Amended in Senate September 1, 2015

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 begin delete Sections 1367.24 and end delete begin insert Section end insert 1367.205 of, to add Sections 1367.41 and 1367.42 to, and to add and repeal Section 1342.71 begin delete to, end delete begin insert of, end insert the Health and Safety Code, and to amend Section 10123.192 of, to add Section 10123.201 to, and to add and repeal Section 10123.193 begin delete to, end delete begin insert of, 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.

(1) 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 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 the generosity of the benefit for enrollees or insureds with a particular condition. The bill, until January 1, begin delete 2021, end delete begin insert 2020, end insert would provide that the copayment, coinsurance, or any other form of cost sharing for a covered outpatient prescription drug for an individual prescription shall not exceed $250 for a supply of up to 30 days, except as begin delete specified. end delete begin insert specified, and would prohibit, for a nongrandfathered individual or small group plan contract or policy, the deductible for outpatient drugs from exceeding a specified amount. 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 antiretroviral drug treatments that are medically necessary for the treatment of AIDS/HIV, as specified. begin delete 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. end delete The begin delete bill end delete begin insert bill, until January 1, 2020, end insert 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 begin insert health care service plan contract or end insert health begin delete insurer end delete begin insert insurance policy end insert that provides coverage for outpatient prescription drugs to provide coverage for medically necessary prescription drugs, including begin delete those for which there is not a therapeutic equivalent, end delete begin insert nonformulary drugs determined to be medically end insert begin insert necessary, end insert and, for an insurer, would require copayments, coinsurance, and other cost sharing for outpatient prescription drugs to be reasonable.

This bill would make these provisions applicable to nongrandfathered begin delete 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 end delete health care service plan contracts or health insurance policies that are offered, renewed, or amended on or after January 1, 2017.

(2) Existing law requires every health care service plan that provides prescription drug benefits to maintain begin delete an expeditious process by which prescribing providers may obtain authorization for a medically necessary nonformulary prescription drug, and requires these plans to maintain end delete 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. begin delete The bill would require a plan or insurer to respond to authorization requests for nonformulary prescription drugs within specified timeframes. end delete 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 insured to repeat step therapy when that person is already being treated for a medical condition by a prescription drug, as specified. begin delete The end delete begin insert For plan years commencing on or after January 1, 2017, the end insert 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, commencing January 1, 2017, 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.

(3) Existing 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.

(4) 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:

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 begin delete 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 end delete 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. begin delete This
section does not apply to Medi-Cal managed care contracts. end delete

begin insert

(c) (1) A health care service plan contract that provides
coverage for outpatient prescription drugs shall cover medically
necessary prescription drugs, including nonformulary drugs
determined to be medically necessary consistent with this chapter.

end insert begin insert

(2) If a nonformulary drug is authorized consistent with this
chapter, the cost sharing shall be the same as for a formulary drug.

end insert begin delete

(c) Consistent

end delete

begin insert (d) end insert begin insert   end insert begin insert (1) end insert begin insert   end insert begin insert Consistent end insert with federal law and begin delete guidance, and
notwithstanding Section 1342.7 and any regulations adopted
pursuant to that section, end delete begin insert guidance, end insert 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 begin delete condition. end delete begin insert condition in a
manner that is not based on a clinical indication or reasonable
medical management practices. Section 1342.7 and any regulations
adopted pursuant to that section shall be interpreted in a manner
that is consistent with this section. end insert

begin delete

(1)

end delete

begin insert ( end insert begin insert 2) end insert  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.

begin delete

(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)

end delete

begin insert ( end insert begin insert e) end insert  (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 begin delete ($500). end delete begin insert ($500),
except as provided in paragraph (3). end insert

(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, begin delete paragraph end delete
begin insert paragraphs end insert (1) begin insert and (2) end insert of this subdivision shall apply only once
an enrollee’s deductible has been satisfied for the year.

