BILL ANALYSIS                                                                                                                                                                                                    

                                                                    AB 1162

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          Date of Hearing:  May 13, 2015


                                 Jimmy Gomez, Chair

          1162 (Holden) - As Amended April 23, 2015

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          Urgency:  No  State Mandated Local Program:  NoReimbursable:  No


          This bill requires tobacco cessation services to be a covered  
          Medi-Cal benefit, and specifies terms of coverage, including  
          coverage of unlimited quit attempts, no age limits, and no  
          required breaks between attempts.  


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          This bill defines "quit attempt" as a 90-day treatment regimen  
          of any FDA-approved tobacco cessation medication with no  
          barriers or restrictions, as well as specified counseling  

          FISCAL EFFECT:

          1)Costs in the range of $650,000 (GF/federal) to Medi-Cal  
            annually, based on an approximate 10% increase in utilization  
            of tobacco cessation services.  A California Health Benefits  
            Review Program (CHBRP) analysis is not available, but certain  
            assumptions from prior analysis were used to construct this  
            estimate.  The utilization estimate is subject to significant  
            uncertainty. We estimate 2,500 individuals will attempt to  
            quit and 100 will successfully quit based on the increased  
            utilization of services.  

          2)Potential additional increased costs in the same $650,000  
            range, or greater, due to increased drug prices.  This bill  
            would reduce the ability of the Department of Health Care  
            Services (DHCS) to negotiate supplemental rebates with  
            manufacturers of tobacco cessation products since all tobacco  
            cessation products would automatically be included in the  
            Fee-for-Service formulary, and a similar dynamic would exist  
            for Medi-Cal managed care.  In addition, new drugs would  
            automatically be covered without restriction, leading to  
            unknown future increased costs.

          3)Potential short-term (1-3 year) reductions in health care  
            costs associated with Medi-Cal enrollees who successfully  
            quit. A 2012 study of the Massachusetts Medicaid program found  
            each $1 spent on medications, counseling, and promotion and  
            outreach for Medicaid smokers was associated with a reduction  


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            of $3.12 (range $3.00 to $3.25) in Medicaid expenditures for  
            cardiovascular hospital admissions, resulting in net savings  
            between $2.00 and $2.25.  Long-term cost savings are also  
            possible, but are subject to significant uncertainty.   
            Potential long-term savings are also offset by increased  


          1)Purpose. The author asserts that FDA-approved tobacco  
            cessation medications and counseling are very effective  
            methods of having smokers quit, yet maintains that access to  
            these services is sometimes difficult for Medi-Cal recipients  
            due to the many barriers to access, including requiring  
            prior-authorization and step therapy.  The purpose of this  
            bill is to remove all restrictions on tobacco cessation  
            services, increasing their availability.

          2)Background. According to CDC estimated that approximately 45%  
            of California's Medi-Cal population smoke.  Section 2502 of  
            the Patient Protection and Affordable Care Act (ACA) requires  
            Medicaid programs to cover FDA-approved cessation medications,  
            and further guidance specifies over-the-counter smoking  
            cessation drugs must also be covered. 

            DHCS Policy on Tobacco Cessation. On September 3, 2014, DHCS  
            released policy letter 14-006 to provide Medi-Cal managed care  
            health plans (MCPs) with minimum requirements for  
            comprehensive tobacco cessation services.  The requirements,  
            similar to federal guidance on the issue, include: 

             a)   Coverage of all seven FDA-approved tobacco cessation  
               medications, at least one of which must be available  
               without prior authorization, and any additional tobacco  


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               cessation medications once approved by the FDA.

             b)   Coverage of a 90-day treatment regimen of medications  
               without other requirements, restrictions, or barriers; and  
               a minimum of two separate quit attempts per year, with no  
               mandatory break required between quit attempts.

             c)   MCPs may not require members to attend counseling  
               sessions or classes prior to receiving a prescription for  
               an FDA-approved tobacco cessation medication.

             d)   Cessation counseling must be offered; four counseling  
               sessions of at least ten minutes each in length for at  
               least two separate quit attempts a year without prior  

