Amended in Senate July 16, 2015

Amended in Senate July 7, 2015

Amended in Senate June 24, 2015

Amended in Assembly June 1, 2015

Amended in Assembly May 20, 2015

Amended in Assembly May 4, 2015

Amended in Assembly April 7, 2015

California Legislature—2015–16 Regular Session

Assembly Bill No. 339

Introduced by Assembly Member Gordon

(Coauthor: Assembly Member Atkins)

February 13, 2015

An act to amend Sections 1367.24 and 1367.205 of, begin delete and end delete to add Sections begin delete 1342.71, 1367.41, end delete begin insert 1367.41 end insert and 1367.42 to, begin insert and to add and repeal Section 1342.71 to, end insert the Health and Safety Code, and to amend Section 10123.192 of, begin delete and end delete to add begin delete Sections 10123.193 and end delete begin insert Section end insert 10123.201 to, begin insert and to add and repeal Section 10123.193 to, end insert the Insurance Code, relating to health care coverage.

LEGISLATIVE COUNSEL’S DIGEST

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

begin delete

Existing

end delete

begin insert (1) end insert begin insert   end insert begin insert Existing end insert 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 begin delete require, with respect to a nongrandfathered group health care service plan contract or health insurance policy that is offered, renewed, or amended on or after July 1, 2016, and a nongrandfathered individual health care service plan contract or health insurance policy that is offered, renewed, or amended on or after January 1, 2017, and that provides coverage for outpatient prescription drugs, that end delete begin insert prohibit the formulary or formularies for outpatient prescription drugs maintained by a health care service plan or health insurer from discouraging the enrollment of individuals with health conditions and from reducing end insert begin insert the generosity of the benefit for enrollees or insureds with a particular condition. The bill, until January 1, 2021, would provide that end insert the copayment, coinsurance, or any other form of cost sharing for a covered outpatient prescription drug for an individual prescription begin insert shall end insert not exceed begin delete $250, except as specified, end delete begin insert $250 end insert for a supply of up to 30 begin delete days. end delete begin insert days, except as specified. end insert The bill would make these cost-sharing limits applicable only to covered outpatient prescription drugs that constitute essential health benefits, as defined. The bill would require a plan contract or policy to cover a single-tablet prescription drug regimen for combination begin insert antiretroviral end insert drug treatments begin delete that include antiretrovirals, as specified. end delete begin insert that are medically necessary for the treatment of AIDS/HIV, as specified. end insert The bill would prohibit, except as specified, a plan contract or policy from placing more than 50% of drugs approved by the United States Food and Drug Administration that are in the same drug class into the 2 highest cost tiers of a drug formulary. The bill would require a plan contract or policy to use specified definitions for each tier of a drug formulary. The bill would make related findings and declarations.

This bill would require a health insurer that provides coverage for outpatient prescription drugs to provide coverage for medically necessary prescription drugs, including those for which there is not a therapeutic equivalent, and, for an insurer, would require copayments, coinsurance, and other cost sharing for outpatient prescription drugs to be reasonable.

begin insert

This bill would make these provisions applicable to nongrandfathered group health care service plan contracts or health insurance policies that are offered, renewed, or amended on or after July 1, 2016, and applicable to nongrandfathered individual health care service plan contracts or health insurance policies that are offered, renewed, or amended on or after January 1, 2017.

end insert begin delete

Existing

end delete

begin insert (2) end insert begin insert   end insert begin insert Existing end insert law requires every health care service plan that provides prescription drug benefits to maintain an expeditious process by which prescribing providers may obtain authorization for a medically necessary nonformulary prescription drug, and requires these plans to maintain specified information that is required to be made available to the Director of the Department of Managed Health Care upon request.

This bill would also impose these requirements on a health insurer that provides prescription drug benefits, as provided. The bill would require a plan or insurer to respond to authorization requests for nonformulary prescription drugs within specified timeframes. The bill would authorize an insurer to require step therapy, as defined, when more than one drug is appropriate for the treatment of a medical condition, subject to specified requirements. The bill would require an insurer that requires step therapy to have an expeditious process in place to authorize exceptions to step therapy when medically necessary and to conform effectively and efficiently with continuity of care requirements. The bill, with regard to an insured changing policies, would prohibit a new insurer from requiring the begin delete enrollee or end delete insured to repeat step therapy when that person is already being treated for a medical condition by a prescription drug, as specified. The bill, except as specified, would require a plan or insurer that provides essential health benefits to allow an enrollee or insured to access his or her prescription drug benefits at an in-network retail pharmacy, and would authorize a plan or insurer to charge an enrollee or insured a different cost sharing for obtaining a covered drug at a retail pharmacy, and would require that cost-sharing amount to count towards the plan’s or insurer’s annual out-of-pocket limitation, as specified.

This bill begin insert , commencing January 1, 2017, end insert would require a plan or insurer to maintain a pharmacy and therapeutics committee that is responsible for developing, maintaining, and overseeing any drug formulary list, as provided. The bill would require the committee to, among other things, evaluate and analyze treatment protocols and procedures related to the plan’s or insurer’s drug formulary at least annually.

begin delete

Existing

end delete

begin insert (3) end insert begin insert   end insert begin insert Existing end insert law requires the Department of Managed Health Care and the Department of Insurance to jointly develop a standard formulary template by January 1, 2017, and requires plans and insurers to use that template to display formularies, as specified. Existing law requires the standard formulary template to include specified information.

This bill would require the standard formulary template to include additional specified information, including which medications are covered, including both generic and brand name.

begin delete

Because

end delete

begin insert (4) end insert begin insert   end insert begin insert Because end insert 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:

SECTION 1.  

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

1342.71.  

(a) The Legislature hereby finds and declares all of
the following:

(1) The federal Patient Protection and Affordable Care Act, its
implementing regulations and guidance, and related state law
prohibit discrimination based on a person’s expected length of life,
present or predicted disability, degree of medical dependency,
quality of life, or other health conditions, including benefit designs
that have the effect of discouraging the enrollment of individuals
with significant health needs.

(2) The Legislature intends to build on existing state and federal
law to ensure that health coverage benefit designs do not have an
unreasonable discriminatory impact on chronically ill individuals,
and to ensure affordability of outpatient prescription drugs.

