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 that act a crime. Existing law also provides for the regulation of health insurers by the Department of Insurance. Existing law imposes various requirements and restrictions on health care service plans and health insurers, including, among other things, requiring a health care service plan or health insurer that provides prescription drug benefits to utilize a specified uniform prior authorization form or electronic authorization process when requiring prior authorization for prescription drug benefits.

This bill would authorize a request for an exception to a health care service plans or health insurers step therapy process for prescription drugs to be submitted in the same manner as a request for prior authorization for prescription drugs, and would require the plan or insurer to treat, and respond to, the request in the same manner as a request for prior authorization for prescription drugs.

The bill would require the Department of Managed Health Care and the Department of Insurance to include a provision for step therapy exception requests in the uniform prior authorization form specified above.

Because a willful violation of these requirements with respect to health care service plans would be a crime, the 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.

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 that act a crime. Existing law also provides for the regulation of health insurers by the Department of Insurance. Existing law imposes various requirements and restrictions on health care service plans and health insurers, including, among other things, requiring a health care service plan or health insurer that provides prescription drug benefits to utilize a specified uniform prior authorization form or electronic authorization process when requiring prior authorization for prescription drug benefits.

This bill would authorize a request for an exception to a health care service plans or health insurers step therapy process for prescription drugs to be submitted in the same manner as a request for prior authorization for prescription drugs, and would require the plan or insurer to treat, and respond to, the request in the same manner as a request for prior authorization for prescription drugs.

The bill would require the Department of Managed Health Care and the Department of Insurance to include a provision for step therapy exception requests in the uniform prior authorization form specified above.

Because a willful violation of these requirements with respect to health care service plans would be a crime, the 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.

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 that act a crime. Existing law also provides for the regulation of health insurers by the Department of Insurance. Existing law imposes various requirements and restrictions on health care service plans and health insurers, including, among other things, requiring a health care service plan or health insurer that provides prescription drug benefits to utilize a specified uniform prior authorization form or electronic authorization process when requiring prior authorization for prescription drug benefits.

This bill would authorize a request for an exception to a health care service plans or health insurers step therapy process for prescription drugs to be submitted in the same manner as a request for prior authorization for prescription drugs, and would require the plan or insurer to treat, and respond to, the request in the same manner as a request for prior authorization for prescription drugs.

The bill would require the Department of Managed Health Care and the Department of Insurance to include a provision for step therapy exception requests in the uniform prior authorization form specified above.

Because a willful violation of these requirements with respect to health care service plans would be a crime, the 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.

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 that act a crime. Existing law also provides for the regulation of health insurers by the Department of Insurance. Existing law imposes various requirements and restrictions on health care service plans and health insurers, including, among other things, requiring a health care service plan or health insurer that provides prescription drug benefits to maintain an expeditious process by which prescribing providers, as described, may obtain authorization for a medically necessary nonformulary prescription drug, according to certain procedures to utilize a specified uniform prior authorization form or electronic authorization process when requiring prior authorization for prescription drug benefits.

Because a willful violation of these requirements with respect to health care service plans would be a crime, the 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.

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 that act a crime. Existing law also provides for the regulation of health insurers by the Department of Insurance. Existing law imposes various requirements and restrictions on health care service plans and health insurers, including, among other things, requiring a health care service plan that provides prescription drug benefits to maintain an expeditious process by which prescribing providers, as described, may obtain authorization for a medically necessary nonformulary prescription drug, according to certain procedures.

Because a willful violation of these requirements with respect to health care service plans would be a crime, the 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.

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 that act a crime. Existing law also provides for the regulation of health insurers by the Department of Insurance. Existing law imposes various requirements and restrictions on health care service plans and health insurers, including, among other things, requiring a health care service plan that provides prescription drug benefits to maintain an expeditious process by which prescribing providers, as described, may obtain authorization for a medically necessary nonformulary prescription drug, according to certain procedures.

This bill would prohibit a health care service plan or health insurer that provides medication pursuant to a step therapy or fail-first requirement from applying that requirement to a patient who has made a step therapy override determination request if, in the professional judgment of the prescribing physician, provider, the step therapy or fail-first requirement would be medically inappropriate either medically inappropriate or medically unnecessary for that patient for specified reasons. reasons, as specified.

Because a willful violation of these requirements with respect to health care service plans would be a crime, the 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.

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 that act a crime. Existing law also provides for the regulation of health insurers by the Department of Insurance. Existing law imposes various requirements and restrictions on health care service plans and health insurers, including, among other things, requiring a health care service plan that provides prescription drug benefits to maintain an expeditious process by which prescribing providers, as described, may obtain authorization for a medically necessary nonformulary prescription drug, according to certain procedures.

This bill would prohibit a health care service plan or health insurer that provides medication pursuant to a step therapy or fail-first requirement from applying that requirement to a patient who has made a step therapy override determination request if, in the professional judgment of the prescribing physician, the step therapy or fail-first requirement would be medically inappropriate for that patient for specified reasons.

Because a willful violation of these requirements with respect to health care service plans would be a crime, the 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.

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 that act a crime. Existing law also provides for the regulation of health insurers by the Department of Insurance. Existing law imposes various requirements and restrictions on health care service plans and health insurers, including, among other things, requiring a health care service plan that provides prescription drug benefits to maintain an expeditious process by which prescribing providers, as described, may obtain authorization for a medically necessary nonformulary prescription drug, according to certain procedures.

This bill would prohibit a health care service plan or health insurer that provides medication pursuant to a step therapy or first-fail fail-first requirement from applying that requirement to a patient who has made a step therapy override determination request if, in the professional judgment of the prescribing physician, the step therapy or first-fail fail-first requirement would be medically inappropriate for that patient for specified reasons.

Because a willful violation of these requirements with respect to health care service plans would be a crime, the 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.

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 that act a crime. Existing law also provides for the regulation of health insurers by the Department of Insurance. Existing law imposes various requirements and restrictions on health care service plans and health insurers, including, among other things, requiring a health care service plan that provides prescription drug benefits to maintain an expeditious process by which prescribing providers, as described, may obtain authorization for a medically necessary nonformulary prescription drug, according to certain procedures.

This bill would prohibit a health care service plan or health insurer that provides medication pursuant to a step therapy or first-fail requirement from applying that requirement to a patient if, in the professional judgment of the prescribing physician, the step therapy or first-fail requirement would be medically inappropriate for that patient.

Because a willful violation of these requirements with respect to health care service plans would be a crime, the 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.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 374

Author:(Nazarian)

As Amended Ver:September 2, 2015

Majority vote

Original Committee Reference: HEALTH

SUMMARY: Creates a process for prescribers to request an override of a health plan or health insurer's step therapy requirement.

The Senate amendments further the initial policy intent of this bill, but delete the assembly-approved language that limited the use of step therapy protocols and instead:

1. Authorize a request for an exception to a health care service plan's or health insurer's step therapy process for prescription drugs to be submitted in the same manner as a request for prior authorization for prescription drugs.

2. Require the plan or insurer to treat, and respond to, the request in the same manner as a request for prior authorization for prescription drugs.

3. Require the Department of Managed Health Care (DMHC) and the Department of Insurance (CDI) to include a provision for step therapy exception requests in the uniform prior authorization form specified above.

FISCAL EFFECT: According to the Senate Appropriations Committee, minor costs to CDI and DMHC to revise the existing prior authorization form to allow it to be used for step therapy override requests.

COMMENTS: According to the author, use of step therapy leads to an exacerbation of a patient's condition, potentially causing irreversible deterioration or damage to the patient, such as limiting their daily functions and ability to remain a productive member of the workforce and society. The author asserts that a determination about whether a step therapy protocol is appropriate should take into account the individual needs and circumstances of the patient, along with the professional judgment of the prescribing physician.

According to the California Health Benefits Review Program (CHBRP), step therapy, or fail-first protocols, may be implemented as methods of utilization management in a variety of ways and are known by a number of terms. Step therapy, when implemented by carriers, requires an enrollee to try a first-line medication (often a generic alternative) prior to receiving coverage for a second-line medication (often a brand-name medication). A fail-first protocol may also be the basis for part or all of a precertification or prior authorization protocol, which may also require the prescribing provider to confirm to the plan or insurer that an alternate medication or medications have been unsuccessfully tried by the patient before the coverage for the prescribed medication is approved. However, not all prior authorization protocols have a fail-first component. Some prior authorization protocols are based on other criteria, such as intended use to treat a specific medical problem or diagnosis, or confirmation that the patient meets other criteria such as age or specified comorbidities.

There is a wide variation in the presence of step therapy protocols among plans. According to CHBRP, approximately 3% of covered enrollees have no outpatient drug benefits, and 34% have drug benefits that are not subject to step therapy protocols. Of the remaining 63% of enrollees with outpatient drug coverage, the number of drugs subjected to Step Therapy Protocol varies from two to more than 100.

Existing law provides certain protections for insured patients. Under state regulation, a plan that requires step therapy must have an expeditious process in place to authorize exceptions to step therapy when medically necessary. Step therapy overrides follow a procedure by which a prescriber submits clinical documentation to the plan or insurer documenting why an enrollee should be allowed to skip one or more of a protocol's steps.

In many plans, the step therapy override process is the same as the prior authorization process. Step therapy override requests may take several days to be reviewed by the plan or insurer. For prior authorization, DMHC-regulated plans are required to respond and issue authorization determinations within two business days. CDI-regulated insurers are required to issue nonurgent authorization determinations within five business days. Urgent determinations must be made within 72 hours. Existing regulations also state that a plan or insurer must notify the patient of their right to appeal the dispute through independent medical review.

Support and Opposition letters on file refer to a previous version of this bill.

Analysis Prepared by: Dharia McGrew / HEALTH / (916) 319-2097 FN: 0002085

 THIRD READING  

Bill No: AB 374

Author: Nazarian (D)

Amended: 9/2/15 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: 63-14, 6/2/15 - See last page for vote

SUBJECT: Health care coverage: prescription drugs

SOURCE: Arthritis Foundation

California Rheumatology Alliance

Union of American Physician and Dentists/AFSCME Local 206

DIGEST: This bill permits an exception to a health plan or insurer’s step therapy process to be submitted in the same manner as a request for prior authorization for prescription drugs. This bill requires those requests to be treated in the same manner, and responded to by the plan or insurer in the same manner, as a prior authorization request.

Senate Floor Amendments of 9/2/15 delete language that is redundant with existing law.

ANALYSIS:

Existing law:

1. Provides for regulation of health insurers by the California Department of Insurance (CDI) under the Insurance Code, and provides for the regulation of health plans by the Department of Managed Health Care (DMHC), pursuant to the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene Act).

2. Requires carriers to provide certain benefits, but does not require carriers to cover prescription drugs. Establishes various requirements on carriers if they do offer prescription drug coverage.

3. Prohibits carriers that cover prescription drugs from limiting or excluding coverage for a drug on the basis that the drug is prescribed for a use different from the use for which the drug has been approved by the federal Food and Drug Administration, provided that specified conditions have been met, including that the drug is prescribed by a participating licensed health care professional for the treatment of a chronic and seriously debilitating condition, the drug is medically necessary to treat that condition, and the drug is on the plan formulary.

4. Requires DMHC-regulated plans to respond issue authorization determinations within two business days. Requires CDI-regulated insurers to issue nonurgent authorization determinations within five business days and urgent determinations to be made within 72 hours.

5. Requires DMHC and CDI to jointly develop a uniform prior authorization form that health plans and insurers must accept when prescribing providers seek authorization for prescription drug benefits.
   
   

This bill:

1. Permits an exception to a health plan or insurer’s step therapy process to be submitted in the same manner as a request for prior authorization for prescription drugs. Requires those requests to be treated in the same manner, and responded to by the plan or insurer in the same manner, as a prior authorization request.

2. Requires DMHC and CDI to include a provision for step therapy exception request in the uniform prior authorization form developed pursuant to #5 in existing law above.

Comments

1. Author’s statement. According to the author, AB 374 does not prohibit step therapy protocols. Rather, this bill establishes an exception process that creates a balance between a provider’s professional judgment and health plan and insurer’s business practice. This bill recognizes that the health plan/insurer must not have complete and ultimate control on the medications a patient is permitted to try.  Plans utilize step therapy to reduce their costs. This process forces patients to “fail first” on several alternative medications, before they are permitted to obtain the appropriate medication. Anecdotal data shows that plans may require a patient to try up to five different medications before receiving the one prescribed by their physician. Also, the duration of this protocol is left up to the health plan and has been known to last up to 90 days.  Step therapy is based solely on cost and does not take into consideration patients’ unique needs. The use of step therapy can exacerbate patient’s condition, causing irreversible deterioration or damage to patients, such as limiting their daily functions and ability to remain a productive member of the workforce and society.

2. Step therapy. According to the California Health Benefits Review Program (CHBRP), step therapy, or fail-first protocols, may be implemented as methods of utilization management in a variety of ways and are known by a number of terms. Step therapy, when implemented by carriers, requires an enrollee to try a first-line medication (often a generic alternative) prior to receiving coverage for a second-line medication (often a brand-name medication). Step edit is a process by which a prescription, submitted for payment authorization, is electronically reviewed at point-of-service for use of a prior, first-line medication. For either step therapy or step edit, upon decline of coverage for the prescription, a patient’s health care provider may reissue the prescription for a first-line agent covered by the patient’s health plan contract or policy or appeal the decision. Alternatively, the patient may purchase the prescription despite the lack of coverage. A fail-first protocol may also be the basis for part or all of a precertification or prior authorization protocol, which may also require the prescribing provider to confirm to the plan or insurer that an alternate medication or medications have been unsuccessfully tried by the patient before the coverage for the prescribed medication is approved. However, not all prior authorization protocols have a fail-first component. Some prior authorization protocols are based on other criteria, such as intended use to treat a specific medical problem or diagnosis, or confirmation that the patient meets other criteria such as age or specified comorbidities.

