BILL ANALYSIS
SB 961
Page 1
Date of Hearing: June 22, 2010
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
SB 961 (Wright) - As Amended: June 10, 2010
SENATE VOTE : 26-6
SUBJECT : Health care coverage: cancer treatment.
SUMMARY : Requires a health care service plan contract or
health insurance policy (collectively carrier contract or
policy) that provides coverage for cancer chemotherapy treatment
to establish limits on enrollee out of pocket costs for
prescribed, orally administered, nongeneric cancer medication.
Specifically, this bill :
1)Requires a carrier contract or policy issued, amended, or
renewed on or after January 1, 2011, that provides coverage
for cancer chemotherapy treatment, to provide coverage for
prescribed, orally administered, nongeneric cancer medication,
used to kill or slow the growth of cancerous cells.
2)Requires the carrier contract or policy referenced in 1)
above, to review the percentage cost share for oral nongeneric
cancer medication and intravenous (IV) or injected nongeneric
cancer medications and apply the lower of the two as the
cost-sharing provision for oral nongeneric cancer medications.
3)Prohibits a carrier contract or policy from providing an
increase in enrollee cost sharing for nongeneric cancer
medications to any greater extent than the contract or policy
provides for an increase in enrollee cost sharing for other
nongeneric covered medications.
4)Defines "cost share" as copayment, coinsurance, or deductible
provisions applicable to coverage for oral, IV, or injected
nongeneric cancer medications.
5)Prohibits the provisions of this bill from being construed to
require a carrier contract or policy to provide coverage for
any additional medication not otherwise required by law.
6)Clarifies that provisions of this bill do not prohibit a
carrier contract or policy from removing a prescription drug
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from its formulary of covered prescription drugs.
7)Prohibits the provisions of this bill from applying to a
carrier contract or policy that does not provide coverage for
prescription drugs.
8)Prohibits the provision of this bill from applying to a health
care benefit plan or contract entered into with the Board of
Administration of the Public Employees' Retirement System
(CalPERS) pursuant to the Public Employees' Medical and
Hospital Care Act.
9)Requires the provisions of this bill to remain in effect only
until January 1, 2015, and as of that date are repealed,
unless a later enacted statute deletes or extends that date.
EXISTING LAW :
1)Provides for the regulation of health plans by the Department
of Managed Health Care (DMHC) and regulation of health
insurers by the California Department of Insurance (CDI).
2)Requires health plan contracts and health insurance policies
to provide coverage for all generally medically accepted
cancer screening tests and requires those plans and policies
to also provide coverage for the treatment of breast cancer.
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)Authorizes DMHC to regulate the provision of medically
necessary prescription drug benefits by a health plan to the
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.
FISCAL EFFECT : According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible costs.
COMMENTS :
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1)PURPOSE OF THIS BILL . According to the author, the emergence
of safe, clinically effective, orally administered anticancer
medication has significantly increased the treatment options
for cancer patients; however, many barriers currently impede
the adoption of orally administered treatment as the main form
of cancer therapy. The author maintains that one of the most
significant barriers is greater patient out-of-pocket costs
for oral therapies covered under the pharmacy benefit than IV
therapies covered under the medical benefit. The author
further maintains that, where IV administered anticancer
medications are typically covered under a plan's medical
benefit, most patients are only responsible for an office
co-payment for each episode of care and are not required to
pay a separate fee for the IV drug. The author argues that,
in contrast, orally administered anticancer medications are
typically covered under a plan's pharmacy benefit, where many
of these agents are placed on a 4th or specialty tier of a
prescription plan's formulary. The author points out that,
according to the Kaiser Family Foundation, the average
coinsurance rate for 4th tier drugs is 28%, which, for a
$3,000 per month oral anticancer medication, could expose a
patient to $900 in out-of-pocket spending. The author
believes that this disparity is likely to affect increasing
numbers of cancer patients, because 25% of 400 chemotherapy
drugs in the development pipeline are oral.
