BILL ANALYSIS                                                                                                                                                                                                    

                          Senator Ed Hernandez, O.D., Chair

          BILL NO:                    AB 1162             
          |AUTHOR:        |Holden                                         |
          |VERSION:       |June 1, 2015                                   |
          |HEARING DATE:  |July 8, 2015   |               |               |
          |CONSULTANT:    |Scott Bain                                     |
           SUBJECT  :  Medi-Cal: tobacco cessation.

           SUMMARY  :  Requires tobacco cessation services to be a covered benefit  
          under the Medi-Cal program. Requires the benefit to include  
          unlimited quit attempts with no required break between attempts,  
          at least four tobacco cessation counseling sessions per quit  
          attempt, and a 90-day treatment regimen of any prescription or  
          over-the-counter medication approved by the federal Food and  
          Drug Administration for tobacco cessation that was covered under  
          the Medi-Cal program as of January 1, 2015. Prohibits tobacco  
          cessation medication coverage for drugs covered under Medi-Cal  
          as of January 1, 2015, from being subject to any barriers,  
          requirements, or restrictions, including, but not limited to,  
          prior authorization.
          Existing law:
          1)Establishes the Medi-Cal program, administered by the  
            Department of Health Care Services (DHCS), under which basic  
            health care services are provided to qualified low-income  

          2)Establishes a schedule of benefits under the Medi-Cal program,  
            which includes the purchase of prescribed drugs, subject to  
            the Medi-Cal List of Contract Drugs and utilization controls.

          3)Requires that preventive services assigned a grade of A or B  
            by the U.S. Preventive Services Task Force be provided to  
            Medi-Cal beneficiaries without any cost sharing by the  
            beneficiary in order for the state to receive increased  
            federal contributions for those services, as specified.
          This bill:


          AB 1162 (Holden)                                   Page 2 of ?
          1)Requires tobacco cessation services to be a covered benefit  
            under the Medi-Cal program. Requires the tobacco cessation  
            services to include, at minimum, unlimited quit attempts, with  
            no required break between attempts, for beneficiaries of any  
            age who use tobacco.

          2)Requires tobacco cessation services to include:

               a)     At least four tobacco cessation counseling sessions  
                 per quit attempt, which may be conducted in person or by  
                 telephone and individually or as part of a group, at the  
                 beneficiary's option.
               b)     A 90-day treatment regimen of any medication  
                 approved by the federal Food and Drug Administration  
                 (FDA) for tobacco cessation, including prescription and  
                 over-the-counter (OTC) medications approved by the FDA  
                 that were covered under the Medi-Cal program as of  
                 January 1, 2015.

          3)Requires that a prescription from a provider with authority to  
            prescribe and proof of Medi-Cal coverage to be sufficient  
            documentation to fill a prescription for OTC tobacco cessation  

          4)Prohibits tobacco cessation medication coverage described in  
            b) from being subject to any barriers, requirements, or  
            restrictions, including, but not limited to, prior  

          5)Prohibits Medi-Cal beneficiaries from being required to  
            receive a particular form of tobacco cessation service as a  
            condition of receiving any other form of tobacco cessation  

          EFFECT  : According to the Assembly Appropriations Committee:

          1)Costs in the range of $650,000 (General Fund/federal funds) to  
            Medi-Cal annually, based on an approximate 10% increase in  
            utilization of tobacco cessation services. A California Health  
            Benefits Review Program analysis is not available, but certain  


          AB 1162 (Holden)                                   Page 3 of ?
            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 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 (FFS) formulary, and a similar dynamic  
            would exist for Medi-Cal managed care. 

          3)Potential short-term (one to three 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  
            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  

          VOTES  :  
          |Assembly Floor:                     |67 - 12                     |
          |Assembly Appropriations Committee:  |12 - 5                      |
          |Assembly Health Committee:          |18 - 0                      |
          |                                    |                            |
          COMMENTS  :
          1)Author's statement.  According to the author, quitting tobacco  
            products is a difficult feat that many attempt every year but  
            few accomplish. It can cause cancer, respiratory and heart  