begin insert

(4) For a nongrandfathered individual or small group health
care service plan contract, the deductible for outpatient drugs, if
any, shall not exceed twice the amount specified in paragraph (1)
or (2), respectively.

end insert begin insert

(5) For purposes of paragraphs (1) and (2), “any other form
of cost sharing” shall not include deductible.

end insert begin delete

(e)

end delete

begin insert ( end insert begin insert f) end insert  (1) If a health care service plan contract maintains a drug
formulary grouped into tiers that includes a fourth begin delete tier or specialty end delete
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 begin delete low cost end delete
begin insert low-cost end insert preferred brand begin insert name end insert 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 begin delete 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. end delete begin insert safety, efficacy, and cost. end insert

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

(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 begin delete rebates. end delete begin insert rebates for a one-month supply. end insert

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

begin insert

(3) This section shall not be construed to limit a health care
service plan from placing any drug in a lower tier.

end insert begin delete

(f)

end delete

begin insert ( end insert begin insert g) end insert  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.

begin delete

(g)

end delete

begin insert ( end insert begin insert h) end insert  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.

begin delete

(h)

end delete

begin insert ( end insert begin insert i) end insert  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

(j) In the provision of outpatient prescription drug coverage, a
health care service plan may utilize formulary, prior authorization,
step therapy, or other reasonable medical management practices
consistent with this chapter.

end insert begin insert

(k) This section shall not apply to a health care service plan
that contracts with the State Department of Health Care Services.

end insert begin delete

(i)

end delete

begin insert ( end insert begin insert l) end insert  This section shall remain in effect only until January 1, begin delete 2021, end delete
begin insert 2020, end insert and as of that date is repealed, unless a later enacted statute,
that is enacted before January 1, begin delete 2021, end delete begin insert 2020, end insert deletes or extends
that date.

SEC. 2.  

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 begin delete 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 end delete health
care service plan contract that is offered, amended, or renewed on
or after January 1, 2017, shall comply with this section. begin delete 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. end delete

begin insert

(c) (1) A health care service plan contract that provides
coverage for outpatient prescription drugs shall cover medically
necessary prescription drugs, including nonformulary drugs
determined to be medically necessary consistent with this chapter.

end insert begin insert

(2) If a nonformulary drug is authorized consistent with this
chapter, the cost sharing shall be the same as for a formulary drug.

end insert begin delete

(c)

end delete

begin insert ( end insert begin insert d) end insert   begin insert (1) end insert begin insert   end insert Consistent with federal law and begin delete guidance, and
notwithstanding Section 1342.7 and any regulations adopted
pursuant to that section, end delete begin insert guidance, end insert 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 begin delete condition. end delete begin insert end insert begin insert condition in a
manner that is not based on a clinical indication or reasonable
medical management practices. Section 1342.7 and any regulations
adopted pursuant to that section shall be interpreted in a manner
that is consistent with this section. end insert

begin delete

(1)

end delete

begin insert ( end insert begin insert 2) end insert  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.

begin delete

(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

end delete

begin insert (e) end insert begin insert   end insert begin insert (1) end insert begin insert   end insert begin insert A end insert health care service plan contract may maintain a drug
formulary with fewer than four tiers.

begin insert

(2) This section shall not be construed to limit a health care
service plan from placing any drug in a lower tier.

end insert begin delete

(e)

end delete

begin insert ( end insert begin insert f) end insert  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.

begin delete

(f)

end delete

begin insert ( end insert begin insert g) end insert  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.

begin delete

(g)

end delete

begin insert ( end insert begin insert h) end insert  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) In the provision of outpatient prescription drug coverage, a
health care service plan may utilize formulary, prior authorization,
step therapy, or other reasonable medical management practices
consistent with this chapter.

end insert begin insert

(j) This section shall not apply to a health care service plan that
contracts with the State Department of Health Care Services.

end insert begin delete

(h)

end delete

begin insert ( end insert begin insert k) end insert  This section shall become operative on January 1, begin delete 2021. end delete
begin insert 2020. end insert

begin delete

SEC. 3.  

