BILL ANALYSIS                                                                                                                                                                                                    

          |SENATE RULES COMMITTEE            |                        SB 282|
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                                   THIRD READING 

          Bill No:  SB 282
          Author:   Hernandez (D)
          Amended:  4/9/15  
          Vote:     21  

           SENATE HEALTH COMMITTEE:  8-0, 4/22/15
           AYES:  Hernandez, Nguyen, Mitchell, Monning, Nielsen, Pan,  
            Roth, Wolk
           NO VOTE RECORDED:  Hall

           AYES:  Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen

           SUBJECT:   Health care coverage:  prescription drugs

          SOURCE:    Author

          DIGEST:   This bill permits the use of alternative methods of  
          electronic prior authorization of prescription drugs other than  
          the required standardized form, and exempts physician groups  
          with delegated financial risk from the standardized prior  
          authorization process.ANALYSIS:

          Existing law:

          1)Regulates health plans under the Knox-Keene Health Care  
            Service Plan Act of 1975 through the Department of Managed  
            Health Care (DMHC) and regulates health insurers under the  
            Insurance Code through the California Department of Insurance  

          2)Requires DMHC and CDI to jointly develop a uniform prior  


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            authorization form that health plans and insurers must accept  
            when prescribing providers seek authorization for prescription  
            drug benefits. 

          3)Prohibits the standardized prior authorization form from  
            exceeding two pages.  Requires the standardized prior  
            authorization form to be made electronically available by the  
            DMHC, CDI, and health insurers.  Requires the standardized  
            prior authorization form, through regulation, to be accepted  
            by any reasonable means of transmission, including, but not  
            limited to, paper, electronic transmission, telephone, web  
            portal, or another mutually agreeable method of transmission.   
            Prohibits, through regulation, standardized prior  
            authorization forms accepted telephonically or through a web  
            portal from requiring more information than is on the two-page  
            form.  Requires the standardized prior authorization form to  
            request only the minimum amount of information DMHC and CDI  
            deemed necessary for an insurer to approve or disapprove the  
            prior authorization request. 

          4)Requires prescribers to use the standardized prior  
            authorization form to request prior authorization for coverage  
            of prescription drug benefits. 

          5)Requires health plans and health insurers to accept only the  
            standardized form when requiring prior authorization for  
            prescription drug benefits.

          6)Exempts from the standardized prior authorization process a  
            physician or physician group that has been delegated the  
            financial risk for prescription drugs by a health care service  
            plan and does not use a prior authorization process. 

          7)Deems authorization granted if a health plan or health insurer  
            fails to utilize or accept the standardized prior  
            authorization form, or fails to respond within two business  
            days upon receipt of a request from a prescribing provider.   
            Exempts health plan contracts and insurance policies for  
            enrolled Medi-Cal beneficiaries from the standardized prior  
            authorization process.

          This bill:

          1)Authorizes a prescribing provider to use an electronic prior  


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            authorization system that utilizes the standardized form or an  
            electronic process developed specifically for transmuting  
            prior authorization information that is consistent with the  
            standardized form and that meets the National Council for  
            Prescription Drug Programs' (NCPDP) SCRIPT standard for  
            electronic prior authorization transactions.  

           2)Redefines the groups that are exempt from the requirement to  
            use the standardized prior authorization process to any  
            contracted network physician group that:

             a)   Is delegated the financial risk for the pharmacy or  
               medical drug benefit by a health plan; 

             b)   Uses its own internal prior authorization process,  
               rather than the health plan's prior authorization process  
               for plan enrollees; or 

             c)   Is delegated a utilization management function by the  
               health plan concerning any pharmacy or medical drug  
               benefit, regardless of the delegation of financial risk. 

          1)Author's statement. According to the author, advances in  
            health information technology have increased health care  
            efficiency and lowered costs, and innovation promises to make  
            health care delivery faster and cheaper.  This bill increases  
            efficiency by removing roadblocks to electronic prior  
            authorization - a utilization review method used to curb abuse  
            of controlled substances and control prescription drug costs  
            by requiring prescribers to obtain permission from an insurer  
            before prescribing certain drugs.  

             Until the passage of SB 866 (Hernandez, Chapter 648, Statues  
            of 2011), each insurer had their own prior authorization form,  
            and some had multiple forms, depending on the type of drug  
            requested.  The complexity of the process made it confusing  
            and costly for many prescribers.  SB 866 streamlined the  
            process and improved timely access to prescription drugs by  
            creating a standardized electronic form.  This bill further  
            increases efficiency by permitting additional methods of  
            electronic prior authorization, including, innovative software  


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            programs and user-friendly computer portals.

