BILL ANALYSIS Ó AB 374 Page 1 Date of Hearing: May 13, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair AB 374 (Nazarian) - As Amended April 30, 2015 ----------------------------------------------------------------- |Policy |Health |Vote:|14 - 4 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: YesReimbursable: No SUMMARY: This bill prohibits a health care service 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 AB 374 Page 2 physician determines step therapy would not be medically appropriate for any one of several reasons specified in the bill. It also: 1)Requires a carrier to expeditiously review the step therapy override determination request by a patient with adequate supporting rationale and documentation from the prescribing physician, if any specified conditions apply. 2)Requires carriers to, upon granting a step therapy override determination, authorize coverage for the drug, if that drug is covered in the patient's policy or contract. 3)Specifies it does not prevent a carrier from requiring a patient to try a generic equivalent drug prior to providing coverage for the branded prescription. FISCAL EFFECT: 1)The California Health Benefits Review Program (CHBRP) reports: a) State costs: 1. $969,000 annually in Medi-Cal managed care (GF/federal). 2. $315,000 annually for provision of services through CalPERS benefit plans (GF/federal/special/local funds). About 60% of this cost is state cost, while the rest is a local cost. AB 374 Page 3 a) Private sector and individual costs: 1. Increased employer-funded premium costs in the private insurance market of $3.7 million annually. 2. Increased premium expenditures by employees and individuals purchasing insurance of $4.1 million annually, as well as increased out-of-pocket expenditures of $1.6 million. 1)Potential minor one-time costs to DMHC (Managed Care Fund) and California Department of Insurance (Insurance Fund) to verify plan and policy compliance. COMMENTS: 1)Purpose. This bill attempts to create a framework to allow plans and insurers to continue using step therapy processes for prescription drug coverage, but provide for clear and standardized override procedures. 2)Benefit Mandate. This bill is a benefit mandate subject to analysis by CHBRP. 3)Step Therapy Protocols. CHBRP indicates 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 is used to control costs and AB 374 Page 4 encourage appropriate clinical use. Step therapy 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. 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 that are subject to STPs, the number of drugs subjected to STPs varies from two to more than 100. 4)Support. This bill is supported by numerous groups advocating for various diseases and health care access, oncologists, biotechnology companies, social workers, and the Western Center on Law and Poverty. Supporters contend most STPs rely on generalized information regarding patients and their treatments, as opposed to taking into account unique patient experiences and responses to treatments, creating barriers for patients. 5)Opposition. America's Health Insurance Plans states that step therapy for prescription drugs is one utilization protocol 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. The For Grace Foundation, sponsor of several previous iterations of step therapy bills, opposes this bill stating AB 374 Page 5 that it does not respond to the governor's veto message on AB 369 (Huffman) of 2012. 6)Related Legislation. Several recent bills have similarly restricted step therapy, including AB 889 (Frazier) of 2013 and AB 1826 (Huffman) of 2010 (both held on the Suspense File of the Senate Appropriations Committee), and AB 369 (Huffman) of 2012. The Governor vetoed AB 369, stating it overly limited carriers' legitimate role in determining allowable steps. 7)Prior Legislation. AB 68 (Waldron) and AB 73 (Waldron), both pending in this committee establish that a prescriber's reasonable professional judgment prevails over the policies and utilization controls of the Medi-Cal program. AB 68 is specific to epilepsy drugs; AB 73 covers several drug classes. Analysis Prepared by:Lisa Murawski / APPR. / (916) 319-2081