BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:  May 20, 2015


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                                 Jimmy Gomez, Chair


          AB  
          73 (Waldron) - As Amended May 4, 2015


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          Urgency:  No  State Mandated Local Program:  NoReimbursable:  No


          SUMMARY:



          This bill establishes the "Prescriber Prevails Act," specifying  
          access requirements for certain drug classes covered by the  
          Medi-Cal program and creating an urgent appeal process.  
          Specifically, this bill:







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       1)Requires, if any drug from a specified therapeutic drug class is  
            prescribed by a Medi-Cal beneficiary's provider, the drug to  
            be covered in the Medi-Cal program.

       2)Specifies the affected drug classes are antiretrovirals for  
            AIDS/HIV, antipsychotics, anti-rejection drugs, and drugs used  
            to treat seizures or epilepsy. 

       3)Requires a Medi-Cal managed care plan to cover a drug in the  
            named drug classes if prescribed by a beneficiary's provider.   
            Requires the provider to demonstrate reasonable professional  
            judgment, the drug is medically necessary, and it is  
            consistent with the federal Food and Drug Administration (FDA)  
            labeling and use rules and regulations as described in at  
            least one of the official compendia named in federal law.

       4)Provides that if a Medi-Cal managed care plan chooses not to  
            cover the specified drugs, the drugs are to be carved out of  
            the plan and covered on a fee-for-service basis and the plan's  
            contracted rate shall be reduced accordingly.

       5)Requires managed care plans to continue to develop and authorizes  
            plans to administer formularies and prior authorization  
            programs for the specified drugs.

          FISCAL EFFECT:





          1)Unknown costs and potential lost revenues, ranging from zero  
            cost if this bill had no impact on the provision of  
            pharmaceuticals in Medi-Cal, to millions of dollars annually  
            (GF/federal) if the policy was implemented more liberally to  
            allow greater prescriber control.  Cost could vary  
            dramatically depending on how this policy was operationalized.  
             Policies and procedures would have to be clarified by DHCS,  
            and the ease with which prescribed medications are available  







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            despite their non-preferred status would directly impact  
            costs.    

            For example, if stricter limits were placed on a managed care  
            plan's ability to conduct utilization review for these drug  
            categories, there would likely be significant cost pressure on  
            Medi-Cal managed care rates for pharmaceutical benefits.  This  
            bill could lead to increased Medi-Cal costs in several ways:  
            higher prices for drugs, reduced revenue from federal and  
            state-negotiated rebates, and reduced revenue from the state's  
            managed care tax if drugs were carved out of managed care.   

            The bill specifies the use of formularies and prior  
            authorization is allowable in managed care, but not in the  
            fee-for-service (FFS) Medi-Cal.  Antiretroviral drugs for  
            HIV/AIDS and antipsychotics are carved out of managed care and  
            provided exclusively through FFS Medi-Cal.  Restrictions on  
            prior authorization poses significant fiscal risk as it  
            appears to allows prescribers to bypass the state's preferred  
            drug list for FFS Medi-Cal as long as certain criteria are  
            met. 

            Finally, the marketplace dynamics for various drug classes,  
            prescriber behavior, and how pharmaceutical manufacturers  
            respond to the market conditions created by this bill would  
            also influence long-term costs.

          2)Unknown, likely minor, potential increased administrative  
            costs for FFS Medi-Cal, and cost pressure to managed care, for  
            an additional number of appeals.  

          3)Unknown, likely minor, administrative costs to DHCS to adjust  
            managed care rates if plans choose not to cover antirejection  
            and drugs used to treat seizures or epilepsy.   



          4)Unknown offsetting cost savings, to the extent the bill is  
            implemented robustly, in individual cases where prescribers'  
            chosen medication prevents other medical complications.  Such  







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            offsets, if any, would likely be a small percentage of  
            increased costs.
          