The author additionally points out that, in 2007, the Oregon
State Senate passed similar legislation (S.B. 8 (Courtney),
Chapter 566, 2007 Laws), and that, upon enactment of S.B. 8 in
January 2008, the top state plans eliminated their high
coinsurance rates. Most Oregon plans established separate
oral anticancer therapy coverage under their pharmacy benefit,
and patients with no pharmacy benefits gained access to oral
anticancer agents through their medical benefit. The author
further notes that, Colorado, Hawaii, Indiana, Iowa, Kansas,
Minnesota, Vermont, Washington D.C., and Connecticut have all
passed similar legislation.
2)CALIFORNIA HEALTH BENEFITS REVIEW PROGRAM . AB 1996 (Thomson),
Chapter 795, Statutes of 2002, requests the University of
California to assess legislation proposing a mandated benefit
or service, and prepare a written analysis with relevant data
on the medical, economic, and public health impacts of
proposed health plan and health insurance benefit mandate
legislation. The California Health Benefits Review Program
(CHBRP) was created in response to AB 1996 and extended for
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four additional years in SB 1704 (Kuehl), Chapter 684,
Statutes of 2006.
The June 10, 2010 amendments of this bill reflect similar
language expressed in SB 161 (Wright) of 2009 which was
analyzed by CHBRP. Pursuant to a letter from CHBRP dated, Jun
17, 2010, the 2009 analysis of SB 161would apply to the
current version of this bill. In its 2009 analysis of SB 161,
CHBRP reports the following findings:
a) Overview of Oral Anti-Cancer Medications . CHBRP reports
that, nearly one in two Californians born today will
develop cancer at some point in their lifetime. There are
an estimated 140,000 cases of cancer diagnosed each year,
while approximately 1.2 million Californians alive today
have a history with the disease. According to CHBRP,
breast cancer is the most prevalent cancer in California.
Sixty-five percent of the prescriptions and 33% of the
total cost for oral anticancer medications are for drugs
used to treat breast cancer. After breast cancer, the next
three most common cancers in California are colorectal,
prostate, and lung cancer. Non-Hispanic blacks in
California have higher rates of diagnoses of these three
cancers compared to all other racial and ethnic groups.
These three cancers are all treated using oral anticancer
medications; therefore, to the extent that this bill
reduces out-of-pocket costs for oral anticancer
medications, non-Hispanic black cancer patients could face
a reduced financial burden.
According to CHBRP, oral anticancer medications are used
alone or in combination with other oral, IV, or injected
anticancer medications, depending on the cancer they are
being used to treat. For many oral anticancer medications,
there are no IV or injected substitutes (and vice versa);
there are, however, some important exceptions. Generally,
the manner in which anticancer medications are administered
depends upon the specific medicine.
CHBRP states, the most frequently prescribed oral anticancer
medications in California in 2006 were three hormone drugs
used to treat breast, ovarian, endometrial, and uterine
cancers. The most expensive oral anticancer medications
prescribed to Californians are Revlimid (for multiple
myeloma and myelodysplastic syndromes), Sutent (for
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gastrointestinal stromal tumors and for kidney, renal cell,
and thyroid cancers), and Nexavar (for hepatocellular,
kidney, renal cell, and thyroid cancers).
CHBRP maintains that oral anticancer medications are being
prescribed more frequently for cancer treatment. Four of
the five most prevalent cancers in California, including
breast, colorectal, prostate, and lung cancers, can be
treated using oral anticancer medications. To date the
federal Food and Drug Administration has approved 38 oral
anticancer medications used to treat 52 different types of
cancer. According to the National Comprehensive Cancer
Network, experts estimate that 400 anticancer medications
are currently under development and an estimated 25% of
anticancer agents currently in development are oral
anticancer treatments.
