BILL ANALYSIS Ó
AB 374
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ASSEMBLY THIRD READING
AB
374 (Nazarian)
As Amended April 30, 2015
Majority vote
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|Committee |Votes |Ayes |Noes |
| | | | |
| | | | |
|----------------+------+--------------------+----------------------|
|Health |14-4 |Bonta, Bonilla, |Maienschein, Lackey, |
| | |Burke, Chávez, |Patterson, Steinorth |
| | |Chiu, Gomez, | |
| | |Gonzalez, Roger | |
| | |Hernández, | |
| | |Nazarian, | |
| | |Ridley-Thomas, | |
| | |Rodriguez, | |
| | |Santiago, Thurmond, | |
| | |Wood | |
| | | | |
|----------------+------+--------------------+----------------------|
|Appropriations |12-5 |Gomez, Bonta, |Bigelow, Chang, |
| | |Calderon, Daly, |Gallagher, Jones, |
| | |Eggman, |Wagner |
| | | | |
| | | | |
| | |Eduardo Garcia, | |
| | |Gordon, Holden, | |
| | |Quirk, Rendon, | |
| | |Weber, Wood | |
AB 374
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| | | | |
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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. Requires a carrier to expeditiously review
a request made by a patient, if specific criteria are met and
adequate supporting rationale and documentation is provided by the
prescribing physician.
FISCAL EFFECT: According to the Assembly Appropriations
Committee:
1)The California Health Benefits Review Program (CHBRP) reports:
a) State costs:
i) $969,000 annually in Medi-Cal managed care (General
Fund/federal).
ii) $315,000 annually for provision of services through
CalPERS benefit plans (General Fund/federal/special/local
funds). About 60% of this cost is state cost, while the
rest is a local cost.
b) Private sector and individual costs:
i) Increased employer-funded premium costs in the private
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insurance market of $3.7 million annually.
ii) 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.
2)Potential minor one-time costs to California Department of
Managed Health Care (Managed Care Fund) and California
Department of Insurance (Insurance Fund) to verify plan and
policy compliance.
COMMENTS: According to the author, use of step therapy leads to
an exacerbation of a patient's condition, potentially 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 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 judgment of the prescribing physician.
According to 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). 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
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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.
Existing law provides certain 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 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.
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, Department of Managed Health Care
(DMHC)-regulated plans are required to respond and issue
authorization determinations within two business days. Department
of Insurance (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.
Below are major findings of CHBRP's analysis:
1)Enrollees covered. In 2016, approximately 24.6 million
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Californians will have state-regulated health insurance that
would be subject to this bill.
2)Medical effectiveness. CHBRP found insufficient evidence to
conclude whether STP overrides affect health outcomes. The
absence of evidence is not evidence of no effect.
3)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.
4)Utilization. Filled prescriptions would be unchanged, although
use of initially prescribed drugs would increase 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.
5)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
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$0.06 (large group and individual) to $0.13 (small group) PMPM.
The Association of Northern California Oncologists states in 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.
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.
Analysis Prepared by: Dharia McGrew / HEALTH /
(916) 319-2097 FN: 0000596
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