For its review of this bill, CHBRP identified 15 studies of the impact of step therapy protocols on varying drugs. The studies CHBRP identified addressed step therapy protocols (STPs) for: antidepressants, antihypertensives, antipsychotics and anticonvulsants, nonsteroidal anti-inflammatory drugs (to reduce inflation or pain, and proton pump inhibitors to reduce stomach acidity. No studies were found that addressed STP or override procedures across all drug classes. According to CHBRP, there is no pattern as to particular drugs being more likely to be subject to step therapy protocols amongst California plans/insurers. Among enrollees with an outpatient prescription drug (OPD) benefit, there is not even a pattern in the presence or number-of protocols. For example, 34.4% of enrollees with an OPD benefit are not subject to step therapy protocols. Among the remaining 62.6% of enrollees with an OPD benefit, the number of drugs subject to step therapy varies widely, from two to more than 100.

3. Existing policy on step therapy exceptions. Under regulation, Knox-Keene plans are permitted to require step therapy, but must have an expeditious process in place to authorize exceptions when medically necessary and to conform effectively and efficiently with continuity of care requirements. In circumstances where an enrollee is changing plans, the new plan may not require the enrollee to repeat step therapy when he or she 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 enrollee's condition. Under these circumstances, the regulation permits the new plan to impose a prior authorization requirement for the continued coverage. This Knox-Keene regulation is referenced in regulations related CDI insurers, but there is some question as to whether it applies to those products. Nevertheless, it appears that, in practice, insurers apply the same protocol for step therapy exceptions across all lines of business regardless of the regulator. According to CHBRP, to obtain a step therapy override a prescriber first submits clinical documentation to the health plan or insurer documenting why an enrollee should be allowed should skip one or more step. Reasons prescribers use to justify such an override include the enrollee has already tried a drug unsuccessfully or the drug is contraindicated for that enrollee due to drug-drug interactions, drug-disease interactions, or drug allergy or intolerance. According to CHRBP, step therapy override requests may take several days to be reviewed by the health plan or insurer.

4. Opposition. The opposition listed below is based upon the previous version. Amendments taken on September 1, 2015, may have addressed many of the oppositions’ concerns.

Prior Legislation

AB 889 (Huffman, 2014) would have permitted health plans and insurers, when there is more than one drug that is appropriate for the treatment of a medical condition, to require step therapy, but would have prohibited them from requiring an enrollee to try and fail on more than two medications before allowing the enrollee access to the medication, or generically equivalent drug, as specified. AB 889 died on the Senate Appropriations Committee suspense file.

AB 1814 (Waldron, 2014) was substantially similar to AB 73. AB 889 died on the Assembly Appropriations Committee suspense file.

AB 369 (Huffman, 2012) would have prohibited carriers that restrict medications for the treatment of pain, pursuant to step therapy or fail-first protocol, from requiring a patient to try and fail on more than two pain medications before allowing the patient access to the pain medication, or generically equivalent drug, as defined, prescribed by the prescribing provider, as defined. AB 369 was vetoed by Governor Brown, who stated:

While I sympathize with the author's good intentions, I am not convinced that this bill strikes the right balance between physician discretion and health plan or insurer oversight. A doctor's judgment and a health plan's clinical protocols both have a role in ensuring the prudent prescribing of pain medications. Independent medical reviews are available to resolve differences in clinical judgment when they occur, even on an expedited basis.

If current law does not suffice, and I am not certain that it doesn't, any limitations on the practice of "step-therapy" should better reflect a health plan or insurer's legitimate role in determining the allowable steps.

AB 1826 (Huffman, 2010) would have required a carrier that covers prescription drug benefits to provide coverage for a drug that has been prescribed for the treatment of pain without first requiring the enrollee or insured to use an alternative drug or product. AB 1826 died on the Senate Appropriations Committee suspense file.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

According to the Senate Appropriations Committee, minor costs to CDI and DMHC to revise the existing prior authorization form to allow it to be used for step therapy override requests.

SUPPORT: (Verified 9/3/15)

Arthritis Foundation (co-source)

California Rheumatology Alliance (co-source)

Union of American Physician and Dentists/AFSCME Local 206 (co-source)

ALS Association Golden West Chapter

American Cancer Society Cancer Action Network

American GI Forum

Association of Northern California Oncologists

Bay Area Women’s Health Advocacy Council

Biocom

California Academy of Physician Assistants

California Association of Area Agencies on Aging

California Chapter of the National Association of Social Workers

California Chronic Care Coalition

California Council for the Advancement of Pharmacy

California Healthcare Institute

California Hepatitis C Task Force

California Life Sciences Association

California Pharmacists Association

California Primary Care Association

California School Employees Association

California State Retirees

Congress of California Seniors

Epilepsy California

International Foundation for Autoimmune Arthritis

Latina Breast Cancer Agency

Leukemia and Lymphoma Society

Lupus Foundation of Northern California

Lupus Foundation of Southern California

Medical Oncology Association of Southern California

Mental Health America of California

NAMI California

National Multiple Sclerosis Society California

Neuropathy Action Foundation

Osteopathic Physicians and Surgeons of California

Pharmaceutical Research and Manufacturers of America

Power of Pain Foundation

Susan G. Komen Central Valley Affiliate

Susan G. Komen Inland Empire Affiliate

Susan G. Komen Los Angeles County Affiliate

Susan G. Komen Orange County Affiliate

Susan G. Komen Sacramento Valley Affiliate

Susan G. Komen San Diego Affiliate

Susan G. Komen San Francisco Bay Area Affiliate

Western Center on Law and Poverty

Western Neuropathy Association

OPPOSITION: (Verified 9/3/15)

California Association of Health Plans

California Department of Managed Health Care

CSAC Excess Insurance Authority

CVS Health

For Grace

Molina Healthcare of California

Pharmaceutical Care Management Association

ASSEMBLY FLOOR: 63-14, 6/2/15

AYES: Achadjian, Alejo, Baker, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Hadley, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Levine, Linder, Lopez, Low, Mayes, McCarty, Medina, Mullin, Nazarian, O'Donnell, Olsen, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Waldron, Weber, Wilk, Williams, Wood, Atkins

NOES: Travis Allen, Bigelow, Dahle, Beth Gaines, Harper, Kim, Lackey, Maienschein, Mathis, Melendez, Obernolte, Patterson, Steinorth, Wagner

NO VOTE RECORDED: Chang, Chávez, Grove

Prepared by: Melanie Moreno / HEALTH /

9/4/15 18:55:35

**** END ****

 THIRD READING  

Bill No: AB 374

Author: Nazarian (D)

Amended: 9/2/15 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: 63-14, 6/2/15 - See last page for vote

SUBJECT: Health care coverage: prescription drugs

SOURCE: Arthritis Foundation

California Rheumatology Alliance

Union of American Physician and Dentists/AFSCME Local 206

DIGEST: This bill permits an exception to a health plan or insurer’s step therapy process to be submitted in the same manner as a request for prior authorization for prescription drugs. This bill requires those requests to be treated in the same manner, and responded to by the plan or insurer in the same manner, as a prior authorization request.

Senate Floor Amendments of 9/2/15 delete language that is redundant with existing law.

ANALYSIS:

Existing law:

1. Provides for regulation of health insurers by the California Department of Insurance (CDI) under the Insurance Code, and provides for the regulation of health plans by the Department of Managed Health Care (DMHC), pursuant to the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene Act).

2. Requires carriers to provide certain benefits, but does not require carriers to cover prescription drugs. Establishes various requirements on carriers if they do offer prescription drug coverage.

3. Prohibits carriers that cover prescription drugs from limiting or excluding coverage for a drug on the basis that the drug is prescribed for a use different from the use for which the drug has been approved by the federal Food and Drug Administration, provided that specified conditions have been met, including that the drug is prescribed by a participating licensed health care professional for the treatment of a chronic and seriously debilitating condition, the drug is medically necessary to treat that condition, and the drug is on the plan formulary.

4. Requires DMHC-regulated plans to respond issue authorization determinations within two business days. Requires CDI-regulated insurers to issue nonurgent authorization determinations within five business days and urgent determinations to be made within 72 hours.

5. Requires DMHC and CDI to jointly develop a uniform prior authorization form that health plans and insurers must accept when prescribing providers seek authorization for prescription drug benefits.
   
   

This bill:

1. Permits an exception to a health plan or insurer’s step therapy process to be submitted in the same manner as a request for prior authorization for prescription drugs. Requires those requests to be treated in the same manner, and responded to by the plan or insurer in the same manner, as a prior authorization request.

2. Requires DMHC and CDI to include a provision for step therapy exception request in the uniform prior authorization form developed pursuant to #5 in existing law above.

Comments

1. Author’s statement. According to the author, AB 374 does not prohibit step therapy protocols. Rather, this bill establishes an exception process that creates a balance between a provider’s professional judgment and health plan and insurer’s business practice. This bill recognizes that the health plan/insurer must not have complete and ultimate control on the medications a patient is permitted to try.  Plans utilize step therapy to reduce their costs. This process forces patients to “fail first” on several alternative medications, before they are permitted to obtain the appropriate medication. Anecdotal data shows that plans may require a patient to try up to five different medications before receiving the one prescribed by their physician. Also, the duration of this protocol is left up to the health plan and has been known to last up to 90 days.  Step therapy is based solely on cost and does not take into consideration patients’ unique needs. The use of step therapy can exacerbate patient’s condition, causing irreversible deterioration or damage to patients, such as limiting their daily functions and ability to remain a productive member of the workforce and society.

2. Step therapy. According to the California Health Benefits Review Program (CHBRP), step therapy, or fail-first protocols, may be implemented as methods of utilization management in a variety of ways and are known by a number of terms. Step therapy, when implemented by carriers, requires an enrollee to try a first-line medication (often a generic alternative) prior to receiving coverage for a second-line medication (often a brand-name medication). Step edit is a process by which a prescription, submitted for payment authorization, is electronically reviewed at point-of-service for use of a prior, first-line medication. For either step therapy or step edit, upon decline of coverage for the prescription, a patient’s health care provider may reissue the prescription for a first-line agent covered by the patient’s health plan contract or policy or appeal the decision. Alternatively, the patient may purchase the prescription despite the lack of coverage. A fail-first protocol may also be the basis for part or all of a precertification or prior authorization protocol, which may also require the prescribing provider to confirm to the plan or insurer that an alternate medication or medications have been unsuccessfully tried by the patient before the coverage for the prescribed medication is approved. However, not all prior authorization protocols have a fail-first component. Some prior authorization protocols are based on other criteria, such as intended use to treat a specific medical problem or diagnosis, or confirmation that the patient meets other criteria such as age or specified comorbidities.

For its review of this bill, CHBRP identified 15 studies of the impact of step therapy protocols on varying drugs. The studies CHBRP identified addressed step therapy protocols (STPs) for: antidepressants, antihypertensives, antipsychotics and anticonvulsants, nonsteroidal anti-inflammatory drugs (to reduce inflation or pain, and proton pump inhibitors to reduce stomach acidity. No studies were found that addressed STP or override procedures across all drug classes. According to CHBRP, there is no pattern as to particular drugs being more likely to be subject to step therapy protocols amongst California plans/insurers. Among enrollees with an outpatient prescription drug (OPD) benefit, there is not even a pattern in the presence or number-of protocols. For example, 34.4% of enrollees with an OPD benefit are not subject to step therapy protocols. Among the remaining 62.6% of enrollees with an OPD benefit, the number of drugs subject to step therapy varies widely, from two to more than 100.

3. Existing policy on step therapy exceptions. Under regulation, Knox-Keene plans are permitted to require step therapy, but must have an expeditious process in place to authorize exceptions when medically necessary and to conform effectively and efficiently with continuity of care requirements. In circumstances where an enrollee is changing plans, the new plan may not require the enrollee to repeat step therapy when he or she 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 enrollee's condition. Under these circumstances, the regulation permits the new plan to impose a prior authorization requirement for the continued coverage. This Knox-Keene regulation is referenced in regulations related CDI insurers, but there is some question as to whether it applies to those products. Nevertheless, it appears that, in practice, insurers apply the same protocol for step therapy exceptions across all lines of business regardless of the regulator. According to CHBRP, to obtain a step therapy override a prescriber first submits clinical documentation to the health plan or insurer documenting why an enrollee should be allowed should skip one or more step. Reasons prescribers use to justify such an override include the enrollee has already tried a drug unsuccessfully or the drug is contraindicated for that enrollee due to drug-drug interactions, drug-disease interactions, or drug allergy or intolerance. According to CHRBP, step therapy override requests may take several days to be reviewed by the health plan or insurer.

4. Opposition. The opposition listed below is based upon the previous version. Amendments taken on September 1, 2015, may have addressed many of the oppositions’ concerns.

Prior Legislation

AB 889 (Huffman, 2014) would have permitted health plans and insurers, when there is more than one drug that is appropriate for the treatment of a medical condition, to require step therapy, but would have prohibited them from requiring an enrollee to try and fail on more than two medications before allowing the enrollee access to the medication, or generically equivalent drug, as specified. AB 889 died on the Senate Appropriations Committee suspense file.

AB 1814 (Waldron, 2014) was substantially similar to AB 73. AB 889 died on the Assembly Appropriations Committee suspense file.

AB 369 (Huffman, 2012) would have prohibited carriers that restrict medications for the treatment of pain, pursuant to step therapy or fail-first protocol, from requiring a patient to try and fail on more than two pain medications before allowing the patient access to the pain medication, or generically equivalent drug, as defined, prescribed by the prescribing provider, as defined. AB 369 was vetoed by Governor Brown, who stated:

While I sympathize with the author's good intentions, I am not convinced that this bill strikes the right balance between physician discretion and health plan or insurer oversight. A doctor's judgment and a health plan's clinical protocols both have a role in ensuring the prudent prescribing of pain medications. Independent medical reviews are available to resolve differences in clinical judgment when they occur, even on an expedited basis.

If current law does not suffice, and I am not certain that it doesn't, any limitations on the practice of "step-therapy" should better reflect a health plan or insurer's legitimate role in determining the allowable steps.

AB 1826 (Huffman, 2010) would have required a carrier that covers prescription drug benefits to provide coverage for a drug that has been prescribed for the treatment of pain without first requiring the enrollee or insured to use an alternative drug or product. AB 1826 died on the Senate Appropriations Committee suspense file.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

According to the Senate Appropriations Committee, minor costs to CDI and DMHC to revise the existing prior authorization form to allow it to be used for step therapy override requests.

