BILL ANALYSIS �
AB 2418
Page 1
Date of Hearing: May 21, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 2418 (Bonilla and Skinner) - As Amended: May 7, 2014
Policy Committee: HealthVote:19-0
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill requires health plans and insurers that provide
prescription drug benefits to comply with three provisions for
products sold and contracts issued after January 1, 2016.
Specifically, this bill:
1)Requires a plan that imposes a mandatory mail-order restriction
for some or all covered prescription drugs to establish a
process for enrollees to opt out of that restriction, and
allows a plan to require the use of specific contracting
pharmacies.
2)Prohibits plans from denying coverage for a refill for purposes
of placing all enrollee's medications on the same schedule, and
requires the application of prorated cost-sharing to refills
that are for purposes of such synchronization and that meet
other criteria.
3)Prohibits plans from denying coverage for the early refill of
covered ophthalmic products at 70% of the predicted days of
use.
FISCAL EFFECT
This bill has been amended and implications of the mandatory mail
order provisions have been clarified since the California Health
Benefits Review Program (CHBRP) analyzed it. Cost estimates from
CHBRP have been modified, and costs are estimated as follows:
1)Potential one-time costs to DMHC of $200,000 for plan
licensing, regulatory, and enforcement costs (Managed Care
Fund). Ongoing costs are likely to be minor.
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2)Minor one-time costs to CDI, in the range of $30,000
(Insurance Fund) for oversight and enforcement.
3)Costs of at least $6,000 annually for provision of services
through CalPERS benefit plans (GF/federal/special/local funds).
About 60% of this cost is state cost, while the rest is a
local cost. This range is based on assumptions related to
cost-sharing and percentage of visits billed.
4)State expenditures for Medi-Cal Managed Care Plans are
estimated to increase by at least $154,000 annually.
5)Increased employer-funded premium costs in the private
insurance market of at least $845,000 annually.
6)Increased premium expenditures by employees and individuals
purchasing insurance of at least $500,000 annually, as well as
increased out-of-pocket expenditures of at least $1.8 million.
7)To the extent this bill precludes the ability of plans and
insurers to direct enrollees, for certain drugs, to mandatory
mail order or to networks of specific pharmacies with which
plans have pricing agreements for certain drugs, there could be
significant cost pressures to the market beyond that estimated
by CHBRP. This cost pressure is likely to grow over time, as
this bill will limit the ability of pharmaceutical benefits
managers to use mandatory mail order, and may limit the use of
narrower networks of pharmacies for certain high-cost drugs.
COMMENTS
1)Purpose . According to the author, this bill is aimed at
improving patient medication adherence and health outcomes
through streamlining the medication refill process using three
strategies. The author states that by creating processes that
support and improve patient access to medications, patients
experience better health outcomes and improved quality of life.
Furthermore, patients who pick up their medications at their
local pharmacy have the opportunity to talk with the pharmacist
about how to properly take their medications and to understand
the positive benefits of taking their medication.
2)Background . This bill contains three separate provisions.
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a) Mandatory mail order opt-out . Pharmacy benefit managers
and plans that provide prescription drug benefits generally
contract with, or own, mail-order pharmacies in addition to
community pharmacies. According to these entities,
providing certain drugs through mail-order arrangements can
sometimes be cost-efficient and clinically beneficial, as
there is greater assurance of medication adherence and a
greater ability to direct utilization to certain drugs,
offering cost savings based on negotiated prices and
rebates. The Centers for Medicaid and Medicare Services
(CMS), however, requires participating Medicare Part D
pharmacy benefit plans to allow patients to opt out of
mandatory mail order. Truly mandatory mail order with no
opportunity to opt out does not appear widespread at this
time. Most plans that use mandatory mail order programs for
certain drugs allow enrollees to opt out. However, even some
plans offering opt-out processes would not be compliant with
this bill and would have to change their processes in order
to comply. For example, this bill would prohibit plans from
requiring enrollees to sign a form in order to opt out.