When compared to IV and injectable anticancer medications,
oral anticancer medications have both advantages and
disadvantages. According to CHBRP, advantages include that
oral anticancer medications may allow administration of the
medication on a daily basis; may be more convenient for
patients; and, may reduce the risk of infection or other
infiltration complications. Disadvantages include less
certainty in patient adherence to treatment regimens and a
reduction in interaction between patients and their health
care providers to manage complications of treatment.
b) Anticancer Medication Coverage . CHBRP reports that
coverage for anticancer medications can differ in any of a
number of ways, depending on provisions of a person's
contract or policy with a carrier. At a very broad level,
anticancer medications may be covered as pharmacy plan
benefits or as medical plan benefits, and most plans and
insurers depend on the dispensing site to determine which
will be the form of coverage. IV anticancer medication,
which is usually provided in a hospital or a physician's
office, is generally covered as a medical benefit. Oral
anticancer medications (usually pills) dispensed by a
pharmacy are usually covered as a pharmacy benefit. Some
injected anticancer medications are considered
"self-injectable," and so are regularly delivered through a
pharmacy and covered as a pharmacy benefit. In part, these
variations are due to the fact that pharmacy benefits are
relatively new for carrier contracts and policies, having
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been added in the 1970s and 1980s, long after
hospitalization and physician visits had become covered
medical benefits.
CHBRP indicates for both medical and pharmacy benefits,
payers have devised strategies to promote appropriate
utilization and control of costs. A short list of these
strategies includes: creation of formularies; maximization
of manufacturer rebates; quantity restrictions; use of
prior authorization; development of clinical guidelines;
and, implementation of patient cost sharing, such as
deductibles, coinsurance, and copayments. Cost sharing for
medications is frequently complicated by tiered pricing. A
carrier may assign drugs to tiers (generic drugs in the
lowest and very expensive drugs in the highest) and apply
varying copayments and coinsurance rates to different
tiers. As with cost sharing in general, the impact of
tiers (if any) depends on the specifics of a person's
contract or policy.
According to CHBRP, the variety of cost sharing provisions
currently used in California makes it difficult to
generalize about the ways in which a cancer patient may be
required to pay out-of-pocket for any anticancer
medication. Fixed copayments are a common form of cost
sharing for medications delivered through a pharmacy.
However, some carrier contracts and polices specify
coinsurance for one or more medications. The terms of
coverage may or may not include a deductible. The coverage
of medications delivered as medical benefits is equally
variable.
c) Utilization, Cost and Coverage Impacts . Based on the
results of CHBRP's survey of the six largest plans and
insurers, 100% of enrollees are estimated to have at least
some coverage for inpatient anticancer medications and
outpatient IV and injected anticancer medications, while
97.8% of enrollees are estimated to have at least some
coverage for outpatient oral anticancer medications.
Approximately 472,000 enrollees (2.2%) have no coverage for
outpatient oral anticancer medication. This group includes
persons with coverage from small group or individual market
policies regulated by CDI.
CHBRP states that only 66% of individual market policies
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regulated by CDI cover oral anticancer medications, in
comparison to 88% of small group policies under CDI.
(However, CDI indicates that oral anticancer medication for
breast cancer is covered under all CDI products, which
CHBRP discounted for this analysis, based on survey
results). One hundred percent of large group policies
under CDI covered oral anticancer medications, as did all
other market segments.
CHBRP estimates that 0.5% of people with coverage subject to
the mandate will use oral anticancer medications during the
year following implementation. Of the people using
anticancer medications, CHBRP estimates that 69.5% use oral
only, 20.2% use injected or IV only, and 10.3% use a
combination of oral and injected/IV anticancer medications.
According to CHBRP, the greatest impact on premiums will be
in the small group and individual markets regulated by CDI.
While it is possible that this bill will have the
unintended consequence of causing small group employers or
individuals to drop health care coverage altogether as a
result of an increase in premiums, CHBRP projects no
measurable impact on the number of persons who are
uninsured because the estimated premium increase is 0.025%
- which is less than the 1% threshold at which CHBRP would
estimate a change in the number of persons covered by
insurance.