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, until January 1, 2021, subdivision (d) 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.

end delete

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

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

1367.41.  

(a) Commencing January 1, 2017, a begin delete plan end delete begin insert health care
service plan end insert 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 United States 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 insert

(g) This section shall be interpreted consistent with federal
guidance issued under paragraph (3) of subdivision (a) of Section
156.122 of Title 45 of the Code of Federal Regulations. This section
shall apply to the individual, small group, and large group markets.

end insert

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

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

1367.42.  

(a)  begin delete A end delete begin insert For plan years commencing on or after January
1, 2017, a end insert 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 United States 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. 6. end delete
begin insert SEC. 5. 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 begin delete cost sharing end delete begin insert cost-sharing end insert 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. 7. end delete
begin insert SEC. 6. 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 begin delete cost sharing end delete begin insert cost-sharing end insert 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. 8. end delete
begin insert SEC. 7. 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 begin delete 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 end delete 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 begin delete drugs. end delete begin insert drugs, including nonformulary drugs
determined to be medically necessary consistent with this part. end insert

begin delete

(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.

end delete begin insert

(2) If a nonformulary drug is authorized consistent with this
part, the cost sharing shall be the same as for a formulary drug.

end insert

(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)  begin insert (1) end insert begin insert   end insert 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 begin delete condition. end delete begin insert condition in a
manner that is not based on a clinical indication or reasonable
medical management practices. end insert begin insert Section 1342.7 of the Health and
Safety Code and any regulations adopted pursuant to that section
shall be interpreted in a manner that is consistent with this section. end insert

begin delete

(1)

end delete

begin insert ( end insert begin insert 2) end insert  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.

begin delete

(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.

end delete

(3)  begin delete A health insurer shall demonstrate to the commissioner that
any end delete begin insert Any end insert limitation or utilization management begin delete is end delete begin insert shall be end insert 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 begin delete ($500). end delete begin insert ($500),
except as provided in paragraph (3). end insert

(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, begin delete paragraph end delete begin insert paragraphs end insert (1) begin insert and
(2) end insert of this subdivision shall apply only once an insured’s deductible
has been satisfied for the year.

begin insert

(4) For a nongrandfathered individual or small group policy
of health insurance, the deductible for outpatient drugs, if any,
shall not exceed twice the amount specified in paragraph (1) or
(2), respectively.

end insert begin insert

(5) For purposes of paragraphs (1) and (2), “any other form
of cost sharing” shall not include deductible.

end insert

(g) (1) If a policy of health insurance maintains a drug
formulary grouped into tiers that includes a fourth begin delete tier or specialty end delete
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 begin insert name end insert 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 begin delete safety and efficacy and not solely based on the cost of the
prescription drug. end delete begin insert safety, efficacy, and cost. end insert

(C) Tier three shall consist of nonpreferred brand name drugs
begin insert or drugs end insert that are recommended by the health insurer’s pharmacy
and therapeutics committee based on begin delete safety and efficacy and not
solely based on the cost of the prescription drug, and which end delete begin insert safety,
efficacy, and cost, or that end insert 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 begin delete rebates. end delete begin insert rebates for a one-month supply. end insert

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

begin insert

(3) This section shall not be construed to limit a health insurer
from placing any drug in a lower tier.