SUPPORT: (Verified 9/3/15)

Arthritis Foundation (co-source)

California Rheumatology Alliance (co-source)

Union of American Physician and Dentists/AFSCME Local 206 (co-source)

ALS Association Golden West Chapter

American Cancer Society Cancer Action Network

American GI Forum

Association of Northern California Oncologists

Bay Area Women’s Health Advocacy Council

Biocom

California Academy of Physician Assistants

California Association of Area Agencies on Aging

California Chapter of the National Association of Social Workers

California Chronic Care Coalition

California Council for the Advancement of Pharmacy

California Healthcare Institute

California Hepatitis C Task Force

California Life Sciences Association

California Pharmacists Association

California Primary Care Association

California School Employees Association

California State Retirees

Congress of California Seniors

Epilepsy California

International Foundation for Autoimmune Arthritis

Latina Breast Cancer Agency

Leukemia and Lymphoma Society

Lupus Foundation of Northern California

Lupus Foundation of Southern California

Medical Oncology Association of Southern California

Mental Health America of California

NAMI California

National Multiple Sclerosis Society California

Neuropathy Action Foundation

Osteopathic Physicians and Surgeons of California

Pharmaceutical Research and Manufacturers of America

Power of Pain Foundation

Susan G. Komen Central Valley Affiliate

Susan G. Komen Inland Empire Affiliate

Susan G. Komen Los Angeles County Affiliate

Susan G. Komen Orange County Affiliate

Susan G. Komen Sacramento Valley Affiliate

Susan G. Komen San Diego Affiliate

Susan G. Komen San Francisco Bay Area Affiliate

Western Center on Law and Poverty

Western Neuropathy Association

OPPOSITION: (Verified 9/3/15)

California Association of Health Plans

California Association of Joint Powers Authorities

California Department of Managed Health Care

CSAC Excess Insurance Authority

CVS Health

For Grace

Molina Healthcare of California

Pharmaceutical Care Management Association

ASSEMBLY FLOOR: 63-14, 6/2/15

AYES: Achadjian, Alejo, Baker, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Hadley, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Levine, Linder, Lopez, Low, Mayes, McCarty, Medina, Mullin, Nazarian, O'Donnell, Olsen, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Waldron, Weber, Wilk, Williams, Wood, Atkins

NOES: Travis Allen, Bigelow, Dahle, Beth Gaines, Harper, Kim, Lackey, Maienschein, Mathis, Melendez, Obernolte, Patterson, Steinorth, Wagner

NO VOTE RECORDED: Chang, Chávez, Grove

Prepared by: Melanie Moreno / HEALTH /

9/3/15 17:50:08

**** END ****

 THIRD READING  

Bill No: AB 374

Author: Nazarian (D)

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: 63-14, 6/2/15 - See last page for vote

SUBJECT: Health care coverage: prescription drugs

SOURCE: Arthritis Foundation

California Rheumatology Alliance

Union of American Physician and Dentists/AFSCME Local 206

DIGEST: This bill permits an exception to a health plan or insurer’s step therapy process to be submitted in the same manner as a request for prior authorization for prescription drugs. This bill requires those requests to be treated in the same manner, and responded to by the plan or insurer in the same manner, as a prior authorization request, including utilization of any grievance process applicable, as specified.

ANALYSIS:

Existing law:

1. Provides for regulation of health insurers by the California Department of Insurance (CDI) under the Insurance Code, and provides for the regulation of health plans by the Department of Managed Health Care (DMHC), pursuant to the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene Act).

2. Requires carriers to provide certain benefits, but does not require carriers to cover prescription drugs. Establishes various requirements on carriers if they do offer prescription drug coverage.

3. Prohibits carriers that cover prescription drugs from limiting or excluding coverage for a drug on the basis that the drug is prescribed for a use different from the use for which the drug has been approved by the federal Food and Drug Administration, provided that specified conditions have been met, including that the drug is prescribed by a participating licensed health care professional for the treatment of a chronic and seriously debilitating condition, the drug is medically necessary to treat that condition, and the drug is on the plan formulary.

4. Requires DMHC-regulated plans to respond issue authorization determinations within two business days. Requires CDI-regulated insurers to issue nonurgent authorization determinations within five business days and urgent determinations to be made within 72 hours.

5. Requires DMHC and CDI to jointly develop a uniform prior authorization form that health plans and insurers must accept when prescribing providers seek authorization for prescription drug benefits.
   
   

This bill:

1. Permits an exception to a health plan or insurer’s step therapy process to be submitted in the same manner as a request for prior authorization for prescription drugs. Requires those requests to be treated in the same manner, and responded to by the plan or insurer in the same manner, as a prior authorization request, including utilization of any grievance process applicable, as specified.

2. Requires DMHC and CDI to include a provision for step therapy exception request in the uniform prior authorization form developed pursuant to #5 in existing law above.

Comments

1. Author’s statement. According to the author, AB 374 does not prohibit step therapy protocols. Rather, this bill establishes an exception process that creates a balance between a provider’s professional judgment and health plan and insurer’s business practice. This bill recognizes that the health plan/insurer must not have complete and ultimate control on the medications a patient is permitted to try.  Plans utilize step therapy to reduce their costs. This process forces patients to “fail first” on several alternative medications, before they are permitted to obtain the appropriate medication. Anecdotal data shows that plans may require a patient to try up to five different medications before receiving the one prescribed by their physician. Also, the duration of this protocol is left up to the health plan and has been known to last up to 90 days.  Step therapy is based solely on cost and does not take into consideration patients’ unique needs. The use of step therapy can exacerbate patient’s condition, causing irreversible deterioration or damage to patients, such as limiting their daily functions and ability to remain a productive member of the workforce and society.

2. Step therapy. According to the California Health Benefits Review Program (CHBRP), step therapy, or fail-first protocols, may be implemented as methods of utilization management in a variety of ways and are known by a number of terms. Step therapy, when implemented by carriers, requires an enrollee to try a first-line medication (often a generic alternative) prior to receiving coverage for a second-line medication (often a brand-name medication). Step edit is a process by which a prescription, submitted for payment authorization, is electronically reviewed at point-of-service for use of a prior, first-line medication. For either step therapy or step edit, upon decline of coverage for the prescription, a patient’s health care provider may reissue the prescription for a first-line agent covered by the patient’s health plan contract or policy or appeal the decision. Alternatively, the patient may purchase the prescription despite the lack of coverage. A fail-first protocol may also be the basis for part or all of a precertification or prior authorization protocol, which may also require the prescribing provider to confirm to the plan or insurer that an alternate medication or medications have been unsuccessfully tried by the patient before the coverage for the prescribed medication is approved. However, not all prior authorization protocols have a fail-first component. Some prior authorization protocols are based on other criteria, such as intended use to treat a specific medical problem or diagnosis, or confirmation that the patient meets other criteria such as age or specified comorbidities.

For its review of this bill, CHBRP identified 15 studies of the impact of step therapy protocols on varying drugs. The studies CHBRP identified addressed step therapy protocols (STPs) for: antidepressants, antihypertensives, antipsychotics and anticonvulsants, nonsteroidal anti-inflammatory drugs (to reduce inflation or pain, and proton pump inhibitors to reduce stomach acidity. No studies were found that addressed STP or override procedures across all drug classes. According to CHBRP, there is no pattern as to particular drugs being more likely to be subject to step therapy protocols amongst California plans/insurers. Among enrollees with an outpatient prescription drug (OPD) benefit, there is not even a pattern in the presence or number-of protocols. For example, 34.4% of enrollees with an OPD benefit are not subject to step therapy protocols. Among the remaining 62.6% of enrollees with an OPD benefit, the number of drugs subject to step therapy varies widely, from two to more than 100.

3. Existing policy on step therapy exceptions. Under regulation, Knox-Keene plans are permitted to require step therapy, but must have an expeditious process in place to authorize exceptions when medically necessary and to conform effectively and efficiently with continuity of care requirements. In circumstances where an enrollee is changing plans, the new plan may not require the enrollee to repeat step therapy when he or she 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 enrollee's condition. Under these circumstances, the regulation permits the new plan to impose a prior authorization requirement for the continued coverage. This Knox-Keene regulation is referenced in regulations related CDI insurers, but there is some question as to whether it applies to those products. Nevertheless, it appears that, in practice, insurers apply the same protocol for step therapy exceptions across all lines of business regardless of the regulator. According to CHBRP, to obtain a step therapy override a prescriber first submits clinical documentation to the health plan or insurer documenting why an enrollee should be allowed should skip one or more step. Reasons prescribers use to justify such an override include the enrollee has already tried a drug unsuccessfully or the drug is contraindicated for that enrollee due to drug-drug interactions, drug-disease interactions, or drug allergy or intolerance. According to CHRBP, step therapy override requests may take several days to be reviewed by the health plan or insurer.

4. Opposition. The opposition listed below is based upon the previous version. Amendments taken on 9/1/2015 may have addressed many of the oppositions concerns.

Prior Legislation

AB 889 (Huffman, 2014) would have permitted health plans and insurers, when there is more than one drug that is appropriate for the treatment of a medical condition, to require step therapy, but would have prohibited them from requiring an enrollee to try and fail on more than two medications before allowing the enrollee access to the medication, or generically equivalent drug, as specified. AB 889 died on the Senate Appropriations Committee suspense file.

AB 1814 (Waldron, 2014) was substantially similar to AB 73. AB 889 died on the Assembly Appropriations Committee suspense file.

AB 369 (Huffman, 2012) would have prohibited carriers that restrict medications for the treatment of pain, pursuant to step therapy or fail-first protocol, from requiring a patient to try and fail on more than two pain medications before allowing the patient access to the pain medication, or generically equivalent drug, as defined, prescribed by the prescribing provider, as defined. AB 369 was vetoed by Governor Brown, who stated:

While I sympathize with the author's good intentions, I am not convinced that this bill strikes the right balance between physician discretion and health plan or insurer oversight. A doctor's judgment and a health plan's clinical protocols both have a role in ensuring the prudent prescribing of pain medications. Independent medical reviews are available to resolve differences in clinical judgment when they occur, even on an expedited basis.

If current law does not suffice, and I am not certain that it doesn't, any limitations on the practice of "step-therapy" should better reflect a health plan or insurer's legitimate role in determining the allowable steps.

AB 1826 (Huffman, 2010) would have required a carrier that covers prescription drug benefits to provide coverage for a drug that has been prescribed for the treatment of pain without first requiring the enrollee or insured to use an alternative drug or product. AB 1826 died on the Senate Appropriations Committee suspense file.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

According to the Senate Appropriations Committee, minor costs to CDI and DMHC to revise the existing prior authorization form to allow it to be used for step therapy override requests.

SUPPORT: (Verified 8/31/15)

Arthritis Foundation (co-source)

California Rheumatology Alliance (co-source)

Union of American Physician and Dentists/AFSCME Local 206 (co-source)

ALS Association Golden West Chapter

American Cancer Society Cancer Action Network

American GI Forum

Association of Northern California Oncologists

Bay Area Women’s Health Advocacy Council

Biocom

California Academy of Physician Assistants

California Association of Area Agencies on Aging

California Chapter of the National Association of Social Workers

California Chronic Care Coalition

California Council for the Advancement of Pharmacy

California Healthcare Institute

California Hepatitis C Task Force

California Life Sciences Association

California Pharmacists Association

California Primary Care Association

California School Employees Association

California State Retirees

Congress of California Seniors

Epilepsy California

International Foundation for Autoimmune Arthritis

Latina Breast Cancer Agency

Leukemia and Lymphoma Society

Lupus Foundation of Northern California

Lupus Foundation of Southern California

Medical Oncology Association of Southern California

Mental Health America of California

NAMI California

National Multiple Sclerosis Society California

Neuropathy Action Foundation

Osteopathic Physicians and Surgeons of California

Pharmaceutical Research and Manufacturers of America

Power of Pain Foundation

Susan G. Komen Central Valley Affiliate

Susan G. Komen Inland Empire Affiliate

Susan G. Komen Los Angeles County Affiliate

Susan G. Komen Orange County Affiliate

Susan G. Komen Sacramento Valley Affiliate

Susan G. Komen San Diego Affiliate

Susan G. Komen San Francisco Bay Area Affiliate

Western Center on Law and Poverty

Western Neuropathy Association

OPPOSITION: (Verified 8/31/15)

Association of California Life and Health Insurance Companies

California Association of Health Plans

California Association of Health Underwriters

California Association of Joint Powers Authorities

California Chamber of Commerce

California Department of Managed Health Care

CSAC Excess Insurance Authority

CVS Health

Express Scripts

For Grace

Molina Healthcare of California

Pharmaceutical Care Management Association

ASSEMBLY FLOOR: 63-14, 6/2/15

AYES: Achadjian, Alejo, Baker, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Hadley, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Levine, Linder, Lopez, Low, Mayes, McCarty, Medina, Mullin, Nazarian, O'Donnell, Olsen, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Waldron, Weber, Wilk, Williams, Wood, Atkins

NOES: Travis Allen, Bigelow, Dahle, Beth Gaines, Harper, Kim, Lackey, Maienschein, Mathis, Melendez, Obernolte, Patterson, Steinorth, Wagner

NO VOTE RECORDED: Chang, Chávez, Grove

Prepared by: Melanie Moreno / HEALTH /

9/2/15 14:31:47

*** END ***

 THIRD READING  

Bill No: AB 374

Author: Nazarian (D)

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: 63-14, 6/2/15 - See last page for vote

SUBJECT: Health care coverage: prescription drugs

SOURCE: Arthritis Foundation

California Rheumatology Alliance

Union of American Physician and Dentists/AFSCME Local 206

DIGEST: This bill permits an exception to a health plan or insurer’s step therapy process to be submitted in the same manner as a request for prior authorization for prescription drugs. This bill requires those requests to be treated in the same manner, and responded to by the plan or insurer in the same manner, as a prior authorization request, including utilization of any grievance process applicable, as specified.

ANALYSIS:

Existing law:

1. Provides for regulation of health insurers by the California Department of Insurance (CDI) under the Insurance Code, and provides for the regulation of health plans by the Department of Managed Health Care (DMHC), pursuant to the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene Act).

