BILL ANALYSIS Ó AB 339 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 339 (Gordon) As Amended September 4, 2015 Majority vote -------------------------------------------------------------------- |ASSEMBLY: |48-30 |(June 3, 2015) |SENATE: |25-13 | (September 10, | | | | | | |2015) | | | | | | | | | | | | | | | -------------------------------------------------------------------- Original Committee Reference: HEALTH SUMMARY: Requires health plans and health insurers that provide coverage for outpatient prescription drugs to have formularies that do not discourage the enrollment of individuals with health conditions, and requires combination antiretrovirals drug treatment coverage of a single-tablet that is as effective as a multitablet regimen for treatment of Human immunodeficiency virus infection and acquired immune deficiency syndrome (HIV/AIDS), as specified. This bill places in state law, federal requirements related to pharmacy and therapeutics committees, access to in-network retail pharmacies, standardized formulary requirements, formulary tier requirements similar to those required of health plans and insurers participating in Covered California and copayment caps of $250 and $500 for a supply of up to 30 days for an individual prescription, as specified. The Senate amendments: AB 339 Page 2 1)Require plans and insurers to cover all medically necessary prescription drugs. 2)Limit the requirement to cover single-tablet regimens of a drug to only combination antiretroviral drug treatments that are medically necessary for the treatment of AIDS/HIV. 3)Delete a provision that required 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. 4)Cap the copay or coinsurance for a 30-day supply of outpatient prescriptions drugs at $250, or $500 for bronze-level plans, consistent with recently adopted Covered California regulations. 5)Make changes to the definitions of tiers in the insurer or plans drug formulary. 6)Limit some provisions of the bill to the individual and small group markets. 7)Sunset some provisions of the bill (copay/coinsurance cap and formulary definitions) on January 1, 2020. 8)Exempt Medi-Cal plans from the provisions of this bill. 9)Require, after January 1, 2017, that plans and insurers to maintain a pharmacy and therapeutics (P&T) committee that is responsible for developing, maintaining, and overseeing any drug formulary list. AB 339 Page 3 FISCAL EFFECT: According to the Senate Appropriations Committee, 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 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. COMMENTS: 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 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 Food and Drug Administration 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. AB 339 Page 4 Payment for covered health benefits is shared between the payer (e.g., health plan/insurer or employer) and the enrollee. The patient cost-share is the portion that must be paid out-of-pocket directly to the provider, generally at the time of treatment. Common cost-sharing mechanisms include copayments (a fixed dollar amount), coinsurance (a percentage of actual cost), and/or deductibles (an amount, generally $500 or more, which the patient must pay for health care before the plan pays anything, subject to certain exclusions). Health plans and insurers use cost-sharing to direct patients toward high-value services. The P&T committee is a medical staff advisory group of a hospital, health or insurance plan, or pharmacy benefit manager that decides which drugs will appear on that entity's drug formulary. The P&T committee is responsible for managing the formulary system. It is composed of actively practicing physicians, other prescribers, pharmacists, nurses, administrators, quality improvement managers, and other health care professionals and staff who participate in the medication-use process. The P&T committee serves in an evaluative, educational, and advisory capacity to the medical staff and organizational administration in all matters pertaining to the use of medications. The P&T committee's primary role is to make clinical decisions based on scientific evidence, such as peer-reviewed medical literature, and standards of practice, such as well-established clinical practice guidelines. Depending on the size of the entity, the P&T committee may weigh the costs and benefits of each drug and decide which ones provide the best efficacy per dollar. Recent state and federal action has been taken on the issue of formulary design and cost-sharing. A proposed federal rule released on November 26, 2014, and the final rule, released on February 27, 2015, cautioned health plans and insurers that certain examples cited appear discriminatory in their application when looking at the totality of the circumstances, and may be prohibited. Examples included placing most or all drugs that treat a specific condition on the highest cost tiers, AB 339 Page 5 or refusal to cover a single-tablet drug regimen or extended-release product, absent an appropriate reason for such refusal. Potential discrimination in plan design is of heightened interest now. Since health insurers can no longer deny coverage for a preexisting condition, discouraging less healthy individuals by strategically charging high cost-sharing is seen as a way that insurers can avoid enrolling individuals with higher health care needs. Health Access California 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 Patient Protection and Affordable Care Act remain intact. Health Access points out that this bill improves federal law by imposing 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 (MS) Society - California 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 injectable 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. 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 AB 339 Page 6 multitablet regimes that have the exact same effectiveness. This bill handcuffs negotiations with manufacturers which limit the discount drug companies will be willing to grant. Amgen believes this bill may limit patient access and is overly prescriptive. Amgen requests an amendment so that biologics are not statutorily defined as tier four products in four-tier formularies. Analysis Prepared by: Dharia McGrew / HEALTH / (916) 319-2097 FN: 0002303