an
enrollee is undergoing a course of treatment using a
non-formulary drug). In exigent circumstances an enrollee
must be notified of the coverage determination no later 24
hours following receipt of the request. The regulations also
require a health plan or insurer to allow enrollees or
insureds to access prescription drug benefits at in-network
retail pharmacies, unless the drug is subject to restricted
distribution by the FDA; or the drug requires special
AB 339 (Gordon) Page 13 of ?
handling, provider coordination, or patient education that
cannot be provided by a retail pharmacy. A health plan or
insurer may charge enrollees or insureds a different
cost-sharing amount for obtaining a covered drug at a retail
pharmacy, but all cost sharing will count towards the plan's
or policies' annual limitation on cost sharing and must be
accounted for in the plan's policies' actuarial value.
5)Covered California. Covered California recently announced
several changes to their 2016 Standard Plan Benefit Designs.
Plan formularies must include at least one drug in Tiers 1, 2
or 3 if all FDA-approved drugs in the same drug class would
otherwise qualify for Tier 4 and at least three drugs in that
class are available as FDA-approved drugs. Plans can have an
opt out retail option for mail order (allowing consumers that
want/need in person assistance to get such service at no
additional cost). Plans must provide enrolled consumers an
estimate of the out-of-pocket cost for specific drugs and
include a statement on the availability of drugs not listed on
the formulary. An exception process must be written clearly on
the formulary and a dedicated pharmacy customer service line
must be available for advocates and prospective consumers to
call for clarification. Covered California indicates that
many factors influence medication adherence including income,
consumer's share of cost, disease being treated, complexity of
medication regimen, and side effect. There is a high degree
of uncertainty with the new introduction and pharmaceutical
pricing of specialty drugs. Ultimately Covered California
determined it was in the best interest of the consumer to set
a lower maximum cap on specialty drugs for the 2016 plan year.
Covered California also adopted caps on pharmacy deductible
for Tier 4 drugs of $250 for a 30 day supply and $500 for a 30
day supply for a bronze plan. The estimated range of premium
impact in the first year is generally less than one percent
and the projected three year premium impact varied widely
between zero and three percent. Covered California also
adopted the following definitions for drug tiers:
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|Tier |Definition |AB 339 |
|--------+-----------------------+---------------------|
|1 |Most generic drugs and |Most generic drugs |
| |low cost preferred |and low cost |
| |brands |preferred brand |
AB 339 (Gordon) Page 14 of ?
| | |drugs |
|--------+-----------------------+---------------------|
|2 |Non-preferred generic |Non-preferred |
| |drugs; or preferred |generic drugs, |
| |brand name drugs or |preferred brand name |
| |recommended by the |drugs, and any other |
| |plan's P&T committee |drugs recommended by |
| |based on drug safety, |the plan's/insurer's |
| |efficacy and cost. |P&T committee based |
| | |on safety and |
| | |efficacy and not |
| | |solely based on the |
| | |cost of the |
| | |prescription drug, |
| | |and which generally |
| | |have a preferred and |
| | |often less costly |
| | |therapeutic |
| | |alternative at a |
| | |lower cost tier. |
|--------+-----------------------+---------------------|
|3 |Non-preferred brand |Non-preferred brand |
| |name drugs; or |name drugs that are |
| |recommended by the |recommended by the |
| |plan's P&T committee |health |
| |based on drug safety, |plan's/insurer's P&T |
| |efficacy and cost; or |committee based on |
| |generally have a |safety and efficacy |
| |preferred and often |and not solely based |
| |less costly |on the cost of the |
| |therapeutic |prescription drug. |
| |alternative at a lower | |
| |tier. | |
|--------+-----------------------+---------------------|
|4 |FDA or drug |Biologics, drugs |
| |manufacturer limits |that FDA or |
| |distribution to |manufacture requires |
| |specialty pharmacies; |to be distributed |
| |or self- |through a specialty |
| |administration |pharmacy, drugs that |
| |requires training, |require the enrollee |
| |clinical monitoring; |to have special |
| |or drug was |training or clinical |
| |manufactured using |monitoring for |
| |biotechnology or plan |self-administration, |
AB 339 (Gordon) Page 15 of ?
| |cost (net of rebates) |or drugs that cost |
| |is > $600. |the health |
| | |plan/insurer more |
| | |than $600 net of |
| | |rebates. |
| | | |
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6)Complaints. According to DMHC, for calendar years 2013 and
2014, the department received a total of 52 grievances and 27
IMRs related to health plan strategies to reduce prescription
drug costs. The majority of these complaints and IMRs
concerned increased prescription drug copayments due to health
plan formulary and tier status changes, with a smaller number
related to step therapy or fail first protocols.
