Amended in Assembly April 7, 2015

California Legislature—2015–16 Regular Session

Assembly BillNo. 339


Introduced by Assembly Member Gordon

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(Coauthor: Assembly Member Atkins)

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February 13, 2015


An act to add Section 1342.71 to the Health and Safety Code, and to add Section 10123.193 to the Insurance Code, relating to health care coverage.

LEGISLATIVE COUNSEL’S DIGEST

AB 339, as amended, Gordon. Health care coverage: outpatient prescription drugs.

Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care and makes a willful violation of the act a crime. Existing law also provides for the regulation of health insurers by the Department of Insurance. Existing law requires a health care service plan or insurer that provides prescription drug benefits and maintains one or more drug formularies to make specified information regarding the formularies available to the public and other specified entities. Existing law also specifies requirements for those plans and insurers regarding coverage and cost sharing of specified prescription drugs.

This bill would requirebegin insert aend insert health care service planbegin delete contracts and policies of health insurance that areend deletebegin insert contract or a health insurance policy that isend insert offered, renewed, or amendedbegin insert on orend insert after January 1, 2016, and thatbegin delete provideend deletebegin insert providesend insert coverage for outpatient prescription drugs, to provide coverage for medically necessary prescriptionbegin delete drugs that do not haveend deletebegin insert drugs, including thend insertbegin insertose for which there is notend insert a therapeutic equivalent. begin deleteThis end deletebegin insertThe end insertbill would require copayments, coinsurance, and other cost sharing for these drugs to bebegin delete reasonable.end deletebegin insert reasonable, and would require that the copayment, coinsurance, or any other form of cost sharing for a covered outpatient prescription drug for an individual prescription not exceed end insertbegin insert124end insertbegin insert of the annual out-of-pocket limit applicable to individual coverage for a supply of up to 30 days. Theend insertbegin delete Thisend delete bill would requirebegin delete those contracts and policiesend deletebegin insert a plan contract or policyend insert to cover single-tablet and extended release prescription drug regimens, unless the plan or insurer can demonstrate that multitablet and nonextended release drug regimens, respectively, are morebegin delete or equallyend delete effective, as specified. begin deleteThis end deletebegin insertThe end insertbill wouldbegin delete prevent those plans and policiesend deletebegin insert prohibit, except as specified, a plan contract or policyend insert from placing prescription medications that treat a specific condition on the highest costbegin delete tierend deletebegin insert tiersend insert of a drug formulary. begin deleteThis end deletebegin insertThe end insertbill would requirebegin delete the Department of Managed Health Care and the Department of Insurance to create a definition of “specialty prescription drugs,” subject to specified limitations, no later than January 1, 2017.end deletebegin insert a plan contract or policy to use specified definitions for each tier of a drug formularyend insertbegin insert.end insert

Because a willful violation of the bill’s requirements relative to health care service plans would be a crime, this bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

P2    1

SECTION 1.  

Section 1342.71 is added to the Health and Safety
2Code
, to read:

3

1342.71.  

(a) A health care service plan contract that is offered,
4amended, or renewed on or after January 1, 2016, shall comply
5with this section. This section shall not apply to Medi-Cal managed
6care contracts.

P3    1(b) (1) A health care service plan that provides coverage for
2outpatient prescription drugs shall cover medically necessary
3prescription drugs.

4(2) A health care service plan that provides coverage for
5outpatient prescription drugs shall cover a medically necessary
6prescription drug for which there is not a therapeutic equivalent.

7(c) Copayments, coinsurance, and other cost sharing for
8outpatient prescription drugs shall be reasonable so as to allow
9access to medically necessary outpatient prescription drugs. The
10health care service plan shall demonstrate to the director that
11proposed cost sharing for a medically necessary prescription drug
12will not discourage medication adherence.