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) In the provision of outpatient prescription drug coverage, a
health insurer may utilize formulary, prior authorization, step
therapy, or other reasonable medical management practices
consistent with this part.

end insert begin delete

(j)

end delete

begin insert ( end insert begin insert k) end insert  This section shall remain in effect only until January 1, begin delete 2021, end delete
begin insert 2020, end insert and as of that date is repealed, unless a later enacted statute,
that is enacted before January 1, begin delete 2021, end delete begin insert 2020, end insert deletes or extends
that date.

begin delete SEC. 9. 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 begin delete 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 end delete policy
of health insurance that is offered, amended, or renewed on or after
January 1, 2017, shall comply with this section. begin delete 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. end delete

(c) (1) A policy of health insurance that provides coverage for
outpatient prescription drugs shall cover medically necessary
prescription begin delete drugs. end delete begin insert drugs, including nonformulary drugs
determined to be medically necessary consistent with this part. end insert

begin delete

(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.

end delete begin insert

(2) If a nonformulary drug is authorized consistent with this
part, the cost sharing shall be the same as for a formulary drug.

end insert

(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)  begin insert (1) end insert begin insert   end insert 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 begin delete condition. end delete begin insert condition in a
manner that is not based on a clinical indication or reasonable
medical management practices. end insert begin insert Section 1342.7 of the Health and
Safety Code and any regulations adopted pursuant to that section
shall be interpreted in a manner that is consistent with this section. end insert

begin delete

(1)

end delete

begin insert ( end insert begin insert 2) end insert  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.

begin delete

(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
thatany

end delete

begin insert (3) end insert begin insert   end insert begin insert Any end insert limitation or utilization management begin delete is end delete begin insert shall be end insert
consistent with and based on clinical guidelines and peer-reviewed
scientific and medical literature.

begin delete

(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

end delete

begin insert (f) end insert begin insert   end insert begin insert (1) end insert begin insert   end insert begin insert A end insert policy of health insurance may maintain a drug
formulary with fewer than four tiers.

begin insert

(2) This section shall not be construed to limit a health insurer
from placing any drug in a lower tier.

end insert

(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.

begin insert

(i) In the provision of outpatient prescription drug coverage, a
health insurer may utilize formulary, prior authorization, step
therapy, or other reasonable medical management practices
consistent with this part.

end insert begin delete

(i)

end delete

begin insert ( end insert begin insert j) end insert  This section shall become operative on January 1, begin delete 2021. end delete
begin insert 2020. end insert

begin delete SEC. 10. end delete
begin insert SEC. 9. end insert   

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

10123.201.  

(a)  begin delete (1) end delete begin delete   end delete begin delete 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. end delete begin insert A policy of health insurance
that covers outpatient prescription drugs shall cover medically
necessary drugs. The policy may provide for step therapy and prior
authorization consistent with Section 1342.7 of the Health and
Safety Code and any regulations adopted pursuant to that section. end insert

begin delete

(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.

end delete

(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 begin delete grievance end delete begin insert complaint end insert 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) Commencing January 1, 2017, an 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 United States 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.

begin insert

(7) This subdivision shall be interpreted consistent with federal
guidance issued under paragraph (3) of subdivision (a) of Section
156.122 of Title 45 of the Code of Federal Regulations. This
subdivision shall apply to the individual, small group, and large
group markets.

end insert

(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. begin delete A health insurer that requires step therapy
shall comply with the requirements specified in paragraph (4) of
subdivision (a). end delete

(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)  begin delete An end delete begin insert For plan years commencing on or after January 1, 2017,
an end insert 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 United States 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.

begin delete

(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.

end delete begin delete

(f)

end delete

begin insert ( end insert begin insert e) end insert  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.

begin delete

(g)

end delete

begin insert ( end insert begin insert f) end insert  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.

begin delete

(h)

end delete

begin insert ( end insert begin insert g) end insert  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.

begin delete

(i)

end delete

begin insert ( end insert begin insert h) end insert  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.

begin delete

(j)

end delete

begin insert ( end insert begin insert i) end insert  (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, until January 1, begin delete 2021, end delete begin insert 2020, end insert subdivision (f) of
Section 10123.193.

begin delete

(k)

end delete

begin insert ( end insert begin insert j) end insert  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 begin delete review. end delete begin insert review under Article 3.5 (commencing
with Section 10169). end insert

begin delete

(l)

end delete

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

begin delete SEC. 11. end delete
begin insert SEC. 10. 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.