BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:  April 28, 2015


                            ASSEMBLY COMMITTEE ON HEALTH


                                  Rob Bonta, Chair


          AB 374  
          (Nazarian) - As Amended March 2, 2015


          SUBJECT:  Health care coverage:  prescription drugs.


          SUMMARY:  Prohibits a health care service plan (plan) or insurer  
          from applying a step therapy protocol (STP) 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.  Specifically, this bill:  


          1)Requires a carrier to "expeditiously grant" the step therapy  
            override determination request by a patient with adequate  
            supporting rationale and documentation from the prescribing  
            physician, if any of the following apply: 

             a)   The drug required by the carrier is contraindicated or  
               will likely cause an adverse reaction by, or physical or  
               mental harm to, the patient;

             b)   The drug required by the carrier is expected to be  
               ineffective based on the known relevant physical or mental  
               characteristics of the patient and the known  
               characteristics of the drug;











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             c)   The drug required by the carrier is not in the best  
               interest of the patient, based on medical appropriateness;



             d)   The patient's condition is currently stable on a  
               medication selected by their health care provider; or,



             e)   The drug required by the carrier has not been approved  
               by the federal Food and Drug Administration (FDA) for the  
               patient's condition



          2)Upon granting a step therapy override determination, the  
            carrier must authorize coverage for the drug prescribed by the  
            patient's provider, if that drug is covered in the patient's  
            policy or contract.

          3)Specifies that this section does not prevent a carrier from  
            requiring a patient to try a generic equivalent drug prior to  
            providing coverage for the branded prescription. 





          EXISTING LAW: 


           
          1)Provides for regulation of health insurers by the California  
            Department of Insurance (CDI) under the Insurance Code, and  
            provides for the regulation of plans by the Department of  
            Managed Health Care (DMHC), pursuant to the Knox-Keene Health  
            Care Service Plan Act of 1975 (Knox-Keene Act).









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          2)Requires carriers to provide certain benefits, but does not  
            require carriers to cover prescription drugs.  Establishes  
            various requirements on carriers if they do offer prescription  
            drug coverage.


          3)Allows, pursuant to DMHC regulations, a plan to require step  
            therapy and requires a plan to have an expeditious process in  
            place to authorize exceptions to step therapy when medically  
            necessary.  Prohibits, in situations where 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 a prescription drug provided that the  
            drug is appropriately prescribed and is considered safe and  
            effective for the enrollee's condition.





          4)Requires any plan denial pursuant to 3) above to provide the  
            enrollee with the reasons for the denial and notify the  
            enrollee of the right to file a grievance and/or Independent  
            Medical Review (IMR) if the enrollee objects to the denial;  
            including any alternative drug or treatment offered by the  
            plan.

          5)Prohibits carriers that cover prescription drugs from limiting  
            or excluding coverage for a drug on the basis that the drug is  
            prescribed for a use different from the use for which the drug  
            has been approved by the FDA, provided that specified  
            conditions have been met, including that the drug is  
            prescribed by a participating licensed health care  
            professional for the treatment of a chronic and seriously  
            debilitating condition, the drug is medically necessary to  
            treat that condition, and the drug is on the plan formulary.











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          6)Establishes the Patient Protection and Affordable Care Act  
            (ACA), which imposes various requirements, some of which take  
            effect on January 1, 2014, on states, carriers, employers, and  
            individuals regarding health care coverage.



          7)Requires, under the ACA, carriers that offer coverage in the  
            small group or individual market to ensure coverage includes  
            essential health benefits (EHBs), as defined.  Provides that  
            the EHB package will be determined by the federal Department  
            of Health and Human Services (HHS) Secretary and must include,  
            at a minimum, ambulatory patient services, emergency services,  
            hospitalizations, and prescription drugs, among other things.





          FISCAL EFFECT:  This bill has not been analyzed by a fiscal  
          committee. 


          COMMENTS:  


          1)PURPOSE OF THIS BILL.  According to the author, use of step  
            therapy leads to an exacerbation of a patient's condition,  
            causing irreversible deterioration or damage to the patient,  
            such as limiting their daily functions and ability to remain a  
            productive member of the workforce and society.  The author  
            writes that the insurer is not the treating physician and  
            cannot possible know the individual circumstances or pain a  
            particular patient may be experiencing.  It does not make  
            logical sense for the plan to have complete and ultimate  
            control on the medications a patient is allowed to try.  The  
            author asserts that a determination about whether a STP is  
            appropriate should take into account the individual needs and  
            circumstances of the patient, along with the professional  








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            judgment of the prescribing physician.  