          AB 1162 (Holden)                                   Page 4 of ?
            diseases, birth defects and is still the leading preventable  
            cause of death in the United States. Though the dangers of  
            smoking are better understood now than 50 years ago,  
            cigarettes are more addictive than ever and smoking rates in  
            the Medi-Cal population are still too high. In addition to  
            efforts to discourage people from smoking, this bill fights  
            against tobacco dependence by giving smokers the tools to  
            fight the addiction. The coverage mandated by this bill  
            ensures that Medi-Cal patients have access to clinically  
            proven treatments like counseling, medication, and nicotine  
            replacement treatments. Studies have shown that the  
            comprehensive coverage of these treatments has led to  
            decreases in the smoking population. Tobacco companies make it  
            hard enough for smokers to quit, as a state we must remove all  
            barriers to treatments that make quitting possible.
          2)Background. According to the Centers for Disease Control and  
            Prevention, tobacco use is the leading preventable cause of  
            death in the United States. Every year, smoking kills 480,000  
            Americans and costs the nation at least $130 billion in  
            medical care costs for adults and more than $150 billion in  
            lost productivity, imposing a heavy economic burden on private  
            employers, private health plans, and federal, state, and local  
            governments. The cost of tobacco use to California is  
            estimated to be $18.1 billion annually. According to data from  
            2001 to 2010 published by the Centers for Disease Control and  
            Prevention in 2011, most smokers want to quit smoking (69%),  
            and over half (52%) tried to quit in the previous year, but  
            only 6% were successful.

          The U.S. Preventive Services Task Force (USPSFT) reviewed new  
            evidence in the U.S. Public Health Service's 2008 clinical  
            practice guideline and determined that the net benefits of  
            tobacco cessation interventions in adults and pregnant remain  
            well established. The USPSTF found convincing evidence that  
            smoking cessation interventions, including brief behavioral  
            counseling sessions and pharmacotherapy delivered in primary  
            care settings are effective in increasing the proportion of  
            smokers who successfully quit and remain abstinent for one  
            year. The USPSTF concluded that there is high certainty that  
            the net benefit of tobacco cessation interventions in adults  
            is substantial, and there is high certainty that the net  
            benefit of augmented, pregnancy-tailored counseling in  
            pregnant women is substantial.


          AB 1162 (Holden)                                   Page 5 of ?
          3)Affordable Care Act Changes to Tobacco Cessation Coverage.  
            Section 2502 of the Patient Protection and Affordable Care Act  
            (ACA) prohibited drugs used to promote smoking cessation,  
            including agents approved by the FDA for over-the-counter for  
            purposes of promoting tobacco cessation, from being excluded  
            from Medicaid coverage. In addition, Section 4107 of the ACA  
            required Medicaid coverage of tobacco cessation counseling and  
            pharmacotherapy (FDA-approved OTC and prescription drugs) for  
            pregnant women, and prohibited cost-sharing for these  

          The seven FDA-approved medications include five forms of  
            nicotine replacement therapy (NRT): the patch, gum, inhaler,  
            nasal spray, and lozenge, as well as two non-NRT medications,  
            bupropion SR (brand name Zyban if used for tobacco cessation  
            and Wellbutrin if used as an antidepressant), and varenicline  
            (brand name Chantix). Three forms of NRT - the patch, gum, and  
            the lozenge - are available OTC. The other two forms of NRT  
            (the inhaler and the nasal spray), as well as the two non-NRT  
            medications, are available by prescription. The patch is  
            available by prescription as well as OTC.

          4)Current Medi-Cal coverage of tobacco cessation. Medi-Cal  
            beneficiaries have a higher prevalence of tobacco use than the  
            general California population. In the 2011-12 California  
            Health Interview Survey, 16.1% of adult and teen Medi-Cal  
            beneficiaries were current smokers, as compared to 12.1% of  
            adults and teens not covered by Medi-Cal. DHCS indicates  
            expenditures on smoking deterrents in 2014 was $1 million in  
            FFS and $3.1 million in managed care. Coverage of tobacco  
            cessation medication varies, depending upon whether the  
            beneficiary is in FFS Medi-Cal or Medi-Cal managed care plan,  
            and the particular Medi-Cal managed care plan the beneficiary  
            is enrolled in. In 2015-16, Medi-Cal is projected to enroll  
            12.4 million individuals, of whom 76.6% (9.5 million people)  
            are projected to be in managed care plans. For FFS Medi-Cal,  
            DHCS is required to use the following criteria when adding a  
            drug to the Medi-Cal contract drug list: (a) the safety of the  
            drug; (b) the effectiveness of the drug; (c) the essential  
            need for the drug; (d) the potential for misuse of the drug;  
            and, (e) the cost of the drug. 