2. Requires carriers to provide certain benefits, but does not require carriers to cover prescription drugs. Establishes various requirements on carriers if they do offer prescription drug coverage.

3. Prohibits carriers that cover prescription drugs from limiting or excluding coverage for a drug on the basis that the drug is prescribed for a use different from the use for which the drug has been approved by the federal Food and Drug Administration, provided that specified conditions have been met, including that the drug is prescribed by a participating licensed health care professional for the treatment of a chronic and seriously debilitating condition, the drug is medically necessary to treat that condition, and the drug is on the plan formulary.

4. Requires DMHC-regulated plans to respond issue authorization determinations within two business days. Requires CDI-regulated insurers to issue nonurgent authorization determinations within five business days and urgent determinations to be made within 72 hours.

5. Requires DMHC and CDI to jointly develop a uniform prior authorization form that health plans and insurers must accept when prescribing providers seek authorization for prescription drug benefits.
   
   

This bill:

1. Permits an exception to a health plan or insurer’s step therapy process to be submitted in the same manner as a request for prior authorization for prescription drugs. Requires those requests to be treated in the same manner, and responded to by the plan or insurer in the same manner, as a prior authorization request, including utilization of any grievance process applicable, as specified.

2. Requires DMHC and CDI to include a provision for step therapy exception request in the uniform prior authorization form developed pursuant to #5 in existing law above.

Comments

1. Author’s statement. According to the author, AB 374 does not prohibit step therapy protocols. Rather, this bill establishes an exception process that creates a balance between a provider’s professional judgment and health plan and insurer’s business practice. This bill recognizes that the health plan/insurer must not have complete and ultimate control on the medications a patient is permitted to try.  Plans utilize step therapy to reduce their costs. This process forces patients to “fail first” on several alternative medications, before they are permitted to obtain the appropriate medication. Anecdotal data shows that plans may require a patient to try up to five different medications before receiving the one prescribed by their physician. Also, the duration of this protocol is left up to the health plan and has been known to last up to 90 days.  Step therapy is based solely on cost and does not take into consideration patients’ unique needs. The use of step therapy can exacerbate patient’s condition, causing irreversible deterioration or damage to patients, such as limiting their daily functions and ability to remain a productive member of the workforce and society.

2. Step therapy. According to the California Health Benefits Review Program (CHBRP), step therapy, or fail-first protocols, may be implemented as methods of utilization management in a variety of ways and are known by a number of terms. Step therapy, when implemented by carriers, requires an enrollee to try a first-line medication (often a generic alternative) prior to receiving coverage for a second-line medication (often a brand-name medication). Step edit is a process by which a prescription, submitted for payment authorization, is electronically reviewed at point-of-service for use of a prior, first-line medication. For either step therapy or step edit, upon decline of coverage for the prescription, a patient’s health care provider may reissue the prescription for a first-line agent covered by the patient’s health plan contract or policy or appeal the decision. Alternatively, the patient may purchase the prescription despite the lack of coverage. A fail-first protocol may also be the basis for part or all of a precertification or prior authorization protocol, which may also require the prescribing provider to confirm to the plan or insurer that an alternate medication or medications have been unsuccessfully tried by the patient before the coverage for the prescribed medication is approved. However, not all prior authorization protocols have a fail-first component. Some prior authorization protocols are based on other criteria, such as intended use to treat a specific medical problem or diagnosis, or confirmation that the patient meets other criteria such as age or specified comorbidities.

For its review of this bill, CHBRP identified 15 studies of the impact of step therapy protocols on varying drugs. The studies CHBRP identified addressed step therapy protocols (STPs) for: antidepressants, antihypertensives, antipsychotics and anticonvulsants, nonsteroidal anti-inflammatory drugs (to reduce inflation or pain, and proton pump inhibitors to reduce stomach acidity. No studies were found that addressed STP or override procedures across all drug classes. According to CHBRP, there is no pattern as to particular drugs being more likely to be subject to step therapy protocols amongst California plans/insurers. Among enrollees with an outpatient prescription drug (OPD) benefit, there is not even a pattern in the presence or number-of protocols. For example, 34.4% of enrollees with an OPD benefit are not subject to step therapy protocols. Among the remaining 62.6% of enrollees with an OPD benefit, the number of drugs subject to step therapy varies widely, from two to more than 100.

3. Existing policy on step therapy exceptions. Under regulation, Knox-Keene plans are permitted to require step therapy, but must have an expeditious process in place to authorize exceptions when medically necessary and to conform effectively and efficiently with continuity of care requirements. In circumstances where an enrollee is changing plans, the new plan may not require the enrollee to repeat step therapy when he or she 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 enrollee's condition. Under these circumstances, the regulation permits the new plan to impose a prior authorization requirement for the continued coverage. This Knox-Keene regulation is referenced in regulations related CDI insurers, but there is some question as to whether it applies to those products. Nevertheless, it appears that, in practice, insurers apply the same protocol for step therapy exceptions across all lines of business regardless of the regulator. According to CHBRP, to obtain a step therapy override a prescriber first submits clinical documentation to the health plan or insurer documenting why an enrollee should be allowed should skip one or more step. Reasons prescribers use to justify such an override include the enrollee has already tried a drug unsuccessfully or the drug is contraindicated for that enrollee due to drug-drug interactions, drug-disease interactions, or drug allergy or intolerance. According to CHRBP, step therapy override requests may take several days to be reviewed by the health plan or insurer.

4. Opposition. The opposition listed below is based upon the previous version. Amendments taken on 9/1/2015 may have addressed many of the oppositions concerns.

Prior Legislation

AB 889 (Huffman, 2014) would have permitted health plans and insurers, when there is more than one drug that is appropriate for the treatment of a medical condition, to require step therapy, but would have prohibited them from requiring an enrollee to try and fail on more than two medications before allowing the enrollee access to the medication, or generically equivalent drug, as specified. AB 889 died on the Senate Appropriations Committee suspense file.

AB 1814 (Waldron, 2014) was substantially similar to AB 73. AB 889 died on the Assembly Appropriations Committee suspense file.

AB 369 (Huffman, 2012) would have prohibited carriers that restrict medications for the treatment of pain, pursuant to step therapy or fail-first protocol, from requiring a patient to try and fail on more than two pain medications before allowing the patient access to the pain medication, or generically equivalent drug, as defined, prescribed by the prescribing provider, as defined. AB 369 was vetoed by Governor Brown, who stated:

While I sympathize with the author's good intentions, I am not convinced that this bill strikes the right balance between physician discretion and health plan or insurer oversight. A doctor's judgment and a health plan's clinical protocols both have a role in ensuring the prudent prescribing of pain medications. Independent medical reviews are available to resolve differences in clinical judgment when they occur, even on an expedited basis.

If current law does not suffice, and I am not certain that it doesn't, any limitations on the practice of "step-therapy" should better reflect a health plan or insurer's legitimate role in determining the allowable steps.

AB 1826 (Huffman, 2010) would have required a carrier that covers prescription drug benefits to provide coverage for a drug that has been prescribed for the treatment of pain without first requiring the enrollee or insured to use an alternative drug or product. AB 1826 died on the Senate Appropriations Committee suspense file.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

According to the Senate Appropriations Committee, minor costs to CDI and DMHC to revise the existing prior authorization form to allow it to be used for step therapy override requests.

SUPPORT: (Verified 9/2/15)

Arthritis Foundation (co-source)

California Rheumatology Alliance (co-source)

Union of American Physician and Dentists/AFSCME Local 206 (co-source)

ALS Association Golden West Chapter

American Cancer Society Cancer Action Network

American GI Forum

Association of Northern California Oncologists

Bay Area Women’s Health Advocacy Council

Biocom

California Academy of Physician Assistants

California Association of Area Agencies on Aging

California Chapter of the National Association of Social Workers

California Chronic Care Coalition

California Council for the Advancement of Pharmacy

California Healthcare Institute

California Hepatitis C Task Force

California Life Sciences Association

California Pharmacists Association

California Primary Care Association

California School Employees Association

California State Retirees

Congress of California Seniors

Epilepsy California

International Foundation for Autoimmune Arthritis

Latina Breast Cancer Agency

Leukemia and Lymphoma Society

Lupus Foundation of Northern California

Lupus Foundation of Southern California

Medical Oncology Association of Southern California

Mental Health America of California

NAMI California

National Multiple Sclerosis Society California

Neuropathy Action Foundation

Osteopathic Physicians and Surgeons of California

Pharmaceutical Research and Manufacturers of America

Power of Pain Foundation

Susan G. Komen Central Valley Affiliate

Susan G. Komen Inland Empire Affiliate

Susan G. Komen Los Angeles County Affiliate

Susan G. Komen Orange County Affiliate

Susan G. Komen Sacramento Valley Affiliate

Susan G. Komen San Diego Affiliate

Susan G. Komen San Francisco Bay Area Affiliate

Western Center on Law and Poverty

Western Neuropathy Association

OPPOSITION: (Verified 9/2/15)

California Association of Health Plans

California Association of Health Underwriters

California Association of Joint Powers Authorities

California Chamber of Commerce

California Department of Managed Health Care

CSAC Excess Insurance Authority

CVS Health

Express Scripts

For Grace

Molina Healthcare of California

Pharmaceutical Care Management Association

ASSEMBLY FLOOR: 63-14, 6/2/15

AYES: Achadjian, Alejo, Baker, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Hadley, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Levine, Linder, Lopez, Low, Mayes, McCarty, Medina, Mullin, Nazarian, O'Donnell, Olsen, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Waldron, Weber, Wilk, Williams, Wood, Atkins

NOES: Travis Allen, Bigelow, Dahle, Beth Gaines, Harper, Kim, Lackey, Maienschein, Mathis, Melendez, Obernolte, Patterson, Steinorth, Wagner

NO VOTE RECORDED: Chang, Chávez, Grove

Prepared by: Melanie Moreno / HEALTH /

9/2/15 19:04:46

*** END ***

 THIRD READING  

Bill No: AB 374

Author: Nazarian (D)

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: 63-14, 6/2/15 - See last page for vote

SUBJECT: Health care coverage: prescription drugs

SOURCE: Arthritis Foundation

California Rheumatology Alliance

Union of American Physician and Dentists/AFSCME Local 206

DIGEST: This bill permits an exception to a health plan or insurer’s step therapy process to be submitted in the same manner as a request for prior authorization for prescription drugs. This bill requires those requests to be treated in the same manner, and responded to by the plan or insurer in the same manner, as a prior authorization request, including utilization of any grievance process applicable, as specified.

ANALYSIS:

Existing law:

1. Provides for regulation of health insurers by the California Department of Insurance (CDI) under the Insurance Code, and provides for the regulation of health plans by the Department of Managed Health Care (DMHC), pursuant to the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene Act).

2. Requires carriers to provide certain benefits, but does not require carriers to cover prescription drugs. Establishes various requirements on carriers if they do offer prescription drug coverage.

3. Prohibits carriers that cover prescription drugs from limiting or excluding coverage for a drug on the basis that the drug is prescribed for a use different from the use for which the drug has been approved by the federal Food and Drug Administration, provided that specified conditions have been met, including that the drug is prescribed by a participating licensed health care professional for the treatment of a chronic and seriously debilitating condition, the drug is medically necessary to treat that condition, and the drug is on the plan formulary.

4. Requires DMHC-regulated plans to respond issue authorization determinations within two business days. Requires CDI-regulated insurers to issue nonurgent authorization determinations within five business days and urgent determinations to be made within 72 hours.

5. Requires DMHC and CDI to jointly develop a uniform prior authorization form that health plans and insurers must accept when prescribing providers seek authorization for prescription drug benefits.
   
   

This bill:

1. Permits an exception to a health plan or insurer’s step therapy process to be submitted in the same manner as a request for prior authorization for prescription drugs. Requires those requests to be treated in the same manner, and responded to by the plan or insurer in the same manner, as a prior authorization request, including utilization of any grievance process applicable, as specified.

2. Requires DMHC and CDI to include a provision for step therapy exception request in the uniform prior authorization form developed pursuant to #5 in existing law above.

Comments

1. Author’s statement. According to the author, AB 374 does not prohibit step therapy protocols. Rather, this bill establishes an exception process that creates a balance between a provider’s professional judgment and health plan and insurer’s business practice. This bill recognizes that the health plan/insurer must not have complete and ultimate control on the medications a patient is permitted to try.  Plans utilize step therapy to reduce their costs. This process forces patients to “fail first” on several alternative medications, before they are permitted to obtain the appropriate medication. Anecdotal data shows that plans may require a patient to try up to five different medications before receiving the one prescribed by their physician. Also, the duration of this protocol is left up to the health plan and has been known to last up to 90 days.  Step therapy is based solely on cost and does not take into consideration patients’ unique needs. The use of step therapy can exacerbate patient’s condition, causing irreversible deterioration or damage to patients, such as limiting their daily functions and ability to remain a productive member of the workforce and society.

2. Step therapy. According to the California Health Benefits Review Program (CHBRP), step therapy, or fail-first protocols, may be implemented as methods of utilization management in a variety of ways and are known by a number of terms. Step therapy, when implemented by carriers, requires an enrollee to try a first-line medication (often a generic alternative) prior to receiving coverage for a second-line medication (often a brand-name medication). Step edit is a process by which a prescription, submitted for payment authorization, is electronically reviewed at point-of-service for use of a prior, first-line medication. For either step therapy or step edit, upon decline of coverage for the prescription, a patient’s health care provider may reissue the prescription for a first-line agent covered by the patient’s health plan contract or policy or appeal the decision. Alternatively, the patient may purchase the prescription despite the lack of coverage. A fail-first protocol may also be the basis for part or all of a precertification or prior authorization protocol, which may also require the prescribing provider to confirm to the plan or insurer that an alternate medication or medications have been unsuccessfully tried by the patient before the coverage for the prescribed medication is approved. However, not all prior authorization protocols have a fail-first component. Some prior authorization protocols are based on other criteria, such as intended use to treat a specific medical problem or diagnosis, or confirmation that the patient meets other criteria such as age or specified comorbidities.

