Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care and makes a willful violation of the act a crime. Existing law also provides for the regulation of health insurers by the Department of Insurance.

Existing law prohibits the copayment, coinsurance, or any other form of cost sharing for a covered outpatient prescription drug for an individual prescription from exceeding $250 for a supply of up to 30 days, except as specified. Existing law requires a health care service plan contract or health insurance policy for a nongrandfathered individual or small group product that maintains a drug formulary grouped into tiers, and that includes a 4th tier, to define each tier of the drug formulary, as specified. Existing law defines Tier 4 to include, among others, drugs that are biologics. Existing law repeals these provisions on January 1, 2024.

This bill would delete drugs that are biologics from the definition of Tier 4. The bill would require a health care service plan or a health insurer, if there is a generic equivalent to a brand name drug, to ensure that an enrollee or insured is subject to the lowest cost sharing that would be applied, whether or not both the generic equivalent and the brand name drug are on the formulary. The bill also would delete the January 1, 2024, repeal date of the above provisions, thus making them operative indefinitely. Because extension of the bills requirements relative to health care service plans would extend the existence of 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 the act a crime. Existing law also provides for the regulation of health insurers by the Department of Insurance.

Existing law prohibits the copayment, coinsurance, or any other form of cost sharing for a covered outpatient prescription drug for an individual prescription from exceeding $250 for a supply of up to 30 days, except as specified. Existing law requires a health care service plan contract or health insurance policy for a nongrandfathered individual or small group product that maintains a drug formulary grouped into tiers, and that includes a 4th tier, to define each tier of the drug formulary, as specified. Existing law defines Tier 4 to include, among others, drugs that are biologics. Existing law repeals these provisions on January 1, 2024.

This bill would delete drugs that are biologics from the definition of Tier 4. The bill would require a health care service plan or a health insurer, if there is a generic equivalent to a brand name drug, to ensure that an enrollee or insured is subject to the lowest cost sharing that would be applied, whether or not both the generic equivalent and the brand name drug are on the formulary. The bill also would delete the January 1, 2024, repeal date of the above provisions, thus making them operative indefinitely. Because extension of the bills requirements relative to health care service plans would extend the existence of 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 the act a crime. Existing law also provides for the regulation of health insurers by the Department of Insurance.

Existing law prohibits the copayment, coinsurance, or any other form of cost sharing for a covered outpatient prescription drug for an individual prescription from exceeding $250 for a supply of up to 30 days, except as specified. Existing law requires a health care service plan contract or health insurance policy for a nongrandfathered individual or small group product that maintains a drug formulary grouped into tiers, and that includes a 4th tier, to define each tier of the drug formulary, as specified. Existing law defines Tier 4 to include, among others, drugs that are biologics. Existing law repeals these provisions on January 1, 2024.

This bill would delete drugs that are biologics from the definition of Tier 4. The bill would require a health care service plan or a health insurer, if there is a generic equivalent to a brand name drug, to ensure that an enrollee or insured is subject to the lowest cost sharing that would be applied, whether or not both the generic equivalent and the brand name drug are on the formulary. The bill also would delete the January 1, 2024, repeal date of the above provisions, thus making them operative indefinitely. Because extension of the bills requirements relative to health care service plans would extend the existence of 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 the act a crime. Existing law also provides for the regulation of health insurers by the Department of Insurance.

Existing law, until January 1, 2024, law prohibits the copayment, coinsurance, or any other form of cost sharing for a covered outpatient prescription drug for an individual prescription from exceeding $250 for a supply of up to 30 days, except as specified. Existing law, until January 1, 2024, requires a nongrandfathered individual or small group plan contract or policy to use specified definitions for each tier of a drug formulary. law requires a health care service plan contract or health insurance policy for a nongrandfathered individual or small group product that maintains a drug formulary grouped into tiers, and that includes a 4th tier, to define each tier of the drug formulary, as specified. Existing law defines Tier 4 to include, among others, drugs that are biologics. Existing law repeals these provisions on January 1, 2024.

This bill would delete drugs that are biologics from the definition of Tier 4. The bill would require a health care service plan or a health insurer, if there is a generic equivalent to a brand name drug, to ensure that an enrollee or insured is subject to the lowest cost sharing that would be applied, whether or not both the generic equivalent and the brand name drug are on the formulary. The bill also would delete the January 1, 2024, repeal date of those the above provisions, thus making them operative indefinitely. Because extension of the bills requirements relative to health care service plans would extend the existence of 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 the act a crime. Existing law also provides for the regulation of health insurers by the Department of Insurance.

Existing law, until January 1, 2024, prohibits the copayment, coinsurance, or any other form of cost sharing for a covered outpatient prescription drug for an individual prescription from exceeding $250 for a supply of up to 30 days, except as specified. Existing law, until January 1, 2024, requires a nongrandfathered individual or small group plan contract or policy to use specified definitions for each tier of a drug formulary.

This bill would delete the January 1, 2024, repeal date of those provisions, thus making them operative indefinitely. Because extension of the bills requirements relative to health care service plans would extend the existence of 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 948

Author:(Berman)

As Amended Ver:August 14, 2023

Majority vote

SUMMARY

Makes permanent existing law provisions that prohibit the copayment, coinsurance, or any other form of cost sharing for a covered outpatient prescription drug for an individual prescription from exceeding $250 for a supply of up to 30 days or $500 for bronze products, except as specified; and, requires a non-grandfathered individual or small group plan contract or insurance policy to use specified definitions for each tier of a drug formulary.

Senate Amendments

Add provisions that prohibit a copayment or percentage coinsurance from exceeding 50% of the cost to the plan and require a plan or insurer to ensure that the enrollee or insured is subject to the lowest cost sharing that would be applied, whether or not both the generic equivalent and the brand name drug are on the formulary, if there is a generic equivalent to a brand name drug. Delete biologics from the tier four definition in existing law.

COMMENTS

1. SB 17 DMHC Report. SB 17 (Hernandez), Chapter 603, Statutes of 2017, requires health plans in the commercial market to annually report their prescription drug costs to the Department of Managed Health Care (DMHC). This report looks at the impact of the cost of prescription drugs on health plan premiums and compares this data across the reporting years. The DMHC considers the total volume of prescription drugs prescribed by health plans and the total cost paid by health plans for these drugs, on both an aggregate spending level and a per member per month (PMPM) basis and compares the annualized data. The DMHC also analyzes how the 25 most frequently prescribed drugs, the 25 most costly drugs, and the 25 drugs with the highest year-over-year increase in total annual spending impacted health plan premiums over the course of the last four years. The most recent report notes the following key findings:
   1. Health plans paid about $10.8 billion for prescription drugs in 2021, an increase of almost $700 million or 6.6% from 2020. On a PMPM basis, health plans paid $71.46 in 2021, which is an increase of $4.56 PMPM from 2020. Since 2017, prescription drug costs paid by health plans increased by $2.1 billion or 22.2%. Unless otherwise specified, the prescription drug costs in this report are not adjusted for any manufacturer rebates. However, this report includes the total manufacturer drug rebates collected by health plans.
   2. Prescription drugs accounted for 13.3% of total health plan premiums in 2021, an increase from 12.7% in 2020. Prescription drugs accounted for 12.8% and 12.7% of total health plan premiums in 2019 and 2018, respectively. The figures in this report include only those prescription drugs dispensed through retail or mail order pharmacies, and do not include drugs that are provided in a hospital, administered in a doctor office, or otherwise paid for through capitated payments to delegated providers. Therefore, the 13.3% of premium in 2021 does not capture all costs of prescription drugs paid by health plans.
   3. Total prescription drug costs increased by 6.6% in 2021, whereas total medical expenses increased by 9.2%. Overall, total health plan premiums increased by 2.2% from 2020 to 2021.
   4. On a PMPM basis, health plans’ prescription drug costs increased by 6.8%, medical expenses increased by 9.4% and health plan premiums increased by 2.4% from 2020 to 2021.
   5. Manufacturer drug rebates totaled approximately $1.674 billion, up from $1.437 billion in 2020 and $1.205 billion in 2019. This represents about 15.5% of the $10.8 billion spent on prescription drugs in 2021. On a PMPM basis, manufacturer drug rebates equaled $11.10 PMPM, up from $9.51 PMPM in 2020. This also equates to 15.5% of the $71.46 PMPM health plans paid for prescription drugs in 2021. Health plans provided the total manufacturer drug rebate information for all drugs. The manufacturer drug rebate was not provided for the top 25 most frequently prescribed drugs, the top 25 most costly drugs or top 25 drugs with highest year-over-year increase in total annual spending.
   6. While specialty drugs accounted for only 1.6% of all prescription drugs dispensed, they accounted for 62.9% of total annual spending on prescription drugs. “Specialty Drug” is a drug with a negotiated monthly cost that exceeds the threshold for a specialty drug under the Medicare Part D program.
   7. Generic drugs accounted for 88.2% of all prescribed drugs but only 16.3% of the total annual spending on prescription drugs.
   8. Brand name drugs accounted for 10.2% of prescriptions and constituted 20.8% of the total annual spending on prescription drugs.
   9. The 25 most frequently prescribed drugs represented 49.2% of all drugs prescribed and approximately 42.5% of the total annual spending on prescription drugs.
   10. For the 25 most frequently prescribed drugs, enrollees paid 3.3% of the cost of specialty drugs, 9.2% of the cost of brand name drugs, and 62.4% of the cost of generics.
   11. Of the 13.3% of total health plan premium that was spent on prescription drugs, the 25 most costly drugs accounted for 6.8%.
   12. Overall, health plans paid 92.6% of the cost of the 25 most costly prescribed drugs across all three categories (generic, brand name and specialty).
   13. For the first time, the Pfizer and Moderna COVID-19 vaccines were amongst the 25 most frequently prescribed drugs, 25 most costly drugs and 25 drugs with the highest year-over year increase in total spending. While the cost of the COVID-19 vaccines was covered by the federal government, health plans were responsible for the cost of administration of a significant number of vaccines in 2021.
2. Cost-sharing. This bill makes permanent the provisions in existing law capping the copay for a prescription at $250 or $500 for a bronze level product. According to the California Health Benefits Review Program, for each test, treatment, or service that is a benefit covered by a plan or policy that includes a deductible, one or more of the following cost-sharing requirements may be applicable:
   1. Deductible: The enrollee is responsible for paying the full cost of covered benefits subject to the deductible until the full value of the deductible is paid by the enrollee. The enrollee’s payments towards the deductible accumulates over the course of the plan/policy year. For example, if an enrollee has a $750 deductible, and uses four $250 services that are subject to the deductible throughout the course of the year, the enrollee would pay for the first three services ($250 x 3 = $750) in full. At that point, the deductible would be met and a different form of cost sharing such as a copayment or coinsurance may be applied to the fourth visit, depending on the plan/policy.
   2. Copayment: A copayment is a flat dollar amount paid by the enrollee per service for services subject to a copayment. Copayments may be applied on their own or to services subject to a deductible after the deductible is met.
   3. Coinsurance: Coinsurance is the percentage of the total cost of a service that will be paid by the enrollee. For example, on a $250 service subject to a 10% coinsurance, the enrollee cost sharing would be $25. Coinsurance may be applied on its own or to services subject to deductible after the deductible is met.
   4. Out-of-pocket maximums: Out-of-pocket maximums are the maximum an enrollee will spend on cost sharing for covered services in the form of deductibles, copayments, and coinsurance during the plan/policy year. For plans and policies available through Covered California, out-of-pocket maximums for in-network EHBs are applicable. In 2023, the out-of-pocket maximum limit for self-only coverage is $9,100. If an enrollee has a high cost hospital stay in the first month of their plan/policy year (whether or not that plan or policy includes a deductible) and reaches their out-of-pocket maximum, the enrollee would not have any other cost sharing for covered services for the remaining 11 months of the plan/policy year.
3. Tiers. Health insurance plans often structure their formularies into pricing groups or tiers. Several factors determine which tier a drug is placed in. These factors include: cost of the drug; cost of the drug in comparison to other drugs used for the same type of treatment; availability of over-the-counter options; and, other clinical and cost factors. Preferred drugs are usually the cheapest for the consumer and the insurance company. Non-preferred and specialty drugs are the most expensive, both for the consumer and the insurance company. Some drugs are in lower-priced tiers and cost consumers less money. Other drugs are in higher-priced tiers and cost consumers more money. The particular prescription drugs placed into tiers change frequently.

