BILL ANALYSIS                                                                                                                                                                                                    

                                                                     SB 282

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          Date of Hearing:  July 14, 2015

                            ASSEMBLY COMMITTEE ON HEALTH

                                  Rob Bonta, Chair

          282 (Ed Hernandez) - As Amended July 8, 2015

          SENATE VOTE:  40-0

          SUBJECT:  Health care coverage: prescription drugs.

          SUMMARY:  Authorizes a prescribing provider to use an electronic  
          process to transmit prior authorization (PA) requests for  
          prescription drugs, and modifies timeframes by which health  
          plans and insurers (collectively referred to as "carriers") must  
          respond to such PA requests.  Specifically, this bill: 

          1)Authorizes a prescribing provider to use an electronic PA  
            system utilizing an established uniform PA form, or an  
            electronic process developed specifically for transmitting PA  
            information that meets the National Council for Prescription  
            Drug Programs' (NCPDP) SCRIPT standard for electronic PA.

          2)Requires the Department of Managed Health Care (DMHC) and the  
            California Department of Insurance (CDI) to, on or before  
            January 1, 2017, jointly develop a uniform PA form, and  
            requires every prescribing provider to, on and after July 1,  
            2017, or six months after the form is completed, use the PA  
            form, or the electronic PA process referenced in 1) above.


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          3)Exempts contracted network physician groups from requirements  
            to use the uniform PA form if the contracted network physician  

             a)   Is delegated financial risk for prescription drugs by a  

             b)   Uses its own internal PA process rather than the  
               carrier's PA process; or,

             c)   Is delegated a utilization management function by the  
               carrier concerning any prescription drug, regardless of the  
               delegation of financial risk.

          4)Modifies the timeframe by which a PA request would be deemed  
            granted by a carrier from two business days to 72 hours for  
            non-urgent PA requests and 24 hours if exigent circumstances  
            exist.  Specifies that a completed PA request submitted to a  
            contracted network physician group is deemed granted under  
            these same timeframes, and makes conforming changes requiring  
            compliance with the timeframes in existing statutes regarding  
            PA and grievances. 

          5)Provides that "exigent circumstances" exist when an enrollee  
            is suffering from a health condition that may seriously  
            jeopardize the enrollee's life, health, or ability to regain  
            maximum function or when an enrollee is undergoing a current  
            course of treatment using a non-formulary drug.

          6)Specifies that PA requirements for prescription drugs apply  
            regardless of how that benefit is classified under the terms  


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            of the carrier's subscriber or provider contract.


          EXISTING LAW:   

          1)Establishes the Knox-Keene Health Care Service Plan Act of  
            1975, the body of law governing health plans in the state, and  
            provides for the licensure and regulation of health plans by  

          2)Provides for the regulation of health insurers by CDI.

          3)Establishes a standardized PA process through a uniform PA  
            form jointly developed by DMHC and CDI that prescribing  
            providers must use when requesting PA, and carriers must  
            accept when requiring PA for, prescription drug benefits. 

          4)Exempts the following from requirements to use and accept the  
            uniform PA form:

             a)   Physicians or physician groups that are delegated the  
               financial risk for prescription drugs by a carrier and that  
               do not use a PA process; and,

             b)   A carrier, or its affilated providers, that owns and  
               operates its own pharmacies and does not use a PA process  
               for prescription drugs. 

          5)Deems a PA request granted if a carrier fails to utilize or  
            accept the uniform PA form, or fails to respond within two  
            business days upon receipt of a completed PA request from a  


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            prescribing provider submitting the form.  Exempts Medi-Cal  
            managed care plans from these provisions.

          6)Requires DMHC and CDI to develop the uniform PA form with  
            input from interested parties, and to take into consideration  
            existing PA forms established by the federal Centers for  
            Medicare and Medicaid Services and the Department of Health  
            Care Services, as well as national standards pertaining to  
            electronic PA.

          7)Requires the uniform PA form to meet specified criteria,  
            including that the form shall not exceed two pages and shall  
            be made available electronically by the carriers and DMHC and  
            CDI.  Authorizes completed forms to be submitted  
            electronically by the prescribing provider to a carrier.

          FISCAL EFFECT:  According to the Senate Appropriations  
          Committee, this bill, as amended April 9, 2015, will result in:

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

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


          1)PURPOSE OF THIS BILL.  According to the author, advances in  
            health information technology have increased health care  
            efficiency and lowered costs, and innovation promises to make  


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            health care delivery faster and cheaper.  This bill increases  
            efficiency by removing roadblocks to electronic PA - 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. 

            The author states that, until the passage of SB 866, (Ed  
            Hernandez) Chapter 648, Statutes of 2011, each insurer had  
            their own PA 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 PA, including, innovative  
            software programs and user-friendly computer portals.


             a)   PA.  PA is a common cost-containment and utilization  
               review method used by health plans, insurers, and some  
               public coverage programs.  The practice of PA, also called  
               prior approval or preauthorization, requires a prescriber  
               to obtain permission from the health plan or insurer to  
               prescribe a medication before prescribing it.  