          2)STEP THERAPY PROTOCOLS.  According to the California Health  
            Benefits Review Program (CHBRP), step therapy, or fail-first  
            protocols, may be implemented as methods of utilization  
            management in a variety of ways and are known by a number of  
            terms.  Step therapy, when implemented by carriers, requires  
            an enrollee to try a first-line medication (often a generic  
            alternative) prior to receiving coverage for a second-line  
            medication (often a brand-name medication).  Step edit is a  
            process by which a prescription, submitted for payment  
            authorization, is electronically reviewed at point-of-service  
            for use of a prior, first-line medication.  A fail-first  
            protocol may also be the basis for part or all of a  
            precertification or prior authorization protocol, which may  
            also require the prescribing provider to confirm to the plan  
            or insurer that an alternate medication or medications have  
            been unsuccessfully tried by the patient before the coverage  
            for the prescribed medication is approved.  However, not all  
            prior authorization protocols have a fail-first component.   
            Some prior authorization protocols are based on other  
            criteria, such as intended use to treat a specific medical  
            problem or diagnosis, or confirmation that the patient meets  
            other criteria such as age or specified comorbidities.


            There is a wide variation in the presence of STPs among plans.  
             According to CHBRP, approximately 3% of covered enrollees  
            have no outpatient drug benefits, and 34% have drug benefits  
            that are not subject to STPs.  Of the remaining 63% of  
            enrollees with outpatient drug coverage, the number of drugs  
            subjected to STP varies from two to more than 100. 


          3)CURRENT PROTOCOLS FOR STEP THERAPY EXCEPTIONS.  Existing law  
            provides protections for insured patients.  Under state  
            regulation, a plan that requires step therapy must have an  
            expeditious process in place to authorize exceptions to step  








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            therapy when medically necessary.  Step therapy overrides  
            follow a procedure by which a prescriber submits clinical  
            documentation to the plan or insurer documenting why an  
            enrollee should be allowed to skip one or more of a protocol's  
            steps.  Reasons prescribers use to justify such an step  
            therapy override include:

             a)   The enrollee has already tried step-required drug(s)  
               unsuccessfully, or

             b)   The step-required drug is contraindicated for that  
               enrollee due to drug-drug interactions, drug-disease  
               interactions, or drug allergy or intolerance. 





            In many plans, the step therapy override process is the same  
            as the prior authorization process.  Step therapy override  
            requests may take several days to be reviewed by the plan or  
            insurer.  For prior authorization, DMHC-regulated plans are  
            required to respond and issue authorization determinations  
            within two business days.  CDI-regulated insurers are required  
            to issue nonurgent authorization determinations within five  
            business days.  Urgent determinations must be made within 72  
            hours.  Existing regulations also state that a plan or insurer  
            must notify the patient of their right to appeal the dispute  
            through IMR. 





          4)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 plan and  








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            health insurance benefit mandate legislation.  Below are major  
            findings of CHBRP's analysis:
             a)   Enrollees covered.  In 2016, approximately 24.6 million  
               Californians will have state-regulated health insurance  
               that would be subject to this bill. 


             b)   EHBs.  This bill would not exceed EHBs, because the  
               mandate is applicable to particular terms or conditions,  
               but does not require new benefit coverage. 


             c)   Medical effectiveness.  CHBRP found insufficient  
               evidence to conclude whether STP overrides affect health  
               outcomes.  The absence of evidence is not evidence of no  
               effect. 


             d)   Benefit coverage.  The terms and conditions of 27% of  
               enrollees would change to become fully compliant with this  
               bill's override approval criteria. 


             e)   Override criteria.  CHBRP found that all enrollees in  
               DMHC-regulated plans or CDI-regulated policies with drug  
               benefits subject to step therapy protocols have override  
               procedures in place.  This bill would require plans and  
               policies to grant step therapy overrides in five  
               circumstances, as specified, when the prescriber provides  
               specific documentation.  CHBRP found that most override  
               policies already consider the specific criteria laid forth  
               by this bill, and therefore are already partially compliant  
               with this bill.  However, not all override procedures are  
               fully compliant with the five criteria specified by this  
               bill.