13(d) Consistent with federal law and guidance, and
14notwithstanding Section 1342.7 and any regulations adopted
15pursuant to that section, a health care service plan that provides
16coverage for outpatient prescription drugs shallbegin insert demonstrate to the
17satisfaction of the director that the formulary or formularend insert
begin inserties
18maintained by the health care service plan doend insert
not discourage the
19enrollment of individuals with healthbegin delete conditions.end deletebegin insert conditions and
20do not reduce the generosity of the benefit for enrollees with a
21particular condition.end insert

22(1) A health care service plan contract shall cover a single-tablet
23drug regimen that is as effective as a multitablet regimen unless
24the health care service plan is able to demonstrate to the director
25that consistent with clinical guidelines and peer-reviewed scientific
26and medical literature that the multitablet regimen is clinically
27more effective andbegin delete equally orend delete more likely to result in adherence
28to a drug regimen. A health care service plan contract shall cover
29an extended release prescription drug that is clinically as effective
30as a nonextended release product unless the health care service
31plan is able to demonstrate to the director that consistent with
32clinical guidelines and peer-reviewed scientific and medical
33literature that the nonextended release product is clinicallybegin delete equally
34orend delete
more effective.begin delete The cost sharing for the enrollee shall be the
35same for a single-tablet regimen as for the drugs included in a
36multitablet regimen. The same cost sharing shall apply for an
37extended release product as for a nonextended release product.end delete

38(2) A health care service plan contract shall not place most or
39all of the prescription medications that treat a specific condition
40on the highest costbegin delete tierend deletebegin insert tiersend insert of abegin delete formulary.end deletebegin insert formulary unless the
P4    1health care service plan can demonstrate to the satisfaction of the
2director that such placement does not reduce the generosity of the
3benefits for enrollees with a particular condition. In no instance
4in which there is more than one treatment that is the standard of
5care for a condition shall most or all prescription medications to
6treat that condition be placed on the highest cost tiers.end insert
This shall
7not apply to any medication for which there is a therapeutic
8equivalent available on a lower cost tier.

begin insert

9(3) For coverage offered in the individual market, the health
10care service plan shall demonstrate to the satisfaction of the
11director that the formulary or formularies maintained for coverage
12in the individual market are the same or comparable to those
13maintained for coverage in the group market.

end insert
begin delete

14(3)

end delete

15begin insert(end insertbegin insert4)end insert A health care service plan shall demonstrate to the director
16that any limitation or utilization management is consistent with
17and based on clinical guidelines and peer-reviewed scientific and
18medical literature.

begin delete

19(e) (1) No later than January 1, 2017, the department shall
20develop a definition of specialty prescription drugs that is based
21on clinical guidelines and peer-reviewed scientific and medical
22literature, including the need for special handling, storage,
23administration, clinical monitoring, or reporting clinical outcomes
24to the federal Food and Drug Administration of such prescription
25drugs.

end delete
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26(2) The definition of specialty prescription drugs shall not be
27based on the cost of the prescription drug to the health care service
28plan but shall be based on medical management.

end delete
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29(3) A health care service plan contract shall use the definition
30of specialty drug developed by the department in its outpatient
31prescription drug benefit plan. The highest cost tier of a formulary
32shall be based on clinical guidelines and medical evidence and
33shall not be based on the cost of the prescription drug.

end delete
begin insert

34(e) With respect to an individual or group health care service
35plan contract subject to Section 1367.006, the copayment,
36coinsurance, or any other form of cost sharing for a covered
37outpatient prescription drug for an individual prescription shall
38not exceed 124 of the annual out-of-pocket limit applicable to
39individual coverage under Section 1367.006 for a supply of up to
4030 days.

end insert
begin insert

P5    1(f) (1) If a health care service plan contract maintains a drug
2formulary grouped into tiers, including a fourth tier or specialty
3tier, a health care service plan contract shall use the following
4definitions for each tier of the drug formulary:

end insert
begin insert

5(A) Tier one shall consist of preferred generic drugs and
6preferred brand name drugs if the cost to the health care service
7plan for a preferred brand name drug is comparable to those for
8generic drugs.

end insert
begin insert

9(B) Tier two shall consist of nonpreferred generic drugs,
10preferred brand name drugs, and any other drugs recommended
11by the health care service plan’s pharmaceutical and therapeutics
12committee based on safety and efficacy and not solely based on
13the cost of the prescription drug.

end insert
begin insert

14(C) Tier three shall consist of nonpreferred brand name drugs
15that are recommended by the health care service plan’s
16pharmaceutical and therapeutics committee based on safety and
17efficacy and not solely based on the cost of the prescription drug.