7)CHBRP analysis. AB 1996 (Thomson, Chapter 795, Statutes of
2002), requests the University of California to assess
legislation proposing a mandated benefit or service and
prepare a written analysis with relevant data on the medical,
economic, and public health impacts of proposed health plan
and health insurance benefit mandate legislation. The
assessments were expanded to include legislation impacting
essential health benefits and health insurance benefit design,
cost sharing, premiums, and other health insurance topics.
CHBRP was created in response to AB 1996. A report was issued
by CHBRP on this bill on May 19, 2015, which focused on
provisions of this bill that would have imposed limits on
outpatient drug cost sharing of no more than 1/24 of the total
annual out-of-pocket maximum or the equivalent of $260 per 30
day prescription. CHBRP indicates that the prescription
drugs most likely to be affected are the most expensive
prescriptions in several classes of specialty and biologic
drugs used to treat conditions such as cancer, multiple
sclerosis, rheumatoid arthritis, immune disorders, anemia, HIV
and infertility.
a) Medical effectiveness. There is a preponderance of
evidence that people who face higher cost sharing for a
prescription drug are less likely to maintain meaningful
levels of adherence than persons who face lower cost
sharing. Poorer adherence to prescription drug therapy
for chronic conditions is associated with higher rates of
hospitalization and emergency department visits and
AB 339 (Gordon) Page 16 of ?
poorer health outcomes. In general, as cost sharing
increases usage decreases. However, there is some
evidence that the effect of cost sharing may differ
depending on the specific disease and specific specialty
drug. There is a preponderance of evidence that cost
sharing has stronger effects on use of health care
services by low-income persons compared to high-income
persons. However, this was not observed in a recent
well-done observational study from Massachusetts.
b) Capacity and access. CHBRP estimates that 46,357
enrollees, including 947 new users, would fill an
additional 13,184 high-cost prescription drugs.
c) Utilization and cost. Forty-two percent reduction
in the average cost sharing for an enrollee's high cost
prescription drug.
d) Impact on expenditures. Private employer premium
increases are expected to increase by .29% and .35% for
enrollees with group insurance. Enrollees for
individually purchased insurance have the highest
increases of .71%.
e) Public health impacts. No measurable public health
outcomes impact due to the small number of enrollees with
a reduction in cost sharing for prescriptions that would
have exceeded the limit. However, on a case by case
basis, this bill may yield important health and quality
of life improvements for some.
f) Interaction with EHB. This bill appears not to
exceed EHBs, and therefore would not trigger the ACA
requirement that the state defray the cost of additional
benefit coverage for enrollees in Covered California
participating plans.
8)Related legislation. AB 374 (Nazarian) prohibits a health
plan or insurer from applying a step therapy protocol when a
patient has made a "step therapy override determination
request," if the patient's physician determines that step
therapy would not be medically appropriate. Requires a
carrier to expeditiously review a request made by a patient,
if specific criteria are met and adequate supporting rationale
and documentation is provided by the prescribing physician.
AB 374 is also set for hearing in this committee on July 15,
2015.
AB 339 (Gordon) Page 17 of ?
SB 282 (Hernandez) permits the use of alternative methods of
electronic prior authorization of prescription drugs other
than the required standardized form, and exempts physician
groups with delegated financial risk from the standardized
prior authorization process. SB 282 is set for hearing in the
Assembly Health Committee on July 14, 2015.
SB 43 (Hernandez) updates California's EHB statute to reflect
recent federal regulations. SB 43 is set for hearing in the
Assembly Health Committee on July 14, 2015.
9)Prior legislation. AB 1917 (Gordon, 2014), would have limited
cost sharing for a 30-day supply of a prescription drug to
1/12 of the annual out-of-pocket maximum for a prescription
that has a course of treatment more than three months or 1/2
of the annual out-of-pocket limit for a prescription with a
course of treatment of less than three months. AB 1917 was
held on the Senate Floor at the request of the author.
SB 1052 (Torres, Chapter 575, Statutes of 2014) requires
health plans and insurers to use a standard drug formulary
template to display their drug formularies and to post their
formularies on their Web sites and requires Covered California
to provide links to the formularies.
AB 219 (Perea, Chapter 661, Statutes of 2013), limits the
total amount of copayments and coinsurance an enrollee or
insured is required to pay for orally administered anticancer
medications to $200 for an individual prescription of up to a
30-day supply, adjust the cap annually not to exceed the
percentage increase in the Consumer Price Index for that year,
and sunsets on January 1, 2019. Governor Brown wrote in a
message approving AB 219 that this policy is not without the
potential for unintended consequences and that placing a price
cap on a specific class of drugs for a specific class of
diseases might not be a policy for the ages. A sunset on the
bill allows for examination of intended and unintended
consequences before embracing the policy long term.