          2)Prior authorization. According to the Consumer Health  
            Information Corporation, prior authorization is a utilization  
            review method used by health plans, insurers, and some public  
            coverage programs, and requires prescribers to obtain  
            permission from the health plan or insurer before prescribing  
            certain medications.  Prior authorization is used by insurance  
            companies like Blue Cross Blue Shield of Massachusetts to curb  
            abuse and diversion of controlled substances. Medications that  
            commonly require prior authorization include:

             a)   Brand name medications that have an available generic; 

             b)   Expensive medications;

             c)   Drugs not usually covered by the insurance company, but  
               said to be medically necessary by the doctor;

             d)   Drugs usually covered but prescribed at a higher dosage;

             e)   Drugs used for cosmetic reasons; and

             f)   Drugs prescribed to treat a non-life threatening medical  

          1)Emerging technologies.  A 2012 study by the California  
            HealthCare Foundation showed that the health care industry is  
            increasingly moving toward electronic health information  
            systems that manage patients' prescriptions and medication  
            history.  Electronic prior authorization systems can be  
            integrated with electronic prescriptions and electronic health  
            records, potentially reducing errors and enabling better  
            coordination of care.  Beginning in 1997, NCPDP began  
            publishing technical standards for electronic prescribing, and  
            later developed the SCRIPT standard for transmitting  
            prescription information electronically between prescribers,  


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            pharmacies, and payers.  Included in the SCRIPT standards are  
            standards for prior authorization.  NCPDP is a not-for-profit,  
            multi-stakeholder forum for developing and promoting industry  
            electronic transmission standards.

          Prior Legislation

          SB 866 (Hernandez, Chapter 648, Statutes of 2011) requires DMHC  
          and CDI to jointly develop a uniform prior authorization form  
          that health plans and insurers must accept when prescribing  
          providers seek authorization for prescription drug benefits. 

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   Yes

          According to the Senate Appropriations Committee:

           One-time costs of $134,000 in 2015-16 and $169,000 in 2016-17  
            to revise existing regulations by CDI (Insurance Fund).

           One-time costs of about $90,000 to amend regulations by DMHC  
            (Managed Care Fund).

          SUPPORT:    (Verified  5/28/15) 

          Alamitos Independent Physicians Association
          AllCare Independent Physician Association
          Brookshire Independent Physicians Association
          Brown and Toland Physicians
          California Academy of Family Physicians
          California Association of Physician Groups
          California Council of Community Mental Health Agencies
          California Healthcare Institute
          California Society of Health-System Pharmacists
          Coachella Valley Physicians
          Facey Medical Group
          Fountain Valley Independent Physicians Association
          Greater Tri-Cities Independent Physicians Association
          HealthCare Partners Medical Group and Affiliated Physicians
          MedPOINT Management
          Memorial Care Medical Foundation


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          Mental Health America of California
          Mercy Medical Group
          Mercy Physicians Medical Group, Inc.
          Lakewood Independent Physicians Association
          Noble AMA Independent Practice Association
          Primary Care Associates
          Prime Care of Chino
          Prime Care of Citrus Valley
          Prime Care of Hemet Valley
          Prime Care of Inland Valley
          Prime Care of Moreno Valley
          Prime Care of Redlands
          Prime Care of Riverside
          Prime Care of San Bernadino
          Prime Care of Sun City
          Prime Care of Temecula
          Sansum Clinic
          Scripps Health Plan Services
          Sharp Community Medical Group
          St. Mary Independent Physicians Association
          Valley Physicians Network

          OPPOSITION:   (Verified5/28/15)

          None received

          ARGUMENTS IN SUPPORT:  CoverMyMeds states that this bill will  
          allow innovative companies to automate prior authorization,  
          saving valuable time and money while ensuring patients receive  
          the medication they need faster.  The California Council of  
          Community Mental Health Agencies and Mental Health America of  
          California state that eliminating roadblocks to timely filling  
          of prescriptions can improve outcomes.  AARP states that by  
          providing for the use of electronic transmission of prior  
          authorization information for prescription drugs, health  
          information technology can reduce prescription errors and  
          duplication, as well as contain costs.  The California Society  
          of Health-System Pharmacists states that allowing prior  
          authorization to be handled via electronic means would expedite  
          the delivery of healthcare services and reduce undue stress or  
          delays for patients and providers.


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          Prepared by:Shannon Muir / HEALTH / 
          5/31/15 13:12:12

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