(3) Assignment of all or most prescription medications that treat
a specific medical condition to the highest cost tiers of a formulary
may effectively discourage enrollment by chronically ill
individuals, and may result in lower adherence to a prescription
drug treatment regimen.

(b) A nongrandfathered group health care service plan contract
that is offered, amended, or renewed on or after July 1, 2016, shall
comply with this section. A nongrandfathered individual health
care service plan contract that is offered, amended, or renewed on
or after January 1, 2017, shall comply with this section. The
cost-sharing limits established by this section apply only to
outpatient prescription drugs covered by the contract that constitute
essential health benefits, as defined in Section 1367.005. This
section does not apply to Medi-Cal managed care contracts.

(c) Consistent with federal law and guidance, and
notwithstanding Section 1342.7 and any regulations adopted
pursuant to that section, begin delete a health care service plan that provides
coverage for outpatient prescription drugs shall demonstrate that end delete
the formulary or formularies begin insert for outpatient prescription drugs end insert
maintained by the health care service plan begin delete do end delete begin insert shall end insert not discourage
the enrollment of individuals with health conditions and begin delete do end delete begin insert shall end insert
not reduce the generosity of the benefit for enrollees with a
particular condition.

(1) For combination begin insert antiretroviral end insert drug treatments that begin delete include
antiretrovirals, end delete begin insert are medically necessary for the treatment end insert begin insert of
AIDS/HIV, end insert a health care service plan contract shall cover a
single-tablet drug regimen that is as effective as a multitablet
regimen begin delete unless the health care service plan is able to demonstrate
to the director, end delete begin insert unless, end insert consistent with clinical guidelines and
peer-reviewed scientific and medical literature, begin delete that end delete the multitablet
regimen is clinically equally or more effective and more likely to
result in adherence to a drug regimen.

(2) No more than 50 percent of drugs approved by the United
States Food and Drug Administration (FDA) that are in the same
drug class may be assigned to the two highest cost tiers of a drug
formulary. All health care service plan formularies shall include
at least one drug in the lower cost tiers if all FDA-approved drugs
in the same drug class would otherwise qualify for the highest cost
tiers and at least three drugs in that class are available as
FDA-approved drugs. The drug or drugs assigned to the lower cost
tiers pursuant to this paragraph shall be the drug or drugs that were
most often prescribed during the immediately preceding plan year,
based on the health care service plan’s experience.

begin delete

(3) For coverage offered in the individual market, the health
care service plan shall demonstrate that the formulary or
formularies maintained for coverage in the individual market are
the same or comparable to those maintained for coverage in the
group market.

end delete

(d) (1) With respect to an individual or group health care service
plan contract subject to Section 1367.006, the copayment,
coinsurance, or any other form of cost sharing for a covered
outpatient prescription drug for an individual prescription for a
supply of up to 30 days shall not exceed two hundred fifty dollars
($250), except as provided in paragraphs (2) and (3).

(2) With respect to products with actuarial value at, or equivalent
to, the bronze level, cost sharing for a covered outpatient
prescription drug for an individual prescription for a supply of up
to 30 days shall not exceed five hundred dollars ($500).

(3) For a health care service plan contract that is a “high
deductible health plan” under the definition set forth in Section
223(c)(2) of Title 26 of the United States Code, paragraph (1) of
this subdivision shall apply only once an enrollee’s deductible has
been satisfied for the year.

(e) (1) If a health care service plan contract maintains a drug
formulary grouped into begin delete tiers, including end delete begin insert tiers that includes end insert a fourth
tier or specialty tier, a health care service plan contract shall use
the following definitions for each tier of the drug formulary:

(A) Tier one shall consist of most generic drugs and low cost
preferred brand drugs.

(B) Tier two shall consist of nonpreferred generic drugs,
preferred brand name drugs, and any other drugs recommended
by the health care service plan’s pharmacy and therapeutics
committee based on safety and efficacy and not solely based on
the cost of the prescription drug, and which generally have a
preferred and often less costly therapeutic alternative at a lower
tier.

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

(D) Tier four shall consist of drugs that are biologics, drugs that
the begin delete federal Food and Drug Administration end delete begin insert FDA end insert or the manufacturer
requires to be distributed through a specialty pharmacy, drugs that
require the enrollee to have special training or clinical monitoring
for self-administration, or drugs that cost the health plan more than
six hundred dollars ($600) net of rebates.

(2) This section does not require a health care service plan
contract to include a fourth tier. begin insert A health care service plan contract
may maintain a drug formulary with fewer than four tiers. end insert

(f) A health care service plan contract shall ensure that the
placement of prescription drugs on formulary tiers is based on
clinically indicated, reasonable medical management practices.

(g) This section shall not be construed to require a health care
service plan to impose cost sharing. This section shall not be
construed to require cost sharing for prescription drugs that state
or federal law otherwise requires to be provided without cost
sharing.

(h) This section does not require or authorize a health care
service plan that contracts with the State Department of Health
Care Services to provide services to Medi-Cal beneficiaries to
provide coverage for prescription drugs that are not required
pursuant to those programs or contracts, or to limit or exclude any
prescription drugs that are required by those programs or contracts.

begin insert

(i) This section shall remain in effect only until January 1, 2021,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2021, deletes or extends that date.

end insert

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Section 1342.71 is added to the end insert begin insert Health and Safety
Code end insert begin insert , to read: end insert

begin insert

begin insert 1342.71. end insert   

(a) The Legislature hereby finds and declares all of
the following:

(1) The federal Patient Protection and Affordable Care Act, its
implementing regulations and guidance, and related state law
prohibit discrimination based on a person’s expected length of
life, present or predicted disability, degree of medical dependency,
quality of life, or other health conditions, including benefit designs
that have the effect of discouraging the enrollment of individuals
with significant health needs.

(2) The Legislature intends to build on existing state and federal
law to ensure that health coverage benefit designs do not have an
unreasonable discriminatory impact on chronically ill individuals,
and to ensure affordability of outpatient prescription drugs.

