BILL ANALYSIS �
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 866
S
AUTHOR: Hernandez
B
AMENDED: April 11, 2011
HEARING DATE: April 13, 2011
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CONSULTANT:
6
Chan-Sawin
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SUBJECT
Health care coverage: prescription drugs
SUMMARY
Directs the Departments of Managed Health Care and
Insurance, on or before July 1, 2012, to develop a
standardized prior authorization form for prescription drug
benefits, as specified. Requires prescribing providers, as
defined, to use, and health care service plans and health
insurers to accept, the standardized form when requiring
prior authorization for prescription drug benefits.
CHANGES TO EXISTING LAW
Existing law:
Provides for the regulation of health care services plans
(health plans) by the Department of Managed Health Care
(DMHC), and for the regulation of health insurers by the
California Department of Insurance (CDI).
Imposes various requirements and restrictions on certain
procedures, commonly referred to as utilization review,
that apply to every health plan and insurer that
prospectively, retrospectively, or concurrently reviews and
approves, modifies, delays, or denies, based on medical
necessity, requests by providers prior to, retrospectively,
Continued---
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or concurrent with, the provision of health care services
to enrollees or insureds, as specified.
Imposes various requirements and restrictions on health
plans and insurers, including, among other things, a
prohibition on health plans and insurers that provide
prescription drug benefits from excluding or limiting
coverage for a drug on the basis that the drug is
prescribed for a use that is different from the use for
which the drug has been approved for marketing by the
federal Food and Drug Administration.
Requires health plans and insurers to respond to requests
for authorization within five business days for non-urgent
medically necessary health care services, as specified, or
within 72 hours for situations when the enrollee or
insured's condition is such that he or she faces an
imminent and serious threat to his or her health, as
specified.
Requires health plans and insurers to communicate decisions
to approve, modify or deny requests within 24 hours of the
decision to the provider, with certain exceptions.
Additionally requires health plans and insurers to
communicate decisions resulting in the denial, delay or
modification of all or part of the request to the enrollee
or insured within two business days.
Requires health plans that provide prescription drug
benefits to maintain an expeditious process by which
prescribing providers, as described, may obtain
authorization for a medically necessary nonformulary
prescription drug, according to certain procedures.
This bill:
Directs DMHC and CDI to jointly develop a standardized
prior authorization form for prescription drug benefits on
or before July 1, 2012, which every prescribing provider is
required to use to request prior authorization for coverage
of prescription drug benefits.
Defines "prescribing provider" as a provider authorized to
write a prescription to treat a medical condition of an
enrollee, as currently defined in existing law.
Requires health plans and insurers that provide
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prescription drug benefits to accept the standardized form
when requiring prior authorization for prescription drug
benefits.
Specifies that the form shall not exceed two pages, be made
electronically available by the departments and health
plans and insurers, and may be electronically submitted
from the prescribing provider to the health plan or
insurer.
Requires DMHC and CDI to develop the form with input from
interested parties, as specified.
Requires DMHC and CDI, in developing the form, to consider
existing prior authorization forms established by the
federal Centers for Medicare and Medicaid and the state
Department of Health Care Services, and national standards
for electronic prior authorization.
If the health plan or insurer fails to use or accept the
prior authorization form, or fails to respond within 48
hours to a request from a prescribing provider who has
submitted a prior authorization form, the prior
authorization request shall be deemed granted.
Provides an exemption for a physician or physician group
that has been delegated the financial risk for prescription
drugs by a health plan and does not use a prior
authorization process within the group.
FISCAL IMPACT
This bill has not been analyzed by a fiscal committee.
BACKGROUND AND DISCUSSION
According to the author, SB 866 streamlines the prior
authorization process and improves access to prescription
drugs by creating a standardized form for providers to use
when making such a request. Prior authorization
significantly delays medication accessibility for patients
and imposes high costs that adversely impact operating
margins for health care providers. The lack of
standardization in the prior authorization process
negatively delays and impacts patient care, as indicated in
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a recent survey of pharmacists that found 61 percent of
pharmacists knew of an incident when the requirement for
prior authorization adversely affected patient care.
The lack of standardization also results in providers
spending excessive time on paperwork that could be spent
providing patient care. Physicians spend, on average, 20
hours per week handling prior authorizations. Pharmacists
also find prior authorization time consuming, spending an
average of 4.6 hours a week on requests. A May 2010 survey
by the American Medical Association (AMA) found nearly
two-thirds of physicians wait several days to receive prior
authorization from an insurer, and over half of physicians
experience difficulty obtaining approval from health plans
and insurers.