b) Prohibition on denial of refills for synchronization
purposes . This bill requires plans and insurers to allow
enrollees to refill prescriptions at less than the full
amount, for purposes of synchronizing medications (putting a
patient's medications on the same schedule). CMS requires
participating Medicare Part D pharmacy benefit plans to
allow patients to receive "short fills" at a prorated
cost-sharing amount, similar to this bill.
c) Topical ophthalmics . Also aligning with a Medicare
requirement, this bill allow for early refills of covered
ophthalmic products - generally eye drops-at 70% of the
predicted days of use. This provision is intended to
account for potential spillage.
3)Support . California Pharmacists Association and California
Healthcare Institute, co-sponsors of this bill, write in
support that lack of medication adherence results in lost
opportunities to treat patients and improving adherence
requires a multi-faceted approach, including the strategies
outlined in this bill. Patient advocate groups also support
this bill.
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4)Opposition . Health plans, insurers and pharmacy benefit
managers oppose this bill, concerned about the costs and
administrative complexity of the proposed changes. Health
plans and insurers view this bill as micromanaging the
prescription refill process. Blue Shield of California (BSC)
argues this bill will eviscerate the benefits members realize
from mandatory mail order programs.
5)Staff Comments . The mandatory mail-order provision of this
bill raises questions of the balance between consumer choice
about where to pick up drugs, versus the provision of
pharmaceutical benefits in the most cost-effective way. Given
the emergence of costly specialty drugs that account for a
small percentage of prescriptions but a large portion of
overall drug spending, it appears this bill may result in
increased cost pressure, particularly in future years as plans
seek new strategies to mitigate the cost of prescription drug
benefits. Removing the ability of plans to use mandatory
mail-order for certain drugs may have significant costs over
the long term.
Furthermore, in addition to requiring a way to opt out of
mandatory mail-order, this bill may be interpreted as a
requirement to go further and prohibit the use of limited
networks of pharmacies for the provision of certain drugs. In
other words, when someone opts out of mail order, it may
restrict a plan's ability to direct enrollees to certain
pharmacies over others. This bill states, "the opt-out process
may require the use of a plan's participating pharmacy that, at
the discretion of the plan, is suited to special handling of
the prescription drug and patient care." However, the
inclusion of this language may preclude arrangements currently
in use that are not in place due to special handling or patient
care requirements, but exist purely for purposes of cost
efficiency. For example, under current law and practice, a
plan can require enrollees to fill certain high-cost
prescriptions at, for example, Pharmacy X, even though a plan
might have contracts with numerous other pharmacies for
provision of other drugs. By contracting with Pharmacy X to be
the sole provider for the high-cost Drug A, the plan is able to
reduce costs by procuring Drug A at volume discounts and/or
negotiating rebates. Although it is not explicitly stated,
this bill may require the plan to allow the enrollee to choose
any community pharmacy contracted with the plan for provision
of any drug, except for drugs the plan believes require special
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handling and patient care. If this is required, it may
increase costs by undermining negotiated pricing agreements.
If the intent is to allow the use of limited pharmacy networks
as they are currently used, as a means to manage drug costs,
this should be clarified.
Overall, if the opt-out provisions become law, consumers may
gain choice at the front end, but they will likely pay some
price for it through increased costs for benefits. Given the
mandatory nature of the bill's opt-out provisions, these costs
will not be apparent and consumers and employers will not have
the option to avoid these costs or weigh potential benefits
against the costs, since they will be embedded in the benefit
design. Plans and insurers that provide prescription drug
benefits are still required to provide adequate access to drugs
to as a condition of state licensure. Given this, it is far
from obvious that prohibiting strategies that may mitigate
growth in drug spending truly benefits consumers over the long
run, when considering the potential for increased benefit
costs.
Analysis Prepared by : Lisa Murawski / APPR. / (916) 319-2081