BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 339| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 339 Author: Gordon (D), et al. Amended: 9/1/15 in Senate Vote: 21 SENATE HEALTH COMMITTEE: 7-2, 7/15/15 AYES: Hernandez, Hall, Mitchell, Monning, Pan, Roth, Wolk NOES: Nguyen, Nielsen SENATE APPROPRIATIONS COMMITTEE: 5-2, 8/27/15 AYES: Lara, Beall, Hill, Leyva, Mendoza NOES: Bates, Nielsen ASSEMBLY FLOOR: 48-30, 6/3/15 - See last page for vote SUBJECT: Health care coverage: outpatient prescription drugs SOURCE: Health Access California DIGEST: This bill requires health plans and health insurers that provide coverage for outpatient prescription drugs to have formularies that do not discourage the enrollment of individuals with health conditions, and requires combination antiretrovirals drug treatment coverage of a single-tablet that is as effective as a multitablet regimen for treatment of HIV/AIDS, as specified. This bill places in state law, federal requirements related to pharmacy and therapeutics committees, access to in-network retail pharmacies, standardized formulary requirements, formulary tier requirements similar to those required of health plans and insurers participating in Covered California and copayment caps of $250 and $500 for a supply of up to 30 days for an individual prescription, as specified. ANALYSIS: AB 339 Page 2 Existing law: 1) Regulates health plans through the Department of Managed Health Care (DMHC) under the Knox-Keene Act and health insurance policies through the California Department of Insurance (CDI) under the Insurance Code. 2) Establishes Covered California as California's health benefit exchange where individuals and small employers can purchase standardized health insurance from selectively contracted qualified health plans based on bronze, silver, gold and platinum actuarial level categories. 3) Requires health plans and insurers to update their posted formularies with any change to those formularies on a monthly basis. This bill: 1) States legislative intent 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, to ensure affordability of outpatient prescription drugs, and that 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. 2) Requires a non-grandfathered health plan or policy of health insurance offered, amended, or renewed on or after January 1, 2017 to comply with the following, with respect to plans and policies that cover outpatient prescription drugs: a) Cover medically necessary prescription drugs, including nonformulary drugs determined to be medically necessary consistent with this bill and if approved, requires the cost sharing to be the same as for a formulary drug; b) Prohibit the formulary or formularies from discouraging the enrollment of individuals with health conditions and do AB 339 Page 3 not reduce the generosity of the benefit for enrollees or insureds with a particular condition in a manner that is not based on a clinical indication or reasonable medical management practices, consistent with federal law, as specified; c) Cover combination antiretroviral drug treatments that are medically necessary for the treatment of AIDS/HIV, that is a single-tablet drug regimen that is as effective as a multitablet regimen unless the health plan is able to demonstrate to the DMHC director, or insurer is able to demonstrate to the CDI Commissioner (Commissioner), consistent with clinical guidelines and peer-reviewed scientific and medical literature, that the multitablet regimen is clinically equally or more effective and more likely to result in adherence to a drug regimen; d) Limit the copayment, coinsurance, or any other form of cost sharing for a covered outpatient prescription drug for an individual prescription for up to a 30 day supply to not more than $250, as specified, except for a product with actuarial value to bronze coverage, cost sharing for a covered outpatient prescription drug for an individual prescription for a supply of up to 30 days to not more than $500. Requires for a federally defined high deductible health plan the limit to apply only after the enrollee's deductible has been satisfied for the year, and limits for nongrandfathered individual and small group products the outpatient drug deductible to not more than twice these caps; e) Use defined formulary tier groupings if a plan contract or insurance policy maintains a drug formulary with a fourth tier, but does not require the use of a fourth tier, and does not limit a health plan or insurer from placing any drug in a lower tier; and, f) Ensure placement of prescription drugs on formulary tiers is clinically indicated, reasonable medical management practices. 3) States that this bill does not require a health plan or AB 339 Page 4 health insurance policy to impose cost sharing for prescription drugs that state and federal law requires to be provided without cost sharing. 4) States that this bill does not require or authorize a Medi-Cal managed care plan to provide coverage for prescription drugs that are not required pursuant to program contracts, or to limit or exclude any prescription drugs that are required by those programs or contracts. 5) States that health plan or health insurer may utilize formulary, prior authorization, step therapy, or other reasonable medical management practices in the provision of outpatient prescription drug coverage, consistent with this bill. 6) Sunset's the cost cap and tiering definitions on January 1, 2020. 