CHBRP states that this bill would affect the coverage of more
than 21.3 million persons enrolled in group or individual
insurance plans or policies in California with anticancer
therapy coverage. CHBRP maintains that it is expected to
increase the premiums paid by both employers and employees
(by almost $19.7 million), and would cause a decrease in
the out-of-pocket costs paid by members using oral
anticancer medications incurred through the cost sharing
provisions of a policy or contract (by almost $14.7
million). Total net annual expenditures are estimated to
increase by $5 million annually, or 0.0059%, mainly due to
administrative costs.
Of the expected premium increase of about $19,674,000, total
premiums for private employers are estimated to increase by
$7,287,000, or 0.0144%.
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Medi-Cal Managed Care plans and the Healthy Families Program
would not be expected to face any expenditure or premium
increases because they currently provide oral anticancer
medication benefits in accordance with the coverage
mandated by this bill.
As recently amended, this bill excludes the CalPERS from the
provisions of this bill, therefore reducing costs to the
state.
CHBRP reports that approximately 1.6% of the enrollees who
use oral anticancer medications have out-of-pocket costs
for such medications over $1,000 per year. Post-mandate
amounts shifted from patient to carrier would range from $0
to $7,800 per user per year. The wide variation is related
to the price of particular oral anticancer medications and
the cost sharing provisions of any one person's contract or
policy.
According to CHBRP, utilization of oral anticancer
medications is not expected to increase as a result of this
bill, as 97.8% of enrollees with coverage subject to the
mandate already have some coverage for oral anticancer
medications, public and private assistance programs exist,
price elasticity of demand for anticancer medications is
low (as patients will do whatever they can to comply with
prescribed treatments, given the life-threatening nature of
the illness), and oncologists prescribing behaviors are
unlikely to change materially. Therefore, according to
CHBRP, the only potential public health impact as a result
of this bill is a reduction in out-of-pocket costs for oral
anticancer medications.
CHBRP states longer-term impacts on health care costs as a
result of the mandate are unknown but are likely to
increase over time. It is estimated that a quarter of
chemotherapy treatments in the pipeline are planned as oral
medications. According to a recent pharmaceutical report
on cancer medication development, almost 650 new
medications and new indications for existing cancer
medications are in clinical development. Several other
factors may be influential, such as an increase in the
number of patients receiving long-term treatment with more
targeted oral anticancer medications, continued growth in
the use of combination treatment for various types of
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cancers, and expanding indications or off-label use of
existing drugs for the treatment of various cancers.
d) Administrative Costs . According to CHBRP, carrier
contract and policies include a component for
administration and profit in their premiums. In estimating
the impact of this mandate on premiums, CHBRP states that,
actuarial analysis assumes that carriers will apply their
existing administration and profit loads to the increase in
health care costs produced by this bill. Therefore, CHBRP
indicates, although there may be administrative costs
associated with the mandate, administrative costs as a
portion of premiums would not change. In addition, this
bill will require that carriers notify members and
applicants of their oral chemotherapy coverage changes.
Health plans and insurers may also need to increase staff
specializing in utilization management.
3)FEDERAL HEALTH REFORM . On March 23, 2010, President Obama
signed the Patient Protection and Affordable Care Act (PPACA);
P. L. 111-148, as amended by the Health Care and Education
Reconciliation Act of 2010; P. L. 111-152. PPACA includes
prescriptions as a general category that is included in the
"essential health benefits package," but at this time it is
unclear as to what prescriptions will be covered as an
essential benefit. It is likely that what is covered may
remain unknown until federal regulations are promulgated. The
author has included a sunset date of January 1, 2015 for the
provisions of this bill, unless a later enacted statute
deletes or extends the date, in order to accommodate potential
direction from the federal level.
