BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          AB 374 (Nazarian) - Health care coverage:  prescription drugs
          
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          |Version: July 16, 2015          |Policy Vote: HEALTH 7 - 2       |
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          |Urgency: No                     |Mandate: Yes                    |
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          |Hearing Date: August 17, 2015   |Consultant: Brendan McCarthy    |
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          This bill meets the criteria for referral to the Suspense File.


          Bill  
          Summary:  AB 374 would create a process for prescribers to  
          request an override of a health plan or health insurer's step  
          therapy requirement.


          Fiscal  
          Impact:  
           One-time costs of $131,000 over two fiscal years to develop  
            policies, create a step therapy override request form, and  
            adopt regulations by the Department of Insurance (Insurance  
            Fund).

           One-time costs between $150,000 and $300,000 to develop  
            policies, create a step therapy override request form, and  
            adopt regulations by the Department of Managed Health Care  
            (Managed Care Fund).

           Unknown additional costs to provide independent medical  
            reviews of rejected step therapy override requests (Managed  
            Care Fund and Insurance Fund). The bill would place relatively  







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            short deadlines for health insurers and managed care plans to  
            respond to step therapy override requests. If health insurers  
            and health plans end up rejecting a large number of override  
            requests, patients or providers may request a significant  
            number of independent medical reviews of those decisions. To  
            the extent that the bill results in more independent medical  
            reviews, costs to the two departments could be significant. 


          Background:  Under current law, health plans are regulated by the  
          Department of Managed Health Care and health insurers are  
          regulated by the Department of Insurance. Health plans and  
          health insurers in the state are not currently required to cover  
          pharmacy benefits, but they are subject to regulatory  
          requirements if they do.

          Health plans and insurers (or subcontracted pharmacy benefit  
          managers) sometimes require patients to use a process known as  
          "fail first protocol" or "step therapy" for certain drugs. Under  
          step therapy, before a patient can access a specific medication  
          prescribed by the provider, the patient must first attempt to  
          use one or more alternative medications. If those medications do  
          not have the intended therapeutic effect or have significant  
          side-effects, the patient progresses to the next medication. The  
          use of step therapy varies between health plans and insurers,  
          with different drugs covered by such protocols and different  
          numbers of steps required.

          Under current law, health care consumers who have been denied  
          coverage of services can appeal to the state's independent  
          medical review process. There are three categories of decisions  
          that can be appealed through this process: coverage decisions  
          relating to medical necessity of the service, the urgency of  
          emergency care, or the need for experimental or investigational  
          services. Under independent medical review, an outside  
          contractor (hired by either the Department of Insurance or the  
          Department of Managed Health Care) arranges for medical  
          professionals with relevant training and experience to review  
          the appeal and decide whether to overturn the coverage decision,  
          based on the consumer's medical condition and the best available  
          information about the service requested.


          Proposed Law:  








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            AB 374 would create a process for prescribers to request an  
          override of a health plan or health insurer's step therapy  
          requirement.
          Specific provisions of the bill would:
                 Require the Department of Managed Health Care and the  
               Department of Insurance to jointly develop a step therapy  
               override determination request form;
                 After January 1, 2017 or six months after the form has  
               been developed, every prescribing provider would be  
               required to use the form when requesting an override of a  
               health insurer or health plan's step therapy requirement  
               and every health insurer and health plan must accept the  
               form;
                 Authorize a prescribing provider to request a step  
               therapy override determination if he or she determines that  
               a prescription drug subject to step therapy requirements is  
               in the best interest of the patient;
                 If an insurer or health plan fails to accept the form,  
               fails to respond within 72 hours for noncurrent requests or  
               24 hours for urgent requests, the request shall be deemed  
               to be granted;
                 Authorize the rejection of an override request by a  
               health insurer or health plan to be appealed through the  
               independent medical review process, except that decisions  
               of the reviewers shall be rendered within three days (the  
               same standard for the existing expedited review process).


          Related  
          Legislation:  
                 AB 889 (Huffman, 2014) would have limited step therapy  
               protocols by only allowing such policies to require two  
               failures before an enrollee could access the originally  
               prescribed drug. That bill was held on this committee's  
               Suspense File.
                 AB 369 (Huffman, 2012) was similar to AB 889. However,  
               the limitations on step therapy in that bill were limited  
               to pain medications. AB 369 was vetoed by Governor Brown.
                 AB 1826 (Huffman, 2010) was substantially similar to AB  
               369 (Huffman, 2012). That bill was held on this committee's  
               Suspense File.


          Staff  








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          Comments:  As noted above, the bill does not substantially limit  
          the use of step therapy protocols as prior bills have. However,  
          the bill does impose short timelines for health insurers and  
          health plans to consider a step therapy override request. How  
          health plans and health insurers will respond to those deadlines  
          will determine whether there are any increased costs due to  
          additional independent medical review requests. 
          The only costs that may be incurred by a local agency relate to  
          crimes and infractions. Under the California Constitution, such  
          costs are not reimbursable by the state.




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