(3) Assignment of all or most prescription medications that treat
a specific medical condition to the highest cost tiers of a formulary
may effectively discourage enrollment by chronically ill individuals,
and may result in lower adherence to a prescription drug treatment
regimen.

(b) A nongrandfathered group health care service plan contract
that is offered, amended, or renewed on or after July 1, 2016, shall
comply with this section. A nongrandfathered individual health
care service plan contract that is offered, amended, or renewed
on or after January 1, 2017, shall comply with this section. The
cost-sharing limits established by this section apply only to
outpatient prescription drugs covered by the contract that
constitute essential health benefits, as defined in Section 1367.005.
This section does not apply to Medi-Cal managed care contracts.

(c) Consistent with federal law and guidance, and
notwithstanding Section 1342.7 and any regulations adopted
pursuant to that section, the formulary or formularies for outpatient
prescription drugs maintained by the health care service plan shall
not discourage the enrollment of individuals with health conditions
and shall not reduce the generosity of the benefit for enrollees with
a particular condition.

(1) For combination antiretroviral drug treatments that are
medically necessary for the treatment of AIDS/HIV, a health care
service plan contract shall cover a single-tablet drug regimen that
is as effective as a multitablet regimen unless, consistent with
clinical guidelines and peer-reviewed scientific and medical
literature, the multitablet regimen is clinically equally or more
effective and more likely to result in adherence to a drug regimen.

(2) No more than 50 percent of drugs approved by the United
States Food and Drug Administration (FDA) that are in the same
drug class may be assigned to the two highest cost tiers of a drug
formulary. All health care service plan formularies shall include
at least one drug in the lower cost tiers if all FDA-approved drugs
in the same drug class would otherwise qualify for the highest cost
tiers and at least three drugs in that class are available as
FDA-approved drugs. The drug or drugs assigned to the lower
cost tiers pursuant to this paragraph shall be the drug or drugs
that were most often prescribed during the immediately preceding
plan year, based on the health care service plan’s experience.

(d) (1) If a health care service plan contract maintains a drug
formulary grouped into tiers that includes a fourth tier or specialty
tier, a health care service plan contract shall use the following
definitions for each tier of the drug formulary:

(A) Tier one shall consist of most generic drugs and low cost
preferred brand drugs.

(B) Tier two shall consist of nonpreferred generic drugs,
preferred brand name drugs, and any other drugs recommended
by the health care service plan’s pharmacy and therapeutics
committee based on safety and efficacy and not solely based on
the cost of the prescription drug, and which generally have a
preferred and often less costly therapeutic alternative at a lower
tier.

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

(D) Tier four shall consist of drugs that are biologics, drugs
that the FDA or the manufacturer requires to be distributed
through a specialty pharmacy, drugs that require the enrollee to
have special training or clinical monitoring for self-administration,
or drugs that cost the health plan more than six hundred dollars
($600) net of rebates.

(2) This section does not require a health care service plan
contract to include a fourth tier. A health care service plan contract
may maintain a drug formulary with fewer than four tiers.

(e) A health care service plan contract shall ensure that the
placement of prescription drugs on formulary tiers is based on
clinically indicated, reasonable medical management practices.

(f) This section shall not be construed to require a health care
service plan to impose cost sharing. This section shall not be
construed to require cost sharing for prescription drugs that state
or federal law otherwise requires to be provided without cost
sharing.

(g) This section does not require or authorize a health care
service plan that contracts with the State Department of Health
Care Services to provide services to Medi-Cal beneficiaries to
provide coverage for prescription drugs that are not required
pursuant to those programs or contracts, or to limit or exclude
any prescription drugs that are required by those programs or
contracts.

(h) This section shall become operative on January 1, 2021.

end insert

begin delete SEC. 2. end delete
begin insert SEC. 3. end insert   

Section 1367.24 of the Health and Safety Code is
amended to read:

1367.24.  

(a) (1) Every health care service plan that provides
prescription drug benefits shall maintain an expeditious process
by which prescribing providers may obtain authorization for a
medically necessary nonformulary prescription drug. On or before
July 1, 1999, every health care service plan that provides
prescription drug benefits shall file with the department a
description of its process for responding to authorization requests
for nonformulary drugs. Any changes to this process shall be filed
with the department pursuant to Section 1352. The plan shall
provide that the enrollee, the enrollee’s designee, or the enrollee’s
prescribing provider may seek an authorization for a nonformulary
prescription drug.

(2) Each plan shall respond to an authorization request within
72 hours following receipt of the authorization request for a
nonurgent authorization. If the plan grants the authorization request,
the plan shall provide coverage of the nonformulary drug for the
duration of the prescription, including refills.

(3) Each plan shall provide that an urgent authorization may be
obtained within 24 hours if an enrollee is suffering from a health
condition that may seriously jeopardize the enrollee’s life, health,
or ability to regain maximum function, or if an enrollee is
undergoing a current course of treatment using a nonformulary
prescription drug. A plan that grants an exception based on these
urgent circumstances shall provide coverage of the nonformulary
prescription drug for the duration of that urgent condition.

(4) Each plan shall provide a written description of its most
current process to its prescribing providers. For purposes of this
section, a prescribing provider shall include a provider authorized
to write a prescription, pursuant to subdivision (a) of Section 4040
of the Business and Professions Code, to treat a medical condition
of an enrollee.

(b) Any plan that disapproves a request made pursuant to
subdivision (a) by a prescribing provider to obtain authorization
for a nonformulary drug shall provide the reasons for the
disapproval in a notice provided to the enrollee. The notice shall
indicate that the enrollee may file a grievance with the plan if the
enrollee objects to the disapproval, including any alternative drug
or treatment offered by the plan. The notice shall comply with
subdivision (b) of Section 1368.02.

(c) The process described in subdivision (a) by which
prescribing providers may obtain authorization for medically
necessary nonformulary drugs shall not apply to a nonformulary
drug that has been prescribed for an enrollee in conformance with
the provisions of Section 1367.22.

(d) The process described in subdivision (a) by which enrollees
may obtain medically necessary nonformulary drugs, including
specified timelines for responding to prescribing provider
authorization requests, shall be described in evidence of coverage
and disclosure forms, as required by subdivision (a) of Section
1363, issued on or after July 1, 1999.