             f)   Utilization.  Filled prescriptions would be unchanged,  
               although use of initially prescribed drugs would increase  








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               and use of step therapy drugs would decrease.  Annual step  
               therapy overrides granted would increase by 4%.  The change  
               would affect expenditures because initially prescribed  
               drugs are frequently more expensive than step therapy  
               required drugs. this bill would not affect cost-sharing  
               terms and condition and that it would not require coverage  
               of drugs not on the plan/policy formulary.



             g)   Impact on expenditures. CHBRP estimates that premium  
               impacts related to an increase in approved override  
               requests would be 0.008%, or $10.8 million total.  In  
               DMHC-regulated plans, CHBRP estimates that premium  
               increases would range from $0.03 (large group) to $0.07  
               (individual) per member per month (PMPM).  In CDI-regulated  
               policies, estimated premium increases range from $0.06  
               (large group and individual) to $0.13 (small group) PMPM.



          5)SUPPORT.  The Association of Northern California Oncologists  
            states that it is not always clinically appropriate to mandate  
            a patient take a similar drug that is not a generic  
            equivalent.  The decision as to which medication should be  
            prescribed should be left solely in the hand of the physician,  
            in consultation with the patient.  California Affiliates of  
            Susan G. Komen write that most STPs rely on generalized  
            information regarding patients and their treatments, as  
            opposed to taking into account unique patient experiences and  
            responses to treatments.  Furthermore, due to the lack of  
            standardized override process, and varying formularies among  
            plans, physicians face considerable challenges identifying  
            drugs that are subject to step therapy, and patients face  
            barriers to accessing timely and appropriate treatments. 


          6)OPPOSITION.  America's Health Insurance Plans states that step  
            therapy for prescription drugs is one utilization protocol  








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            that health insurers use to control health care costs and  
            ensure patient safety.  This bill would place overly broad  
            restrictions on the use of step therapy, hindering health  
            insurers' use of this important tool and limiting its  
            effectiveness.  The California Chamber of Commerce opposes  
            this bill, stating that it would contribute to the problem of  
            rising health care costs by unnecessarily increasing  
            utilization of more expensive prescription medications; its  
            impact on premiums and co-payments will grow in future years  
            as more and more high-priced pharmaceutical drugs enter the  
            market.  


          7)OPPOSE UNLESS AMENDED.  The For Grace Foundation, sponsor of  
            several previous iterations of step therapy bills, opposes  
            this bill stating that it does not respond to the governor's  
            veto message on AB 369 (Huffman) of 2012.  This bill hands  
            over all of the STP authority to the doctors, thus flying in  
            the face of Governor Brown's 2012 veto.  For Grace states that  
            they would change to a support position if the bill was  
            amended to restrict the STP to two "fails" (as Medicare does)  
            and gave the physician no authority in their implementation.  


          8)RELATED LEGISLATION.  


             a)   AB 68 (Waldron) establishes that a prescriber's  
               reasonable professional judgment prevails over the policies  
               and utilization controls of the Medi-Cal program, including  
               the utilization controls of a Medi-Cal managed care plan,  
               in prescribing a pharmaceutical that is in the seizure or  
               epilepsy drug class.  AB 68 was approved by in Assembly  
               Health Committee on April 21, 2015 with a vote of 19-0 and  
               is now pending in Assembly Appropriations Committee. 


             b)   AB 73 (Waldron) establishes that a prescriber's  
               reasonable professional judgment prevails over the policies  








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               and utilization controls of the Medi-Cal program, including  
               the utilization controls of a Medi-Cal managed care plan,  
               in prescribing a pharmaceutical from specified therapeutic  
               drug classes.  AB 73 is pending in this Committee.


