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