          In September 2014, DHCS released Policy Letter 14-006 to provide  
            Medi-Cal managed care health plans with minimum requirements  


          AB 1162 (Holden)                                   Page 6 of ?
            for comprehensive tobacco cessation services. The chart below  
            shows the differences between this bill and current DHCS  
            policy set forth in the Policy Letter:

          |Tobacco          |     AB 1162      |  DHCS Policy for  |
          |Cessation        |                  | Medi-Cal Managed  |
          |Requirements     |                  |    Care Plans     |
          |Number of quit   |    Unlimited     |    At least 2     |
          |attempts         |                  |   separate quit   |
          |                 |                  | attempts per year |
          |Prohibition on   |       Yes        |        Yes        |
          |requiring a      |                  |                   |
          |break between    |                  |                   |
          |quit  attempts   |                  |                   |
          |Number of        |  At least 4 per  | At least 4 of at  |
          |tobacco          |  quit attempt.   | least 10 minutes  |
          |cessation        |                  |     duration      |
          |counseling       |                  |                   |
          |services         |                  |                   |
          |Counseling       |    In person,    | Plans must ensure |
          |Session          |    telephone,    | that individual,  |
          |                 |  individual or   |     group and     |
          |                 |    group, at     |     telephone     |
          |                 |   beneficiary    |   counseling is   |
          |                 |      option      | offered. Does not |
          |                 |                  |    specify at     |
          |                 |                  |beneficiary option |
          |Tobacco          |     90 days      |90                 |
          |cessation drug   |                  |days               |
          |treatment        |                  |                   |
          |regimen duration |                  |                   |
          |Coverage of      | All FDA-approved |   Must cover 7    |
          |tobacco          | prescription and |   FDA-approved    |
          |cessation        | OTC medications  | tobacco cessation |
          |approved by the  |   for tobacco    |  medications, at  |
          |federal FDA for  |cessation covered | least one without |
          |tobacco          |under Medi-Cal as |       prior       |
          |cessation,       |  of January 1,   |  authorization.   |


          AB 1162 (Holden)                                   Page 7 of ?
          |including        |       2015       |    Must cover     |
          |prescription and |                  |    additional     |
          |OTC              |                  | medications once  |
          |                 |                  |   FDA-approved.   |
          |Prohibits        |       Yes        |   Must cover 7    |
          |tobacco          |                  |   FDA-approved    |
          |cessation drug   |                  | tobacco cessation |
          |coverage from    |                  |  medications, at  |
          |being subject to |                  | least one without |
          |barriers,        |                  |       prior       |
          |requirements or  |                  |  authorization.   |
          |restrictions,    |                  |Does not otherwise |
          |including but    |                  |     prohibit      |
          |not limited to,  |                  |    utilization    |
          |utilization      |                  |      review.      |
          |review           |                  |                   |
          |Prohibition on   |       Yes        |  Prohibits plans  |
          |receiving one    |                  |  from requiring   |
          |form of tobacco  |                  | beneficiaries to  |
          |cessation as a   |                  | attend classes or |
          |condition of     |                  |    counseling     |
          |receiving any    |                  | sessions prior to |
          |form of tobacco  |                  |    receiving a    |
          |cessation        |                  | prescription for  |
          |                 |                  |  an FDA-approved  |
          |                 |                  | tobacco cessation |
          |                 |                  |medication.        |
          |                 |                  |                   |

          5)2006 Massachusetts Law. In April 2006, the Massachusetts  
            legislature passed Chapter 58 of the Acts of 2006 (''An Act  
            Providing Access to Affordable, Quality, Accountable Health  
            Care'') requiring all individuals in Massachusetts to have  
            health insurance. In an effort to reduce smoking prevalence in  
            the Medicaid population, the law mandated coverage for two  
            types of tobacco cessation treatment: behavioral counseling  
            and all Food and Drug Administration (FDA)-approved  


          AB 1162 (Holden)                                   Page 8 of ?