end insert
begin insert

18(D) Tier four shall consist of specialty drugs that are biologics,
19which, according to the federal Food and Drug Administration or
20the manufacturer, require distribution through a specialty
21pharmacy or the enrollee to have special training for
22self-administration or special monitoring. Specialty drugs may
23include prescription drugs that cost more than the Medicare Part
24D threshold if those drugs are recommended for Tier four by the
25health care service plan’s pharmaceutical and therapeutics
26committee based on safety and efficacy, but placement shall not
27be solely based on the cost of the prescription drug.

end insert
begin insert

28(2) Nothing in this section shall be construed to require a health
29care service plan contract to include a fourth tier, but if a health
30care service plan contract includes a fourth tier, the health care
31service plan contract shall comply with this section.

end insert
begin insert

32(g) A health care service plan contract shall ensure that the
33placement of prescription drugs on formulary tiers is not based
34solely on the cost of the prescription drug to the health care service
35plan, but is based on clinically indicated, reasonable medical
36management practices.

end insert
begin delete

37(f)

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38begin insert(end insertbegin inserth)end insert Nothing in this section shall be construed to require or
39authorize a health care service plan that contracts with the State
40Department of Health Care Services to provide services to
P6    1Medi-Cal beneficiaries to provide coverage for prescription drugs
2that are not required pursuant to those programs or contracts, or
3to limit or exclude any prescription drugs that are required by those
4programs or contracts.

5

SEC. 2.  

Section 10123.193 is added to the Insurance Code, to
6read:

7

10123.193.  

(a) A policy of health insurance that is offered,
8amended, or renewed on or after January 1, 2016, shall comply
9with this section.

10(b) (1) A policy of health insurance that provides coverage for
11outpatient prescription drugs shall cover medically necessary
12prescription drugs.

13(2) A policy of health insurance that provides coverage for
14outpatient prescription drugs shall cover a medically necessary
15prescription drug for which there is not a therapeutic equivalent.

16(c) Copayments, coinsurance, and other cost sharing for
17outpatient prescription drugs shall be reasonable so as to allow
18access to medically necessary outpatient prescription drugs. The
19health insurer shall demonstrate to the commissioner that proposed
20cost sharing for a medically necessary prescription drug will not
21discourage medication adherence.

22(d) Consistent with federal law and guidance,begin delete and
23notwithstanding Section 1342.7 of the Health and Safety Code,
24and any regulations adopted pursuant to that section,end delete
a policy of
25health insurance that provides coverage for outpatient prescription
26drugs shallbegin insert demonstrate to the satisfaction of the commissioner
27that the formulary or formularies maintained by the health insurer
28doend insert
not discourage the enrollment of individuals with health
29begin delete conditions.end deletebegin insert conditions and do not reduce the generosity of the
30benefit for insureds with a particular condition.end insert

31(1) A policy of health insurance shall cover a single-tablet drug
32regimen that is as effective as a multitablet regimen unless the
33health insurer is able to demonstrate to the commissioner that
34consistent with clinical guidelines and peer-reviewed scientific
35and medical literature that the multitablet regimen is clinically
36more effective andbegin delete equally orend delete more likely to result in adherence
37to a drug regimen. A policy of health insurance shall cover an
38 extended release prescription drug that is clinically as effective as
39a nonextended release product unless the health insurer is able to
40demonstrate to the commissioner that consistent with clinical
P7    1guidelines and peer-reviewed scientific and medical literature that
2the nonextended release product is clinicallybegin delete equally orend delete more
3effective. begin delete The cost sharing for the enrollee shall be the same for a
4single-tablet regimen as for the drugs included in a multitablet
5regimen. The same cost sharing shall apply for an extended release
6product as for a nonextended release product.end delete

7(2) A policy of health insurance shall not place most or all of
8the prescription medications that treat a specific condition on the
9highest costbegin delete tierend deletebegin insert tiersend insert of abegin delete formulary.end deletebegin insert formulary unless the health
10insurer can demonstrate to the satisfaction of the commissioner
11that such placement does not reduce the generosity of the benefits
12for insureds with a particular condition. In no instance in which
13there is more than one treatment that is the standard of care for
14a condition shall most or all prescription medications to treat that
15condition be placed on the highest cost tiers.end insert
This shall not apply
16to any medication for which there is a therapeutic equivalent
17available on a lower cost tier.

