BILL ANALYSIS Ó SENATE COMMITTEE ON HEALTH Senator Ed Hernandez, O.D., Chair BILL NO: AB 339 --------------------------------------------------------------- |AUTHOR: |Gordon | |---------------+-----------------------------------------------| |VERSION: |July 7, 2015 | --------------------------------------------------------------- --------------------------------------------------------------- |HEARING DATE: |July 15, 2015 | | | --------------------------------------------------------------- --------------------------------------------------------------- |CONSULTANT: |Teri Boughton | --------------------------------------------------------------- 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 AB 339 (Gordon) Page 7 of ? 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 : ----------------------------------------------------------------- |Assembly Floor: |48 - 30 | |------------------------------------+----------------------------| |Assembly Appropriations Committee: |12 - 5 | |------------------------------------+----------------------------| |Assembly Health Committee: |12 - 5 | | | | ----------------------------------------------------------------- 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: ------------------------------------------------------ |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. | | | | | ------------------------------------------------------ 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 -- END --