          A 2010 study of Medicaid coverage for tobacco cessation in  
            Massachusetts stated that, prior to 2006, MassHealth (the  
            Massachusetts Medicaid program) did not provide tobacco  
            cessation benefits. With the implementation of this benefit,  
            MassHealth subscribers are allowed two 90-day courses per year  
            of FDA-approved medications for smoking cessation, including  
            OTC medications like nicotine replacement therapy, and up to  
            16 individual or group counseling sessions. Medications  
            require written prescriptions following an office visit. Prior  
            authorization is not required to prescribe the nicotine patch,  
            gum, lozenge, Chantix, or bupropion/Wellbutrin. With prior  
            authorization, the nicotine inhaler and nasal spray may also  
            be covered. The co-payment is minimal at $1 or $3. The 2010  
            study found the smoking rate in the pre-benefit period  
            decreased from 38.3% to 28.3% in the post-benefit period,  
            representing a decline of 26%. The study concluded that these  
            findings suggest that a tobacco cessation benefit that  
            includes coverage for medication and behavioral treatments,  
            has few barriers to access, and involves broad promotion can  
            significantly reduce smoking prevlence.
          6)Prior legislation. SB 220 (Yee, 2010) would have required a  
            health plans and insurers to cover over a minimum of two  
            courses of treatment in a 12-month period for all smoking  
            cessation treatments rated "A" or "B" by the United States  
            Preventive Services Task Force, which shall include counseling  
            and over-the-counter medication and prescription  
            pharmacotherapy approved by the FDA. SB 220 also requested the  
            California Health Benefits Review Program to prepare an  
            analysis of the state cost savings as a result of the bill  
            provisions. SB 220 was vetoed by the Governor.

            AB 2662 (Dymally, 2007) would have prohibited the provision of  
            one form of Medi-Cal covered tobacco cessation service (either  
            pharmacotherapy or counseling) as a condition of receiving the  
            other service. AB 2662 was held on the Senate Appropriations  
            Committee suspense file.

            SB 576 (Ortiz, 2005) would have required health plans and  
            insurers to provide coverage for two courses of tobacco  
            cessation treatments per year, including counseling and  
            prescription and over-the-counter medications, and prohibited  
            plans and insurers from applying deductibles but allowed  


          AB 1162 (Holden)                                   Page 9 of ?
            specific co-payments for those benefits. SB 576 was vetoed by  
            the Governor.

          7)Related legislation. AB 73 (Waldron) would have required a  
            drug from one of four classes of drugs to be covered by  
            Medi-Cal if the treating provider demonstrates, that in his or  
            her reasonable, professional judgment, the drug is medically  
            necessary and consistent with the FDA's labeling and use rules  
            and regulations, and the drug is not on the formulary for the  
            Medi-Cal managed care plan. AB 73 was held on the Assembly  
            Appropriations Committee Suspense File.

            AB 68 (Waldron) requires, if any drug used in the treatment of  
            seizures and epilepsy is prescribed by a Medi-Cal  
            beneficiary's treating provider for the treatment of seizures  
            and epilepsy, and coverage for that prescribed drug is denied  
            by a Medi-Cal managed care plan, that denial to be subject to  
            the automatic urgent appeal process in which the plan  
            immediately notifies DHCS of the denial of coverage, and the  
            beneficiary is not required to take any further action. AB 68  
            requires the automatic urgent appeal to be resolved within 48  
            hours after denial by the plan. AB 68 is scheduled for hearing  
            on July 15, 2015 in the Senate Health Committee.

          8)Support. This bill is jointly sponsored by the American Heart  
            Association/American Stroke Association, the American Lung  
            Association, and the American Cancer Society Cancer Action  
            Network to ensure all Medi-Cal patients are able to access  
            tobacco cessation treatments. The sponsors argue that the  
            success rate of smokers quitting their addiction to tobacco is  
            still very low, due in part because many smokers try to quit  
            without the assistance of tobacco cessation services. The  
            sponsors noted that although the ACA has made tobacco  
            cessation treatments more accessible, current guidelines as to  
            how to implement these treatments are unclear, thereby  
            resulting in differences in coverage between health plans. In  
            addition, the sponsors stated that Medi-Cal patients face  
            barriers to treatment services due to prior authorization and  
            step therapy treatment requirements. Supporters argue this  
            bill provides needed clarity for Medi-Cal participants on  
            tobacco cessation services and ensures access to comprehensive  
            insurance coverage for these services. Supporters conclude  
            that increased access to smoking cessation treatments and  
            eliminating barriers will reduce the incidence of  