          9)PREVIOUS LEGISLATION.  
          
             a)   AB 889 (Frazier) of 2013 would have prohibited plans and  
               health insurers from requiring a patient to try and fail on  
               two medications before allowing the patient access to the  
               medication originally prescribed by the patient's medical  
               provider.  AB 889 was held on the Suspense File in Senate  
               Appropriations Committee. 

             b)   AB 369 (Huffman) of 2012 would have prohibited plans and  
               health insurers that restrict medications for the treatment  
               of pain from requiring a patient to try and fail on more  
               than two pain medications before allowing the patient  
               access to the pain medication, or generically equivalent  
               drug, prescribed by the provider.  The Governor vetoed AB  
               369 because it did not strike "the right balance between  
               physician discretion and health plan or insurer oversight.  
               A doctor's judgment and a health plan's clinical protocols  
               both have a role in ensuring the prudent prescribing of  
               pain medications. Independent medical reviews are available  
               to resolve differences in clinical judgment when they  
               occur, even on an expedited basis.  If current law does not  
               suffice - and I am not certain that it doesn't, any  
               limitations on the practice of "step therapy" should better  
               reflect a health plan or insurer's legitimate role in  
               determining the allowable steps."

             c)   AB 1826 (Huffman) of 2010 would have required plans and  
               health insurers that cover outpatient prescription drug  
               benefits to provide coverage for a drug that has been  
               prescribed for the treatment of pain.  AB 1826 would have  
               prohibited health plans and insurers from requiring the  
               subscriber or enrollee to first use an alternative  








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               prescription drug or an over-the-counter drug, as  
               specified.  Held on the Suspense File in the Senate  
               Appropriations Committee. 

             d)   AB 1144 (Price) of 2009 would have required plans and  
               health insurers that provide prescription drug benefits to  
               submit written reports about step therapy each year to DMHC  
               and CDI.  Held on the Suspense File in the Assembly  
               Appropriations Committee.

          10)POLICY COMMENT.  
          
             a)   Does this bill achieve the author's goal?  This bill  
               seeks to address concerns raised by the Governor in his  
               veto message of a prior bill by establishing a set of  
               circumstances under which a plan/insurer must agree to  
               bypass step therapy, rather than imposing blanket  
               restrictions on its use.  As drafted, this bill requires  
               override approval when the prescriber provides the medical  
               documentation, without explicitly giving the carrier any  
               option to review or deny the request.  It is unclear  
               whether this is, also, a blanket restriction on the use of  
               STPs. 
             
             b)   Expeditious review?  Current law already has an appeal  
               review process to override step therapy requirements.   
               Expeditious is not defined in the Knox-Keene Act or in  
               regulation, giving plans leeway to take into account the  
               severity of the condition in the timing of their response.   
               Because this bill uses the same phrase "expeditious  
               review," it is not clear how setting up a new process for  
               step therapy appeals would offer any improvement on current  
               law. 


             
          11)SUGGESTED AMENDMENT.  This bill requires that all override  
            requests be approved after the physician has submitted their  
            medical opinion, without review or response from the plan or  








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            insurer.  If the author intends to have the request actually  
            be a request, an amendment should be taken to reflect that. 
          
                 (b) A step therapy override determination request by a  
                 patient with adequate supporting rationale and  
                 documentation from the prescribing physician shall be  
                 expeditiously  reviewed   granted  by the plan if any of the  
                 following apply


                 
          REGISTERED SUPPORT / OPPOSITION:




          Support


          Arthritis Foundation (cosponsor)


          California Rheumatology Alliance (cosponsor)


          Union of American Physicians and Dentists (cosponsor)


          American Cancer Society Cancer Action Network


          American GI Forum Education Foundation of Santa Maria


          Association of Northern California Oncologists


          Bay Area Women's Health Advocacy Council









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          Biocom


          California Affiliates of Susan G. Komen


          California Association of Area Agencies on Aging 


          California Healthcare Institute


          California Primary Care Association


          California Psychological Association


          California School Employees Association, AFL-CIO


          Chronic Care Coalition


          Congress of California Seniors


          Latina Breast Cancer Agency


          Leukemia and Lymphoma Society


          Medical Oncology Association of Southern California


          Mental Health America of California









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          National Alliance on Mental Illness


          National Association of Social Workers, California Chapter


          Neuropathy Action Foundation


          Osteopathic Physicians and Surgeons of California


          Pharmaceuticals Research and Manufacturers of America


          Western Center on Law and Poverty




          Opposition
          
          America's Health Insurance Plans


          Association of California Life and Health Insurance Companies


          Blue Shield of California


          California Association of Health Plans


          California Chamber of Commerce


          CSAC Excess Insurance Authority








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          Express Scripts


          For Grace (unless amended)


          Simi Valley Chamber of Commerce


          Southwest California Legislative Council


           

          Analysis Prepared by:Dharia McGrew / HEALTH / (916) 319-2097