According to the Author

Since 2017 Californians have been protected from rising prescription drug costs with a $250 co-pay cap for their medication, but that consumer protection is set to expire next year without legislative action. This bill would make permanent the existing $250 co-pay cap for a 30-day prescription drug supply, ensuring consumers can continue counting on their monthly prescription drug costs staying within reach. The author states that before the $250 co-pay cap was signed into law with AB 339 (Gordon), Chapter 619, Statutes of 2015, and extended until January 1, 2024 with SB 1021 (Wiener), Chapter 787, Statutes of 2018, Californians with serious and chronic conditions like cancer, HIV/AIDS, multiple sclerosis (MS) and lupus were particularly vulnerable to high out-of-pocket costs because more expensive specialty drugs were often put on the highest tier of the drug formulary, costing thousands of dollars. For example, filling just one prescription in January meant consumers often reached their out-of-pocket maximum for that single prescription, requiring Californians to pay thousands of dollars upfront. As a result, Californians were forced to choose between paying for their life-saving medication and paying for housing, child care, or food. The author concludes that with prescription drug costs rising, more and more consumers’ prescription drugs will hit the $250 co-pay cap, increasing the number of Californians who will be counting on the consumer protections in this bill to become permanent.

Arguments in Support

Health Access California (HAC), sponsor, writes that in California, prescription drug costs have increased 22.2% over the last five years, or about 5% each year. To give an example, prices for MS medications have increased nearly 400% since 2004, and 60% in the last five years alone. Cost-sharing for consumers has also continued to grow with the maximum out-of-pocket limit in 2023 at $8,750 for Silver plans, and expected to increase in 2024. That means, if the $250 co-pay cap sunsets, a consumer purchasing a high-cost drug could be charged up to that limit of $8,750 up front for a single 30-day prescription. Without the cost-sharing cap, more of these cost increases will be shifted to the consumer to pay. When the Legislature passed SB 1021, to extend the 2020 sunset on these consumer protections, research showed that that if the law had sunset in 2020, there would be an increase of $45 million in enrollee costs. People who face higher cost-sharing for a prescription drug are less likely to maintain meaningful levels of adherence to prescription drugs prescribed by their doctor, which can lead to worse health outcomes. With prescription drug costs rising, more and more consumers’ prescription drugs will hit the $250 cost-sharing cap, increasing the number of Californians who will be counting on this consumer protection to keep costs lower. For consumers buying coverage as individuals, the Covered California Standard Benefit Design allows consumers to compare health plans, the benefits covered and their level of cost-sharing for prescription drugs. HAC concludes that this bill will make the $250 co-pay cap and tiering standards permanent, helping keep prescription drugs affordable ensuring that consumers can access the medication that they need and focus on their health, not whether they can afford their prescription.

Arguments in Opposition

There is no known registered opposition.

FISCAL COMMENTS

According to the Senate Appropriations Committee, DMHC indicates costs are minor and absorbable. The California Department of Insurance estimates costs of $68,000 (Insurance Fund) in 2023-24 for staffing resources.

VOTES:

ASM HEALTH: 13-0-2

YES: Wood, Waldron, Aguiar-Curry, Arambula, Flora, Vince Fong, Maienschein, McCarty, Joe Patterson, Rodriguez, Santiago, Villapudua, Weber

ABS, ABST OR NV: Boerner Horvath, Wendy Carrillo

ASM APPROPRIATIONS: 14-0-2

YES: Holden, Megan Dahle, Calderon, Wendy Carrillo, Dixon, Mike Fong, Hart, Lowenthal, Mathis, Papan, Robert Rivas, Sanchez, Weber, Wilson

ABS, ABST OR NV: Bryan, Pellerin

ASSEMBLY FLOOR: 79-0-1

YES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Chen, Connolly, Megan Dahle, Davies, Dixon, Essayli, Flora, Mike Fong, Vince Fong, Friedman, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Irwin, Jackson, Jones‑Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Rendon

ABS, ABST OR NV: Jim Patterson

SENATE FLOOR: 39-0-1

YES: Allen, Alvarado-Gil, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dahle, Dodd, Durazo, Eggman, Glazer, Gonzalez, Grove, Hurtado, Jones, Laird, Limón, McGuire, Menjivar, Min, Newman, Nguyen, Niello, Ochoa Bogh, Portantino, Roth, Rubio, Seyarto, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk

ABS, ABST OR NV: Padilla

UPDATED

VERSION: August 14, 2023

CONSULTANT: Kristene Mapile / HEALTH / (916) 319-2097 FN: 0001610

 THIRD READING  

Bill No: AB 948

Author: Berman (D), et al.

Amended: 8/14/23 in Senate

Vote: 21

SENATE HEALTH COMMITTEE: 12-0, 6/7/23

AYES: Eggman, Nguyen, Glazer, Gonzalez, Grove, Hurtado, Limón, Menjivar, Roth, Rubio, Wahab, Wiener

SENATE APPROPRIATIONS COMMITTEE: 6-0, 6/26/23

AYES: Portantino, Ashby, Bradford, Seyarto, Wahab, Wiener

NO VOTE RECORDED: Jones

ASSEMBLY FLOOR: 79-0, 4/27/23 (Consent) - See last page for vote

SUBJECT: Prescription drugs

SOURCE: Health Access California

DIGEST:

This bill deletes the January 1, 2024 repeal date on the existing $250 limit on cost-sharing for a 30-day supply of a covered outpatient prescription drug for an individual prescription and makes other clarifications to this law.

Senate Floor Amendments of 8/14/23 correct an inconsistency which requires health insurers, with respect to placing specific drugs on specific tiers, or formulary placement, to “comply with” other provisions of law in the Insurance Code, as specified.

ANALYSIS:

Existing law:

1. Establishes the Department of Managed Health Care (DMHC) to regulate health plans and the California Department of Insurance (CDI) to regulate health insurance. [HSC §1340, et seq. and INS §106, et seq.]
2. Requires an individual or group health plan contract or insurance policy that provides coverage for essential health benefits, as specified, to limit the copayment, coinsurance, or any other form of cost-sharing for a covered outpatient prescription drug for up to a 30-day supply of an individual prescription, to $250, with the following exceptions:
   1. Limits the cost-sharing with respect to products with actuarial value at, or equivalent to, the bronze level, for an individual prescription for a 30-day supply, to $500; or,
   2. Applies the cost sharing cap for a health plan contract or insurance policy that is a “high deductible health plan,” defined under federal law only after an enrollee’s or insured’s deductible has been satisfied for the year. [HSC §1342.73 and INS §10123.1932]
3. Repeals 2) above on January 1, 2024. [HSC §1342.73 and INS §10123.1932]

This bill:

1. Deletes the January 1, 2024 repeal date on the $250 limit on cost-sharing for a 30-day supply of a covered outpatient prescription drug for an individual prescription.
   
2. Prohibits a copayment or percentage coinsurance from exceeding 50% of the cost to the plan or insurer as described in DMHC regulations, as specified.
   
3. Requires if there is a generic equivalent to a brand name drug, a plan or insurer to ensure the enrollee or insured is subject to the lowest cost sharing that would be applied, whether or not both the generic equivalent and the brand name drug are on the formulary. This does not require both the generic equivalent and the brand name drug to be on the formulary.
   
4. Requires in placing specific drugs on specific tiers, or choosing to place a drug on the formulary, the health plan to comply with the other provisions of law, as specified.

Comments

According to the author, since 2017 Californians have been protected from rising prescription drug costs with a $250 co-pay cap for their medication, but that consumer protection is set to expire next year. This bill would make permanent the existing $250 co-pay cap for a 30-day prescription drug supply, ensuring consumers can continue counting on their monthly prescription drug costs staying within reach. Before the $250 co-pay cap was signed into law and extended until January 1, 2024, Californians with serious and chronic conditions like cancer, HIV/AIDS, multiple sclerosis, and lupus were particularly vulnerable to high out-of-pocket costs because more expensive specialty drugs were often put on the highest tier of the drug formulary, costing thousands of dollars. For example, filling just one prescription in January meant consumers often reached their out-of-pocket maximum for that single prescription, requiring Californians to pay thousands of dollars upfront. As a result, Californians were forced to choose between paying for their life-saving medication and paying for housing, childcare, or food. By making the existing co-pay cap permanent, this bill would ensure that Californians can access the medication that they need and focus on their health, not whether they can afford their prescription.

