BILL ANALYSIS
AB 2170
Page 1
Date of Hearing: April 20, 2010
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
AB 2170 (Bonnie Lowenthal) - As Amended: April 13, 2010
SUBJECT : Health care coverage: prescriptions: formularies.
SUMMARY : Prohibits a health care service plan (health plan) or
a health insurer (insurer) (collectively carriers), as
specified, that covers prescription drugs and uses a formulary,
from increasing applicable copayments or deductibles for
prescription drugs for the length of the contract, including,
but not limited to, during an open enrollment period. States
that this bill does not apply to health plan contracts issued
through a publicly funded state health care coverage program,
including, but not limited to Medi-Cal, Healthy Families, or
Medicare supplement contracts.
EXISTING LAW :
1)Licenses and regulates health plans under the Knox-Keene
Health Care Service Plan Act of 1975 through the Department of
Managed Health Care (DMHC) and regulates insurers under the
Department of Insurance.
2)Prohibits changes in premium rates or coverage from becoming
effective without prior written notification of the change to
the contractholder or policyholder. Prohibits carriers,
during the term of a group plan contract or policy, from
changing the rate of the premium, copayment, coinsurance, or
deductible during specified time periods.
3)Imposes various requirements on contracts and policies that
cover prescription drug benefits, such as a requirement to
cover "off-label" uses, as specified, and a requirement to
cover previously prescribed drugs, as specified.
4)Prohibits health plans from limiting coverage for a drug that
had previously been approved by the plan and requires
specified disclosures regarding the use and contents of drug
formularies.
5)Authorizes DMHC to regulate the provision of medically
necessary prescription drug benefits by a health plan to the
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extent that the plan provides coverage for those benefits.
Existing regulation requires health plans providing outpatient
prescription drugs to provide all medically necessary
prescription drugs, except as specified in that regulation.
6)Requires, under federal law, a Medicare Part D plan to notify
the Centers for Medicare & Medicaid Services (CMS), and other
specified entities at least 60 days prior to removing a
covered drug from its formulary or making any change in the
preferred or tiered cost-sharing status of the drug.
Prohibits Medicare Part D plans from changing their
therapeutic categories and classes in a formulary other than
at the beginning of each plan year, except as specified.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, this bill will
prohibit health plans and health insurance policies from
increasing their enrollees' out-of-pocket costs for their
prescription drugs during the contract year. The author
states that a health plan's prescription drug formulary plays
a significant role in a patient's selection of a health
insurance plan during the open enrollment period. This bill
will stabilize the cost of drugs during a contract year,
allowing enrollees to calculate and budget for their annual
out-of-pocket costs.
2)PRESCRIPTION DRUG FORMULARIES . According to the California
Health Care Foundation (CHCF), a prescription drug formulary
is a list of prescription drugs recommended to patients and
prescribers that are covered by the health plan. While there
are several types of formularies, three-tier formulary plans
have increased in popularity, particularly among employer
based coverage. In a three-tiered plan, individuals will pay
the lowest co-pay for generic drugs, the next highest co-pay
for preferred drugs, and the highest co-pay for non-preferred
or non-formulary drugs. Typically, nearly all brand-name
drugs that come off patent and have approved generic
substitutes are subject to nonpreferred co-pay as a means to
encourage patients to use less expensive generics. Other
types of formularies include open formularies and closed
formularies. In open formularies a health plan or pharmacy
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benefit manager suggests a broad list of drugs, which
physicians are encouraged to prescribe and patients may or may
not incur additional out-of-pocket costs for non-formulary
drugs. In a closed formulary, non-formulary drugs are not
reimbursed by the payer, with certain exceptions for medically
necessary non-formulary medications.
3)MEDICARE PART D . According to CHCF, 4.2 million Medicare
beneficiaries in California receive prescription drug coverage
through two types of private plans: stand-alone prescription
drug plans and Medicare Advantage prescription drug plans,
which cover both prescription drugs and medical services.
