BILL ANALYSIS Ó AB 374 Page 1 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; AB 374 Page 2 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). AB 374 Page 3 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. AB 374 Page 4 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 AB 374 Page 5 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 AB 374 Page 6 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 AB 374 Page 7 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 AB 374 Page 8 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 AB 374 Page 9 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 AB 374 Page 10 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 AB 374 Page 11 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 AB 374 Page 12 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 reviewedgrantedby 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 AB 374 Page 13 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 AB 374 Page 14 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 AB 374 Page 15 Express Scripts For Grace (unless amended) Simi Valley Chamber of Commerce Southwest California Legislative Council Analysis Prepared by:Dharia McGrew / HEALTH / (916) 319-2097