Kaiser Family Foundation Survey, 2021. From an individual perspective, prescription drug affordability is a bigger issue for those who are currently taking four or more prescription medicines. Three in ten of those taking four or more prescription drugs say they have difficulty affording their prescriptions, compared to one in five adults who currently take three or fewer prescription medications. Those who take four or more prescription drugs, those with chronic conditions in their households, and those with an annual household income of less than $40,000 report having much more difficulty affording prescriptions.

Prescription drug costs. According to the 2021 U.S. National Health Expenditures (NHE) report, NHE grew 2.7% to $4.3 trillion in 2021, or $12,914 per person, and accounted for 18.3% of Gross Domestic Product (GDP). Private health insurance spending grew 5.8% to $1,211.4 billion in 2021, or 28% of total NHE. Out-of-pocket spending grew 10.4% to $433.2 billion in 2021, or 10% of total NHE. Hospital expenditures grew 4.4% to $1,323.9 billion in 2021, slower than the 6.2% growth in 2020. Physician and clinical services expenditures grew 5.6% to $864.6 billion in 2021, slower growth than the 6.6% in 2020. Prescription drug spending increased 7.8% to $378.0 billion in 2021, faster than the 3.7% growth in 2020. The largest shares of total health spending were sponsored by the federal government (34%) and households (27%). The private business share of health spending accounted for 17% of total health care spending, state and local governments accounted for 15%, and other private revenues accounted for 7%.

California data. Health plans regulated by DMHC paid more than $10.8 billion for prescription drugs in 2021, an increase of almost $700 million (6.6%) from 2020. Total medical expenses increased by 9.2%. Enrollees spent nearly $1 billion for prescription drugs in 2021. Manufacturer drug rebates totaled approximately $1.674 billion, up from $1.437 billion in 2020 and $1.205 billion in 2019. This represents about 15.5% of the $10.8 billion spent on prescription drugs in 2021. While specialty drugs accounted for only 1.6% of all prescription drugs dispensed, they accounted for 62.9% of total annual spending on prescription drugs. Generic drugs accounted for 88.2% of all prescribed drugs but only 16.3% of the total annual spending on prescription drugs. Brand name drugs accounted for 10.2% of prescriptions and constituted 20.8% of the total annual spending on prescription drugs. According to a March 16, 2022, DMHC public meeting on rates and drug costs, for 2021, average health plan premium rate increases in the large group market were just over 4%. Average health plan rate increases in the small group market ranged from 1.7% to 3.7% with total weighted average of 1.8%, and in the individual market health plan total weighted average premium rate decreased 4%.

For CDI insurers, prescription drugs accounted for 14.1% of total health care premiums in 2021 once rebates are considered, this is up from 13.4% in 2020. Prescription drugs accounted for 16.3% of all medical costs in 2021 once rebates are considered, and 16.6% for 2020. Drug costs per prescription decreased by 1.5% overall. But decreased costs per prescription were not found across all drug categories: generic drugs decreased by 3.7% in cost per prescription, while specialty drugs increased in cost per prescription by 6.1%. A portion of the increased drug costs per prescription for brand and specialty drugs was offset by the increased use of rebates in 2021.

PBMs. PBMs help health plans manage their drug benefits through negotiating or contracting with manufacturers and/or pharmacies on behalf of their contracted health plans. The DMHC PBM report required by AB 315 (Wood, Chapter 905, Statutes of 2018), indicates that rebates may offer perverse incentives, as higher cost drugs could mean higher rebates for the PBM.

Attorney General action. In January 2023, California Attorney General Rob Bonta announced a lawsuit against the nation's largest insulin makers (Eli Lilly, Novo Nordisk, and Sanofi) and three PBMs (CVS Caremark, Express Scripts, and Optum Rx) for driving up the cost of insulin through unlawful, unfair, and deceptive business practices in violation of California's Unfair Competition Law. The lawsuit alleges these manufacturers and PBMs have leveraged their market power to overcharge patients. The complaint alleges the defendants separately conspired to artificially inflate prices while agreeing to provide secret rebates in an attempt to obtain preferred positions on drug formularies.

Related/Prior Legislation

AB 1860 (Limón, Chapter 427, Statutes of 2018) raised the $200 copayment and coinsurance limit to $250 for prescribed, orally administered anticancer medications used to kill or slow the growth of cancerous cells, and extends the sunset on the law that established the limit.

SB 1021 (Wiener, Chapter 787, Statutes of 2018) prohibited health plan contracts and health insurance policies from having utilization management policies or procedures which rely on a multi-tablet drug regimen over a single-tablet drug regimen for the prevention of HIV infection and AIDS; extends the January 1, 2020 sunset on law that caps cost sharing for a covered outpatient prescription drug at $250/$500 per 30-day supply, as specified, as well as other formulary requirements; and codifies a regulation that prohibits an enrollee or insured from being charged more than the retail price for a prescription drug when the applicable copayment or coinsurance is a higher amount.

AB 399 (Gordon, Chapter 619, Statutes of 2015) required health plans and health insurers that provide coverage for outpatient prescription drugs to have formularies that do not discourage the enrollment of individuals with health conditions, and requires combination antiretrovirals drug treatment coverage of a single-tablet that is as effective as a multi-tablet regimen for treatment of HIV/AIDS, as specified. Places in state law, federal requirements related to pharmacy and therapeutics committees, access to in-network retail pharmacies, standardized formulary requirements, formulary tier requirements similar to those required of health plans and insurers participating in Covered California and copayment caps of $250 and $500 for a supply of up to 30 days for an individual prescription, as specified.

AB 219 (Perea, Chapter 662, Statutes of 2013) limited the total amount of copayments and coinsurance an enrollee or insured is required to pay for orally administered anticancer medications to $200 for an individual prescription of up to a 30-day supply.

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

According to the Senate Appropriations Committee:

• DMHC indicates costs are minor and absorbable.
• CDI estimates costs of $68,000 (Insurance Fund) in 2023-24 for staffing resources.

SUPPORT: (Verified 8/11/23)

Health Access California (source)

AFSCME

Breathe California

California Academy of Family Physicians

California Chapter American College of Cardiology

California Chronic Care Coalition

California Life Sciences

California Medical Association

California Rheumatology Alliance

California Pharmacists Association

California Public Interest Research Group

California Podiatric Medical Association

California School Employees Association

California Society of Plastic Surgeons

California Teachers Association

Community Clinic Association of Los Angeles County

Community Health Councils

Crohn’s & Colitis Foundation

End the Epidemic

Equality California

Harm Reduction Institute

Mental Health America of California

National Association of Social Workers, California Chapter

National Health Law Program

National Multiple Sclerosis Society, MS-CAN

Radiant Health Centers

San Francisco AIDS Foundation

The Leukemia & Lymphoma Society

Western Center on Law & Poverty

OPPOSITION: (Verified 8/11/23)

None received

ARGUMENTS IN SUPPORT: According to Health Access Californian, this bill’s sponsor, in 2015, the Legislature passed AB 339, establishing the $250 co-pay cap for a 30-day supply of a prescription drug, with a sunset in 2020, which was extended with SB 1021 (Wiener, 2018) until the end of this year. Before the $250 cost-sharing cap, Californians with serious and chronic conditions like cancer, HIV/AIDS, multiple sclerosis (MS), and lupus were particularly vulnerable to high out-of-pocket costs because more expensive specialty drugs were often put on the highest tier of the formulary, costing thousands of dollars. Just filling one prescription in January meant consumers often reached their annual out-of-pocket limit of $6,000 for that single prescription in one month. Since the passage of AB 339, prescription drug prices have risen significantly, making this consumer protection even more critical to protect consumers from high out-of-pocket costs. In California, prescription drug costs have increased 22.2% over the last five years, or about 5% each year. To give an example, prices for MS medications have increased nearly 400% since 2004, and 60% in the last five years alone. This bill also makes permanent standardized tiering definitions for drug formularies in coverage offered to individual consumers and employees of small businesses. Formularies are a list that health plans use to show the consumer which medications they offer. These lists are grouped into categories called tiers, with less expensive medications placed on lower tiers, and more expensive medications placed on the highest tiers. Health plans encourage doctors to prescribe lower-cost alternatives, found on lower tiers, to help keep costs down. For example, substituting generic drugs for brand name medication helps reduce costs, as does trying out lower cost brand name drug that is in the same therapeutic class as a higher cost drug.

ASSEMBLY FLOOR: 79-0, 4/27/23

AYES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Chen, Connolly, Megan Dahle, Davies, Dixon, Essayli, Flora, Mike Fong, Vince Fong, Friedman, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Rendon

NO VOTE RECORDED: Jim Patterson

Prepared by: Teri Boughton / HEALTH / (916) 651-4111

8/16/23 10:11:45

**** END ****

 THIRD READING  

Bill No: AB 948

Author: Berman (D), et al.

Amended: 6/12/23 in Senate

Vote: 21

SENATE HEALTH COMMITTEE: 12-0, 6/7/23

AYES: Eggman, Nguyen, Glazer, Gonzalez, Grove, Hurtado, Limón, Menjivar, Roth, Rubio, Wahab, Wiener

SENATE APPROPRIATIONS COMMITTEE: 6-0, 6/26/23

AYES: Portantino, Ashby, Bradford, Seyarto, Wahab, Wiener

NO VOTE RECORDED: Jones

ASSEMBLY FLOOR: 79-0, 4/27/23 (Consent) - See last page for vote

SUBJECT: Prescription drugs

SOURCE: Health Access California

DIGEST:

This bill deletes the January 1, 2024 repeal date on the existing $250 limit on cost-sharing for a 30-day supply of a covered outpatient prescription drug for an individual prescription.