Beyond the access problems created by the lack of
standardization, prior authorization also increases health
care costs. A September 2010 study published in the
Journal of Clinical Infectious Diseases revealed a direct
cost of $14.24 per prior authorization to the provider.
When the opportunity costs are combined with the direct
cost, the overall cost per prior authorization increased to
$41.60.
Prior authorization
Prior authorization is a common cost-containment and
utilization review method used by health plans, insurers,
and some public coverage programs. The practice of prior
authorization, 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 prior authorization forms when the provider
prescribes a medicine or treatment not covered by the plan
or insurer's formulary. Each plan or insurer has their own
prior authorization form, and some plans and insurers may
have multiple forms depending on the type of drug
requested.
Prior authorization 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 prior authorization
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include:
Brand name medications that have a generic
available;
Expensive medications;
Drugs not usually covered by the insurance company,
but said to be medically necessary by the doctor;
Drugs usually covered but prescribed at a higher
dosage;
Drugs used for cosmetic reasons; and
Drugs prescribed to treat a non-life threatening
medical condition.
Standardization of prior authorization in public programs
Fee-for-service Medi-Cal uses a "treatment authorization
request" or "TAR" process for prior authorization. In this
process, both the doctor and pharmacist must obtain state
approval before the beneficiary can receive the medication
they need. A standardized prior authorization form is
available in both paper and electronic form to providers
participating in the Medi-Cal fee-for-service program.
Medi-Cal managed care plans have their own prior
authorization procedures. Both federal and state law
specifies that the state must respond to such requests
under the Medi-Cal program within 24 hours.
The standard Medicare fee-for-service program does not
require prior authorization for services. However, health
plans and insurers participating in the Medicare Advantage
program and Part D program may institute prior
authorization processes. As part of the Medicare Part D
roll-out, to further simplify procedures in the new
Medicare drug benefit program, the American Medical
Association (AMA) and America's Health Insurance Plans
(AHIP), in conjunction with Centers for Medicare & Medicaid
Services (CMS), established a standardized prior
authorization form for physicians to use when dealing with
Medicare Part D drug plans.
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Other national prior authorization efforts
As part of CMS funded electronic prescribing pilots in
2006, a task force of the National Council for Prescription
Drug Programs (NCPDP) began examining prior authorization
requirements associated with the e-prescribing process. In
2009, NCPDP established a technical standard for electronic
prior authorization transactions for broader industry pilot
testing. This effort did not include establishment of a
standardized form or questions for prior authorization.
Related bills
AB 369 (Huffman), among other things, specifies that once a
patient has tried and failed on two pain medications, prior
authorization is no longer required and the physician may
write the prescription for the appropriate pain medication.
It further specifies that a note in the patient's chart
that a patient has tried and failed on the health insurer's
step therapy or fail first protocol shall suffice as prior
authorization from the insurer. Set for hearing on April
26, 2011 in the Assembly Committee on Health.
Prior legislation
SB 1169 (Lowenthal) of 2010, among other things, would have
required health plans and insurers to assign a tracking
number to a claim or provider request for prior
authorization, provide acknowledgment of its receipt and
use the tracking number in subsequent communication
regarding the claim or request. These provisions were
subsequently amended out of the bill.
SB 842 (Speier), Chapter 791, Statutes of 2002, among other
things, requires DMHC to develop regulations outlining the
standards to be used in reviewing a health plan's request
for approval of its proposed copayment, deductible,
limitation, or exclusion on its prescription drug benefits,
including processes for prior authorization. Defines
"authorization" as approval by the health plan to provide
payment for the prescription drug, for purposes of a
specified provision in existing law requiring plans to
maintain an expeditious process by which prescribing
providers may obtain authorization for a medically
necessary nonformulary prescription drug. These provisions
were subsequently amended out of the bill.
SB 2046 (Speier), Chapter 852, Statutes of 2000, prohibits
health plan contracts and disability insurance products
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from excluding coverage for a drug prescribed for a chronic
and seriously debilitating condition, and requires health
plans to maintain an expeditious process by which
prescribing providers may obtain authorization for
medically necessary nonformulary drugs.
SB 59 (Perata and Ortiz), Chapter 539, Statutes of 1999,
among other things, establishes various requirements
regarding health plan and insurer utilization review
procedures, which would include prior authorization for
prescription drugs. These provisions were subsequently
amended out of the bill.
SB 625 (Rosenthal), Chapter 69, Statutes of 1998, requires
health plans that include prescription drug benefits to
maintain an expedited process by which prescribing
providers may obtain authorization for a medically
necessary non-formulary prescription drug and requires
various disclosures and recordkeeping related to plan
formularies.