          AB 1162 (Holden)                                   Page 10 of ?
            tobacco-related diseases and will lower health care costs.
          9)Opposition. The California Association of Health Plans (CAHP)  
            writes in opposition that this bill will increase costs to the  
            state by requiring Medi-Cal managed care plans to pay for  
            tobacco cessation drugs in a manner that is inconsistent with  
            policies of DHCS. CAHP argues Medi-Cal managed care plans  
            already comply with the requirements of the DHCS policy  
            letter, and that removing all prior authorization protocols  
            and requiring plans to cover all specific medications would  
            create a new benefit mandate, which would result in higher  
                                         state costs in Medi-Cal reimbursement rates to plans in order  
            to reflect the benefit expansion. CAHP also argues the  
            removing prior authorization can be risky as certain smoking  
            cessation treatments are indicated only for limited time use,  
            and allowing indefinite access to them with weakened oversight  
            or approval will increase the risk of side-effects.
          10)Policy issues.
               a)     Requirement for coverage of FDA-approved tobacco  
                 cessation drugs without prior authorization and  
                 utilization review. This bill requires Medi-Cal to  
                 provide coverage for a 90-day treatment regimen of any  
                 FDA-approved tobacco cessation medication, including  
                 prescription medication and OTC drugs that were covered  
                 under the Medi-Cal program as of January 1, 2015. In  
                 addition, this bill prohibits tobacco cessation  
                 medication coverage from being subject to any barriers,  
                 requirements, or restrictions, including, but not limited  
                 to, prior authorization. 
                 A prohibition on utilization review and prior  
                 authorization enables providers to prescribe and patients  
                 to receive a greater variety of medication to treat  
                 diseases and conditions, and ensures prompter access to  
                 prescribed medications that might otherwise be subject to  
                 prior authorization. To the extent that broader tobacco  
                 cessation coverage makes it easier to access medication  
                 and results in greater success in successfully quitting  
                 tobacco use, long-term cost savings from a reduction in  
                 tobacco-related diseases would result. 

                 However, when third payors negotiate prescription drug  
                 coverage, they use prior authorization and utilization  
                 controls as a mechanism to obtain price discounts from  


          AB 1162 (Holden)                                   Page 11 of ?
                 drug manufacturers and to ensure appropriate use of the  
                 medication. For example, when DHCS establishes its  
                 contract drug list in FFS Medi-Cal, it uses its ability  
                 to put drugs on prior authorization (through a Treatment  
                 Authorization Request or "TAR") to obtain rebates from  
                 drug manufacturers. For tobacco cessation drugs on the  
                 Medi-Cal contract drug list, DHCS has a limit on the  
                 number of tablets (for example, one drug has a 60 tablet  
                 limit per dispensing), duration limits (for example, 12  
                 weeks) and restrictions on dispensing within a time  
                 period (for example, one dispensing in a 25-day period  
                 and eight dispensings within a 12 month period). By  
                 requiring coverage of FDA-approved medication and  
                 prohibiting utilization controls, these tools would not  
                 be available by Medi-Cal managed care plans and DHCS to  
                 obtain price concessions from drug manufacturers or to  
                 ensure appropriate utilization. 
               b)     Recent DHCS policy. DHCS policy for Medi-Cal managed  
                 care plans was released in September 2014 and has been in  
                 effect for less than a year. This bill expands the scope  
                 of that coverage in several ways. Has sufficient time  
                 elapsed to know whether the provisions of that policy are  
                 adversely affecting tobacco cessation services and should  
                 be expanded?

          Support:  American Cancer Society Cancer Action Network  
                    American Heart Association/American Stroke Association  
                    American Lung Association in California (co-sponsor)
                    Association of California Healthcare Districts
                    Association of Northern California Oncologists
                    California Academy of Physician Assistants
                    California Academy of Preventative Medicine
                    California Black Health Network
                    California Chapter of the American College of  
               Emergency Physicians 
                    California Chronic Care Coalition
                    California Dental Association
                    California Healthcare Institute
                    California Life Sciences Association
                    California Medical Association


          AB 1162 (Holden)                                   Page 12 of ?
                    California Pan-Ethnic Health Network
                    California Society of Addiction Medicine
                    Community Clinic Association of Los Angeles County
                    County Health Executives Association of California
                    First 5 California
                    Health Officers Association of California
                    March of Dimes California Chapter
                    Medical Oncology Association of Southern California
                    Tobacco Education and Research Oversight Committee
                    Western Center on Law and Poverty

          Opposition:California Association of Health Plans

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