               Health plans and insurers routinely require physicians to  
               fill out PA forms when the provider prescribes a medicine  
               or treatment not covered by the plan or insurer's  
               formulary.  PA is intended to curb abuse and diversion of  
               controlled substances, and has been shown to be effective  
               in controlling prescription drug costs.  Medications that  
               commonly require PA include:


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               i)     Brand name medications that have a generic  
               ii)    Expensive medications;
               iii)   Drugs not usually covered by the insurance company,  
                 but said to be medically necessary by the doctor;
               iv)    Drugs usually covered but prescribed at a higher  
               v)     Drugs used for cosmetic reasons; and
               vi)    Drugs prescribed to treat a non-life threatening  
                 medical condition. 
             b)   Uniform PA form and process.  Pursuant to SB 866, DMHC  
               and CDI jointly developed the "Prescription Drug Prior  
               Authorization Request Form" which was approved and became  
               effective through regulations which took effect on July 1,  
               2014.  The form requires prescribing providers to include  
               specified information, including patient information,  
               insurance information, prescriber information, medication  
               and dispensing information, patient diagnoses, relevant  
               clinical information to support the PA, and other  
               information.  Through the use of this form, prescribing  
               provider face fewer issues regarding variation among PA  
               forms and processes used by carriers. 

          Pursuant to state regulations, carriers are required to make the  
          form available electronically on their websites; accept the form  
          through any reasonable means of transmission including paper,  
          electronic transmission, telephone, or web portal; and, request  
          only the minimum amount of material information necessary to  
          approve or disapprove the prescription drug PA request.

          Carriers are also required to notify the prescribing provider  
          within two business days of receipt of a prescription PA request  
          that either:
               i)     The request is approved;
               ii)    The request is disapproved as not medically  
                 necessary or not a covered benefit;


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               iii)   The request is disapproved as missing material  
                 information necessary to approve or disapprove the  
               iv)    The patient is no longer eligible for coverage; or,
               v)     The request was not submitted on the required form  
                 and must be resubmitted on the required uniform PA form.

             c)   Federal regulations.  In February 2015, final  
               regulations from the federal Health and Human Services  
               Agency became effective requiring carriers to establish  
               certain exceptions processes that allow enrollees, or their  
               prescribing provider, to request and gain access to  
               clinically appropriate drugs not covered by the carrier.   
               Specifically, the regulations require, for plan years  
               beginning on or after January 1, 2016, carriers to make  
               determinations on a standard exception request, and to  
               notify the enrollee and the prescribing provider of its  
               coverage determination, no later than 72 hours following  
               receipt of the request.

          The regulations also require a carrier to have a process for an  
          enrollee, or the enrollee's prescribing provider, to request an  
          expedited exception request based on exigent circumstances under  
          which an enrollee is suffering from a health condition that may  
          seriously jeopardize the enrollee's life, health, or ability to  
          regain maximum function or when an enrollee is undergoing a  
          current course of treatment using a non-formulary drug.  In  
          these cases, the carrier must notify the enrollee and the  
          prescribing provider of its coverage determination no later than  
          24 hours following receipt of the request.

          Finally, the regulations require carriers that deny a standard  
          or expedited exception request for a non-formulary drug to have  
          a process for the enrollee or the enrollee's prescribing  
          provider to request a review of the denial by an independent  
          review organization.  The same timing applied to the carrier's  
          initial review of the exception request apply. Thus, if the  
          enrollee submitted a standard exception request, the independent  
          review organization would have to make its determination, and  


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          the carrier would have to notify the enrollee and prescribing  
          provider of the decision within 72 hours.  Similarly, the  
          independent review organization and carrier would have 24 hours  
          to make determinations on denials of expedited exception  
          Under this bill, consistent with the federal regulations,  
          carriers and physician groups using the PA process, either  
          through the uniform form or the electronic process, would be  
          required to make determinations within these same timeframes.  

             d)   NCPDP SCRIPT.  The NCPDP is a non-profit organization  
               which develops and promotes pharmacy industry standards,  
               including standards on the electronic exchange of  
               information.  According to the NCPDP, it maintains a  
               primary focus on information exchange for prescribing,  
               dispensing, monitoring, managing, and paying for  
               medications and pharmacy services.  Beginning in 1997, the  
               NCPDP began publishing technical standards for electronic  
               prescribing, and later developed the SCRIPT standard for  
               transmitting prescription information electronically  
               between prescribers, pharmacies, and payers.  According to  
               the NCPDP, its SCRIPT standards were developed for  
               transmitting prescription information electronically  
               between prescribers, pharmacies, payers, and other entities  
               for new prescriptions, changes of prescriptions,  
               prescription refill requests, prescription fill status  
               notifications, cancellation notifications, relaying of  
               medication history, and transactions for long-term care,  
               and electronic PA.  SCRIPT standards are implemented in  
               various federal guidelines governing electronic  
               prescription capabilities.  The SCRIPT standards are also  
               used by the California Division of Workers Compensation for  
               the purposes of electronic billing. 