SB 639 (Hernandez, Chapter 316, Statutes of 2013), places in
California law provisions of the ACA relating to out-of-pocket
limits on health plan enrollee and insured cost-sharing,
health plan and insurer actuarial value coverage levels and
catastrophic coverage requirements, and requirements on health
AB 339 (Gordon) Page 18 of ?
insurers with regard to coverage for out-of-network emergency
services. Applies health plan enrollee and insured
out-of-pocket limits to specialized products that offer EHBs.
Allows carriers in the small group market to establish an
index rate no more frequently than each calendar quarter.
SB 866 (Hernandez, Chapter 648, Statutes of 2011), requires
DMHC and CDI to jointly develop a uniform prior authorization
form that health plans and insurers must accept when
prescribing providers seek authorization for prescription drug
benefits.
10)Support. According to Biocom, this bill sets realistic
limits on the out-of-pocket expenses that can be assessed to
patients while maintaining the plans ability to direct
patients to therapeutically equivalent lower cost drugs. The
Orange County HIV/AIDS Advocacy Team writes this bill
implements concepts from federal guidance and improves upon
the antidiscrimination provisions of the ACA. Health Access
California writes that when people can't afford their
prescription drugs they skip doses, split pills in half and
some just don't pick up their prescriptions. Health Access
indicates that this bill implements and improves upon concepts
from the federal rule and regulations and California law and
regulations in order to ensure that Californians are better
able to afford their prescription drugs and that the
anti-discrimination provisions of the ACA remain intact.
Health Access points out that this bill improves federal law
by applying the nondiscrimination provisions to large
purchasers, includes prior authorization and step therapy
requirements in the Insurance Code, imposes a per-30 day
prescription limit on cost sharing so it cannot exceed $250
for most coverage and $500 for bronze, and finally aligns
patient protections with Covered California. The National
Multiple Sclerosis Society - CA Action Network writes that
people living with MS make frequent health care visits and
rely on expensive medications to help manage their disease.
There are 10 injectibles and three oral medications used to
help manage MS. There are no generic equivalents and these
treatments are typically placed on specialty tiers. Those
with MS also take four to six other drugs to ease symptoms,
monthly out-of-pocket medication costs can become exorbitant.
The Hemophilia Council of CA writes that this bill would allow
their patients to receive an exemption from "step therapy" to
be able to use the clotting factor that works best for them as
AB 339 (Gordon) Page 19 of ?
prescribed by their hematologist.
11)Opposition. Aetna writes that while Covered California has
enacted a cost-sharing limitation for individuals utilizing
the health insurance exchange, the legislature is encouraged
to study the impact of those regulations before expanding
these coverage requirements to all insurance policies. Blue
Shield of California has a number of concerns with the
provisions of this bill that exacerbate the drug pricing
challenge by giving drug companies seeking to exploit patent
protections, preferential placement of expensive single dose
drugs over lower cost multitablet regimes that have the exact
same effectiveness. The bill handcuffs negotiations with
manufacturers which limit the discount drug companies will be
willing to grant. By arbitrarily stipulating half of the
drugs for a condition to be on a lower tier, you are removing
any market leverage a plan has to obtain pricing concessions
from manufacturers. Pharmaceutical Care Management
Association believes this bill will raise costs for all, is
premature, will be complicated to implement, eliminate
competition of high priced drugs, and differs from the federal
regulations in that this bill takes effect sooner than the
federal regulations. PCMA also points out that federal
regulation can change and putting them in California statute
complicates matters.
12)Opposition Unless Amended. Kaiser Permanente to remove
language of this bill about cost-sharing that is vague,
unnecessary and sets up an impossible bar for prescribers and
health plans to meet. Kaiser also requests provisions be
removed that require plans to demonstrate to the regulator
that they are in compliance. Kaiser requested other changes
which may have been addressed by the July 7th amendments. The
Northern California Carpenters requests grandfathered plans to
be exempt from the bill. It appears the bill has been amended
to address these concerns.
13)Controlling Costs vs. Discouraging Enrollment. When third
party payors negotiate prescription drug coverage, they use
prior authorization, utilization controls, and formulary
design as mechanisms to obtain price discounts from drug
manufacturers and to ensure appropriate use of the medication.