For its review of this bill, CHBRP identified 15 studies of the impact of step therapy protocols on varying drugs. The studies CHBRP identified addressed step therapy protocols (STPs) for: antidepressants, antihypertensives, antipsychotics and anticonvulsants, nonsteroidal anti-inflammatory drugs (to reduce inflation or pain, and proton pump inhibitors to reduce stomach acidity. No studies were found that addressed STP or override procedures across all drug classes. According to CHBRP, there is no pattern as to particular drugs being more likely to be subject to step therapy protocols amongst California plans/insurers. Among enrollees with an outpatient prescription drug (OPD) benefit, there is not even a pattern in the presence or number-of protocols. For example, 34.4% of enrollees with an OPD benefit are not subject to step therapy protocols. Among the remaining 62.6% of enrollees with an OPD benefit, the number of drugs subject to step therapy varies widely, from two to more than 100.

3. Existing policy on step therapy exceptions. Under regulation, Knox-Keene plans are permitted to require step therapy, but must have an expeditious process in place to authorize exceptions when medically necessary and to conform effectively and efficiently with continuity of care requirements. In circumstances where an enrollee is changing plans, the new plan may not require the enrollee to repeat step therapy when he or she 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 enrollee's condition. Under these circumstances, the regulation permits the new plan to impose a prior authorization requirement for the continued coverage. This Knox-Keene regulation is referenced in regulations related CDI insurers, but there is some question as to whether it applies to those products. Nevertheless, it appears that, in practice, insurers apply the same protocol for step therapy exceptions across all lines of business regardless of the regulator. According to CHBRP, to obtain a step therapy override a prescriber first submits clinical documentation to the health plan or insurer documenting why an enrollee should be allowed should skip one or more step. Reasons prescribers use to justify such an override include the enrollee has already tried a drug unsuccessfully or the drug is contraindicated for that enrollee due to drug-drug interactions, drug-disease interactions, or drug allergy or intolerance. According to CHRBP, step therapy override requests may take several days to be reviewed by the health plan or insurer.

4. Opposition. The opposition listed below is based upon the previous version. Amendments taken on 9/1/2015 may have addressed many of the oppositions concerns.

Prior Legislation

AB 889 (Huffman, 2014) would have permitted health plans and insurers, when there is more than one drug that is appropriate for the treatment of a medical condition, to require step therapy, but would have prohibited them from requiring an enrollee to try and fail on more than two medications before allowing the enrollee access to the medication, or generically equivalent drug, as specified. AB 889 died on the Senate Appropriations Committee suspense file.

AB 1814 (Waldron, 2014) was substantially similar to AB 73. AB 889 died on the Assembly Appropriations Committee suspense file.

AB 369 (Huffman, 2012) would have prohibited carriers that restrict medications for the treatment of pain, pursuant to step therapy or fail-first protocol, from requiring a patient to try and fail on more than two pain medications before allowing the patient access to the pain medication, or generically equivalent drug, as defined, prescribed by the prescribing provider, as defined. AB 369 was vetoed by Governor Brown, who stated:

While I sympathize with the author's good intentions, I am not convinced that this bill strikes the right balance between physician discretion and health plan or insurer oversight. A doctor's judgment and a health plan's clinical protocols both have a role in ensuring the prudent prescribing of pain medications. Independent medical reviews are available to resolve differences in clinical judgment when they occur, even on an expedited basis.

If current law does not suffice, and I am not certain that it doesn't, any limitations on the practice of "step-therapy" should better reflect a health plan or insurer's legitimate role in determining the allowable steps.

AB 1826 (Huffman, 2010) would have required a carrier that covers prescription drug benefits to provide coverage for a drug that has been prescribed for the treatment of pain without first requiring the enrollee or insured to use an alternative drug or product. AB 1826 died on the Senate Appropriations Committee suspense file.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

According to the Senate Appropriations Committee, minor costs to CDI and DMHC to revise the existing prior authorization form to allow it to be used for step therapy override requests.

SUPPORT: (Verified 8/31/15)

Arthritis Foundation (co-source)

California Rheumatology Alliance (co-source)

Union of American Physician and Dentists/AFSCME Local 206 (co-source)

ALS Association Golden West Chapter

American Cancer Society Cancer Action Network

American GI Forum

Association of Northern California Oncologists

Bay Area Women’s Health Advocacy Council

Biocom

California Academy of Physician Assistants

California Association of Area Agencies on Aging

California Chapter of the National Association of Social Workers

California Chronic Care Coalition

California Council for the Advancement of Pharmacy

California Healthcare Institute

California Hepatitis C Task Force

California Life Sciences Association

California Pharmacists Association

California Primary Care Association

California School Employees Association

California State Retirees

Congress of California Seniors

Epilepsy California

International Foundation for Autoimmune Arthritis

Latina Breast Cancer Agency

Leukemia and Lymphoma Society

Lupus Foundation of Northern California

Lupus Foundation of Southern California

Medical Oncology Association of Southern California

Mental Health America of California

NAMI California

National Multiple Sclerosis Society California

Neuropathy Action Foundation

Osteopathic Physicians and Surgeons of California

Pharmaceutical Research and Manufacturers of America

Power of Pain Foundation

Susan G. Komen Central Valley Affiliate

Susan G. Komen Inland Empire Affiliate

Susan G. Komen Los Angeles County Affiliate

Susan G. Komen Orange County Affiliate

Susan G. Komen Sacramento Valley Affiliate

Susan G. Komen San Diego Affiliate

Susan G. Komen San Francisco Bay Area Affiliate

Western Center on Law and Poverty

Western Neuropathy Association

OPPOSITION: (Verified 8/31/15)

America’s Health Insurance Plans

Association of California Life and Health Insurance Companies

California Association of Health Plans

California Association of Health Underwriters

California Association of Joint Powers Authorities

California Chamber of Commerce

California Department of Managed Health Care

CSAC Excess Insurance Authority

CVS Health

Express Scripts

For Grace (unless amended)

Molina Healthcare of California

Pharmaceutical Care Management Association

ASSEMBLY FLOOR: 63-14, 6/2/15

AYES: Achadjian, Alejo, Baker, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Hadley, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Levine, Linder, Lopez, Low, Mayes, McCarty, Medina, Mullin, Nazarian, O'Donnell, Olsen, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Waldron, Weber, Wilk, Williams, Wood, Atkins

NOES: Travis Allen, Bigelow, Dahle, Beth Gaines, Harper, Kim, Lackey, Maienschein, Mathis, Melendez, Obernolte, Patterson, Steinorth, Wagner

NO VOTE RECORDED: Chang, Chávez, Grove

Prepared by: Melanie Moreno / HEALTH /

9/1/15 21:30:40

*** END ***

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

AB 374 (Nazarian) - Health care coverage: prescription drugs

*********** ANALYSIS ADDENDUM – SUSPENSE FILE ***********

The following information is revised to reflect amendments

adopted by the committee on August 27, 2015

Bill Summary:

AB 374 would create a process for prescribers to request an override of a health plan or health insurer’s step therapy requirement.

Fiscal Impact:

• Minor costs to the Department of Insurance and the Department of Managed Health Care to revise the existing prior authorization form to allow it to be used for step therapy override requests.

Author Amendments:

Revise the requirements of the bill, to allow a step therapy override request to be made using the standardized prior authorization form.

-- END --

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

AB 374 (Nazarian) - Health care coverage: prescription drugs

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

AB 374 would create a process for prescribers to request an override of a health plan or health insurer’s step therapy requirement.

Fiscal Impact:

• One-time costs of $131,000 over two fiscal years to develop policies, create a step therapy override request form, and adopt regulations by the Department of Insurance (Insurance Fund).

• One-time costs between $150,000 and $300,000 to develop policies, create a step therapy override request form, and adopt regulations by the Department of Managed Health Care (Managed Care Fund).

• Unknown additional costs to provide independent medical reviews of rejected step therapy override requests (Managed Care Fund and Insurance Fund). The bill would place relatively short deadlines for health insurers and managed care plans to respond to step therapy override requests. If health insurers and health plans end up rejecting a large number of override requests, patients or providers may request a significant number of independent medical reviews of those decisions. To the extent that the bill results in more independent medical reviews, costs to the two departments could be significant.

Background:

Under current law, health plans are regulated by the Department of Managed Health Care and health insurers are regulated by the Department of Insurance. Health plans and health insurers in the state are not currently required to cover pharmacy benefits, but they are subject to regulatory requirements if they do.

Health plans and insurers (or subcontracted pharmacy benefit managers) sometimes require patients to use a process known as “fail first protocol” or “step therapy” for certain drugs. Under step therapy, before a patient can access a specific medication prescribed by the provider, the patient must first attempt to use one or more alternative medications. If those medications do not have the intended therapeutic effect or have significant side-effects, the patient progresses to the next medication. The use of step therapy varies between health plans and insurers, with different drugs covered by such protocols and different numbers of steps required.

Under current law, health care consumers who have been denied coverage of services can appeal to the state’s independent medical review process. There are three categories of decisions that can be appealed through this process: coverage decisions relating to medical necessity of the service, the urgency of emergency care, or the need for experimental or investigational services. Under independent medical review, an outside contractor (hired by either the Department of Insurance or the Department of Managed Health Care) arranges for medical professionals with relevant training and experience to review the appeal and decide whether to overturn the coverage decision, based on the consumer’s medical condition and the best available information about the service requested.

Proposed Law:

AB 374 would create a process for prescribers to request an override of a health plan or health insurer’s step therapy requirement.

Specific provisions of the bill would:

• Require the Department of Managed Health Care and the Department of Insurance to jointly develop a step therapy override determination request form;

• After January 1, 2017 or six months after the form has been developed, every prescribing provider would be required to use the form when requesting an override of a health insurer or health plan’s step therapy requirement and every health insurer and health plan must accept the form;

• Authorize a prescribing provider to request a step therapy override determination if he or she determines that a prescription drug subject to step therapy requirements is in the best interest of the patient;

• If an insurer or health plan fails to accept the form, fails to respond within 72 hours for noncurrent requests or 24 hours for urgent requests, the request shall be deemed to be granted;

• Authorize the rejection of an override request by a health insurer or health plan to be appealed through the independent medical review process, except that decisions of the reviewers shall be rendered within three days (the same standard for the existing expedited review process).

Related Legislation:

• AB 889 (Huffman, 2014) would have limited step therapy protocols by only allowing such policies to require two failures before an enrollee could access the originally prescribed drug. That bill was held on this committee’s Suspense File.

• AB 369 (Huffman, 2012) was similar to AB 889. However, the limitations on step therapy in that bill were limited to pain medications. AB 369 was vetoed by Governor Brown.

• AB 1826 (Huffman, 2010) was substantially similar to AB 369 (Huffman, 2012). That bill was held on this committee’s Suspense File.

Staff Comments:

As noted above, the bill does not substantially limit the use of step therapy protocols as prior bills have. However, the bill does impose short timelines for health insurers and health plans to consider a step therapy override request. How health plans and health insurers will respond to those deadlines will determine whether there are any increased costs due to additional independent medical review requests.

The only costs that may be incurred by a local agency relate to crimes and infractions. Under the California Constitution, such costs are not reimbursable by the state.

-- END --

SENATE COMMITTEE ON HEALTH

Senator Ed Hernandez, O.D., Chair

BILL NO: AB 374

SUBJECT: Health care coverage: prescription drugs.

SUMMARY:

Prohibits a health plan or insurer that provides coverage for medications pursuant to a step therapy or fail-first protocol from applying that requirement to a patient who has made a step therapy override determination request if, in the professional judgment of the prescribing provider, the step therapy or fail-first requirement would be medically inappropriate for that patient, as specified.

Existing law:

1. Provides for regulation of health insurers by the California Department of Insurance (CDI) under the Insurance Code, and provides for the regulation of health plans by the Department of Managed Health Care (DMHC), pursuant to the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene Act).

2. Requires carriers to provide certain benefits, but does not require carriers to cover prescription drugs. Establishes various requirements on carriers if they do offer prescription drug coverage.

3. Prohibits carriers that cover prescription drugs from limiting or excluding coverage for a drug on the basis that the drug is prescribed for a use different from the use for which the drug has been approved by the federal Food and Drug Administration (FDA), provided that specified conditions have been met, including that the drug is prescribed by a participating licensed health care professional for the treatment of a chronic and seriously debilitating condition, the drug is medically necessary to treat that condition, and the drug is on the plan formulary.

4. Requires DMHC-regulated plans to respond issue authorization determinations within two business days. Requires CDI-regulated insurers to issue nonurgent authorization determinations within five business days and urgent determinations to be made within 72 hours.
   
   

This bill:

1. Prohibits a health plan or insurer that provides coverage for medications pursuant to a step therapy or fail-first protocol from applying that requirement to a patient who has made a step therapy override determination request if, in the professional judgment of the prescribing provider, the step therapy or fail-first requirement would be medically inappropriate for that patient, as specified. Defines “step therapy override determination” as a determination as to whether a step therapy protocol should apply in a particular patient’s situation, or whether the step therapy protocol should be overridden in favor of immediate coverage of the health care provider’s selected prescription drug.

2. Requires an override determination request by a patient with adequate supporting rationale and documentation from the prescribing provider to be expeditiously reviewed by the plan or insurer if any of the following apply:

1. The prescription drug required by the plan is contraindicated or will likely cause an adverse reaction by, or physical or mental harm to, the patient;

2. The prescription drug required by the plan is expected to be ineffective based on the known relevant physical or mental characteristics of the patient and the known characteristics of the prescription drug regimen;

3. The prescription drug required by the plan is not in the best interest of the patient, based on medical appropriateness;

4. The patient is stable on a prescription drug selected by their health care provider for the medical condition under consideration; or,

5. The prescription drug required by the plan has not been approved by the federal FDA for the patient’s condition.

3. Requires a health plan or insurer, upon the granting of an override determination, to authorize coverage for the prescribed drug, provided that it is a covered prescription drug under that policy or contract.