(e) Every health care service plan that provides prescription
drug benefits shall maintain, as part of its books and records under
Section 1381, all of the following information, which shall be
made available to the director upon request:

(1) The complete drug formulary or formularies of the plan, if
the plan maintains a formulary, including a list of the prescription
drugs on the formulary of the plan by major therapeutic category
with an indication of whether any drugs are preferred over other
drugs.

(2) Records developed by the pharmacy and therapeutic
committee of the plan, or by others responsible for developing,
modifying, and overseeing formularies, including medical groups,
individual practice associations, and contracting pharmaceutical
benefit management companies, used to guide the drugs prescribed
for the enrollees of the plan, that fully describe the reasoning
behind formulary decisions.

(3) Any plan arrangements with prescribing providers, medical
groups, individual practice associations, pharmacists, contracting
pharmaceutical benefit management companies, or other entities
that are associated with activities of the plan to encourage
formulary compliance or otherwise manage prescription drug
benefits.

(f) If a plan provides prescription drug benefits, the department
shall, as part of its periodic onsite medical survey of each plan
undertaken pursuant to Section 1380, review the performance of
the plan in providing those benefits, including, but not limited to,
a review of the procedures and information maintained pursuant
to this section, and describe the performance of the plan as part of
its report issued pursuant to Section 1380.

(g) The director shall not publicly disclose any information
reviewed pursuant to this section that is determined by the director
to be confidential pursuant to state law.

(h) For purposes of this section, “authorization” means approval
by the health care service plan to provide payment for the
prescription drug.

(i) (1) Nonformulary prescription drugs shall include any drug
for which an enrollee’s copayment or out-of-pocket costs are
different than the copayment for a formulary prescription drug,
except as otherwise provided by law or regulation or in cases in
which the drug has been excluded in the plan contract pursuant to
Section 1342.7.

(2) If a nonformulary drug is authorized consistent with this
section, the cost sharing shall be the same as for a formulary drug
consistent with begin insert , until January 1, 2021, end insert subdivision begin delete (e) end delete begin insert (d) end insert of
Section 1342.71.

(j) Nothing in this section shall be construed to affect an
enrollee’s or subscriber’s eligibility to submit a grievance to the
department for review under Section 1368 or to apply to the
department for an independent medical review under Section
1370.4 or Article 5.55 (commencing with Section 1374.30) of this
chapter.

(k) Nothing in this section shall be construed to restrict or impair
the application of any other provision of this chapter, including,
but not limited to, Section 1367, which includes among its
requirements that a health care service plan furnish services in a
manner providing continuity of care and demonstrate that medical
decisions are rendered by qualified medical providers unhindered
by fiscal and administrative management.

begin delete SEC. 3. end delete
begin insert SEC. 4. end insert   

Section 1367.41 is added to the Health and Safety
Code, immediately following Section 1367.4, to read:

1367.41.  

(a)  begin delete A end delete begin insert Commencing January 1, 2017, a end insert plan shall
maintain a pharmacy and therapeutics committee that shall be
responsible for developing, maintaining, and overseeing any drug
formulary list. If the plan delegates responsibility for the formulary
to any entity, the obligation of the plan to comply with this chapter
shall not be waived.

(b) The pharmacy and therapeutics committee board membership
shall conform with both of the following:

(1) Represent a sufficient number of clinical specialties to
adequately meet the needs of enrollees.

(2) Consist of a majority of individuals who are practicing
physicians, practicing pharmacists, and other practicing health
professionals who are licensed to prescribe drugs.

(c) Members of the board shall abstain from voting on any issue
in which the member has a conflict of interest with respect to the
issuer or a pharmaceutical manufacturer.

(d) At least 20 percent of the board membership shall not have
a conflict of interest with respect to the issuer or any
pharmaceutical manufacturer.

(e) The pharmacy and therapeutics committee shall meet at least
quarterly and shall maintain written documentation of the rationale
for its decisions regarding the development of, or revisions to, the
formulary drug list.

(f) The pharmacy and therapeutics committee shall do all of the
following:

(1) Develop and document procedures to ensure appropriate
drug review and inclusion.

(2) Base clinical decisions on the strength of the scientific
evidence and standards of practice, including assessing
peer-reviewed medical literature, pharmacoeconomic studies,
outcomes research data, and other related information.

(3) Consider the therapeutic advantages of drugs in terms of
safety and efficacy when selecting formulary drugs.

(4) Review policies that guide exceptions and other utilization
management processes, including drug utilization review, quantity
limits, and therapeutic interchange.

(5) Evaluate and analyze treatment protocols and procedures
related to the plan’s formulary at least annually.

(6) Review and approve all clinical prior authorization criteria,
step therapy protocols, and quantity limit restrictions applied to
each covered drug.

(7) Review new begin delete federal end delete begin insert United States end insert Food and Drug
Administration-approved drugs and new uses for existing drugs.

(8) Ensure that the plan’s formulary drug list or lists cover a
range of drugs across a broad distribution of therapeutic categories
and classes and recommended drug treatment regimens that treat
all disease states and do not discourage enrollment by any group
of enrollees.

(9) Ensure that the plan’s formulary drug list or lists provide
appropriate access to drugs that are included in broadly accepted
treatment guidelines and that are indicative of general best practices
at the time.

begin delete SEC. 4. end delete
begin insert SEC. 5. end insert   

Section 1367.42 is added to the Health and Safety
Code, to read:

1367.42.  

(a) A plan that provides essential health benefits shall
allow an enrollee to access prescription drug benefits at an
in-network retail pharmacy unless the prescription drug is subject
to restricted distribution by the begin delete federal end delete begin insert United States end insert Food and
Drug Administration or requires special handling, provider
coordination, or patient education that cannot be provided by a
retail pharmacy.

(b) A nongrandfathered individual or small group health plan
contract may charge an enrollee a different cost sharing for
obtaining a covered drug at a retail pharmacy, but all cost sharing
shall count toward the plan’s annual limitation on cost sharing
consistent with Section 1367.006.

begin delete SEC. 5. end delete
begin insert SEC. 6. end insert   

Section 1367.205 of the Health and Safety Code is
amended to read:

1367.205.  