begin insert

18(3) For coverage offered in the individual market, the health
19insurer shall demonstrate to the satisfaction of the commissioner
20that the formulary or formularies maintained for coverage in the
21individual market are the same or comparable to those maintained
22for coverage in the group market.

end insert
begin delete

23(3)

end delete

24begin insert(end insertbegin insert4)end insert A health insurer shall demonstrate to the commissioner that
25any limitation or utilization management is consistent with and
26based on clinical guidelines and peer-reviewed scientific and
27medical literature.

begin delete

28(e) (1) No later than January 1, 2017, the department shall
29develop a definition of specialty prescription drugs that is based
30on clinical guidelines and peer-reviewed scientific and medical
31literature, including the need for special handling, storage,
32administration, clinical monitoring, or reporting clinical outcomes
33to the federal Food and Drug Administration of such prescription
34drugs.

35(2) The definition of specialty prescription drugs shall not be
36based on the cost of the prescription drug to the health insurer but
37shall be based on medical management.

38(3) A policy of health insurance shall use the definition of
39specialty drug developed by the department in its outpatient
40prescription drug benefit plan. The highest cost tier of a formulary
P8    1shall be based on clinical guidelines and medical evidence and
2shall not be based on the cost of the prescription drug.

3(f) Nothing in this section shall be construed to require or
4authorize a health insurer that contracts with the State Department
5of Health Care Services to provide services to Medi-Cal
6beneficiaries to provide coverage for prescription drugs that are
7not required pursuant to those programs or health insurance
8policies, or to limit or exclude any prescription drugs that are
9required by those programs or health insurance policies.

end delete
begin insert

10(e) With respect to an individual or group policy of health
11insurance subject to Section 10112.28, the copayment, coinsurance,
12or any other form of cost sharing for a covered outpatient
13prescription drug for an individual prescription shall not exceed
14124 of the annual out-of-pocket limit applicable to individual
15 coverage under Section 10112.28 for a supply of up to 30 days.

end insert
begin insert

16(f) (1) If a policy of health insurance maintains a drug
17formulary grouped into tiers, including a fourth tier or specialty
18tier, a policy of health insurance shall use the following definitions
19for each tier of the drug formulary:

end insert
begin insert

20(A) Tier one shall consist of preferred generic drugs and
21preferred brand name drugs if the cost to the health insurer for a
22preferred brand name drug is comparable to those for generic
23drugs.

end insert
begin insert

24(B) Tier two shall consist of nonpreferred generic drugs,
25preferred brand name drugs, and any other drugs recommended
26by the health insurer’s pharmaceutical and therapeutics committee
27based on safety and efficacy and not solely based on the cost of
28the prescription drug.

end insert
begin insert

29(C) Tier three shall consist of nonpreferred brand name drugs
30that are recommended by the health insurer’s pharmaceutical and
31therapeutics committee based on safety and efficacy and not solely
32based on the cost of the prescription drug.

end insert
begin insert

33(D) Tier four shall consist of specialty drugs that are biologics,
34which, according to the federal Food and Drug Administration or
35the manufacturer, require distribution through a specialty
36pharmacy or the insured to have special training for
37self-administration or special monitoring. Specialty drugs may
38include prescription drugs that cost more than the Medicare Part
39D threshold if those drugs are recommended for Tier four by the
40health insurer’s pharmaceutical and therapeutics committee based
P9    1on safety and efficacy, but placement shall not be solely based on
2the cost of the prescription drug.

end insert
begin insert

3(2) Nothing in this section shall be construed to require a policy
4of health insurance to include a fourth tier, but if a policy of health
5insurance includes a fourth tier, the policy of health insurance
6shall comply with this section.

end insert
begin insert

7(g) A policy of health insurance shall ensure that the placement
8of prescription drugs on formulary tiers is not based solely on the
9cost of the prescription drug to the health insurer, but is based on
10clinically indicated, reasonable medical management practices.

end insert
11

SEC. 3.  

No reimbursement is required by this act pursuant to
12Section 6 of Article XIII B of the California Constitution because
13the only costs that may be incurred by a local agency or school
14district will be incurred because this act creates a new crime or
15infraction, eliminates a crime or infraction, or changes the penalty
16for a crime or infraction, within the meaning of Section 17556 of
17the Government Code, or changes the definition of a crime within
18the meaning of Section 6 of Article XIII B of the California
19Constitution.



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