According to CMS, It is in the best interest of Medicare
beneficiaries to ensure limited formulary changes during the
benefit year, which allows enrollees to maintain access to
necessary prescription drugs. CMS also acknowledges that as
prescription drug use and pricing constantly evolve, formulary
changes must occur during the year to ensure quality, low-cost
prescription drugs. Current law protects Medicare Part D
beneficiaries from discontinuations and reductions in coverage
during the plan year, except for clear scientific and cost
reasons such as the availability of a new generic equivalent
or new Food and Drug Administration approved or clinical
information. Additionally, CMS reviews and approves all
proposed formulary changes, excluding formulary expansion
changes, which must be submitted to CMS and other specified
entities within 60 days.
4)SUPPORT . According to the Multiple Sclerosis Society, this
bill will protect individuals enrolled in group health
insurance plans from increasing their enrollee's out-of-pocket
costs for prescription drugs. Individuals who depend on
prescription medications should be should be assured that the
co-payment schedule in their insurer's drug formulary will be
stable for the entire term of their insurance contract.
Particularly for those with chronic medical conditions, this
bill will allow enrollees to plan and budget for the annual
out-of-pocket costs of their prescription drugs without
worrying about sudden increases after they have signed a
contract with the insurer.
5)OPPOSITION . According to the California Association of Health
Plans, prohibiting plans from altering co-payments for drugs
during a contract year will hinder the ability of plans to
offer incentives for patients to use more affordable drugs
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that are medically equivalent. Cost effective generic
alternatives enter the market throughout the year and do not
coincide with the timing of an individual or group contract.
Limiting the ability to adjust drugs from one tier to another
will have the unintended consequence of increasing the overall
cost of care.
6)RELATED LEGISLATION . AB 1826 (Huffman) would require a health
plan or insurer that covers prescription drug benefits to
provide coverage for a drug that has been prescribed for the
treatment of pain without first requiring the subscriber,
enrollee, or insured to use another drug or product. AB 1826
would specify that these provisions do not apply to a health
plan or health insurance policy purchased by the Board of
Administration of the Public Employees' Retirement System. AB
1826 is set to be heard in the Assembly Committee on Health on
April 20, 2010.
1)PREVIOUS LEGISLATION .
a) SB 161 (Wright) of 2009 would have required a health
care service plan contract or health insurance policy
issued, amended, or renewed after January 1, 2010, that
provides coverage for cancer chemotherapy treatment to
provide coverage for an orally administered cancer
medication no less favorably than intravenously
administered or injected cancer medications covered under
the contract or policy. SB 161 was vetoed by Governor
Schwarzenegger who stated that it would limit a plan's
ability to control both the appropriateness of the care
b) AB 2052 (Goldberg), Chapter 336, Statutes of 2002
prohibits a carrier from making any change in premium rates
or cost sharing after acceptance of a contract or after the
annual open enrollment period.
c) AB 974 (Gallegos), Chapter 68, Statutes of 1998
prohibits health plans from limiting coverage for a drug
that had previously been approved by the plan and requires
specified disclosures regarding the use and contents of
drug formularies.
2)TECHNICAL AMENDMENT . One Page 2, lines 10 and 11, and on
lines 26 and 27: strike out ", including, but not limited to,
during any open enrollment period"
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REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County and Municipal Employees,
AFL-CIO
Association of California Neurologists
Association of Northern California Oncologists
BayBio
California Academy of Physician Assistants
California ALS Advocacy Committee
California NeuroAlliance
Consumer Attorneys of California
Epilepsy California
Guillain-Barre Syndrome/Chronic Inflammatory Demyelinating
Foundation International
Health Access California
Immune Deficiency Foundation
Myositis Association
National Cornerstone Healthcare Services
National Fibromyalgia Association
National Kidney Foundation of Northern California & Northern
Nevada
National Multiple Sclerosis Society
National Psoriasis Foundation
Neuropathy Action Foundation
Parkinson Association of Northern California
United Leukodystrophy Foundation
One Individual
Opposition
Anthem Blue Cross
Association of California Life and Health Insurance Companies
California Association of Health Plans
California Association of Health Underwriters
California Association of Joint Powers Authorities
Health Net
Analysis Prepared by : Martin Radosevich / HEALTH / (916)
319-2097