(a) In addition to the list required to be provided
under Section 1367.20, a health care service plan that provides
prescription drug benefits and maintains one or more drug
formularies shall do all of the following:

(1) Post the formulary or formularies for each product offered
by the plan on the plan’s Internet Web site in a manner that is
accessible and searchable by potential enrollees, enrollees,
providers, the general public, the department, and federal agencies
as required by federal law or regulations.

(2) Update the formularies posted pursuant to paragraph (1)
with any change to those formularies on a monthly basis.

(3) No later than six months after the date that a standard
formulary template is developed under subdivision (b), use that
template to display the formulary or formularies for each product
offered by the plan.

(b) (1) By January 1, 2017, the department and the Department
of Insurance shall jointly, and with input from interested parties
from at least one public meeting, develop a standard formulary
template for purposes of paragraph (3) of subdivision (a). In
developing the template, the department and Department of
Insurance shall take into consideration existing requirements for
reporting of formulary information established by the federal
Centers for Medicare and Medicaid Services. To the extent feasible,
in developing the template, the department and the Department of
Insurance shall evaluate a way to include on the template, in
addition to the information required to be included under paragraph
(2), cost-sharing information for drugs subject to coinsurance.

(2) The standard formulary template shall include the
notification described in subdivision (c) of Section 1363.01, and
as applied to a particular formulary for a product offered by a plan,
shall do all of the following:

(A) Include information on cost sharing tiers and utilization
controls, including prior authorization or step therapy requirements,
for each drug covered by the product.

(B) Indicate any drugs on the formulary that are preferred over
other drugs on the formulary.

(C) Include information to educate enrollees about the
differences between drugs administered or provided under a health
care service plan’s medical benefit and drugs prescribed under a
health care service plan’s prescription drug benefit and about how
to obtain coverage information regarding drugs that are not covered
under the plan’s prescription drug benefit.

(D) Include information to educate enrollees that health care
service plans that provide prescription drug benefits are required
to have a method for enrollees to obtain prescription drugs not
listed in the health plan drug formulary if the drugs are deemed
medically necessary by a clinician pursuant to Section 1367.24.

(E) Include information on which medications are covered,
including both generic and brand name.

(F) Include information on what tier of the plan’s drug formulary
each medication is in.

(c) For purposes of this section, “formulary” means the complete
list of drugs preferred for use and eligible for coverage under a
health care service plan product and includes the drugs covered
under the pharmacy benefit of the product.

begin delete SEC. 6. end delete
begin insert SEC. 7. end insert   

Section 10123.192 of the Insurance Code is amended
to read:

10123.192.  

(a) A health insurer that provides prescription drug
benefits and maintains one or more drug formularies shall do all
of the following:

(1) Post the formulary or formularies for each product offered
by the insurer on the insurer’s Internet Web site in a manner that
is accessible and searchable by potential insureds, insureds,
providers, the general public, the department, and federal agencies
as required by federal law or regulations.

(2) Update the formularies posted pursuant to paragraph (1)
with any change to those formularies on a monthly basis.

(3) No later than six months after the date that a standard
formulary template is developed under subdivision (b), use that
template to display the formulary or formularies for each product
offered by the insurer.

(b) (1) By January 1, 2017, the department and the Department
of Managed Health Care shall jointly, and with input from
interested parties from at least one public meeting, develop a
standard formulary template for purposes of paragraph (3) of
subdivision (a). In developing the template, the department and
Department of Managed Health Care shall take into consideration
existing requirements for reporting of formulary information
established by the federal Centers for Medicare and Medicaid
Services. To the extent feasible, in developing the template, the
department and the Department of Managed Health Care shall
evaluate a way to include on the template, in addition to the
information required to be included under paragraph (2),
cost-sharing information for drugs subject to coinsurance.

(2) The standard formulary template shall include a notification
that the presence of a drug on the insurer’s formulary does not
guarantee that an insured will be prescribed that drug by his or her
prescribing provider for a particular medical condition. As applied
to a particular formulary for a product offered by an insurer, the
standard formulary template shall do all of the following:

(A) Include information on cost sharing tiers and utilization
controls, including prior authorization or step therapy requirements,
for each drug covered by the product.

(B) Indicate any drugs on the formulary that are preferred over
other drugs on the formulary.

(C) Include information to educate insureds about the differences
between drugs administered or provided under a health insurer’s
medical benefit and drugs prescribed under a health insurer’s
prescription drug benefit and about how to obtain coverage
information about drugs that are not covered under the health
insurer’s prescription drug benefit.

(D) Include information to educate insureds that health insurers
that provide prescription drug benefits are required to have a
method for insureds to obtain prescription drugs not listed in the
health insurer’s drug formulary if the drugs are deemed to be
medically necessary by a clinician pursuant to Section 1367.24 of
the Health and Safety Code, as required by clause (iv) of
subparagraph (A) of paragraph (2) of subdivision (a) of Section
10112.27.

(E) Include information on which medications are covered,
including both generic and brand name.

(F) Include information on what tier of the health insurer’s drug
formulary each medication is in.

(c) The commissioner may adopt regulations as may be
necessary to carry out the purposes of this section. In adopting
regulations, the commissioner shall comply with Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title
2 of the Government Code.

(d) For purposes of this section, “formulary” means the complete
list of drugs preferred for use and eligible for coverage under a
health insurance product and includes the drugs covered under the
pharmacy benefit of the product.

begin delete SEC. 7. end delete
begin insert SEC. 8. end insert   

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

10123.193.  

(a) The Legislature hereby finds and declares all
of the following:

(1) The federal Patient Protection and Affordable Care Act, its
implementing regulations and guidance, and related state law
prohibit discrimination based on a person’s expected length of life,
present or predicted disability, degree of medical dependency,
quality of life, or other health conditions, including benefit designs
that have the effect of discouraging the enrollment of individuals
with significant health needs.

(2) The Legislature intends to build on existing state and federal
law to ensure that health coverage benefit designs do not have an
unreasonable discriminatory impact on chronically ill individuals,
and to ensure affordability of outpatient prescription drugs.