4. Requires DMHC and CDI, on or before July 1, 2016, to jointly develop a step therapy override determination request form. Requires all prescribing providers, on and after January 1, 2017, or six months after the form is developed, whichever is later, to use the step therapy override determination request form to request an override determination. Requires health plans and insurers to accept that form as sufficient to request an override determination. Requires DMHC and CDI to develop the override determination request form in a manner that allows it to be submitted by a prescribing provider to a health plan or insurer electronically.

5. Prohibits this bill from preventing a health plan or insurer from requiring a patient to try an generic equivalent drug, as specified, prior to providing coverage for the equivalent branded prescription drug nor from preventing a health care provider from prescribing a prescription drug that is determined to be medically appropriate.

FISCAL EFFECT:

According to the Assembly Appropriations Committee, the California Health Benefits Review Program (CHBRP) reports:

1. State costs:

   1. $969,000 annually in Medi-Cal managed care (General Fund/federal).

   2. $315,000 annually for provision of services through CalPERS benefit plans (General Fund/federal/special/local funds). About 60% of this cost is state cost, while the rest is a local cost.

2. Private sector and individual costs:

   1. Increased employer-funded premium costs in the private insurance market of $3.7 million annually.

   2. Increased premium expenditures by employees and individuals purchasing insurance of $4.1 million annually, as well as increased out-of-pocket expenditures of $1.6 million.

3. Potential minor one-time costs to DMHC (Managed Care Fund) and CDI (Insurance Fund) to verify plan and policy compliance.

PRIOR VOTES:

COMMENTS:

1. Author’s statement. According to the author, AB 374 does not prohibit step therapy protocols. Rather, the bill establishes an override process that creates a balance between a provider’s professional judgment and health plan and insurer’s business practice. This bill recognizes that the health plan/insurer must not have complete and ultimate control on the medications a patient is permitted to try. Plans utilize step therapy to reduce their costs. This process forces patients to “fail first” on several alternative medications, before they are permitted to obtain the appropriate medication. Anecdotal data shows that plans may require a patient to try up to five different medications before receiving the one prescribed by their physician. Also, the duration of this protocol is left up to the health plan and has been known to last up to 90 days. Step therapy is based solely on cost and does not take into consideration patients’ unique needs. The use of step therapy can exacerbate patient’s condition, causing irreversible deterioration or damage to patients, such as limiting their daily functions and ability to remain a productive member of the workforce and society.

2. Background. According to CHBRP, step therapy, or fail-first protocols, may be implemented as methods of utilization management in a variety of ways and are known by a number of terms. Step therapy, when implemented by carriers, requires an enrollee to try a first-line medication (often a generic alternative) prior to receiving coverage for a second-line medication (often a brand-name medication). Step edit is a process by which a prescription, submitted for payment authorization, is electronically reviewed at point-of-service for use of a prior, first-line medication. For either step therapy or step edit, upon decline of coverage for the prescription, a patient’s health care provider may reissue the prescription for a first-line agent covered by the patient’s health plan contract or policy or appeal the decision. Alternatively, the patient may purchase the prescription despite the lack of coverage. A fail-first protocol may also be the basis for part or all of a precertification or prior authorization protocol, which may also require the prescribing provider to confirm to the plan or insurer that an alternate medication or medications have been unsuccessfully tried by the patient before the coverage for the prescribed medication is approved. However, not all prior authorization protocols have a fail-first component. Some prior authorization protocols are based on other criteria, such as intended use to treat a specific medical problem or diagnosis, or confirmation that the patient meets other criteria such as age or specified comorbidities. Information about what types of drugs are subject to step therapy by California plans/insurers was not available to this Committee, but for its review of this bill, CHBRP identified 15 studies of the impact of step therapy protocols on varying drugs. The studies CHBRP identified addressed STPs for: antidepressants, antihypertensives, antipsychotics and anticonvulsants, nonsteroidal anti-inflammatory drugs (to reduce inflation or pain, and proton pump inhibitors to reduce stomach acidity. No studies were found that addressed STP or override procedures across all drug classes.

3. Existing policy on step therapy exceptions. Under regulation, Knox-Keene plans are permitted to require step therapy, but must have an expeditious process in place to authorize exceptions when medically necessary and to conform effectively and efficiently with continuity of care requirements. In circumstances where an enrollee is changing plans, the new plan may not require the enrollee to repeat step therapy when he or she 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 enrollee's condition. Under these circumstances, the regulation permits the new plan to impose a prior authorization requirement for the continued coverage. This Knox-Keene regulation is referenced in regulations related CDI insurers, but there is some question as to whether it applies to those products. Nevertheless, it appears that, in practice, insurers apply the same protocol for step therapy exceptions across all lines of business regardless of the regulator. According to CHBRP, to obtain a step therapy override a prescriber first submits clinical documentation to the health plan or insurer documenting why an enrollee should be allowed should skip one or more step. Reasons prescribers use to justify such an override include the enrollee has already tried a drug unsuccessfully or the drug is contraindicated for that enrollee due to drug-drug interactions, drug-disease interactions, or drug allergy or intolerance. According to CHRBP, step therapy override requests may take several days to be reviewed by the health plan or insurer.

4. CHBRP analysis. AB 1996 (Thomson, Chapter 795, Statutes of 2002), requests the University of California to assess legislation proposing a mandated benefit or service and prepare a written analysis with relevant data on the medical, economic, and public health impacts of proposed health plan and health insurance benefit mandate legislation. CHBRP was created in response to AB 1996, and reviewed this bill. Key findings include:

1. Enrollees covered. In 2016, approximately 24.6 million Californians will have state-regulated health insurance subject to AB 374.

2. EHBs. AB 374 would not exceed EHBs, because the mandate is applicable to particular terms or conditions but does not require new benefit coverage.

3. Medical effectiveness. CHBRP found insufficient evidence to conclude whether overrides affect health outcomes. The absence of evidence is not evidence of no effect.

4. Benefit coverage. The terms and conditions of 27% of enrollees would change to become fully compliant with AB 374’s override approval criteria.

5. Utilization. Filled prescriptions would be unchanged, although use of initially prescribed drugs would increase and use of STP-required drugs would decrease. The change would affect expenditures because initially prescribed drugs are frequently more expensive than STP-required drugs.

6. Impact on expenditures. CHBRP estimates that premium impacts related to an increase in approved override requests would be 0.008%.

7. Public Health. Because there is insufficient evidence to link approved overrides and health outcomes, the public health impact is unknown. Note: insufficient evidence is not evidence of no effect.

According to CHBRP, there is no pattern as to particular drugs being more likely to be subject to step therapy protocols amongst California plans/insurers. Among enrollees with an outpatient prescription drug (OPD) benefit, there is not even a pattern in the presence or number-of protocols. For example, 34.4% of enrollees with an OPD benefit are not subject to step therapy protocols. Among the remaining 62.6% of enrollees with an OPD benefit, the number of drugs subject to step therapy varies widely, from two to more than 100.

5. Related legislation. AB 73 (Waldron), would have required a prescriber’s reasonable professional judgment prevail over the policies and utilization controls of the Medi-Cal program, including the utilization controls of a Medi-Cal managed care plan, in prescribing a pharmaceutical from specified therapeutic drug classes. AB 73 died on the Assembly Appropriations Committee Suspense File.

AB 68 (Waldron), would require a prescriber’s reasonable professional judgment to prevail over the policies and utilization controls of the Medi-Cal program, including the utilization controls of a Medi-Cal managed care plan, in prescribing a pharmaceutical that is in the seizure or epilepsy drug class. AB 68 is set to be heard in the Senate Health Committee on July 15, 2015.

AB 339 (Gordon), would make a number of changes to existing law governing health plans and insurers, including restricting cost-sharing, specifying coverage requirements for prescription drugs, and codifying the DMHC regulations related to exceptions for step therapy discussed in 3) above. AB 339 is set for hearing in the Senate Health Committee on July 15, 2015.

6. Prior legislation. AB 889 (Huffman, 2014), would have permitted health plans and insurers, when there is more than one drug that is appropriate for the treatment of a medical condition, to require step therapy, but would have prohibited them from requiring an enrollee to try and fail on more than two medications before allowing the enrollee access to the medication, or generically equivalent drug, as specified. AB 889 died on the Senate Appropriations Committee Suspense File.

AB 1814 (Waldron, 2014) was substantially similar to AB 73. AB 889 died on the Assembly Appropriations Committee Suspense File.

AB 369 (Huffman, 2012), would have prohibited carriers that restrict medications for the treatment of pain, pursuant to step therapy or fail-first protocol, from requiring a patient to try and fail on more than two pain medications before allowing the patient access to the pain medication, or generically equivalent drug, as defined, prescribed by the prescribing provider, as defined. AB 369 was vetoed by Governor Brown, who stated:

While I sympathize with the author's good intentions, I am not convinced that this bill strikes the right balance between physician discretion and health plan or insurer oversight. A doctor's judgment and a health plan's clinical protocols both have a role in ensuring the prudent prescribing of pain medications. Independent medical reviews are available to resolve differences in clinical judgment when they occur, even on an expedited basis.

If current law does not suffice, and I am not certain that it doesn't, any limitations on the practice of "step-therapy" should better reflect a health plan or insurer's legitimate role in determining the allowable steps.

AB 1826 (Huffman, 2010), would have required a carrier that covers prescription drug benefits to provide coverage for a drug that has been prescribed for the treatment of pain without first requiring the enrollee or insured to use an alternative drug or product. AB 1826 died on the Senate Appropriations Committee Suspense File.

7. Support. According to the Arthritis Foundation, the sponsor of this bill, it may appear that the increased number of steps will lead to lower health care costs; however, excessive steps over a length of time will actually increase utilization of health care services in some patients. A study by the American Journal of Managed Care looked at the effects antihypertensive step therapy has on prescription drug utilization, as well as other medical care utilization and spending. It found that “step therapy was associated with an increase in outpatient office visits and inpatient admissions… [and] emergency room visits [increased] with the amount of time elapsed since step therapy was implemented.” The Association of Northern California Oncologists states that it is not always clinically appropriate to mandate a patient take a similar drug that is not a generic equivalent. The decision as to which medication should be prescribed should be left solely in the hand of the physician, in consultation with the patient. California Affiliates of Susan G. Komen write that most STPs rely on generalized information regarding patients and their treatments, as opposed to taking into account unique patient experiences and responses to treatments. Furthermore, due to the lack of standardized override process, and varying formularies among plans, physicians face considerable challenges identifying drugs that are subject to step therapy, and patients face barriers to accessing timely and appropriate treatments. Western Center on Law and Poverty writes that local legal services programs, which serve low-income clients in the Medi-Cal program, have reported the increased use of step therapy in the programs managed care plans, which has kept beneficiaries from getting mediations that their doctors intended for them to use and has led to poorer health outcomes. NAMI California contends that requiring a mental health consumer to fail-first on one or two older, less effective medications before an appropriate newer medication is prescribed is an inhumane method of treatment and the practice has serious negative consequences for consumers who are denied the best standard of care. The National Multiple Sclerosis Society – CA Action Network states that if the appropriate treatment is not provided to the patient, step therapy, especially for people living with a chronic condition like MS, actually can increase the direct cost of health care due to increased hospital admissions, excessive use of emergency rooms, and even loss of employment. The California State Retirees writes that this bill ensures it is a patient’s physician and not the health care provider or insurer who is responsible for understanding the patient’s individual circumstance and the appropriate treatment plan. The California Life Sciences Association states the override process in this bill helps ensure that a provider’s professional judgment is respected, and the provider’s prescription medication is tailored specifically to each patient’s unique needs. The California Pharmacists Association contends that this bill strikes an appropriate balance of managing costs and access, because it allows health plans and insurers to continue utilizing step therapy protocols while giving patients and their prescribing providers a uniform method of requesting an exception to the requirement of a protocol. The California Health Care Institute writes that this bill is an attempt to decrease the practice of denying or delaying a patient’s access to the treatments they need and the override process helps ensure that a provider’s professional judgment is respected and prescription medication is tailored specifically to each patient’s unique needs.

8. Opposition. America's Health Insurance Plans states that step therapy for prescription drugs is one utilization protocol that health insurers use to control health care costs and ensure patient safety and that this bill would place overly broad restrictions on the use of step therapy, hindering health insurers' use of this important tool and limiting its effectiveness. The California Chamber of Commerce opposes this bill, stating that it would contribute to the problem of rising health care costs by unnecessarily increasing utilization of more expensive prescription medications; its impact on premiums and co-payments will grow in future years as more and more high-priced pharmaceutical drugs enter the market. The Association of California Life and Health Insurance Companies states that this bill would allow for an exception to step therapy, but in a manner that is far too broad. A step therapy override determination request by the patient, with the prescribing provider determining that a particular drug is not “in the best interest of the patient” is not sufficient rationale to override the clinical trials that are the cornerstone of step therapy. The California Association of Health Plans writes that step therapy is a patient safety tool that helps ensure that medical and cost management work in tandem in the delivery of appropriate care. Existing law provides protections for insured patients, and it is unclear why these protections are inadequate or why a new law must be adopted. Express Scripts states that step therapy programs are designed to protect from adverse outcomes. For example, certain potent opioids, such as fentanyl, are covered trough a prior authorization process that requires the use of other opioids first because patients should be opioid-tolerant before using fentanyl (as supported through the black box warning on this drug). The California Association of Health Underwriters and the California Association of Joint Powers Authorities write that step therapy is a well-established and medically documented practice of beginning drug therapy with the most cost-effective and safest drug, and then progressing to more costly or riskier mediation, which is an important tool in patient safety. DMHC writes that under this bill, the provider’s determination would, by statute, always prevail. The DMHC notes that a doctor’s judgment and a health plan’s clinical protocols both have a role in ensuring patient access to medically appropriate and medically necessary prescription drugs. Accordingly, the DMHC is concerned that AB 374 does not strike the right balance between physician discretion and health plan oversight.

9. Oppose unless amended. The For Grace Foundation, sponsor of several previous iterations of step therapy bills, opposes this bill stating that it does not respond to the governor's veto message on AB 369 (Huffman) of 2012. This bill hands over all of the step therapy authority to the doctors, thus flying in the face of Governor Brown's 2012 veto. The For Grace Foundation states that they would change to a support position if the bill was amended to restrict the step therapy protocols to two “fails” (as Medicare does) and gave the physician no authority in their implementation.