            Prior CHBRP Analysis.  A CHBRP analysis of a related bill, AB  
            1738 (Huffman) in 2012, indicated the following:

             a)   The average cost per quit attempt, including counseling  
               and drug treatment, was around $440.  

             b)   CHBRP estimated a 27.4% increase in utilization of  
               tobacco cessation services as a result of gaining coverage  
               for such services. 

             c)   CHBRP attributed between 7 and 12.4 years of life gained  
               for each quitter to the smoking cessation coverage mandate.

             d)   CHBRP found clear and convincing evidence that smoking  
               cessation is a cost-effective preventive treatment that  


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               results in improvements in multiple long-term health  
               outcomes and reduces both direct medical costs and indirect  
               costs associated with smoking.

          1)Staff Comments. 

             a)   Cost-effectiveness. In their 2012 analysis of AB 1758,  
               CHBRP notes: "It is generally accepted that interventions  
               that cost less than $50,000 per Quality Adjusted Life Year,  
               such as mammography, are viewed by society as cost  
               effective. According to these standards, smoking cessation  
               programs are highly cost effective in the long term,  
               producing significant reductions in mortality and morbidity  
               at a net cost that is well below the $50,000/QALY  
               threshold. In addition, [..] a meta-analysis of the  
               economic literature found that in nearly every case,  
               smoking cessation programs are either cost saving or highly  
               cost effective.  This is borne out in the fiscal analysis  
               above, which estimates costs in the range of low thousands  
               of dollars per unadjusted life year gained (assuming 7 and  
               12.4 years of life gained for each quitter).  Although not  
               quality adjusted, this is well below the $50,000/QALY  
               standard and indicates increased expenditures on tobacco  
               cessation are highly cost-effective even in spite of  
               marginally higher drug costs.  However, prices of future  
               drugs are unknown.   

             b)   Potential unintended consequences.  Under current law,  
               health plans and pharmaceutical benefit managers attempt to  
               meet patient needs for medication in a way that minimizes  
               costs and meets clinical standards of appropriate care.  
               Prior authorization, for example, is not only employed to  
               contain costs, but to allow a clinical review to ensure  
               medication is prescribed appropriately and to allow  
               consideration of safer alternatives.  Staff notes that  


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               despite cost-effectiveness of tobacco cessation spending, a  
               complete prohibition on prior authorization may have  
               unintended consequences that could increase costs without  
               providing a benefit to patients. In addition, future  
               FDA-approved medications may have unknown costs and risks  
               to patient safety.  The author may wish to closely examine  
               the bill's total prohibition on prior authorization to  
               ensure the design of this tobacco cessation benefit mandate  
               does not have unintended consequences, either from a cost  
               or patient safety perspective.  If there are drugs that are  
               significantly more expensive without commensurate clinical  
               benefit or patient safety concerns for which prior  
               authorization would be protective of patient safety, staff  
               suggests allowing prior authorization or other utilization  
               review in those cases. Staff suggests the author consider  
               adding a sunset in order to assess, and address, any  
               unintended consequences.

             c)   Evaluation. Furthermore, the author may wish to consider  
               an evaluation of the impact of this bill on cessation  
               outcomes, as well as patient safety.  Such an evaluation  
               could provide valuable data as to whether the improved  
               outcomes the bill seeks actually occur, and could provide  
               evidence-based best practices for the design of tobacco  
               cessation benefits.
             d)   Does this bill accomplish the author's stated intent to  
               allow coverage without restriction? Finally, the bill is  
               drafted in a confusing way, specifying coverage of "quit  
               attempts" and defining quit attempts as including  
               medication and counseling.  However, it appears the bill is  
               intended to offer broad coverage of tobacco cessation  
               medication and services in a "whatever it takes" manner,  
               without conditioning the provision of one service on  
               acceptance of another. Staff suggests the bill be  
               re-drafted such that the products and services required to  
               be covered are clearly listed, and parameters related to  
               the products or services are listed separately-for example,  


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               as prohibitions on requiring prior authorization or other  

          Analysis Prepared by:Lisa Murawski / APPR. / (916)