(3) Assignment of all or most prescription medications that treat
a specific medical condition to the highest cost tiers of a formulary
may effectively discourage enrollment by chronically ill
individuals, and may result in lower adherence to a prescription
drug treatment regimen.

(b) A nongrandfathered group policy of health insurance that
is offered, amended, or renewed on or after July 1, 2016, shall
comply with this section. A nongrandfathered individual policy
of health insurance that is offered, amended, or renewed on or after
January 1, 2017, shall comply with this section. The cost-sharing
limits established by this section apply only to outpatient
prescription drugs covered by the policy that constitute essential
health benefits, as defined by Section 10112.27.

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

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

(d) Copayments, coinsurance, and other cost sharing for
outpatient prescription drugs shall be reasonable so as to allow
access to medically necessary outpatient prescription drugs.

(e) Consistent with federal law and guidance, begin delete a policy of health
insurance that provides coverage for outpatient prescription drugs
shall demonstrate that end delete the formulary or formularies begin insert for outpatient
prescription drugs end insert maintained by the health insurer begin delete do end delete begin insert shall end insert not
discourage the enrollment of individuals with health conditions
and begin delete do end delete begin insert shall end insert not reduce the generosity of the benefit for insureds
with a particular condition.

(1) For combination begin insert antiretroviral end insert drug treatments that begin delete include
antiretrovirals, end delete begin insert are medically necessary for the treatment of
AIDS/HIV, end insert a policy of health insurance shall cover a single-tablet
drug regimen that is as effective as a multitablet regimen begin delete unless
the health insurer is able to demonstrate to the commissioner, end delete
begin insert unless, end insert consistent with clinical guidelines and peer-reviewed
scientific and medical literature, begin delete that end delete the multitablet regimen is
clinically equally or more effective and more likely to result in
adherence to a drug regimen.

(2) No more than 50 percent of drugs approved by the United
States Food and Drug Administration (FDA) that are in the same
drug class may be assigned to the two highest cost tiers of a drug
formulary. All health insurer formularies shall include at least one
drug in the lower cost tiers if all FDA-approved drugs in the same
drug class would otherwise qualify for the highest cost tiers and
at least three drugs in that class are available as FDA-approved
drugs. The drug or drugs assigned to the lower cost tiers pursuant
to this paragraph shall be the drug or drugs that were most often
prescribed during the immediately preceding plan year, based on
the health insurer’s experience.

begin delete

(3) For coverage offered in the individual market, the health
insurer shall demonstrate that the formulary or formularies
maintained for coverage in the individual market are the same or
comparable to those maintained for coverage in the group market.

(4)

end delete

begin insert ( end insert begin insert 3) end insert  A health insurer shall demonstrate to the commissioner that
any limitation or utilization management is consistent with and
based on clinical guidelines and peer-reviewed scientific and
medical literature.

(f) (1) With respect to an individual or group policy of health
insurance subject to Section 10112.28, the copayment, coinsurance,
or any other form of cost sharing for a covered outpatient
prescription drug for an individual prescription for a supply of up
to 30 days shall not exceed two hundred fifty dollars ($250), except
as provided in paragraphs (2) and (3).

(2) With respect to products with actuarial value at or equivalent
to the bronze level, cost sharing for a covered outpatient
prescription drug for an individual prescription for a supply of up
to 30 days shall not exceed five hundred dollars ($500).

(3) For a policy of health insurance that is a “high deductible
health plan” under the definition set forth in Section 223(c)(2) of
Title 26 of the United States Code, paragraph (1) of this subdivision
shall apply only once an insured’s deductible has been satisfied
for the year.

(g) (1) If a policy of health insurance maintains a drug
formulary grouped into begin delete tiers, including end delete begin insert tiers that includes end insert a fourth
tier or specialty tier, a policy of health insurance shall use the
following definitions for each tier of the drug formulary:

(A) Tier one shall consist of most generic drugs and low-cost
preferred brand drugs.

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

(C) Tier three shall consist of nonpreferred brand name drugs
that are recommended by the health insurer’s pharmacy and
therapeutics committee based on safety and efficacy and not solely
based on the cost of the prescription drug, and which generally
have a preferred and often less costly therapeutic alternative at a
lower tier.

(D) Tier four shall consist of drugs that are biologics, drugs that
the begin delete federal Food and Drug Administration end delete begin insert FDA end insert or the manufacturer
requires to be distributed through a specialty pharmacy, drugs that
require the insured to have special training or clinical monitoring
for self-administration, or drugs that cost the health insurer more
than six hundred dollars ($600) net of rebates.

(2) This section does not require a policy of health insurance to
include a fourth tier. begin insert A policy of health insurance may maintain a
drug formulary with fewer than four tiers. end insert

(h) This section shall not be construed to require a health insurer
to impose cost sharing. This section shall not be construed to
require cost sharing for prescription drugs that state or federal law
otherwise requires to be provided without cost sharing.

(i) A policy of health insurance shall ensure that the placement
of prescription drugs on formulary tiers is based on clinically
indicated, reasonable medical management practices.

begin insert

(j) This section shall remain in effect only until January 1, 2021,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2021, deletes or extends that date.

end insert

begin insert

begin insert SEC. 9. end insert   

end insert

begin insert Section 10123.193 is added to the end insert begin insert Insurance Code end insert begin insert , to
read: end insert

begin insert

begin insert 10123.193. end insert   

(a) The Legislature hereby finds and declares all
of the following:

(1) The federal Patient Protection and Affordable Care Act, its
implementing regulations and guidance, and related state law
prohibit discrimination based on a person’s expected length of
life, present or predicted disability, degree of medical dependency,
quality of life, or other health conditions, including benefit designs
that have the effect of discouraging the enrollment of individuals
with significant health needs.

(2) The Legislature intends to build on existing state and federal
law to ensure that health coverage benefit designs do not have an
unreasonable discriminatory impact on chronically ill individuals,
and to ensure affordability of outpatient prescription drugs.

(3) Assignment of all or most prescription medications that treat
a specific medical condition to the highest cost tiers of a formulary
may effectively discourage enrollment by chronically ill individuals,
and may result in lower adherence to a prescription drug treatment
regimen.