By mandating coverage of types of drugs and design elements of
drug formularies the policy impact will likely create more
uniformity of plan designs, less opportunity for
AB 339 (Gordon) Page 20 of ?
discrimination based on treatment of chronic conditions with
high cost medications, and a spreading of the costs associated
with high cost medical treatments more broadly among the
insured population. However, these policies will also impact
a plan's ability to obtain price concessions from drug
manufacturers and possibly ensure appropriate utilization.
14)Multiple Significant Policy Changes Converge. There are four
broad categories of policy pursuits in this bill: 1)
Codifying Covered California policies in some cases with
slight revisions and broad applicability in the commercial
market; 2) Codifying DMHC regulations in the Insurance Code;
3) Codifying federal regulations with broader applicability in
the commercial market; and 4) Additional policy mandates not
required under existing federal or state law, or Covered
California regulation. In some cases this latter category is
inspired by the narrative associated with the federal
regulations. With regard to Covered California policies,
those policies have been established for a limited period of
time. This bill would extend the policy indefinitely and
slightly revises the tier definitions. Codification of DMHC
requirements on CDI plans may reduce the regulatory
disparities in health insurance in California but could also
exacerbate them should DMHC revise its regulations prompting
the need for statutory changes for CDI regulated plans.
California has endeavored to maintain consistency in the
application of health insurance market reforms under the ACA
so that plans not participating in Covered California have to
comply with the same rules as plans participating in Covered
California. Adoption of these federal rules in California law
is consistent with this policy objective.
This bill also establishes new requirements such as requiring
the coverage of single-tablet antiretrovirals that are as
effective as multitablet regimens. This provision has been
amended in an effort to target it's applicability to HIV
treatments. However, more tightening of this provision is
necessary. The bill also requires plans to demonstrate that
formularies do not discriminate and that individual market
coverage formularies are the same or comparable to those in
the group market. This bill requires the cost sharing of
authorized non-formulary drugs to be the same as for formulary
drugs.
It's unclear what impact all of these provisions will have
AB 339 (Gordon) Page 21 of ?
taken together. As indicated above, there will be some
uniformity in the market and some spreading out of costs
across the insured population but substantial cost increases
may also be realized as health plans, insurers and their
pharmacy benefit managers find it more difficult to manage
care and negotiate price discounts with drug manufacturers.
15)Drafting Issues.
a) Health and Safety Code section1342.71 Subdivision
(e) and Insurance Code 10123.193 (g) establish formulary
tier groups. It's not clear if the bill is requiring
these groupings of all plans with outpatient prescription
drug benefits or only on plans with fourth or specialty
tiers. The author may wish to clarify these provisions.
b) Health and Safety Code section 1367.41 (c) and
Insurance Code section 10123.201 (c)(3) the term issuer
should be replaced with plan in the Health and Safety
Code and insurer in the Insurance Code.
SUPPORT AND OPPOSITION :
Support:
Health Access California (sponsor)
AIDS Project Los Angeles
American Federation of State, County and Municipal Employees,
AFL-CIO
Arthritis Foundation
Association of Northern California Oncologists
Berkeley Free Clinic
Biocom
California Academy of Physician Assistants
California Black Health Network
California Chapter of the National Association of Social Workers
California Chronic Care Coalition
California Communities United Institute
California Healthcare Institute
California Labor Federation
California Lesbian, Gay, Bisexual, and Transgender Health and
Human Services Network
California Life Sciences Association
California Nurses Association
California Pan-Ethnic Health Network
California Teachers Association
CALPIRG
AB 339 (Gordon) Page 22 of ?
Community Clinic Association of Los Angeles
Consumers Union
CORE Medical Clinic, Inc.
Epilepsy California
Hemophilia Council of California
Los Angeles LGBT Center
Mental Health America of California
National Multiple Sclerosis Society - CA Action Network
National Psoriasis Foundation
National Stroke Association
Orange County HIV/AIDS Advocacy Team
Project Inform
San Francisco AIDS Foundation
San Luis Obispo County AIDS Support Network
SLO Hep C Project
Western Center on Law and Poverty
Oppose:
Aetna
America's Health Insurance Plans
Association of California Life and Health Insurance Companies
Blue Shield of California
California Association of Health Plans
California Association of Health Underwriters
California Chamber of Commerce
California Farm Bureau Federation
CSAC Excess Insurance Authority
CVS Health
Express Scripts
Health Net
Kaiser Permanente (unless amended)
Molina Healthcare of California
Northern California Carpenters Regional Council (unless amended)
Pharmaceutical Care Management Association
Simi Valley Chamber of Commerce
Southwest California Legislative Council
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