ANALYSIS:

Existing law:

1. Establishes the Department of Managed Health Care (DMHC) to regulate health plans and the California Department of Insurance (CDI) to regulate health insurance. [HSC §1340, et seq. and INS §106, et seq.]
2. Requires an individual or group health plan contract or insurance policy that provides coverage for essential health benefits, as specified, to limit the copayment, coinsurance, or any other form of cost-sharing for a covered outpatient prescription drug for up to a 30-day supply of an individual prescription, to $250, with the following exceptions:
   1. Limits the cost-sharing with respect to products with actuarial value at, or equivalent to, the bronze level, for an individual prescription for a 30-day supply, to $500; or,
   2. Applies the cost sharing cap for a health plan contract or insurance policy that is a “high deductible health plan,” defined under federal law only after an enrollee’s or insured’s deductible has been satisfied for the year. [HSC §1342.73 and INS §10123.1932]
3. Repeals 2) above on January 1, 2024. [HSC §1342.73 and INS §10123.1932]
4. Requires an individual or group health plan contract or health insurance policy that provides coverage for prescribed, orally-administered anticancer medications used to kill or slow the growth of cancerous cells to comply with all of the following:
   1. Limit the total amount of copayments and coinsurance an enrollee or insured is required to pay to not exceed $250 for an individual prescription of up to a 30-day supply of a prescribed orally administered anticancer medication covered by the contract, notwithstanding any deductible;
   2. Apply 4a) to a health plan contract or health insurance policy that meets the definition of a “high deductible health plan,” as defined in federal law only once the deductible has been satisfied for the year;
   3. Exempt any Medicare coverage under a health plan contract or health insurance policy; and,
   4. Require a prescription for an orally administered anticancer medication to be provided consistent with the appropriate standard of care for that medication. [HSC §1367.656 and INS §10123.206]
5. Repeals 4) above on January 1, 2024. [HSC §1367.656 and INS §10123.206]
6. Requires an individual or small group health insurance policy to include, at a minimum, coverage for essential health benefits, as required of health plans pursuant to specified provisions of the Health and Safety Code related to prescription medications. [INS §10112.27]

This bill:

1. Deletes the January 1, 2024 repeal date on the $250 limit on cost-sharing for a 30-day supply of a covered outpatient prescription drug for an individual prescription.
   
2. Prohibits a copayment or percentage coinsurance from exceeding 50% of the cost to the plan or insurer as described in DMHC regulations, as specified.
   
3. Requires if there is a generic equivalent to a brand name drug, a plan or insurer to ensure the enrollee or insured is subject to the lowest cost sharing that would be applied, whether or not both the generic equivalent and the brand name drug are on the formulary. This does not require both the generic equivalent and the brand name drug to be on the formulary.

Comments

According to the author, since 2017 Californians have been protected from rising prescription drug costs with a $250 co-pay cap for their medication, but that consumer protection is set to expire next year. This bill would make permanent the existing $250 co-pay cap for a 30-day prescription drug supply, ensuring consumers can continue counting on their monthly prescription drug costs staying within reach. Before the $250 co-pay cap was signed into law and extended until January 1, 2024, Californians with serious and chronic conditions like cancer, HIV/AIDS, multiple sclerosis, and lupus were particularly vulnerable to high out-of-pocket costs because more expensive specialty drugs were often put on the highest tier of the drug formulary, costing thousands of dollars. For example, filling just one prescription in January meant consumers often reached their out-of-pocket maximum for that single prescription, requiring Californians to pay thousands of dollars upfront. As a result, Californians were forced to choose between paying for their life-saving medication and paying for housing, childcare, or food. By making the existing co-pay cap permanent, this bill would ensure that Californians can access the medication that they need and focus on their health, not whether they can afford their prescription.

Kaiser Family Foundation Survey, 2021. From an individual perspective, prescription drug affordability is a bigger issue for those who are currently taking four or more prescription medicines. Three in ten of those taking four or more prescription drugs say they have difficulty affording their prescriptions, compared to one in five adults who currently take three or fewer prescription medications. Those who take four or more prescription drugs, those with chronic conditions in their households, and those with an annual household income of less than $40,000 report having much more difficulty affording prescriptions.

Prescription drug costs. According to the 2021 U.S. National Health Expenditures (NHE) report, NHE grew 2.7% to $4.3 trillion in 2021, or $12,914 per person, and accounted for 18.3% of Gross Domestic Product (GDP). Private health insurance spending grew 5.8% to $1,211.4 billion in 2021, or 28% of total NHE. Out-of-pocket spending grew 10.4% to $433.2 billion in 2021, or 10% of total NHE. Hospital expenditures grew 4.4% to $1,323.9 billion in 2021, slower than the 6.2% growth in 2020. Physician and clinical services expenditures grew 5.6% to $864.6 billion in 2021, slower growth than the 6.6% in 2020. Prescription drug spending increased 7.8% to $378.0 billion in 2021, faster than the 3.7% growth in 2020. The largest shares of total health spending were sponsored by the federal government (34%) and households (27%). The private business share of health spending accounted for 17% of total health care spending, state and local governments accounted for 15%, and other private revenues accounted for 7%.

California data. Health plans regulated by DMHC paid more than $10.8 billion for prescription drugs in 2021, an increase of almost $700 million (6.6%) from 2020. Total medical expenses increased by 9.2%. Enrollees spent nearly $1 billion for prescription drugs in 2021. Manufacturer drug rebates totaled approximately $1.674 billion, up from $1.437 billion in 2020 and $1.205 billion in 2019. This represents about 15.5% of the $10.8 billion spent on prescription drugs in 2021. While specialty drugs accounted for only 1.6% of all prescription drugs dispensed, they accounted for 62.9% of total annual spending on prescription drugs. Generic drugs accounted for 88.2% of all prescribed drugs but only 16.3% of the total annual spending on prescription drugs. Brand name drugs accounted for 10.2% of prescriptions and constituted 20.8% of the total annual spending on prescription drugs. According to a March 16, 2022, DMHC public meeting on rates and drug costs, for 2021, average health plan premium rate increases in the large group market were just over 4%. Average health plan rate increases in the small group market ranged from 1.7% to 3.7% with total weighted average of 1.8%, and in the individual market health plan total weighted average premium rate decreased 4%.

For CDI insurers, prescription drugs accounted for 14.1% of total health care premiums in 2021 once rebates are considered, this is up from 13.4% in 2020. Prescription drugs accounted for 16.3% of all medical costs in 2021 once rebates are considered, and 16.6% for 2020. Drug costs per prescription decreased by 1.5% overall. But decreased costs per prescription were not found across all drug categories: generic drugs decreased by 3.7% in cost per prescription, while specialty drugs increased in cost per prescription by 6.1%. A portion of the increased drug costs per prescription for brand and specialty drugs was offset by the increased use of rebates in 2021.

PBMs. PBMs help health plans manage their drug benefits through negotiating or contracting with manufacturers and/or pharmacies on behalf of their contracted health plans. The DMHC PBM report required by AB 315 (Wood, Chapter 905, Statutes of 2018), indicates that rebates may offer perverse incentives, as higher cost drugs could mean higher rebates for the PBM.

Attorney General action. In January 2023, California Attorney General Rob Bonta announced a lawsuit against the nation's largest insulin makers (Eli Lilly, Novo Nordisk, and Sanofi) and three PBMs (CVS Caremark, Express Scripts, and Optum Rx) for driving up the cost of insulin through unlawful, unfair, and deceptive business practices in violation of California's Unfair Competition Law. The lawsuit alleges these manufacturers and PBMs have leveraged their market power to overcharge patients. The complaint alleges the defendants separately conspired to artificially inflate prices while agreeing to provide secret rebates in an attempt to obtain preferred positions on drug formularies.

Related/Prior Legislation

AB 1860 (Limón, Chapter 427, Statutes of 2018) raised the $200 copayment and coinsurance limit to $250 for prescribed, orally administered anticancer medications used to kill or slow the growth of cancerous cells, and extends the sunset on the law that established the limit.

SB 1021 (Wiener, Chapter 787, Statutes of 2018) prohibited health plan contracts and health insurance policies from having utilization management policies or procedures which rely on a multi-tablet drug regimen over a single-tablet drug regimen for the prevention of HIV infection and AIDS; extends the January 1, 2020 sunset on law that caps cost sharing for a covered outpatient prescription drug at $250/$500 per 30-day supply, as specified, as well as other formulary requirements; and codifies a regulation that prohibits an enrollee or insured from being charged more than the retail price for a prescription drug when the applicable copayment or coinsurance is a higher amount.

AB 399 (Gordon, Chapter 619, Statutes of 2015) required health plans and health insurers that provide coverage for outpatient prescription drugs to have formularies that do not discourage the enrollment of individuals with health conditions, and requires combination antiretrovirals drug treatment coverage of a single-tablet that is as effective as a multi-tablet regimen for treatment of HIV/AIDS, as specified. Places in state law, federal requirements related to pharmacy and therapeutics committees, access to in-network retail pharmacies, standardized formulary requirements, formulary tier requirements similar to those required of health plans and insurers participating in Covered California and copayment caps of $250 and $500 for a supply of up to 30 days for an individual prescription, as specified.

AB 219 (Perea, Chapter 662, Statutes of 2013) limited the total amount of copayments and coinsurance an enrollee or insured is required to pay for orally administered anticancer medications to $200 for an individual prescription of up to a 30-day supply.

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

According to the Senate Appropriations Committee:

• DMHC indicates costs are minor and absorbable.
• CDI estimates costs of $68,000 (Insurance Fund) in 2023-24 for staffing resources.