(b) A nongrandfathered group policy of health insurance that
is offered, amended, or renewed on or after July 1, 2016, shall
comply with this section. A nongrandfathered individual policy of
health insurance that is offered, amended, or renewed on or after
January 1, 2017, shall comply with this section. The cost-sharing
limits established by this section apply only to outpatient
prescription drugs covered by the policy that constitute essential
health benefits, as defined by Section 10112.27.

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

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

(d) Copayments, coinsurance, and other cost sharing for
outpatient prescription drugs shall be reasonable so as to allow
access to medically necessary outpatient prescription drugs.

(e) Consistent with federal law and guidance, the formulary or
formularies for outpatient prescription drugs maintained by the
health insurer shall not discourage the enrollment of individuals
with health conditions and shall not reduce the generosity of the
benefit for insureds with a particular condition.

(1) For combination antiretroviral drug treatments that are
medically necessary for the treatment of AIDS/HIV, a policy of
health insurance shall cover a single-tablet drug regimen that is
as effective as a multitablet regimen unless, consistent with clinical
guidelines and peer-reviewed scientific and medical literature, the
multitablet regimen is clinically equally or more effective and more
likely to result in adherence to a drug regimen.

(2) No more than 50 percent of drugs approved by the United
States Food and Drug Administration (FDA) that are in the same
drug class may be assigned to the two highest cost tiers of a drug
formulary. All health insurer formularies shall include at least
one drug in the lower cost tiers if all FDA-approved drugs in the
same drug class would otherwise qualify for the highest cost tiers
and at least three drugs in that class are available as
FDA-approved drugs. The drug or drugs assigned to the lower
cost tiers pursuant to this paragraph shall be the drug or drugs
that were most often prescribed during the immediately preceding
plan year, based on the health insurer’s experience.

(3) A health insurer shall demonstrate to the commissioner that
any limitation or utilization management is consistent with and
based on clinical guidelines and peer-reviewed scientific and
medical literature.

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

(A) Tier one shall consist of most generic drugs and low-cost
preferred brand drugs.

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

(C) Tier three shall consist of nonpreferred brand name drugs
that are recommended by the health insurer’s pharmacy and
therapeutics committee based on safety and efficacy and not solely
based on the cost of the prescription drug, and which generally
have a preferred and often less costly therapeutic alternative at a
lower tier.

(D) Tier four shall consist of drugs that are biologics, drugs
that the FDA or the manufacturer requires to be distributed
through a specialty pharmacy, drugs that require the insured to
have special training or clinical monitoring for self-administration,
or drugs that cost the health insurer more than six hundred dollars
($600) net of rebates.

(2) This section does not require a policy of health insurance
to include a fourth tier. A policy of health insurance may maintain
a drug formulary with fewer than four tiers.

(g) This section shall not be construed to require a health
insurer to impose cost sharing. This section shall not be construed
to require cost sharing for prescription drugs that state or federal
law otherwise requires to be provided without cost sharing.

(h) A policy of health insurance shall ensure that the placement
of prescription drugs on formulary tiers is based on clinically
indicated, reasonable medical management practices.

(i) This section shall become operative on January 1, 2021.

end insert

begin delete SEC. 8. end delete
begin insert SEC. 10. end insert   

Section 10123.201 is added to the Insurance Code,
to read:

10123.201.  

(a) (1) Every health insurer that provides
prescription drug benefits shall maintain an expeditious process
by which prescribing providers may obtain authorization for a
medically necessary nonformulary prescription drug. On or before
July 1, 2016, every insurer that provides prescription drug benefits
shall file with the commissioner a description of its process for
responding to authorization requests for nonformulary drugs. Any
changes to this process shall be filed with the commissioner. The
insurer shall provide that the insured, the insured’s designee, or
the insured’s prescribing provider may seek an authorization for
a nonformulary prescription drug.

(2) Each insurer shall respond to an authorization request within
72 hours following receipt of the authorization request for a
nonurgent authorization. If the insurer grants the authorization
request, the insurer shall provide coverage of the nonformulary
drug for the duration of the prescription, including refills.

(3) Each insurer shall provide that an urgent authorization may
be obtained within 24 hours if an insured is suffering from a health
condition that may seriously jeopardize the insured’s life, health,
or ability to regain maximum function, or if an insured is
undergoing a current course of treatment using a nonformulary
prescription drug. An insurer that grants an exception based on
these urgent circumstances shall provide coverage of the
nonformulary prescription drug for the duration of that urgent
condition.

(4) If an insurer imposes step therapy, the insurer shall provide
an expeditious process to authorize an exception to step therapy
when medically necessary and to conform effectively and
efficiently with continuity of care requirements of this part and
federal law, and any regulations issued thereunder. The process
to authorize an exception to step therapy shall be consistent with
this section, including the timelines provided in this section.

(5) Each insurer shall provide a written description of its most
current process to its prescribing providers. For purposes of this
section, a prescribing provider shall include a provider authorized
to write a prescription, pursuant to subdivision (a) of Section 4040
of the Business and Professions Code, to treat a medical condition
of an insured.

(b) Any insurer that disapproves a request made pursuant to
subdivision (a) by a prescribing provider to obtain authorization
for a nonformulary drug shall provide the reasons for the
disapproval in a notice provided to the insured. The notice shall
indicate that the insured may file a grievance with the insurer if
the insured objects to the disapproval, including any alternative
drug or treatment offered by the insurer. The notice shall comply
with Section 10133.661.

(c) (1)  begin delete An end delete begin insert Commencing January 1, 2017, an end insert insurer shall
maintain a pharmacy and therapeutics committee that shall be
responsible for developing, maintaining, and overseeing any drug
formulary list. If the insurer delegates responsibility for the
formulary to any entity, the obligation of the insurer to comply
with this part shall not be waived.

(2) The pharmacy and therapeutics committee board membership
shall conform with both of the following:

(A) Represent a sufficient number of clinical specialties to
adequately meet the needs of insureds.

(B) Consist of a majority of individuals who are practicing
physicians, practicing pharmacists, and other practicing health
professionals who are licensed to prescribe drugs.