7) Requires, commencing January 1, 2017, a plan or insurer to maintain a pharmacy and therapeutics (P&T) committee responsible for developing, maintaining, and overseeing any drug formulary list, and establishes requirements associated with the P&T committee that are substantially similar to federal regulations. 8) Requires, commencing January 1, 2017, a plan or insurer that provides essential health benefits to allow an enrollee or insured to access prescription drug benefits at an in-network retail pharmacy unless the prescription drug is subject to restricted distribution by the Food and Drug Administration, or requires special handling, as specified, or patient education, as specified. Permits the plan or insurer to charge an enrollee or insured different cost sharing but requires all cost sharing to count toward the plan's or policies' annual limitation on cost sharing. 9) Requires a health insurance policy that provides coverage for outpatient prescription drugs to cover medically necessary prescription drugs, and a medically necessary prescription drug for which there is not a therapeutic equivalent. AB 339 Page 5 10)Requires copayments, coinsurance and other cost sharing for prescription drugs to be reasonable so as to allow access to medically necessary outpatient prescription drugs. 11)Authorizes a health insurer to impose prior authorization requirements consistent with this bill. Prohibits an insurer from requiring an insured to repeat step therapy when changing policies. 12)Requires an insurer to provide coverage for the medically necessary dosage and quantity of the drug prescribed consistent with professionally recognized standards of practice. 13)Requires the Commissioner as part of its market conduct examination to review the performance of an insurer that provides prescription drug benefits, in providing those benefits, as described. Prohibits the Commissioner from publicly disclosing any information reviewed. 14)Defines, for the purposes of the Insurance Code, nonformulary prescription drugs to include any drugs for which the 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. Comments 1)Author's statement. According to the author, Californians with cancer, HIV/AIDS, hepatitis, multiple sclerosis, epilepsy, lupus, and other serious and chronic conditions need high cost specialty drugs, which can cost thousands of dollars. These Californians can often reach their out-of-pocket limit in the first month of the plan year with only one prescription drug. Many Californians would find it difficult to pay over $6,000 out-of-pocket for a single prescription drug, let alone in one month. Too many patients are forced to choose between paying for their life-saving drugs and paying for housing, child care, or food. In turn, failure to access prescription drugs leads to suffering, and even death, from illnesses that are treatable. AB 339 is AB 339 Page 6 designed to ensure consumer access to vital medications and builds on existing California law and recent federal guidance to provide basic consumer protections that take the patient out of the middle of the negotiations between health plans and pharmaceutical manufacturers. This bill benefits patients by reducing cost barriers to those who depend on life-saving prescription drugs and implements and improves upon concepts from federal guidance in order to ensure that the anti-discrimination provisions of the Affordable Care Act (ACA) remain intact. 2)Drug discrimination. Jacobs and Summer describe in a 2015 New England Journal of Medicine perspectives piece that there is evidence that insurers are resorting to tactics to dissuade high-cost patients from enrolling. A formal complaint on this point was submitted to the Department of Health and Human Services in May 2014 that insurers in the federal exchange had structured their drug formularies to discourage people with HIV infection from selecting their plans. These insurers categorized all HIV drugs, including generics, in the tier with the highest cost sharing. Insurers have historically used tiered formularies to encourage enrollees to select generic or preferred brand-name drugs instead of higher-cost alternatives. Jacobs and Summer write that "adverse tiering" is not to influence enrollees' drug utilization but rather to deter certain people from enrolling in the first place. Findings of a recently published California HealthCare Foundation study indicate products used to treat complex chronic conditions, especially those for autoimmune disorders like rheumatoid arthritis, were disproportionately placed on the specialty tier in Covered California plans compared to the selected employer plans. Additionally, the study found that Covered California plans were more aggressive than selected employer plans in managing drug use through administrative controls, such as prior authorization and step therapy. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: Yes According to the Senate Appropriations Committee, 1)One-time costs of about $750,000 and ongoing costs of about AB 339 Page 7 $400,000 per year for CDI to adopt policies and regulations, review plan filings, and enforce the requirements of this bill (Insurance Fund). 2)One-time costs in the low millions and ongoing costs of about $500,000 per year for DMHC to adopt policies and regulations, review plan filings, and enforce the requirements of this bill (Managed Care Fund). 