AB 2305 (Runner), Chapter 984, Statutes of 1998, among
other things, requires health plans to cover pain
management medications to terminally ill enrollees, subject
to authorization within 72 hours.
Arguments in support
The California Medical Association writes in support,
stating that preauthorization policies lead to costly
bureaucratic hassles that take time from patient care. The
Medical Oncology Association of Southern California, Inc.
asserts that the prior authorization process is currently
highly complex, lacks transparency, and the criteria and
processes vary significantly among health plans.
Furthermore, these different requirements create logistical
complexity for providers, as well as adding duplicative
overhead and staff time. The American Academy of Private
Physicians concurs, stating that providers need to be able
to get back to the work of patient care and should not be
spending needless time trying to figure out which health
plan has what protocol and what form.
The Alliance for Patient Access supports SB 866, citing
that health plans and insurers have great incentive to
limit a physician's treatment options by using prior
authorization as a way to cut costs. Writing in
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concurrence, the Power of Pain Foundation states that they
receive calls regularly from Californians stating that, in
the course of the prior authorization process, they are
forced to go days and/or weeks before they obtain/continue
to get treatments deemed necessary by their provider, and
that they are forced to go through the prior authorization
process multiple times a year for the same medication for
the same condition.
BIOCOM supports this bill, stating that, by delaying prior
authorization requests, plans and insurers can claim not to
have denied coverage altogether but achieve largely the
same results. BIOCOM believes this bill solves that issue
by allowing a 48 hour window for denial, allowing plans and
insurers time to legitimately deny unreasonable requests
while insuring that patients are able to access vital
therapies and devices as prescribed by their physicians in
a timely manner.
Arguments in opposition unless amended
The Californian Association of Health Plans (CAHP) opposes
the bill unless amended, citing that health plans use drug
specific prior authorization forms because each drug is
unique in its requirements for diagnosis, limitations,
existing diseases, treatment failures and other clinically
relevant information, and that applying a standardized
prior authorization form could create even more
administrative burdens if the form does not ask the
appropriate questions which will subsequently lead to
follow-up calls and faxes. CAHP further objects to the
provision in the bill that deems approval of a prior
authorization request if a plan or insurer does not respond
to a prior authorization request within 48 hours or if the
plan or insurer fails to use the standard form, and raises
concerns that the bill does not address situations where
the provider fails to respond to a request for additional
information or fails to use the standardized form. In
addition, CAHP notes that the implementation date for
plans, insurers and providers is unclear.
COMMENTS
1. Existing standardized forms and standards for
electronic prior authorization. Recent amendments to this
bill require DMHC and CDI to take into account existing
standardized prior authorization forms used in public
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programs, such as Medicare and Medi-Cal, and to consider
national standards for electronic prior authorization.
These amendments direct regulators to incorporate, and be
consistent with, nationally recognized standards and other
prior authorization standardization efforts.
2. When should plans and providers be required to begin
using the standardized form? SB 866 requires DMHC and CDI
to develop a standardized form on or before July 1, 2012,
but is silent on when plans and providers must begin using
this form. It may be appropriate to provide a set
implementation time for plans and providers to incorporate
the standardized form into their workflow and processes
after the regulators complete work on the standardized
form.
3. Should flexibility be allowed in the 48 hour turnaround
window for plans to respond to requests for authorization?
Plans argue that obtaining the necessary information from a
prescriber to make valid authorization decisions can
sometimes be difficult, and often times it is necessary to
make follow-up calls in order to obtain information that is
required to approve an authorization request. In contrast,
providers argue that the bill requires the department to
craft the standardized form with stakeholder input and, if
properly and fully completed, the standardized form should
be inclusive of all the information needed for plans and
insurers to make a valid authorization decision.
POSITIONS
Support: Alliance for Patient Access
American Academy of Private Physicians
American Cancer Society
Association of Northern California Oncologists
BayBio
BIOCOM
California Academy of Family Physicians
California Association of Health Plans
California Association of Physician Groups
California Healthcare Institute
California Medical Association
California NeuroAlliance
Los Angeles County Medical Association
Medical Oncology Association of Southern
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California, Inc.
National Council of Asian Pacific Islander
Physicians
Neuropathy Action Foundation
Orange County Medical Association
Osteopathic Physicians and Surgeons of California
Pharmaceutical Research and Manufacturers of
America
Power of Pain Foundation
US Pain Foundation
Oppose: California Association of Health Plans (unless
amended)
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