(3) Members of the board shall abstain from voting on any issue
in which the member has a conflict of interest with respect to the
issuer or a pharmaceutical manufacturer.

(4) At least 20 percent of the board membership shall not have
a conflict of interest with respect to the issuer or any
pharmaceutical manufacturer.

(5) The pharmacy and therapeutics committee shall meet at least
quarterly and shall maintain written documentation of the rationale
for its decisions regarding the development of, or revisions to, the
formulary drug list.

(6) The pharmacy and therapeutics committee shall do all of
the following:

(A) Develop and document procedures to ensure appropriate
drug review and inclusion.

(B) Base clinical decisions on the strength of the scientific
evidence and standards of practice, including assessing
peer-reviewed medical literature, pharmacoeconomic studies,
outcomes research data, and other related information.

(C) Consider the therapeutic advantages of drugs in terms of
safety and efficacy when selecting formulary drugs.

(D) Review policies that guide exceptions and other utilization
management processes, including drug utilization review, quantity
limits, and therapeutic interchange.

(E) Evaluate and analyze treatment protocols and procedures
related to the insurer’s formulary at least annually.

(F) Review and approve all clinical prior authorization criteria,
step therapy protocols, and quantity limit restrictions applied to
each covered drug.

(G) Review new begin delete federal end delete begin insert United States end insert Food and Drug
Administration-approved drugs and new uses for existing drugs.

(H) Ensure the insurer’s formulary drug list or lists cover a range
of drugs across a broad distribution of therapeutic categories and
classes and recommended drug treatment regimens that treat all
disease states and does not discourage enrollment by any group
of insureds.

(I) Ensure the insurer’s formulary drug list or lists provide
appropriate access to drugs that are included in broadly accepted
treatment guidelines and that are indicative of general best practices
at the time.

(d) (1) A health insurer may impose prior authorization
requirements on prescription drug benefits, consistent with the
requirements of this part.

(2) (A) When there is more than one drug that is appropriate
for the treatment of a medical condition, a health insurer may
require step therapy. A health insurer that requires step therapy
shall comply with the requirements specified in paragraph (4) of
subdivision (a).

(B) In circumstances where an insured is changing policies, the
new policy shall not require the insureds to repeat step therapy
when that insured is already being treated for a medical condition
by a prescription drug provided that the drug is appropriately
prescribed and is considered safe and effective for the insured’s
condition. Nothing in this section shall preclude the new policy
from imposing a prior authorization requirement pursuant to
subdivision (a) for the continued coverage of a prescription drug
prescribed pursuant to step therapy imposed by the former policy,
or preclude the prescribing provider from prescribing another drug
covered by the new policy that is medically appropriate for the
insured.

(3) An insurer shall provide coverage for the medically
necessary dosage and quantity of the drug prescribed for the
treatment of a medical condition consistent with professionally
recognized standards of practice.

(4) An insurer that provides essential health benefits shall allow
an insured to access prescription drug benefits at an in-network
retail pharmacy unless the prescription drug is subject to restricted
distribution by the begin delete federal end delete begin insert United States end insert Food and Drug
Administration or requires special handling, provider coordination,
or patient education that cannot be provided by a retail pharmacy.
An insurer that provides essential health benefits may charge an
insured a different cost sharing for obtaining a covered drug at a
retail pharmacy, but all cost sharing shall count toward the policy’s
annual limitation on cost sharing consistent with Section 10112.28.

(e) The process described in subdivision (a) by which insureds
may obtain medically necessary nonformulary drugs, including
specified timelines for responding to prescribing provider
authorization requests, shall be described in evidence of coverage
and disclosure forms, as required by Section 10603, issued on or
after January 1, 2016.

(f) Every health insurer that provides prescription drug benefits
shall maintain all of the following information, which shall be
made available to the commissioner upon request:

(1) The complete drug formulary or formularies of the insurer,
if the insurer maintains a formulary, including a list of the
prescription drugs on the formulary of the insurer by major
therapeutic category with an indication of whether any drugs are
preferred over other drugs.

(2) Records developed by the pharmacy and therapeutic
committee of the insurer, or by others responsible for developing,
modifying, and overseeing formularies, including medical groups,
individual practice associations, and contracting pharmaceutical
benefit management companies, used to guide the drugs prescribed
for the insureds of the insurer, that fully describe the reasoning
behind formulary decisions.

(3) Any insurer arrangements with prescribing providers,
medical groups, individual practice associations, pharmacists,
contracting pharmaceutical benefit management companies, or
other entities that are associated with activities of the insurer to
encourage formulary compliance or otherwise manage prescription
drug benefits.

(g) If an insurer provides prescription drug benefits, the
commissioner shall, as part of its market conduct examination,
review the performance of the insurer in providing those benefits,
including, but not limited to, a review of the procedures and
information maintained pursuant to this section, and describe the
performance of the insurer as part of its report issued as part of its
market conduct examination.

(h) The commissioner shall not publicly disclose any information
reviewed pursuant to this section that is determined by the
commissioner to be confidential pursuant to state law.

(i) For purposes of this section, the following definitions shall
apply:

(1) “Authorization” means approval by the health insurer to
provide payment for the prescription drug.

(2) “Step therapy” means a type of protocol that specifies the
sequence in which different prescription drugs for a given medical
condition and medically appropriate for a particular patient are to
be prescribed.

(j) (1) Nonformulary prescription drugs shall include any drug
for which an insured’s copayment or out-of-pocket costs are
different than the copayment for a formulary prescription drug,
except as otherwise provided by law or regulation.

(2) If a nonformulary drug is authorized consistent with this
section, the cost sharing shall be the same as for a formulary drug
consistent with begin insert , until January 1, 2021, end insert subdivision begin delete (e) end delete begin insert (f) end insert of Section
10123.193.

(k) Nothing in this section shall be construed to affect an
insured’s or policyholder’s eligibility to submit a complaint to the
department for review or to apply to the department for an
independent medical review.

(l) Nothing in this section shall be construed to restrict or impair
the application of any other provision of this part.

begin delete SEC. 9. end delete
begin insert SEC. 11. end insert   

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