3)No significant impact to the Medi-Cal program is anticipated. The provisions of this bill dealing with cost sharing do not apply to Medi-Cal managed care plans. The other provisions of this bill are not expected to significantly increase costs to Medi-Cal managed care plans. SUPPORT: (Verified9/1/15) Health Access California (source) AIDS Healthcare Foundation AIDS Project Los Angeles American Federation of State, County and Municipal Employees, AFL-CIO Arthritis Foundation Association of Northern California Oncologists Berkeley Free Clinic Biocom California Academy of Physician Assistants California Black Health Network California Chapter of the National Association of Social Workers California Chronic Care Coalition California Communities United Institute California Labor Federation California Lesbian, Gay, Bisexual, and Transgender Health and Human Services Network California Life Sciences Association California Nurses Association California Pan-Ethnic Health Network California Teachers Association CALPIRG AB 339 Page 8 Community Clinic Association of Los Angeles Consumers Union CORE Medical Clinic, Inc. Epilepsy California Hemophilia Council of California Los Angeles LGBT Center Mental Health America of California National Multiple Sclerosis Society - California Action Network National Psoriasis Foundation National Stroke Association Orange County HIV/AIDS Advocacy Team Project Inform San Francisco AIDS Foundation San Luis Obispo County AIDS Support Network SLO Hep C Project Western Center on Law and Poverty OPPOSITION: (Verified9/2/15) Aetna America's Health Insurance Plans AmgenAssociation of California Life and Health Insurance Companies Blue Shield of California Boehringer-Ingelheim Pharmaceuticals California Association of Health Plans California Association of Health Underwriters California Chamber of Commerce California Department of Finance California Farm Bureau Federation California Retailers Association CSAC Excess Insurance Authority CVS Health Express Scripts Fullerton Chamber of Commerce Health Net Johnson & Johnson Kaiser Permanente Molina Healthcare of California North Orange County Chamber AB 339 Page 9 Northern California Carpenters Regional Council Pharmaceutical Care Management Association Rancho Cordova Chamber of Commerce Simi Valley Chamber of Commerce Southwest California Legislative Council ARGUMENTS IN SUPPORT: Health Access California writes that when people can't afford their prescription drugs they skip doses, split pills in half and some just don't pick up their prescriptions. Health Access indicates that this bill implements and improves upon concepts from the federal rule and regulations and California law and regulations in order to ensure that Californians are better able to afford their prescription drugs and that the anti-discrimination provisions of the ACA remain intact. Health Access points out that this bill improves federal law by imposing a per-30 day prescription limit on cost sharing so it cannot exceed $250 for most coverage and $500 for bronze, and finally aligns patient protections with Covered California. The National Multiple Sclerosis (MS) Society - California Action Network writes that people living with MS make frequent health care visits and rely on expensive medications to help manage their disease. There are 10 injectibles and three oral medications used to help manage MS. There are no generic equivalents and these treatments are typically placed on specialty tiers. Those with MS also take four to six other drugs to ease symptoms, monthly out-of-pocket medication costs can become exorbitant. ARGUMENTS IN OPPOSITION: Aetna writes that while Covered California has enacted a cost-sharing limitation for individuals utilizing the health insurance exchange, the legislature is encouraged to study the impact of those regulations before expanding these coverage requirements to all insurance policies. Blue Shield of California has a number of concerns with the provisions of this bill that exacerbate the drug pricing challenge by giving drug companies seeking to exploit patent protections, preferential placement of expensive single dose drugs over lower cost multitablet regimes that have the exact same effectiveness. This bill handcuffs negotiations with manufacturers which limit the discount drug companies will be AB 339 Page 10 willing to grant. Amgen believes this bill may limit patient access and is overly prescriptive. Amgen requests an amendment so that biologics are not statutorily defined as tier four products in four-tier formularies. ASSEMBLY FLOOR: 48-30, 6/3/15 AYES: Alejo, Bloom, Bonilla, Bonta, Brown, Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Daly, Dodd, Eggman, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Roger Hernández, Holden, Irwin, Jones-Sawyer, Levine, Lopez, Low, McCarty, Medina, Mullin, Nazarian, O'Donnell, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Ting, Weber, Williams, Wood, Atkins NOES: Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang, Chávez, Cooper, Dababneh, Dahle, Beth Gaines, Gallagher, Grove, Hadley, Harper, Jones, Kim, Lackey, Linder, Maienschein, Mathis, Mayes, Melendez, Obernolte, Olsen, Patterson, Steinorth, Wagner, Waldron, Wilk NO VOTE RECORDED: Frazier, Thurmond Prepared by:Teri Boughton / HEALTH / 9/2/15 15:34:00 **** END ****