BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 339 (Gordon) - Health care coverage: outpatient prescription
drugs
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|Version: July 16, 2015 |Policy Vote: HEALTH 7 - 2 |
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|Urgency: No |Mandate: Yes |
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|Hearing Date: August 17, 2015 |Consultant: Brendan McCarthy |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: AB 339 would make several changes to existing law
regarding prescription drug coverage and cost sharing for
patients.
Fiscal
Impact:
One-time costs of about $750,000 and ongoing costs of about
$400,000 per year for the Department of Insurance to adopt
policies and regulations, review plan filings, and enforce the
requirements of the bill (Insurance Fund).
One-time costs in the low millions and ongoing costs of about
$500,000 per year for the Department of Managed Health Care to
adopt policies and regulations, review plan filings, and
enforce the requirements of the bill (Managed Care Fund).
No significant impact to the Medi-Cal program is anticipated.
The provisions of the bill dealing with cost sharing and the
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assignment of drugs to formulary tiers do not apply to
Medi-Cal managed care plans. The other provisions of the bill
are not expected to significantly increase costs to Medi-Cal
managed care plans.
Unknown impacts on health care spending by CalPERS. The
California Health Benefits Review Program has reviewed this
bill. According to the Program, the bill in its current form
would not increase costs for CalPERS contracted health plans
and insurance policies due to the limits on prescription drug
cost sharing by enrollees. (A prior version of the bill would
have impacted CalPERS' coverage of infertility drugs; however
the current version of the bill is limited to essential health
benefits, which does not cover infertility treatments).
However, there was not sufficient information available to
conduct a quantitative analysis of the provisions of the bill
that would place requirements on carriers when developing drug
formularies. Health plans and insurers (and their contracted
pharmacy benefits managers) use drug formulary tiers to both
encourage enrollees to make greater use of low-cost drugs and
to incentivize drug manufacturers to lower their prices in
order to have their drugs placed on the lower tiers. By
limiting the ability of health plans and insurers to place
drugs (particularly high cost drugs) on the higher tiers, the
bill is likely to limit the bargaining power of health plans
and insurers. This is likely to increase overall prescription
drug costs to health plans and insurers, and ultimately to
increase the cost of health care to consumers and employers.
The size of this impact is unknown.
Background: Under current law, health insurance is regulated by the
Department of Insurance and health care service plans are
regulated by the Department of Managed Health Care. In general,
health insurers and health plans are required to provide
coverage for medically necessary prescription drugs. Current law
required most health insurers and health plans to limit enrollee
out-of-pocket expenses for essential health benefits, including
prescription drugs.
Health insurers and health plans often use prescription drug
formularies with tiers. Drug formularies typically have one to
four tiers, with the first tier including generic and low cost
drugs and the fourth tier including specialty and high-cost
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drugs. Typically, enrollee cost sharing increases for drugs in
the upper tiers.
Covered California, the state's health benefit exchange,
recently adopted regulations that require qualifying health
plans sold through Covered California to meet certain
requirements relating to prescription drug coverage. Beginning
in 2016, Covered California plans will be required to limit
enrollee deductibles for prescription drugs to $250 for a 30 day
supply of drugs in tier 4 ($500 for enrollees in a bronze plan).
Covered California will also require formularies to include at
least one drug in tiers 1, 2, or 3 if all FDA-approved drugs in
the same class would otherwise be included in the plan's tier 4
and at least three drugs in that class are available.
Proposed Law:
AB 339 would make several changes to existing law regarding
prescription drug coverage and cost sharing for patients.
Specific provisions of the bill would:
Prohibit the drug formularies used by health insurers and
health plans from discouraging the enrollment of individuals
with health conditions and from reducing the generosity of the
benefit for enrollees with a particular condition;
For combination antiretroviral drugs for the treatment of
AIDS/HIV, health insurers and health plans would be required
to cover a single-tablet regimen unless the multi-tablet
regimen is shown to be equally effective and more likely to
result in adherence to a drug regimen;
Prohibit more than 50% of approved drugs in the same drug
class from being assigned to the two highest tiers of a drug
formulary;
Require all drug formularies to include at least one drug in
the lower cost tiers if all approved drugs would otherwise be
in the highest cost tiers and at least three drugs are
available in the drug class;
Require that the drug or drugs assigned to the lower tiers be
those drugs that were most often prescribed in the preceding
year;
Limit cost sharing for a 30-day supply of a prescription drug
to $250 (or $500 for a bronze level plan and only once the
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deductible has been satisfied for a high deductible health
plan). These provisions would sunset on January 1, 2021;
Specify the criteria for formulary tiers that must be used by
health insurers and health plans that include a fourth or
specialty tier;
The above requirements would go into effect on July 1, 2016
for group health plans or insurance policies and on January 1,
2017 for individual market health plans and health insurance
policies;
The above requirements would not apply to Medi-Cal managed
care plans;
Specify the timelines and procedures for requesting coverage
of a non-formulary drug by a prescriber (this modifies an
existing requirement on health plans and creates a new
requirement on health insurers);
Require carriers to have a pharmacy and therapeutics committee
responsible for developing a health insurer's or health plan's
drug formulary, with specified requirements;
Require health insurers and health plans to allow enrollees to
access prescription drugs at an in-network retail pharmacy
unless the drug is subject to federal restrictions on
distribution;
Require health insurers and health plans to provide access to
drug formularies to the general public and state regulators
and require carriers to include information on cost sharing
and what tier of a formulary each medication is on.
Related
Legislation:
AB 374 (Nazarian) would require prescribers to use a step
therapy override request developed by the Department of
Insurance and the Department of Managed Health Care and would
specify the timelines for carriers to respond to the request.
That bill will be heard in this committee.
AB 1917 (Gordon, 2014) would have limited cost sharing for a
30-day supply of prescription drugs to 1/12 of the annual
out-of-pocket maximum limit. That bill was held on the Senate
Floor.
Staff
Comments: The changes to current law reflected in this bill are
based on regulations adopted by Covered California for its
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qualifying health plans, federal regulations, and provisions of
the Knox-Keene act that apply to health plans, but not health
insurers. Rather than reference the existing Covered California
or federal regulations, this bill incorporates language that is
based on, but not exactly the same as, those regulations.
As is discussed above, the provisions of the bill that limit the
ability of health insurers and health plans to place high-cost
drugs on the higher drug formulary tiers will reduce the
bargaining power of health insurers and health plans. Overall,
this is likely to increase the cost of prescription drugs. The
size of this impact is unknown and was not quantifiable by the
California Health Benefits Review Program.
For example, one provision of the bill requires that the drugs
assigned to the lower tiers of a drug formulary (when there are
multiple drugs in the same class) be the drugs in that class
that were most prescribed in the preceding year. This provision
could have the impact of "locking in" high utilization of a very
high cost drug. For example, if several drugs come on to the
market in a short time period (as has happed with Hepatitis C
treatments) the first drug on the market is likely to be very
highly priced at first when there is no new competition. Because
the first drug on the market would have not competition at
first, it would by default be the most widely prescribed drug in
its class. Under this provision of the bill, a health insurers
or health plans could be required to place the first drug on the
market into the lower tiers of the formulary in subsequent
years, even if later entrants into the market are less
expensive.
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