BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session AB 374 (Nazarian) - Health care coverage: prescription drugs ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: July 16, 2015 |Policy Vote: HEALTH 7 - 2 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: Yes | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: August 17, 2015 |Consultant: Brendan McCarthy | | | | ----------------------------------------------------------------- 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 AB 374 (Nazarian) Page 1 of ? 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: AB 374 (Nazarian) Page 2 of ? 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 AB 374 (Nazarian) Page 3 of ? 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. -- END --