BILL ANALYSIS Ó AB 73 Page 1 Date of Hearing: May 20, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair AB 73 (Waldron) - As Amended May 4, 2015 ----------------------------------------------------------------- |Policy |Health |Vote:|19 - 0 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- 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: AB 73 Page 2 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 AB 73 Page 3 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 AB 73 Page 4 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 AB 73 Page 5 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 AB 73 Page 6 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 AB 73 Page 7 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 AB 73 Page 8 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 AB 73 Page 9