SUPPORT: (Verified 6/27/23)

Health Access California (source)

AFSCME

Breathe California

California Academy of Family Physicians

California Chapter American College of Cardiology

California Chronic Care Coalition

California Life Sciences

California Medical Association

California Pharmacists Association

California Podiatric Medical Association

California Public Interest Research Group

California Rheumatology Alliance

California School Employees Association

California Society of Plastic Surgeons

California Teachers Association

Community Clinic Association of Los Angeles County

Community Health Councils

Crohn’s & Colitis Foundation

End the Epidemic

Equality California

Harm Reduction Institute

Mental Health America of California

National Association of Social Workers, California Chapter

National Health Law Program

National Multiple Sclerosis Society, MS-CAN

Radiant Health Centers

San Francisco AIDS Foundation

The Leukemia & Lymphoma Society

Western Center on Law & Poverty

OPPOSITION: (Verified 6/27/23)

None received

ARGUMENTS IN SUPPORT: According to Health Access Californian, this bill’s sponsor, in 2015, the Legislature passed AB 339, establishing the $250 co-pay cap for a 30-day supply of a prescription drug, with a sunset in 2020, which was extended with SB 1021 (Wiener, 2018) until the end of this year. Before the $250 cost-sharing cap, Californians with serious and chronic conditions like cancer, HIV/AIDS, multiple sclerosis (MS), and lupus were particularly vulnerable to high out-of-pocket costs because more expensive specialty drugs were often put on the highest tier of the formulary, costing thousands of dollars. Just filling one prescription in January meant consumers often reached their annual out-of-pocket limit of $6,000 for that single prescription in one month. Since the passage of AB 339, prescription drug prices have risen significantly, making this consumer protection even more critical to protect consumers from high out-of-pocket costs. In California, prescription drug costs have increased 22.2% over the last five years, or about 5% each year. To give an example, prices for MS medications have increased nearly 400% since 2004, and 60% in the last five years alone. This bill also makes permanent standardized tiering definitions for drug formularies in coverage offered to individual consumers and employees of small businesses. Formularies are a list that health plans use to show the consumer which medications they offer. These lists are grouped into categories called tiers, with less expensive medications placed on lower tiers, and more expensive medications placed on the highest tiers. Health plans encourage doctors to prescribe lower-cost alternatives, found on lower tiers, to help keep costs down. For example, substituting generic drugs for brand name medication helps reduce costs, as does trying out lower cost brand name drug that is in the same therapeutic class as a higher cost drug.

ASSEMBLY FLOOR: 79-0, 4/27/23

AYES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Chen, Connolly, Megan Dahle, Davies, Dixon, Essayli, Flora, Mike Fong, Vince Fong, Friedman, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Rendon

NO VOTE RECORDED: Jim Patterson

Prepared by: Teri Boughton / HEALTH / (916) 651-4111

6/28/23 11:07:36

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2023 - 2024 Regular Session

AB 948 (Berman) - Prescription drugs

Bill Summary:

AB 948 would, among other provisions, delete the January 1, 2024 repeal date on the existing $250 limit on cost-sharing for a 30-day supply of a covered outpatient prescription drug for an individual prescription.

Fiscal Impact:

• The Department of Managed Health Care (DMHC) indicates costs are minor and absorbable.
• The California Department of Insurance (CDI) estimates costs of $68,000 (Insurance Fund) in 2023-24 for staffing resources.

Background:

The DMHC regulates health plans and the CDI regulates health insurance. Current law requires an individual or group health plan contract or insurance policy that provides coverage for essential health benefits, as specified, to limit the copayment, coinsurance, or any other form of cost-sharing for a covered outpatient prescription drug for up to a 30-day supply of an individual prescription, to $250, with the following exceptions:

• • Limits the cost-sharing with respect to products with actuarial value at, or equivalent to, the bronze level, for an individual prescription for a 30-day supply, to $500.
  • Applies the cost-sharing cap for a health plan contract or insurance policy that is a “high deductible health plan,” defined under federal law only after an enrollee’s or insured’s deductible has been satisfied for the year.

Current law also requires certain individual and small group plans or policies to use specified definitions regarding drug formulary tiers. Tier four consists of drugs that are biologics, drugs that the Food and Drug Administration of the U.S. Department of Health and Human Services or the manufacturer requires to be distributed through a specialty pharmacy, drugs that require the enrollee or insured to have special training or clinical monitoring for self-administration, or drugs that cost the health plan or insurer more than six hundred dollars ($600) net of rebates for a one-month supply.

Under existing law, the above provisions are repealed on January 1, 2024.

Proposed Law:

Specific provisions of the bill would:

• Delete the January 1, 2024 repeal date on the existing $250 limit on cost-sharing for a 30-day supply of a covered outpatient prescription drug for an individual prescription and further specify that:
  • A copayment or percentage coinsurance shall not exceed 50 percent of the cost to the plan or insurer, as specified.
  • If there is a generic equivalent to a brand name drug, a plan or insurer shall ensure that the enrollee or insured is subject to the lowest cost-sharing that would be applied, whether or not both the generic equivalent and the brand name drug are on the formulary. 
• Delete the January 1, 2024 repeal date regarding the definitions of drug formulary tiers for individual and small group plans or policies, and delete biologics from the definition of drugs on Tier four.

-- END --

SENATE COMMITTEE ON HEALTH

Senator Dr. Susan Talamantes Eggman, Chair

BILL NO: AB 948

SUBJECT: Prescription drugs

SUMMARY:

Deletes the January 1, 2024 repeal date on the existing $250 limit on cost-sharing for a 30-day supply of a covered outpatient prescription drug for an individual prescription.

Existing law:

1. Establishes the Department of Managed Health Care (DMHC) to regulate health plans and the California Department of Insurance (CDI) to regulate health insurance. [HSC §1340, et seq. and INS §106, et seq.]
   
2. Requires an individual or group health plan contract or insurance policy that provides coverage for essential health benefits, as specified, to limit the copayment, coinsurance, or any other form of cost-sharing for a covered outpatient prescription drug for up to a 30-day supply of an individual prescription, to $250, with the following exceptions:
   1. Limits the cost-sharing with respect to products with actuarial value at, or equivalent to, the bronze level, for an individual prescription for a 30-day supply, to $500; or,
   2. Applies the cost sharing cap for a health plan contract or insurance policy that is a “high deductible health plan,” defined under federal law only after an enrollee’s or insured’s deductible has been satisfied for the year. [HSC §1342.73 and INS §10123.1932]
      
3. Repeals 2) above on January 1, 2024. [HSC §1342.73 and INS §10123.1932]
   
4. Requires an individual or group health plan contract or health insurance policy that provides coverage for prescribed, orally-administered anticancer medications used to kill or slow the growth of cancerous cells to comply with all of the following:
   1. Limit the total amount of copayments and coinsurance an enrollee or insured is required to pay to not exceed $250 for an individual prescription of up to a 30-day supply of a prescribed orally administered anticancer medication covered by the contract, notwithstanding any deductible;
   2. Apply 4a) to a health plan contract or health insurance policy that meets the definition of a “high deductible health plan,” as defined in federal law only once the deductible has been satisfied for the year;
   3. Exempt any Medicare coverage under a health plan contract or health insurance policy; and,
   4. Require a prescription for an orally administered anticancer medication to be provided consistent with the appropriate standard of care for that medication. [HSC §1367.656 and INS §10123.206]
      
5. Repeals 4) above on January 1, 2024. [HSC §1367.656 and INS §10123.206]
   
6. Requires an individual or small group health insurance policy to include, at a minimum, coverage for essential health benefits, as required of health plans pursuant to specified provisions of the Health and Safety Code related to prescription medications. [INS §10112.27]
   

This bill: Deletes the January 1, 2024 repeal date on the $250 limit on cost-sharing for a 30-day supply of a covered outpatient prescription drug for an individual prescription.

FISCAL EFFECT:

According to the Assembly Appropriations Committee, minor and absorbable costs to CDI and DMHC.

PRIOR VOTES:

COMMENTS:

1. Author’s statement. According to the author, since 2017 Californians have been protected from rising prescription drug costs with a $250 co-pay cap for their medication, but that consumer protection is set to expire next year. This bill would make permanent the existing $250 co-pay cap for a 30-day prescription drug supply, ensuring consumers can continue counting on their monthly prescription drug costs staying within reach. Before the $250 co-pay cap was signed into law and extended until January 1, 2024, Californians with serious and chronic conditions like cancer, HIV/AIDS, multiple sclerosis, and lupus were particularly vulnerable to high out-of-pocket costs because more expensive specialty drugs were often put on the highest tier of the drug formulary, costing thousands of dollars. For example, filling just one prescription in January meant consumers often reached their out-of-pocket maximum for that single prescription, requiring Californians to pay thousands of dollars upfront. As a result, Californians were forced to choose between paying for their life-saving medication and paying for housing, childcare, or food. By making the existing co-pay cap permanent, this bill would ensure that Californians can access the medication that they need and focus on their health, not whether they can afford their prescription.
   
2. Kaiser Family Foundation Survey, 2021. From an individual perspective, prescription drug affordability is a bigger issue for those who are currently taking four or more prescription medicines. Three in ten of those taking four or more prescription drugs say they have difficulty affording their prescriptions, compared to one in five adults who currently take three or fewer prescription medications. Those who take four or more prescription drugs, those with chronic conditions in their households, and those with an annual household income of less than $40,000 report having much more difficulty affording prescriptions.
   
3. Prescription drug costs. According to the 2021 U.S. National Health Expenditures (NHE) report, NHE grew 2.7% to $4.3 trillion in 2021, or $12,914 per person, and accounted for 18.3% of Gross Domestic Product (GDP). Private health insurance spending grew 5.8% to $1,211.4 billion in 2021, or 28% of total NHE. Out-of-pocket spending grew 10.4% to $433.2 billion in 2021, or 10% of total NHE. Hospital expenditures grew 4.4% to $1,323.9 billion in 2021, slower than the 6.2% growth in 2020. Physician and clinical services expenditures grew 5.6% to $864.6 billion in 2021, slower growth than the 6.6% in 2020. Prescription drug spending increased 7.8% to $378.0 billion in 2021, faster than the 3.7% growth in 2020. The largest shares of total health spending were sponsored by the federal government (34%) and households (27%). The private business share of health spending accounted for 17% of total health care spending, state and local governments accounted for 15%, and other private revenues accounted for 7%.
   
   A February 11, 2020 white paper issued by the USC Schaeffer Center for Health Policy & Economics on “The Association between Drug Rebates and List Prices,” finds that drug rebates and list prices are positively correlated, on average, a $1 increase in rebates is associated with a $1.17 increase in list price. Single-source drugs have higher average list prices and rebates than multi-source drugs, and show a stronger relationship between changes in rebates and list prices. Rebates play a role in increasing drug prices, and reducing or eliminating rebates could result in lower list prices and reduced out-of-pocket expenditures for some patients.
   