          3)SUPPORT.  Supporters state that this bill modernizes the PA  
            process by allowing for the use of alternative programs and  


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            software to electronically transmit PA information.  In doing  
            so, the bill eliminates road blocks to the expeditious filing  
            of prescription drugs and can achieve improved outcomes.  The  
            California Association of Physician Groups states that their  
            members have implemented their own internal processes for PA,  
            and this bill will allow physician groups to utilize a broader  
            range of electronic systems than are currently allowed.   
            CoverMyMeds states that current law does not allow for  
            deviation from the uniform PA form, and this bill will  
            streamline the process and reduce the time it takes to secure  
            drug approval.  Blue Shield of California state that  
            electronic PA systems can be integrated with electronic  
            prescriptions and health records, potentially reducing errors  
            and enabling better coordination of care; this bill will  
            increase efficiency in health care delivery by permitting  
            additional methods of electronic PA.


             a)   AB 339 (Gordon) applies to covered outpatients  
               prescription drugs, restricts cost-sharing amounts for a  
               30-day supply to one-twenty-fourth of the annual  
               out-of-pocket limit, requires coverage for specified drugs  
               under a variety of specified circumstances, standardizes  
               tiers for prescription drug formularies, and restricts the  
               ability of health plans and insurers to institute  
               cost-sharing and place drugs on certain cost-sharing tiers,  
               unless specified conditions are met.  This bill is pending  
               in the Senate Health Committee.

             b)   AB 374 (Nazarian) prohibits a carrier from applying a  
               step therapy protocol 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, and requires a carrier to  
               expeditiously review a request made by a patient, if  


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               specific criteria are met and adequate supporting rationale  
               and documentation is provided by the prescribing physician.  
                This bill is pending in the Senate Health Committee.


             a)   AB 889 (Frazier) of 2013 would have prohibited carriers  
               from requiring a patient to try and fail on two medications  
               before allowing the patient access to the medication  
               originally prescribed by the patient's medical provider.   
               AB 889 was held on the Suspense File in Senate  
               Appropriations Committee. 

             b)   AB 369 (Huffman) of 2012 would have prohibited carriers  
               that restrict medications for the treatment of pain from  
               requiring a patient to try and fail on more than two pain  
               medications before allowing the patient access to the pain  
               medication, or generically equivalent drug, prescribed by  
               the provider.  The Governor vetoed AB 369 because it did  
               not strike "the right balance between physician discretion  
               and health plan or insurer oversight. A doctor's judgment  
               and a health plan's clinical protocols both have a role in  
               ensuring the prudent prescribing of pain medications.  
               Independent medical reviews are available to resolve  
               differences in clinical judgment when they occur, even on  
               an expedited basis.  If current law does not suffice - and  
               I am not certain that it doesn't, any limitations on the  
               practice of "step therapy" should better reflect a health  
               plan or insurer's legitimate role in determining the  
               allowable steps."

             c)   SB 866 requires DMHC and CDI to jointly develop a  
               uniform PA form that health plans and insurers must accept  
               when prescribing providers seek authorization for  
               prescription drug benefits.


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             d)   AB 1826 (Huffman) of 2010 would have required plans and  
               health insurers that cover outpatient prescription drug  
               benefits to provide coverage for a drug that has been  
               prescribed for the treatment of pain.  AB 1826 would have  
               prohibited health plans and insurers from requiring the  
               subscriber or enrollee to first use an alternative  
               prescription drug or an over-the-counter drug, as  
               specified.  AB 1826 was held by the Senate Appropriations  

             e)   AB 1144 (Price) of 2009 would have required plans and  
               health insurers that provide prescription drug benefits to  
               submit written reports about step therapy each year to DMHC  
               and CDI.  AB 1144 was held by the Assembly Appropriations  



          AllCare Independent Physician Association
          Arthritis Foundation 
          Association of Northern California Oncologists 
          Blue Shield of California
          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 Life Sciences Association


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          California Primary Care Association 
          California Society of Health-System Pharmacists
          Coachella Valley Physicians 
          Empire Physicians Medical Group
          Express Scripts
          Facey Medical Group
          Greater Tri-Cities Independent Physicians Association
          HealthCare Partners Medical Group and Affiliated Physicians 
          John Muir Physician Network 
          Medical Oncology Association of Southern California 
          MedPOINT Management
          Memorial Care Medical Foundation
          Mental Health America of California
          Mercy Medical Group 
          Mercy Physicians Medical Group, Inc. 
          Monarch Healthcare
          Noble AMA Independent Practice Association
          Premier Health Plan Services
          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 Bernardino 
          Prime Care of Sun City 
          Prime Care of Temecula 
          Sansum Clinic
          Scripps Health Plan Services
          Sharp Community Medical Group
          Valley Physicians Network 



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          None on file.

          Analysis Prepared by:Kelly Green / HEALTH / (916)