10. Policy comments.

1. Existing process. Health plans and insurers currently have a process for step-therapy override requests. According to DMHC, for calendar years 2013 and 2014, they received a total of 52 grievances and 27 IMRs related to health plan strategies to reduce prescription drug costs. Of those 79, only a small number related to step therapy or fail first protocols.  The majority of these complaints and IMRs concerned increased prescription drug copayments due to health plan formulary and tier status changes, with a smaller number related to step therapy or fail first protocols. Given that detailed data related to the approval or denial of override requests was not made available to this Committee, it is unclear why the existing override process is insufficient.

2. Potential unintended consequences. It appears that this bill prohibits plans and insurers from using step therapy or fail first protocols if the prescribing provider determines it is medically unnecessary due to specified reasons, without plan or insurer approval of an override request. This is sometimes referred to as “provider prevails,” meaning that the prescriber retains full authority to decide what medicine a patient needs. Bypassing the utilization controls in this way might result in significant additional costs.

SUPPORT AND OPPOSITION:

Support: Arthritis Foundation (co-sponsor)

California Rheumatology Alliance (co-sponsor)

Union of American Physician and Dentists/AFSCME Local 206 (co-sponsor)

ALS Association Golden West Chapter

American Cancer Society Cancer Action Network

American GI Forum

Association of Northern California Oncologists

Bay Area Women’s Health Advocacy Council

Biocom

California Academy of Physician Assistants

California Association of Area Agencies on Aging

California Chapter of the National Association of Social Workers

California Chronic Care Coalition

California Healthcare Institute

California Hepatitis C Task Force

California Life Sciences Association

California Pharmacists Association

California Primary Care Association

California School Employees Association

California State Retirees

Congress of California Seniors

Epilepsy California

International Foundation for Autoimmune Arthritis

Latina Breast Cancer Agency

Leukemia and Lymphoma Society

Lupus Foundation of Northern California

Lupus Foundation of Southern California

Medical Oncology Association of Southern California

Mental Health America of California

NAMI California

National Multiple Sclerosis Society California

Neuropathy Action Foundation

Osteopathic Physicians and Surgeons of California

Pharmaceutical Research and Manufacturers of America

Power of Pain Foundation

Susan G. Komen Central Valley Affiliate

Susan G. Komen Inland Empire Affiliate

Susan G. Komen Los Angeles County Affiliate

Susan G. Komen Orange County Affiliate

Susan G. Komen Sacramento Valley Affiliate

Susan G. Komen San Diego Affiliate

Susan G. Komen San Francisco Bay Area Affiliate

Western Center on Law and Poverty

Western Neuropathy Association

Oppose: America’s Health Insurance Plans

Association of California Life and Health Insurance Companies

California Association of Health Plans

California Association of Health Underwriters

California Association of Joint Powers Authorities

California Chamber of Commerce

California Department of Managed Health Care

CSAC Excess Insurance Authority

CVS Health

Express Scripts

For Grace (unless amended)

Molina Healthcare of California

Pharmaceutical Care Management Association

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 374

Author:(Nazarian)

As Amended Ver:April 30, 2015

Majority vote

SUMMARY: Prohibits a health care service plan (plan) or insurer from applying a step therapy protocol (STP) when a patient has made a "step therapy override determination request," if the patient's physician determines that step therapy would not be medically appropriate. Requires a carrier to expeditiously review a request made by a patient, if specific criteria are met and adequate supporting rationale and documentation is provided by the prescribing physician.

FISCAL EFFECT: According to the Assembly Appropriations Committee:

1. The California Health Benefits Review Program (CHBRP) reports:

   1. State costs:

      1. $969,000 annually in Medi-Cal managed care (General Fund/federal).

      2. $315,000 annually for provision of services through CalPERS benefit plans (General Fund/federal/special/local funds). About 60% of this cost is state cost, while the rest is a local cost.

   2. Private sector and individual costs:

      1. Increased employer-funded premium costs in the private insurance market of $3.7 million annually.

      2. Increased premium expenditures by employees and individuals purchasing insurance of $4.1 million annually, as well as increased out-of-pocket expenditures of $1.6 million.

2. Potential minor one-time costs to California Department of Managed Health Care (Managed Care Fund) and California Department of Insurance (Insurance Fund) to verify plan and policy compliance.

COMMENTS: According to the author, use of step therapy leads to an exacerbation of a patient’s condition, potentially causing irreversible deterioration or damage to the patient, such as limiting their daily functions and ability to remain a productive member of the workforce and society. The author asserts that a determination about whether a STP is appropriate should take into account the individual needs and circumstances of the patient, along with the professional judgment of the prescribing physician.

According to CHBRP, step therapy, or fail-first protocols, may be implemented as methods of utilization management in a variety of ways and are known by a number of terms. Step therapy, when implemented by carriers, requires an enrollee to try a first-line medication (often a generic alternative) prior to receiving coverage for a second-line medication (often a brand-name medication). A fail-first protocol may also be the basis for part or all of a precertification or prior authorization protocol, which may also require the prescribing provider to confirm to the plan or insurer that an alternate medication or medications have been unsuccessfully tried by the patient before the coverage for the prescribed medication is approved. However, not all prior authorization protocols have a fail-first component. Some prior authorization protocols are based on other criteria, such as intended use to treat a specific medical problem or diagnosis, or confirmation that the patient meets other criteria such as age or specified comorbidities.

There is a wide variation in the presence of STPs among plans. According to CHBRP, approximately 3% of covered enrollees have no outpatient drug benefits, and 34% have drug benefits that are not subject to STPs. Of the remaining 63% of enrollees with outpatient drug coverage, the number of drugs subjected to STP varies from two to more than 100.

Existing law provides certain protections for insured patients. Under state regulation, a plan that requires step therapy must have an expeditious process in place to authorize exceptions to step therapy when medically necessary. Step therapy overrides follow a procedure by which a prescriber submits clinical documentation to the plan or insurer documenting why an enrollee should be allowed to skip one or more of a protocol's steps.

In many plans, the step therapy override process is the same as the prior authorization process. Step therapy override requests may take several days to be reviewed by the plan or insurer. For prior authorization, Department of Managed Health Care (DMHC)-regulated plans are required to respond and issue authorization determinations within two business days. Department of Insurance (CDI)-regulated insurers are required to issue nonurgent authorization determinations within five business days. Urgent determinations must be made within 72 hours. Existing regulations also state that a plan or insurer must notify the patient of their right to appeal the dispute through IMR.

Below are major findings of CHBRP's analysis:

1. Enrollees covered. In 2016, approximately 24.6 million Californians will have state-regulated health insurance that would be subject to this bill.

2. Medical effectiveness. CHBRP found insufficient evidence to conclude whether STP overrides affect health outcomes. The absence of evidence is not evidence of no effect.

3. Override criteria. CHBRP found that all enrollees in DMHC-regulated plans or CDI-regulated policies with drug benefits subject to step therapy protocols have override procedures in place. This bill would require plans and policies to grant step therapy overrides in five circumstances, as specified, when the prescriber provides specific documentation. CHBRP found that most override policies already consider the specific criteria laid forth by this bill, and therefore are already partially compliant with this bill. However, not all override procedures are fully compliant with the five criteria specified by this bill.

4. Utilization. Filled prescriptions would be unchanged, although use of initially prescribed drugs would increase and use of step therapy drugs would decrease. Annual step therapy overrides granted would increase by 4%. The change would affect expenditures because initially prescribed drugs are frequently more expensive than step therapy required drugs. This bill would not affect cost-sharing terms and condition and that it would not require coverage of drugs not on the plan/policy formulary.

5. Impact on expenditures. CHBRP estimates that premium impacts related to an increase in approved override requests would be 0.008%, or $10.8 million total. In DMHC-regulated plans, CHBRP estimates that premium increases would range from $0.03 (large group) to $0.07 (individual) per member per month (PMPM). In CDI-regulated policies, estimated premium increases range from $0.06 (large group and individual) to $0.13 (small group) PMPM.

The Association of Northern California Oncologists states in the decision as to which medication should be prescribed should be left solely in the hand of the physician, in consultation with the patient. California Affiliates of Susan G. Komen write that most STPs rely on generalized information regarding patients and their treatments, as opposed to taking into account unique patient experiences and responses to treatments. Furthermore, due to the lack of standardized override process, and varying formularies among plans, physicians face considerable challenges identifying drugs that are subject to step therapy, and patients face barriers to accessing timely and appropriate treatments.

America's Health Insurance Plans states that step therapy for prescription drugs is one utilization protocol that health insurers use to control health care costs and ensure patient safety. This bill would place overly broad restrictions on the use of step therapy, hindering health insurers' use of this important tool and limiting its effectiveness. The California Chamber of Commerce opposes this bill, stating that it would contribute to the problem of rising health care costs by unnecessarily increasing utilization of more expensive prescription medications; its impact on premiums and co-payments will grow in future years as more and more high-priced pharmaceutical drugs enter the market.

Analysis Prepared by: Dharia McGrew / HEALTH / (916) 319-2097 FN: 0000596

Date of Hearing: May 13, 2015

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Jimmy Gomez, Chair

ABPCA Bill Id:AB 374

Author:(Nazarian) – As Amended Ver:April 30, 2015

Urgency: No State Mandated Local Program: Yes Reimbursable: No

SUMMARY:

This bill prohibits a health care service plan or insurer from applying a step therapy protocol (STP) when a patient has made a “step therapy override determination request,” if the patient's physician determines step therapy would not be medically appropriate for any one of several reasons specified in the bill. It also:

1. Requires a carrier to expeditiously review the step therapy override determination request by a patient with adequate supporting rationale and documentation from the prescribing physician, if any specified conditions apply.

2. Requires carriers to, upon granting a step therapy override determination, authorize coverage for the drug, if that drug is covered in the patient's policy or contract.

3. Specifies it does not prevent a carrier from requiring a patient to try a generic equivalent drug prior to providing coverage for the branded prescription.
   
   

FISCAL EFFECT:

1. The California Health Benefits Review Program (CHBRP) reports:

1. State costs:

1. $969,000 annually in Medi-Cal managed care (GF/federal).

2. $315,000 annually for provision of services through CalPERS benefit plans (GF/federal/special/local funds).  About 60% of this cost is state cost, while the rest is a local cost.  

2. Private sector and individual costs:

1. Increased employer-funded premium costs in the private insurance market of $3.7 million annually.

2. Increased premium expenditures by employees and individuals purchasing insurance of $4.1 million annually, as well as increased out-of-pocket expenditures of $1.6 million.

2. Potential minor one-time costs to DMHC (Managed Care Fund) and California Department of Insurance (Insurance Fund) to verify plan and policy compliance.

COMMENTS:

1. Purpose. This bill attempts to create a framework to allow plans and insurers to continue using step therapy processes for prescription drug coverage, but provide for clear and standardized override procedures.

2. Benefit Mandate. This bill is a benefit mandate subject to analysis by CHBRP.

3. Step Therapy Protocols. CHBRP indicates step therapy, or fail-first protocols, may be implemented as methods of utilization management in a variety of ways and are known by a number of terms. Step therapy is used to control costs and encourage appropriate clinical use. Step therapy requires an enrollee to try a first-line medication (often a generic alternative) prior to receiving coverage for a second-line medication (often a brand-name medication. There is a wide variation in the presence of STPs among plans. According to CHBRP, approximately 3% of covered enrollees have no outpatient drug benefits, and 34% have drug benefits that are not subject to STPs. Of the remaining 63% of enrollees with outpatient drug coverage that are subject to STPs, the number of drugs subjected to STPs varies from two to more than 100.

4. Support. This bill is supported by numerous groups advocating for various diseases and health care access, oncologists, biotechnology companies, social workers, and the Western Center on Law and Poverty. Supporters contend most STPs rely on generalized information regarding patients and their treatments, as opposed to taking into account unique patient experiences and responses to treatments, creating barriers for patients.

5. Opposition. America's Health Insurance Plans states that step therapy for prescription drugs is one utilization protocol that health insurers use to control health care costs and ensure patient safety. This bill would place overly broad restrictions on the use of step therapy, hindering health insurers' use of this important tool and limiting its effectiveness. The California Chamber of Commerce opposes this bill, stating that it would contribute to the problem of rising health care costs by unnecessarily increasing utilization of more expensive prescription medications; its impact on premiums and co-payments will grow in future years as more and more high-priced pharmaceutical drugs enter the market. The For Grace Foundation, sponsor of several previous iterations of step therapy bills, opposes this bill stating that it does not respond to the governor's veto message on AB 369 (Huffman) of 2012.

6. Related Legislation. Several recent bills have similarly restricted step therapy, including AB 889 (Frazier) of 2013 and AB 1826 (Huffman) of 2010 (both held on the Suspense File of the Senate Appropriations Committee), and AB 369 (Huffman) of 2012. The Governor vetoed AB 369, stating it overly limited carriers' legitimate role in determining allowable steps.

7. Prior Legislation. AB 68 (Waldron) and AB 73 (Waldron), both pending in this committee establish that a prescriber’s reasonable professional judgment prevails over the policies and utilization controls of the Medi-Cal program. AB 68 is specific to epilepsy drugs; AB 73 covers several drug classes.

Analysis Prepared by: Lisa Murawski / APPR. / (916) 319-2081

Date of Hearing: April 28, 2015

ASSEMBLY COMMITTEE ON HEALTH

Rob Bonta, Chair

ABPCA Bill Id:AB 374

Author:(Nazarian) – As Amended Ver:March 2, 2015

SUBJECT: Health care coverage: prescription drugs.