4. California data. Health plans regulated by DMHC paid more than $10.8 billion for prescription drugs in 2021, an increase of almost $700 million (6.6%) from 2020. Total medical expenses increased by 9.2%. Enrollees spent nearly $1 billion for prescription drugs in 2021. Manufacturer drug rebates totaled approximately $1.674 billion, up from $1.437 billion in 2020 and $1.205 billion in 2019. This represents about 15.5% of the $10.8 billion spent on prescription drugs in 2021. While specialty drugs accounted for only 1.6% of all prescription drugs dispensed, they accounted for 62.9% of total annual spending on prescription drugs. Generic drugs accounted for 88.2% of all prescribed drugs but only 16.3% of the total annual spending on prescription drugs. Brand name drugs accounted for 10.2% of prescriptions and constituted 20.8% of the total annual spending on prescription drugs. According to a March 16, 2022, DMHC public meeting on rates and drug costs, for 2021, average health plan premium rate increases in the large group market were just over 4%. Average health plan rate increases in the small group market ranged from 1.7% to 3.7% with total weighted average of 1.8%, and in the individual market health plan total weighted average premium rate decreased 4%.
   
   For CDI insurers, prescription drugs accounted for 14.1% of total health care premiums in 2021 once rebates are considered, this is up from 13.4% in 2020. Prescription drugs accounted for 16.3% of all medical costs in 2021 once rebates are considered, and 16.6% for 2020. Drug costs per prescription decreased by 1.5% overall. But decreased costs per prescription were not found across all drug categories: generic drugs decreased by 3.7% in cost per prescription, while specialty drugs increased in cost per prescription by 6.1%. A portion of the increased drug costs per prescription for brand and specialty drugs was offset by the increased use of rebates in 2021.
   
5. PBMs. PBMs help health plans manage their drug benefits through negotiating or contracting with manufacturers and/or pharmacies on behalf of their contracted health plans. The DMHC PBM report required by AB 315 (Wood, Chapter 905, Statutes of 2018), indicates that rebates may offer perverse incentives, as higher cost drugs could mean higher rebates for the PBM.
   
6. Attorney General action. In January 2023, California Attorney General Rob Bonta announced a lawsuit against the nation's largest insulin makers (Eli Lilly, Novo Nordisk, and Sanofi) and three PBMs (CVS Caremark, Express Scripts, and Optum Rx) for driving up the cost of insulin through unlawful, unfair, and deceptive business practices in violation of California's Unfair Competition Law. The lawsuit alleges these manufacturers and PBMs have leveraged their market power to overcharge patients. The complaint alleges the defendants separately conspired to artificially inflate prices while agreeing to provide secret rebates in an attempt to obtain preferred positions on drug formularies.
   
7. Related legislation. SB 421 (Limón) eliminates the sunset date on a requirement that individual and group health plans and insurance policies limit the copayment for an individual prescription of up to a 30-day supply of an orally administered anticancer medication covered under the contract or policy. SB 421 is pending in the Assembly Health Committee.
   
8. Prior legislation. AB 1860 (Limón, Chapter 427, Statutes of 2018) raises the $200 copayment and coinsurance limit to $250 for prescribed, orally administered anticancer medications used to kill or slow the growth of cancerous cells, and extends the sunset on the law that established the limit.
   
   SB 1021 (Wiener, Chapter 787, Statutes of 2018) prohibits health plan contracts and health insurance policies from having utilization management policies or procedures which rely on a multi-tablet drug regimen over a single-tablet drug regimen for the prevention of HIV infection and AIDS; extends the January 1, 2020 sunset on law that caps cost sharing for a covered outpatient prescription drug at $250/$500 per 30-day supply, as specified, as well as other formulary requirements; and codifies a regulation that prohibits an enrollee or insured from being charged more than the retail price for a prescription drug when the applicable copayment or coinsurance is a higher amount.

AB 399 (Gordon, Chapter 619, Statutes of 2015) requires health plans and health insurers that provide coverage for outpatient prescription drugs to have formularies that do not discourage the enrollment of individuals with health conditions, and requires combination antiretrovirals drug treatment coverage of a single-tablet that is as effective as a multi-tablet regimen for treatment of HIV/AIDS, as specified. Places in state law, federal requirements related to pharmacy and therapeutics committees, access to in-network retail pharmacies, standardized formulary requirements, formulary tier requirements similar to those required of health plans and insurers participating in Covered California and copayment caps of $250 and $500 for a supply of up to 30 days for an individual prescription, as specified.

AB 219 (Perea, Chapter 662, Statutes of 2013) limits the total amount of copayments and coinsurance an enrollee or insured is required to pay for orally administered anticancer medications to $200 for an individual prescription of up to a 30-day supply.

1. Support. According to Health Access Californian, this bill’s sponsor, in 2015, the Legislature passed AB 339, establishing the $250 co-pay cap for a 30-day supply of a prescription drug, with a sunset in 2020, which was extended with SB 1021 (Wiener, 2018) until the end of this year. Before the $250 cost-sharing cap, Californians with serious and chronic conditions like cancer, HIV/AIDS, multiple sclerosis (MS), and lupus were particularly vulnerable to high out-of-pocket costs because more expensive specialty drugs were often put on the highest tier of the formulary, costing thousands of dollars. Just filling one prescription in January meant consumers often reached their annual out-of-pocket limit of $6,000 for that single prescription in one month. Since the passage of AB 339, prescription drug prices have risen significantly, making this consumer protection even more critical to protect consumers from high out-of-pocket costs. In California, prescription drug costs have increased 22.2% over the last five years, or about 5% each year. To give an example, prices for MS medications have increased nearly 400% since 2004, and 60% in the last five years alone. This bill also makes permanent standardized tiering definitions for drug formularies in coverage offered to individual consumers and employees of small businesses. Formularies are a list that health plans use to show the consumer which medications they offer. These lists are grouped into categories called tiers, with less expensive medications placed on lower tiers, and more expensive medications placed on the highest tiers. Health plans encourage doctors to prescribe lower-cost alternatives, found on lower tiers, to help keep costs down. For example, substituting generic drugs for brand name medication helps reduce costs, as does trying out lower cost brand name drug that is in the same therapeutic class as a higher cost drug
   
2. Amendments. The author and sponsor have agreed to the following amendments to make some clarifying changes to guide consistent understanding of prescription drug tiering provisions affecting cost-sharing for consumers:

HSC 1342.73 & INS 10123.1932 (parallel changes). 

(b) (1) If a health care service plan contract for a nongrandfathered individual or small group product maintains a drug formulary grouped into tiers that includes a fourth tier, a health care service plan contract shall use the following definitions for each tier of the drug formulary:

(A) Tier one shall consist of most generic drugs and low-cost preferred brand name drugs.

(B) Tier two shall consist of nonpreferred generic drugs, preferred brand name drugs, and any other drugs recommended by the health care service plan’s pharmacy and therapeutics committee based on safety, efficacy, and cost.

(C) Tier three shall consist of nonpreferred brand name drugs or drugs that are recommended by the health care service plan’s pharmacy and therapeutics committee based on safety, efficacy, and cost, or that generally have a preferred and often less costly therapeutic alternative at a lower tier.

(D) Tier four shall consist of drugs that are biologics, drugs that the Food and Drug Administration of the United States Department of Health and Human Services or the manufacturer requires to be distributed through a specialty pharmacy, drugs that require the enrollee to have special training or clinical monitoring for self-administration, or drugs that cost the health plan more than six hundred dollars ($600) net of rebates for a one-month supply.

(2) In placing specific drugs on specific tiers, or choosing to place a drug on the formulary, the health care service plan shall take into account comply with the other provisions of this section and this chapter.

(3) A health care service plan contract may maintain a drug formulary with fewer than four tiers. A health care service plan contract shall not maintain a drug formulary with more than four tiers.

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

(5) A copayment or percentage coinsurance shall not exceed 50 percent of the cost to the plan as described in Section 1300.67.24 of Title 28 of the California Code of Regulations.

(6) If there is a generic equivalent to a brand name drug, a plan shall ensure the enrollee is subject to the lowest cost sharing that would be applied, whether or not both the generic equivalent and the brand name drug are on the formulary. This paragraph shall not be construed to require both the generic equivalent and the brand name drug to be on the formulary.

SUPPORT AND OPPOSITION:

Support: Health Access California (sponsor)

AFSCME

Breathe California

California Academy of Family Physicians

California Chapter American College of Cardiology

California Chronic Care Coalition

California Life Sciences

California Medical Association

California Rheumatology Alliance

California Pharmacists Association

California Public Interest Research Group

California Podiatric Medical Association

California School Employees Association

California Society of Plastic Surgeons

California Teachers Association

Community Clinic Association of Los Angeles County

Community Health Councils

Crohn’s & Colitis Foundation

End the Epidemic

Equality California

Harm Reduction Institute

Mental Health America of California

National Association of Social Workers, California Chapter

National Multiple Sclerosis Society, MS-CAN

Radiant Health Centers

San Francisco AIDS Foundation

The Leukemia & Lymphoma Society

Western Center on Law & Poverty

Oppose: None received

-- END --

Date of Hearing: April 19, 2023

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Chris Holden, Chair

ABPCA Bill Id:AB 948

Author:(Berman) – As Introduced Ver:February 14, 2023

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

SUMMARY:

This bill removes a repeal date from existing law that: (1) prohibits a health care service plan contract or health insurance policy from requiring cost sharing above specified amounts for covered prescription drugs, and 2) requires certain individual or small group health plan contracts or insurance policies to use specified definitions for each tier of a drug formulary.

Specifically, this bill deletes a repeal date of January 1, 2024, thereby making indefinitely operative statutes that do the following, among other things:

1. Prohibit, for an individual or group health plan contract or health insurance policy that covers essential health benefits (EHBs), copayment, coinsurance, or any other form of cost sharing for a 30-day supply of a covered outpatient prescription drug from exceeding $250; and for a health plan contract or insurance product at or equivalent to a Bronze plan (actuarial value of 60%), limits cost sharing to not more than $500 for a 30-day supply of a covered outpatient prescription drug, after an enrollee or insured’s deductible is met.
   