          COMMENTS:



          1)Purpose. According to the author, this bill strengthens the  
            doctor and patient relationship by legislating that a doctor's  
            professional and reasonable judgment prevails, for purposes of  
            specific and therapeutic drug classes within the Medi-Cal  
            program.  The author argues new pharmaceuticals and treatments  
            are emerging rapidly and individuals are losing access to  
            pharmaceuticals that may best control their condition.

          2)Background.  Drug benefits are provided through FFS Medi-Cal  
            delivery system, and through managed care.  Managed care  
            enrollees generally get their drugs through their managed care  
            plan, which often subcontracts with a pharmaceutical benefits  
            manager for provision of the drug benefit.  Some drugs are  
            carved out of managed care and only offered through the FFS  
            system.  Both managed care plans and the state maintain  
            separate lists of preferred drugs, or formularies, and impose  
            utilization controls on drugs not contained on the formulary.   
            The most common controls include prior authorization (a  
            request to a plan for coverage of a drug, which must be  
            approved in order to fill a prescription) and step therapy  
            (where the patient must try a different, often less expensive  
            or more proven, drug before being prescribed the drug of  
            choice).  Utilization controls function in a variety of ways  
            but are generally designed to impose friction between the  
            prescribing of a drug and the filling of a prescription,  
            offering the health plan the ability to examine  
            cost-effectiveness and clinical appropriateness.  

            This bill would require FFS Medi-Cal and managed care plans to  
            cover drugs for which a prescriber prescribes a drug in a  
            manner consisted with FDA guidelines for use of the drug, and  







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            for which the prescriber demonstrates reasonable professional  
            judgment that the drug is medically necessary.  

          3)Current Protections. Plans, and FFS Medi-Cal, are required to  
            pay for all drugs deemed medically necessary, regardless of  
            the formulary.  Patients can contest denials of service  
            through various means, including the state fair  
            hearing/grievance process and through independent medical  
            review.  2013 data indicates there were an estimated 550  
            annual state fair hearings held specific to prescription drug  
            issues, out of a total of 5.8 million managed care enrollees,  
            a rate of about one in 10,500 enrollees.  

           4)Drug Classes Affected.  The specific drug classes to which  
            this bill would apply are for conditions that are clinically  
            complex, for which prescribing physicians are often  
            specialists with advanced knowledge of the conditions being  
            treated.  They are also among the most expensive drugs.  The  
            fact this bill only applies to drugs listed on a compendia  
            offers some protection, but compendia also include various  
            grades of evidence.  Off-label use may be supported by  
            compendia. According to individuals with expertise in managing  
            pharmacy benefits, there are potential concerns about  
            undermining the ability of health plans or the state to  
            conduct utilization review for these drug classes.  Cost and  
            clinical concerns for these drug classes are noted below.   
           
             a)   Anticonvulsants are marketed and often used for  
               conditions other than epilepsy and seizure disorders.  The  
               bulk of utilization review for anticonvulsants is directed  
               to off-label use.   In addition, a number of new drugs are  
               in the development pipeline at this time, meaning costs for  
               this category are projected to grow.  This bill does not  
               specify it applies to anticonvulsants only when used for  
               treating seizure disorders.  

              b)   Antipsychotics. There are significant concerns about  
               off-label use.  This is a drug class that has benefited  
               significantly from the availability of generic substitutes.  
                Generic versions of former "blockbuster drugs" can be  







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               20-30% or as much as 80%-90% cheaper than drugs with patent  
               protection. To the extent this bill undermines the ability  
               to use generic substitutes, significant additional costs  
               could be incurred.

             c)   Antiretrovirals.  More expensive single-tablet regimens  
               that are marketed and patent-protected without offering  
               significant clinical benefit over generic formulations are  
               of concern in this drug class. 

