BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     AB 374


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          Date of Hearing:  May 13, 2015


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                                 Jimmy Gomez, Chair


          AB  
          374 (Nazarian) - As Amended April 30, 2015


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          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  








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          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.  








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             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  








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            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  








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            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