SUMMARY: Prohibits a health care service plan (plan) or insurer from applying a step therapy protocol (STP) when a patient has made a “step therapy override determination request,”, if the patient's physician determines that step therapy would not be medically appropriate. Specifically, this bill:

1. Requires a carrier to “expeditiously grant” the step therapy override determination request by a patient with adequate supporting rationale and documentation from the prescribing physician, if any of the following apply:
   
   

   1. The drug required by the carrier is contraindicated or will likely cause an adverse reaction by, or physical or mental harm to, the patient;
      
      

   2. The drug required by the carrier is expected to be ineffective based on the known relevant physical or mental characteristics of the patient and the known characteristics of the drug;
      
      

   3. The drug required by the carrier is not in the best interest of the patient, based on medical appropriateness;
      
      

   4. The patient's condition is currently stable on a medication selected by their health care provider; or,
      
      

   5. The drug required by the carrier has not been approved by the federal Food and Drug Administration (FDA) for the patient's condition
      
      

2. Upon granting a step therapy override determination, the carrier must authorize coverage for the drug prescribed by the patient's provider, if that drug is covered in the patient's policy or contract.
   
   

3. Specifies that this section does not prevent a carrier from requiring a patient to try a generic equivalent drug prior to providing coverage for the branded prescription.

EXISTING LAW:

1. Provides for regulation of health insurers by the California Department of Insurance (CDI) under the Insurance Code, and provides for the regulation of plans by the Department of Managed Health Care (DMHC), pursuant to the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene Act).
   
   

2. Requires carriers to provide certain benefits, but does not require carriers to cover prescription drugs. Establishes various requirements on carriers if they do offer prescription drug coverage.

3. Allows, pursuant to DMHC regulations, a plan to require step therapy and requires a plan to have an expeditious process in place to authorize exceptions to step therapy when medically necessary. Prohibits, in situations where an enrollee changes plans, the new plan from requiring the enrollee to repeat step therapy when that enrollee 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 enrollee's condition.

4. Requires any plan denial pursuant to 3) above to provide the enrollee with the reasons for the denial and notify the enrollee of the right to file a grievance and/or Independent Medical Review (IMR) if the enrollee objects to the denial; including any alternative drug or treatment offered by the plan.
   
   

5. Prohibits carriers that cover prescription drugs from limiting or excluding coverage for a drug on the basis that the drug is prescribed for a use different from the use for which the drug has been approved by the FDA, provided that specified conditions have been met, including that the drug is prescribed by a participating licensed health care professional for the treatment of a chronic and seriously debilitating condition, the drug is medically necessary to treat that condition, and the drug is on the plan formulary.
   
   

6. Establishes the Patient Protection and Affordable Care Act (ACA), which imposes various requirements, some of which take effect on January 1, 2014, on states, carriers, employers, and individuals regarding health care coverage.
   
   

7. Requires, under the ACA, carriers that offer coverage in the small group or individual market to ensure coverage includes essential health benefits (EHBs), as defined. Provides that the EHB package will be determined by the federal Department of Health and Human Services (HHS) Secretary and must include, at a minimum, ambulatory patient services, emergency services, hospitalizations, and prescription drugs, among other things.

FISCAL EFFECT: This bill has not been analyzed by a fiscal committee.

COMMENTS:

1. PURPOSE OF THIS BILL. According to the author, use of step therapy leads to an exacerbation of a patient’s condition, causing irreversible deterioration or damage to the patient, such as limiting their daily functions and ability to remain a productive member of the workforce and society. The author writes that the insurer is not the treating physician and cannot possible know the individual circumstances or pain a particular patient may be experiencing. It does not make logical sense for the plan to have complete and ultimate control on the medications a patient is allowed to try. The author asserts that a determination about whether a STP is appropriate should take into account the individual needs and circumstances of the patient, along with the professional judgment of the prescribing physician.

2. STEP THERAPY PROTOCOLS. According to the California Health Benefits Review Program (CHBRP), step therapy, or fail-first protocols, may be implemented as methods of utilization management in a variety of ways and are known by a number of terms. Step therapy, when implemented by carriers, requires an enrollee to try a first-line medication (often a generic alternative) prior to receiving coverage for a second-line medication (often a brand-name medication). Step edit is a process by which a prescription, submitted for payment authorization, is electronically reviewed at point-of-service for use of a prior, first-line medication. A fail-first protocol may also be the basis for part or all of a precertification or prior authorization protocol, which may also require the prescribing provider to confirm to the plan or insurer that an alternate medication or medications have been unsuccessfully tried by the patient before the coverage for the prescribed medication is approved. However, not all prior authorization protocols have a fail-first component. Some prior authorization protocols are based on other criteria, such as intended use to treat a specific medical problem or diagnosis, or confirmation that the patient meets other criteria such as age or specified comorbidities.

There is a wide variation in the presence of STPs among plans. According to CHBRP, approximately 3% of covered enrollees have no outpatient drug benefits, and 34% have drug benefits that are not subject to STPs. Of the remaining 63% of enrollees with outpatient drug coverage, the number of drugs subjected to STP varies from two to more than 100.

3. CURRENT PROTOCOLS FOR STEP THERAPY EXCEPTIONS. Existing law provides protections for insured patients. Under state regulation, a plan that requires step therapy must have an expeditious process in place to authorize exceptions to step therapy when medically necessary. Step therapy overrides follow a procedure by which a prescriber submits clinical documentation to the plan or insurer documenting why an enrollee should be allowed to skip one or more of a protocol's steps. Reasons prescribers use to justify such an step therapy override include:
   
   
   

   1. The enrollee has already tried step-required drug(s) unsuccessfully, or
      
      
      

   2. The step-required drug is contraindicated for that enrollee due to drug-drug interactions, drug-disease interactions, or drug allergy or intolerance.

In many plans, the step therapy override process is the same as the prior authorization process. Step therapy override requests may take several days to be reviewed by the plan or insurer. For prior authorization, DMHC-regulated plans are required to respond and issue authorization determinations within two business days. CDI-regulated insurers are required to issue nonurgent authorization determinations within five business days. Urgent determinations must be made within 72 hours. Existing regulations also state that a plan or insurer must notify the patient of their right to appeal the dispute through IMR.

4. CHBRP ANALYSIS. AB 1996 (Thomson), Chapter 795, Statutes of 2002, requests the University of California to assess legislation proposing a mandated benefit or service and prepare a written analysis with relevant data on the medical, economic, and public health impacts of proposed plan and health insurance benefit mandate legislation. Below are major findings of CHBRP's analysis:

   1. Enrollees covered. In 2016, approximately 24.6 million Californians will have state-regulated health insurance that would be subject to this bill.

   2. EHBs. This bill would not exceed EHBs, because the mandate is applicable to particular terms or conditions, but does not require new benefit coverage.

   3. Medical effectiveness. CHBRP found insufficient evidence to conclude whether STP overrides affect health outcomes. The absence of evidence is not evidence of no effect.

   4. Benefit coverage. The terms and conditions of 27% of enrollees would change to become fully compliant with this bill’s override approval criteria.

   5. Override criteria. CHBRP found that all enrollees in DMHC-regulated plans or CDI-regulated policies with drug benefits subject to step therapy protocols have override procedures in place. This bill would require plans and policies to grant step therapy overrides in five circumstances, as specified, when the prescriber provides specific documentation. CHBRP found that most override policies already consider the specific criteria laid forth by this bill, and therefore are already partially compliant with this bill. However, not all override procedures are fully compliant with the five criteria specified by this bill.

   6. Utilization. Filled prescriptions would be unchanged, although use of initially prescribed drugs would increase and use of step therapy drugs would decrease. Annual step therapy overrides granted would increase by 4%. The change would affect expenditures because initially prescribed drugs are frequently more expensive than step therapy required drugs. this bill would not affect cost-sharing terms and condition and that it would not require coverage of drugs not on the plan/policy formulary.
      
      

   7. Impact on expenditures. CHBRP estimates that premium impacts related to an increase in approved override requests would be 0.008%, or $10.8 million total. In DMHC-regulated plans, CHBRP estimates that premium increases would range from $0.03 (large group) to $0.07 (individual) per member per month (PMPM). In CDI-regulated policies, estimated premium increases range from $0.06 (large group and individual) to $0.13 (small group) PMPM.
      
      

5. SUPPORT. The Association of Northern California Oncologists states that it is not always clinically appropriate to mandate a patient take a similar drug that is not a generic equivalent. The decision as to which medication should be prescribed should be left solely in the hand of the physician, in consultation with the patient. California Affiliates of Susan G. Komen write that most STPs rely on generalized information regarding patients and their treatments, as opposed to taking into account unique patient experiences and responses to treatments. Furthermore, due to the lack of standardized override process, and varying formularies among plans, physicians face considerable challenges identifying drugs that are subject to step therapy, and patients face barriers to accessing timely and appropriate treatments.

6. OPPOSITION. America's Health Insurance Plans states that step therapy for prescription drugs is one utilization protocol that health insurers use to control health care costs and ensure patient safety. This bill would place overly broad restrictions on the use of step therapy, hindering health insurers' use of this important tool and limiting its effectiveness. The California Chamber of Commerce opposes this bill, stating that it would contribute to the problem of rising health care costs by unnecessarily increasing utilization of more expensive prescription medications; its impact on premiums and co-payments will grow in future years as more and more high-priced pharmaceutical drugs enter the market.

7. OPPOSE UNLESS AMENDED. The For Grace Foundation, sponsor of several previous iterations of step therapy bills, opposes this bill stating that it does not respond to the governor's veto message on AB 369 (Huffman) of 2012. This bill hands over all of the STP authority to the doctors, thus flying in the face of Governor Brown's 2012 veto. For Grace states that they would change to a support position if the bill was amended to restrict the STP to two “fails” (as Medicare does) and gave the physician no authority in their implementation.

8. RELATED LEGISLATION.

   1. AB 68 (Waldron) establishes that a prescriber’s reasonable professional judgment prevails over the policies and utilization controls of the Medi-Cal program, including the utilization controls of a Medi-Cal managed care plan, in prescribing a pharmaceutical that is in the seizure or epilepsy drug class. AB 68 was approved by in Assembly Health Committee on April 21, 2015 with a vote of 19-0 and is now pending in Assembly Appropriations Committee.

   2. AB 73 (Waldron) establishes that a prescriber's reasonable professional judgment prevails over the policies and utilization controls of the Medi-Cal program, including the utilization controls of a Medi-Cal managed care plan, in prescribing a pharmaceutical from specified therapeutic drug classes. AB 73 is pending in this Committee.

9. PREVIOUS LEGISLATION.

1. AB 889 (Frazier) of 2013 would have prohibited plans and health insurers from requiring a patient to try and fail on two medications before allowing the patient access to the medication originally prescribed by the patient's medical provider. AB 889 was held on the Suspense File in Senate Appropriations Committee.
   
   

2. AB 369 (Huffman) of 2012 would have prohibited plans and health insurers that restrict medications for the treatment of pain from requiring a patient to try and fail on more than two pain medications before allowing the patient access to the pain medication, or generically equivalent drug, prescribed by the provider. The Governor vetoed AB 369 because it did not strike “the right balance between physician discretion and health plan or insurer oversight. A doctor's judgment and a health plan's clinical protocols both have a role in ensuring the prudent prescribing of pain medications. Independent medical reviews are available to resolve differences in clinical judgment when they occur, even on an expedited basis. If current law does not suffice - and I am not certain that it doesn't, any limitations on the practice of “step therapy” should better reflect a health plan or insurer's legitimate role in determining the allowable steps.”
   
   

3. AB 1826 (Huffman) of 2010 would have required plans and health insurers that cover outpatient prescription drug benefits to provide coverage for a drug that has been prescribed for the treatment of pain. AB 1826 would have prohibited health plans and insurers from requiring the subscriber or enrollee to first use an alternative prescription drug or an over-the-counter drug, as specified. Held on the Suspense File in the Senate Appropriations Committee.
   
   

4. AB 1144 (Price) of 2009 would have required plans and health insurers that provide prescription drug benefits to submit written reports about step therapy each year to DMHC and CDI. Held on the Suspense File in the Assembly Appropriations Committee.

10. POLICY COMMENT.
    
    

    1. Does this bill achieve the author's goal? This bill seeks to address concerns raised by the Governor in his veto message of a prior bill by establishing a set of circumstances under which a plan/insurer must agree to bypass step therapy, rather than imposing blanket restrictions on its use. As drafted, this bill requires override approval when the prescriber provides the medical documentation, without explicitly giving the carrier any option to review or deny the request. It is unclear whether this is, also, a blanket restriction on the use of STPs.
       
       

    2. Expeditious review? Current law already has an appeal review process to override step therapy requirements. Expeditious is not defined in the Knox-Keene Act or in regulation, giving plans leeway to take into account the severity of the condition in the timing of their response. Because this bill uses the same phrase “expeditious review,” it is not clear how setting up a new process for step therapy appeals would offer any improvement on current law.
       
       

11. SUGGESTED AMENDMENT. This bill requires that all override requests be approved after the physician has submitted their medical opinion, without review or response from the plan or insurer. If the author intends to have the request actually be a request, an amendment should be taken to reflect that.
    
    

(b) A step therapy override determination request by a patient with adequate supporting rationale and documentation from the prescribing physician shall be expeditiously reviewed granted by the plan if any of the following apply

REGISTERED SUPPORT / OPPOSITION:

Support

Arthritis Foundation (cosponsor)

California Rheumatology Alliance (cosponsor)

Union of American Physicians and Dentists (cosponsor)

American Cancer Society Cancer Action Network

American GI Forum Education Foundation of Santa Maria

Association of Northern California Oncologists

Bay Area Women's Health Advocacy Council

Biocom

California Affiliates of Susan G. Komen

California Association of Area Agencies on Aging

California Healthcare Institute

California Primary Care Association

California Psychological Association

California School Employees Association, AFL-CIO

Chronic Care Coalition

Congress of California Seniors

Latina Breast Cancer Agency

Leukemia and Lymphoma Society

Medical Oncology Association of Southern California

Mental Health America of California

National Alliance on Mental Illness

National Association of Social Workers, California Chapter

Neuropathy Action Foundation

Osteopathic Physicians and Surgeons of California

Pharmaceuticals Research and Manufacturers of America

Western Center on Law and Poverty

Opposition

America's Health Insurance Plans

Association of California Life and Health Insurance Companies

Blue Shield of California

California Association of Health Plans

California Chamber of Commerce

CSAC Excess Insurance Authority

Express Scripts

For Grace (unless amended)

Simi Valley Chamber of Commerce

Southwest California Legislative Council

Analysis Prepared by: Dharia McGrew / HEALTH / (916) 319-2097