          1)Support.  Biotechnology firms and the California Chronic Care  
            Coalition support this bill, noting individuals who require  
            specific medications are forced to wait while they and their  
            physicians are forced to wade through red tape and sometimes  
            are forced to suffer with inadequate or contraindicated  
            medications

          2)Opposition. The California Association of Health Plans (CAHP)  
            opposes this bill, arguing it minimizes the role of care  
            coordination plans employ to investigate safer alternatives  
            and to help identify appropriate and inappropriate  
            prescribing.  

          3)Staff Comments. This bill addresses an inherent tension  
            between the state's interest in cost-effective provision of  
            health care services and clinical oversight, and a  
            prescriber's professional judgment on what will be optimal for  
            each of his or her patients.  The essential questions are  
            whether these opposing concerns are appropriately balanced,  
            and whether current policies and practices result in patient  
            harm and the denial of needed care in a timely way. 

            Under current law, the state, health plans, and pharmaceutical  
            benefit managers attempt to balance the medical needs of the  
            patient and prescriber preferences with the provision of  
            affordable benefits that meet clinical standards of  
            appropriate care.  In so doing, utilization review controls,  
            such as prior authorization and step therapy, are employed.   
            Prior authorization, for example, is not only employed to  
            contain costs, but to allow a clinical review to ensure  







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            medication is prescribed appropriately and to allow  
            consideration of safer alternatives.  In some instances,  
            inappropriate prescribing can be identified.  Staff notes a  
            "prescriber prevails" policy may help certain patients in  
            individual cases, but also has a potential for unintended  
            consequences that could increase costs without providing a  
            benefit to patients. For example, it may remove safeguards  
            that prevent overprescribing or inappropriate prescribing.  

            The actual operation of a "prescriber prevails" law as it  
            pertains to the Medi-Cal program is unclear and would likely  
            have to be clarified through regulation.  The ease and  
            convenience of the process to document medical necessity, and  
            how much it deviates from the state's current process, would  
            have a direct impact on drug utilization and costs.   For  
            example, if the very act of prescribing a drug that meets the  
            FDA's labeling and use requirements is deemed adequate to meet  
            medical necessity, there would likely be large utilization and  
            cost impacts.  To the extent additional controls are put in,  
            it would have a lesser effect on utilization and cost. 

          4)Technical note. This bill essentially allows managed care  
            plans to choose which drugs they will cover, and requires FFS  
            Medi-Cal to cover them if the managed care plan doesn't.   
            However, managed care plans are required to cover drugs that  
            are medically necessary, subject to certain authorization  
            procedures.  The application of prescriber prevails in these  
            cases would need to be clarified.  

          5)Suggested Amendments. The author indicates the bill is simply  
            intended to speed up the prior authorization review process to  
            allow more prompt access to prescribed medications.  If this  
            is the case, and if the turnaround time is indeed  
            unacceptable, staff suggests removing provisions related to  
            coverage, medical necessity, and provider judgment altogether,  
            and instead amend the bill to address the state FFS program  
            and managed care contractual requirements related to timeline  
            for prior authorization. Since medically necessary drugs are  
            already covered pursuant to existing law and regulations,  
            provided the prescriber demonstrates medical necessity in the  







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            required manner, addressing the timeline should be adequate to  
            accomplish the intent.  

          6)Related Legislation. 

             a)   AB 73 (Waldron), also being heard today, is similar to  
               this bill and applies to four drug classes, including  
               anticonvulsants. 

             b)   AB 374 (Nazarian), pending on the Suspense File of this  
               committee, specifies requirements with which health plan  
               step therapy regimens must comply. 


          1)Prior Legislation. 
            
             a)   AB 1814 (Waldron) of 2014 was similar to AB 73 and was  
               held on this committee's Suspense File.
                
             b)   AB 889 (Frazier) of 2013 prohibited a health plan from  
               requiring an enrollee to try and fail on more than two  
               medications before allowing the enrollee access to the  
               medication, or generically equivalent drug, as specified.   
               This bill was held on the Senate Appropriations Committee  
               suspense file.

          


          Analysis Prepared by:Lisa Murawski / APPR. / (916)  
          319-2081
















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