4)SUPPORT . According to Carrie's TOUCH, Inc. (Carrie's TOUCH),
the sponsors of this bill, the emergence of clinically safe
and effective, orally administered anticancer medication has
significantly increased the treatment options for cancer
patients. Carrie's TOUCH maintains that there is a disparity
that exists between the medical and pharmacy benefit design
creating greater out-of-pocket responsibilities for oral
anticancer treatment covered under the pharmacy benefit than
the out of pocket costs for IV treatment covered under the
medical benefit. Carrie's TOUCH argues that the cost barriers
currently impede access to orally administered cancer
treatment. The American Cancer Society (ACS) states that
patients using oral chemotherapy generally experience milder
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side effects and avoid the need for transportation back and
forth to chemotherapy appointments, which, depending on a
patient's circumstances can be onerous for the patient and the
caretakers. ACS further states that many oral chemotherapy
treatments do not have IV counterparts, making the need to
ensure access to them critical. AstraZeneca argues in support
that access to effective medicines, including oral and IV
therapies, should be determined by medical appropriateness -
as determined by a physician in consultation with a patient.
AstraZeneca asserts that ensuring oral chemotherapy agents are
covered in a similar manner as intravenous therapies helps to
ensure that a physician has all of the necessary tools
available to help patients and their family caregivers.
5)OPPOSITION . The Association of California Life and Health
Insurance Companies (ACLHIC), in opposition to this bill
states that it will put carriers at a disadvantage during
negotiations with pharmaceutical companies regarding drug
pricing. ACLHIC maintains that knowing that health insurers
would be mandated to include these oral drugs on their
formularies, pharmaceutical companies would lack any incentive
to negotiate in good faith. Blue Shield of California asserts
that this bill does not contain a correlating price control on
what the pharmaceutical manufacturer can charge a carrier for
purchasing the oral anticancer medication. Blue Shield argues
that this means the drug manufacturer can charge whatever
price they choose and this bill would limit the carrier's
ability to properly fold those costs into their product
offerings. Health Net argues that given the downturn in the
economy, many employers are struggling to provide coverage for
their employees. According to Health Net, mandates as
expressed in this bill will only make health care coverage
more expensive.
6)PREVIOUS LEGISLATION . SB 161, substantially similar to this
bill, would have required a carrier contract or policy that
provides coverage for anticancer treatment to provide coverage
for a prescribed, orally administered anticancer medication on
a basis no less favorable than IV or injected anticancer
medications. SB 161 was vetoed by Governor Arnold
Schwarzenegger stating that SB 161 limits a carrier's ability
to control both the appropriateness of the care and the cost
by requiring them to immediately cover every medication as
soon as it receives federal approval, regardless of the
provisions of the carrier's formulary, placing carriers at a
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severe disadvantage when negotiating prices with drug
manufacturers. The Governor further stated his belief that
oral anticancer medications were more cost-effective and
efficacious in some instances and encouraged the author, for
reconsideration this year, to collaborate with his
Administration, carriers, and the pharmaceutical manufacturers
to explore whether there were ways to provide greater access
without increasing costs.
7)POLICY ISSUE . From a policy perspective, the provisions to
exclude CalPERS appear to be inconsistent with this bill's
intent to make oral cancer medications available to all
persons with health coverage. The author may wish to address
the rationale for exempting CalPERS from this bill.
REGISTERED SUPPORT / OPPOSITION :
Support
Carrie's TOUCH, Inc. (sponsor)
American Cancer Society
AstraZeneca
BayBio
California Communities United Institute
California Healthcare Institute
California Medical Association
Disability Rights Legal Center
International Myeloma Foundation
Oncology Nursing Society
The Leukemia & Lymphoma Society
Susan G. Komen for the Cure
Opposition
Association of California Life & Health Insurance Companies
Blue Shield of California
California Association of Health Plans
California Chamber of Commerce
Health Net
Medco Health Solutions, Inc.
Analysis Prepared by : Tanya Robinson-Taylor / HEALTH / (916)
319-2097