2. Define, for a health plan contract or insurance policy for an individual or small group product that maintains a drug formulary grouped into four tiers, the types of drugs in each tier. For example, tier one includes most generic drugs and low-cost preferred brand name drugs; and tier four includes drugs that are biologics, drugs that the federal Food and Drug Administration (FDA) or manufacturer require to be distributed through a specialty pharmacy, drugs that require the enrollee to have special training or clinical monitoring for self-administration, or drugs that cost the health plan more than six hundred dollars ($600) net of rebates for a one-month supply.

FISCAL EFFECT:

Minor and absorbable costs to CDI and DMHC.

COMMENTS:

1. Purpose. Health Access California, sponsor of this bill, writes:

Prescription drug prices have risen significantly, making this consumer protection even more critical to protect consumers from high out-of-pocket costs. In California, prescription drug costs have increased 22.2% over the last five years, or about 5% each year. To give an example, prices for MS medications have increased nearly 400% since 2004, and 60% in the last five years alone. Cost-sharing for consumers has also continued to grow with the maximum out-of-pocket limit in 2023 at $8,750 for Silver plans, and expected to increase in 2024. That means, if the $250 co-pay cap sunsets, a consumer purchasing a high-cost drug could be charged up to that limit of $8,750 up front for a single 30-day prescription.

Without the cost-sharing cap, more of these cost increases will be shifted to the consumer to pay. When the Legislature passed SB 1021 (Wiener, 2018) to extend the 2020 sunset on these consumer protections, research showed that that if the law had sunset in 2020, there would be an increase of $45 million in enrollee costs. People who face higher cost-sharing for a prescription drug are less likely to maintain meaningful levels of adherence to prescription drugs prescribed by their doctor, which can lead to worse health outcomes. With prescription drug costs rising, more and more consumers’ prescription drugs will hit the $250 cost-sharing cap, increasing the number of Californians who will be counting on this consumer protection to keep costs lower.

1. Related Legislation.
   
   1. SB 421 (Limon) deletes the sunset in existing law that prohibits plans or insurers that cover certain cancer medication from requiring an enrollee or insured to pay a total amount of copayments and coinsurance exceeding $250 for an individual prescription of up to a 30-day supply of a prescribed orally administered cancer medication, as specified. SB 421 is pending in Senate Appropriations Committee.
   2. SB 90 (Wiener) prohibits a health plan contract or a disability insurance policy from imposing a deductible on an insulin prescription drug or imposing a copayment of more than $35 for a 30-day supply of an insulin prescription drug, except as specified for a high deductible health plan. SB 90 is pending in Senate Health Committee.
   3. SB 873 (Bradford) requires an enrollee’s or insured’s defined cost sharing for each prescription drug to be calculated at the point of sale based on a price that is reduced by an amount equal to 90% of all rebates for the drug. SB 873 also requires a health plan or insurer to, among other things, provide each enrollee or insured at the point of sale a good faith estimate of the enrollee’s or insured’s decrease in cost sharing. SB 873 is pending in Senate Health Committee.
2. Prior Legislation. AB 339 (Gordon), Chapter 619, Statutes of 2015, enacted, until January 1, 2020, the statute for which this bill deletes the sunset date.

Analysis Prepared by: Allegra Kim / APPR. / (916) 319-2081

Date of Hearing: March 21, 2023

ASSEMBLY COMMITTEE ON HEALTH

Jim Wood, Chair

ABPCA Bill Id:AB 948

Author:(Berman) – As Introduced Ver:February 14, 2023

SUBJECT: Prescription drugs.

SUMMARY: Makes permanent existing law provisions that prohibit the copayment, coinsurance, or any other form of cost sharing for a covered outpatient prescription drug for an individual prescription from exceeding $250 for a supply of up to 30 days or $500 for bronze products, except as specified; and, requires a non-grandfathered individual or small group plan contract or insurance policy to use specified definitions for each tier of a drug formulary.

EXISTING LAW:

1. Establishes the Department of Managed Health Care (DMHC) to regulate health plans [Health and Safety Code (HSC) §1340, et seq.], and the California Department of Insurance (CDI) to regulate health insurance. [Insurance Code (INS) §106, et seq.]
2. Establishes as California's essential health benefits (EHBs), the Kaiser Small Group Health Maintenance Organization benchmark plan, existing California mandates, and 10 Patient Protection and Affordable Care Act mandated benefits. [HSC §1367.005 and INS §10112.27]
3. Prohibits, with respect to an individual or group health plan contract or health insurance policy that covers EHBs, the copayment, coinsurance, or any other form of cost sharing for a covered outpatient prescription drug for an individual prescription for a supply of up to 30 days from exceeding $250; and for a product with an actuarial value at or equivalent to a bronze level, limits cost sharing to not more than $500 for a supply of up to 30 days. Specifies that for a high deductible health plan, the $250 or $500 limits apply only after an enrollee or insured’s deductible is met. [HSC §1342.71(a) and INS §10123.193(a)]
   
4. Establishes definitions for each tier of a health plan contract or health insurance policy for a nongrandfathered individual or small group product maintains a drug formulary grouped into tiers that includes a fourth tier:
   1. Tier one to consist of most generic drugs and low-cost preferred brand name drugs;
   2. Tier two to consist of nonpreferred generic drugs, preferred brand name drugs, and any other drugs recommended by the health plan or insurer’s pharmacy and therapeutics committee based on safety, efficacy, and cost;
   3. Tier three to consist of nonpreferred brand name drugs or drugs that are recommended by the health plan or insurer’s pharmacy and therapeutics committee based on safety, efficacy, and cost, or that generally have a preferred and often less costly therapeutic alternative at a lower tier; and,
   4. Tier four to consist of drugs that are biologics, drugs that the Food and Drug Administration (FDA) or the manufacturer requires to be distributed through a specialty pharmacy, drugs that require the enrollee to have special training or clinical monitoring for self-administration, or drugs that cost the health plan more than six hundred dollars ($600) net of rebates for a one-month supply.

Permits health plans and health insurers to maintain a drug formulary with fewer than four tiers. Prevents the law from being construed to require a health plan or health insurer to impose cost sharing, or to require cost sharing for prescription drugs that state or federal law otherwise requires to be provided without cost sharing. [HSC §1342.71(b) and INS §10123.193(b)]

1. States that 3) through 4) above do not require or authorize a Medi-Cal managed care plan to provide coverage for prescription drugs that are not required pursuant to Medi-Cal, or to limit or exclude any prescription drugs that are required by Medi-Cal. States that 3) through 4) above do not apply to a health plan that contracts with the Department of Health Care Services. [HSC §1342.71 and INS §10123.193]
   
2. Sunsets 3) through 6) above on January 1, 2024. [HSC §1342.71(d) and INS §10123.193(d)]
   

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

COMMENTS:

1. PURPOSE OF THIS BILL. According to the author, since 2017 Californians have been protected from rising prescription drug costs with a $250 co-pay cap for their medication, but that consumer protection is set to expire next year without legislative action. This bill would make permanent the existing $250 co-pay cap for a 30-day prescription drug supply, ensuring consumers can continue counting on their monthly prescription drug costs staying within reach. The author states that before the $250 co-pay cap was signed into law with AB 339 (Gordon), Chapter 619, Statutes of 2015, and extended until January 1, 2024 with SB 1021 (Wiener), Chapter 787, Statutes of 2018, Californians with serious and chronic conditions like cancer, HIV/AIDS, multiple sclerosis (MS) and lupus were particularly vulnerable to high out-of-pocket costs because more expensive specialty drugs were often put on the highest tier of the drug formulary, costing thousands of dollars. For example, filling just one prescription in January meant consumers often reached their out-of-pocket maximum for that single prescription, requiring Californians to pay thousands of dollars upfront. As a result, Californians were forced to choose between paying for their life-saving medication and paying for housing, child care, or food. The author concludes that with prescription drug costs rising, more and more consumers’ prescription drugs will hit the $250 co-pay cap, increasing the number of Californians who will be counting on the consumer protections in this bill to become permanent.
2. BACKGROUND.
   1. SB 17 DMHC Report. SB 17 (Hernandez), Chapter 603, Statutes of 2017, requires health plans in the commercial market to annually report their prescription drug costs to the DMHC. This report looks at the impact of the cost of prescription drugs on health plan premiums and compares this data across the reporting years. The DMHC considers the total volume of prescription drugs prescribed by health plans and the total cost paid by health plans for these drugs, on both an aggregate spending level and a per member per month (PMPM) basis and compares the annualized data. The DMHC also analyzes how the 25 most frequently prescribed drugs, the 25 most costly drugs, and the 25 drugs with the highest year-over-year increase in total annual spending impacted health plan premiums over the course of the last four years. The most recent report notes the following key findings:
      1. Health plans paid about $10.8 billion for prescription drugs in 2021, an increase of almost $700 million or 6.6% from 2020. On a PMPM basis, health plans paid $71.46 in 2021, which is an increase of $4.56 PMPM from 2020. Since 2017, prescription drug costs paid by health plans increased by $2.1 billion or 22.2%. Unless otherwise specified, the prescription drug costs in this report are not adjusted for any manufacturer rebates. However, this report includes the total manufacturer drug rebates collected by health plans.
      2. Prescription drugs accounted for 13.3% of total health plan premiums in 2021, an increase from 12.7% in 2020. Prescription drugs accounted for 12.8% and 12.7% of total health plan premiums in 2019 and 2018, respectively. The figures in this report include only those prescription drugs dispensed through retail or mail order pharmacies, and do not include drugs that are provided in a hospital, administered in a doctor office, or otherwise paid for through capitated payments to delegated providers. Therefore, the 13.3% of premium in 2021 does not capture all costs of prescription drugs paid by health plans.
      3. Total prescription drug costs increased by 6.6% in 2021, whereas total medical expenses increased by 9.2%. Overall, total health plan premiums increased by 2.2% from 2020 to 2021.
      4. On a PMPM basis, health plans’ prescription drug costs increased by 6.8%, medical expenses increased by 9.4% and health plan premiums increased by 2.4% from 2020 to 2021.
      5. Manufacturer drug rebates totaled approximately $1.674 billion, up from $1.437 billion in 2020 and $1.205 billion in 2019. This represents about 15.5% of the $10.8 billion spent on prescription drugs in 2021. On a PMPM basis, manufacturer drug rebates equaled $11.10 PMPM, up from $9.51 PMPM in 2020. This also equates to 15.5% of the $71.46 PMPM health plans paid for prescription drugs in 2021. Health plans provided the total manufacturer drug rebate information for all drugs. The manufacturer drug rebate was not provided for the top 25 most frequently prescribed drugs, the top 25 most costly drugs or top 25 drugs with highest year-over-year increase in total annual spending.
      6. While specialty drugs accounted for only 1.6% of all prescription drugs dispensed, they accounted for 62.9% of total annual spending on prescription drugs. “Specialty Drug” is a drug with a negotiated monthly cost that exceeds the threshold for a specialty drug under the Medicare Part D program.
      7. Generic drugs accounted for 88.2% of all prescribed drugs but only 16.3% of the total annual spending on prescription drugs.
      8. Brand name drugs accounted for 10.2% of prescriptions and constituted 20.8% of the total annual spending on prescription drugs.
      9. The 25 most frequently prescribed drugs represented 49.2% of all drugs prescribed and approximately 42.5% of the total annual spending on prescription drugs.
      10. For the 25 most frequently prescribed drugs, enrollees paid 3.3% of the cost of specialty drugs, 9.2% of the cost of brand name drugs, and 62.4% of the cost of generics.
      11. Of the 13.3% of total health plan premium that was spent on prescription drugs, the 25 most costly drugs accounted for 6.8%.
      12. Overall, health plans paid 92.6% of the cost of the 25 most costly prescribed drugs across all three categories (generic, brand name and specialty).
      13. For the first time, the Pfizer and Moderna COVID-19 vaccines were amongst the 25 most frequently prescribed drugs, 25 most costly drugs and 25 drugs with the highest year-over year increase in total spending. While the cost of the COVID-19 vaccines was covered by the federal government, health plans were responsible for the cost of administration of a significant number of vaccines in 2021.
   2. Cost-sharing. This bill makes permanent the provisions in existing law capping the copay for a prescription at $250 or $500 for a bronze level product. According to the California Health Benefits Review Program, for each test, treatment, or service that is a benefit covered by a plan or policy that includes a deductible, one or more of the following cost-sharing requirements may be applicable:
      1. Deductible: The enrollee is responsible for paying the full cost of covered benefits subject to the deductible until the full value of the deductible is paid by the enrollee. The enrollee’s payments towards the deductible accumulates over the course of the plan/policy year. For example, if an enrollee has a $750 deductible, and uses four $250 services that are subject to the deductible throughout the course of the year, the enrollee would pay for the first three services ($250 x 3 = $750) in full. At that point, the deductible would be met and a different form of cost sharing such as a copayment or coinsurance may be applied to the fourth visit, depending on the plan/policy.
      2. Copayment: A copayment is a flat dollar amount paid by the enrollee per service for services subject to a copayment. Copayments may be applied on their own or to services subject to a deductible after the deductible is met.
      3. Coinsurance: Coinsurance is the percentage of the total cost of a service that will be paid by the enrollee. For example, on a $250 service subject to a 10% coinsurance, the enrollee cost sharing would be $25. Coinsurance may be applied on its own or to services subject to deductible after the deductible is met.
      4. Out-of-pocket maximums: Out-of-pocket maximums are the maximum an enrollee will spend on cost sharing for covered services in the form of deductibles, copayments, and coinsurance during the plan/policy year. For plans and policies available through Covered California, out-of-pocket maximums for in-network EHBs are applicable. In 2023, the out-of-pocket maximum limit for self-only coverage is $9,100. If an enrollee has a high cost hospital stay in the first month of their plan/policy year (whether or not that plan or policy includes a deductible) and reaches their out-of-pocket maximum, the enrollee would not have any other cost sharing for covered services for the remaining 11 months of the plan/policy year.
   3. Tiers. Health insurance plans often structure their formularies into pricing groups or tiers. Several factors determine which tier a drug is placed in. These factors include: cost of the drug; cost of the drug in comparison to other drugs used for the same type of treatment; availability of over-the-counter options; and, other clinical and cost factors. Preferred drugs are usually the cheapest for the consumer and the insurance company. Non-preferred and specialty drugs are the most expensive, both for the consumer and the insurance company. Some drugs are in lower-priced tiers and cost consumers less money. Other drugs are in higher-priced tiers and cost consumers more money. The particular prescription drugs placed into tiers change frequently.
3. SUPPORT. Health Access California (HAC), sponsor, writes that in California, prescription drug costs have increased 22.2% over the last five years, or about 5% each year. To give an example, prices for MS medications have increased nearly 400% since 2004, and 60% in the last five years alone. Cost-sharing for consumers has also continued to grow with the maximum out-of-pocket limit in 2023 at $8,750 for Silver plans, and expected to increase in 2024. That means, if the $250 co-pay cap sunsets, a consumer purchasing a high-cost drug could be charged up to that limit of $8,750 up front for a single 30-day prescription. Without the cost-sharing cap, more of these cost increases will be shifted to the consumer to pay. When the Legislature passed SB 1021, to extend the 2020 sunset on these consumer protections, research showed that that if the law had sunset in 2020, there would be an increase of $45 million in enrollee costs. People who face higher cost-sharing for a prescription drug are less likely to maintain meaningful levels of adherence to prescription drugs prescribed by their doctor, which can lead to worse health outcomes. With prescription drug costs rising, more and more consumers’ prescription drugs will hit the $250 cost-sharing cap, increasing the number of Californians who will be counting on this consumer protection to keep costs lower. For consumers buying coverage as individuals, the Covered California Standard Benefit Design allows consumers to compare health plans, the benefits covered and their level of cost-sharing for prescription drugs. HAC concludes that this bill will make the $250 co-pay cap and tiering standards permanent, helping keep prescription drugs affordable ensuring that consumers can access the medication that they need and focus on their health, not whether they can afford their prescription.
4. RELATED LEGISLATION.
   1. SB 421 (Limon) deletes the sunset in existing law that prohibits, until January 1, 2024, an individual or group health plan contract or health insurance policy issued, amended, or renewed on or after January 1, 2015, that provides coverage for prescribed, orally administered anticancer medications used to kill or slow the growth of cancerous cells from requiring an enrollee or insured to pay a total amount of copayments and coinsurance that exceeds $250 for an individual prescription of up to a 30-day supply of a prescribed orally administered anticancer medication, as specified. SB 421 is pending in Senate Appropriations Committee.
   2. AB 1645 (Zbur) prohibits a group or individual nongrandfathered health plan contract or health insurance policy issued, amended, or renewed on or after January 1, 2024, from imposing a cost-sharing requirement for office visits for specified preventive care services and screenings and for items or services that are integral to their provision. Prohibits those contracts and policies from imposing a cost-sharing requirement, utilization review, or other specified limits on a recommended sexually transmitted infections screening, and from imposing a cost-sharing requirement for any items and services integral to a sexually transmitted infections screening, as specified. AB 1645 is currently pending in Assembly Health Committee.
   3. SB 90 (Wiener) prohibits a health plan contract or a disability insurance policy, as specified, issued, amended, delivered, or renewed on or after January 1, 2024, from imposing a deductible on an insulin prescription drug or imposing a copayment of more than $35 for a 30-day supply of an insulin prescription drug, except as specified for a high deductible health plan. SB 90 is pending in Senate Health Committee.
   4. SB 873 (Bradford) requires an enrollee’s or insured’s defined cost sharing for each prescription drug to be calculated at the point of sale based on a price that is reduced by an amount equal to 90% of all rebates received, or to be received, in connection with the dispensing or administration of the drug. Requires a health plan or health insurer to, among other things, pass through to each enrollee or insured at the point of sale a good faith estimate of the enrollee’s or insured’s decrease in cost sharing. SB 873 is pending in Senate Health Committee.
5. PREVIOUS LEGISLATION.
   1. SB 1021 provides that the copayment, coinsurance, or any other form of cost sharing for a covered outpatient prescription drug for an individual prescription shall not exceed $250 for a supply of up to 30 days, except as specified and requires a non-grandfathered individual or small group plan contract or policy to use specified definitions for each tier of a drug formulary. Sunsets on January 1, 2024.
      
   2. AB 1860 (Limon), Chapter 427, Statutes of 2018, prohibits an individual or group health plan contract or health insurance policy, that provides coverage for prescribed, orally administered anticancer medications used to kill or slow the growth of cancerous cells from requiring an enrollee or insured to pay, notwithstanding any deductible, a total amount of copayments and coinsurance that exceeds $250 for an individual prescription of up to a 30-day supply of a prescribed orally administered anticancer medication, as specified. Sunsets on January 1, 2024.
      
   3. AB 315 (Wood), Chapter 905, Statutes of 2018, provides for the registration of pharmacy benefit managers (PBMs) to the DMHC. AB 315 requires DMHC, by July 1, 2019, and in collaboration with other agencies, departments, advocates, experts, health plan representatives, and other entities and stakeholders that it deems appropriate, to convene a Task Force on PBM Reporting to determine what information related to pharmaceutical costs, if any, it should require to be reported by health plans or their contracted PBMs, in addition to reporting required in existing law. AB 315 requires the Task Force to consider inclusion of information including, but not limited to: wholesale acquisition costs of pharmaceuticals; rebates; payments to network pharmacies; and, exclusivity arrangements between health plans or contracted PBMs with manufacturers.
      
   4. AB 265 (Wood), Chapter 611, Statutes of 2017, prohibits prescription drug manufacturers from offering discounts or other reduction in an individual's out-of-pocket expenses associated with insurance coverage, if a lower cost therapeutically equivalent generic drug is available. Specifies a number of exceptions that allow discounts even if a lower cost therapeutically equivalent generic drug is available.
   5. SB 17 requires health plans and insurers that report rate information through the existing large and small group rate review process to also report specified information related to prescription drug pricing to DMHC and CDI. Requires DMHC and CDI to compile specified information into a consumer-friendly report that demonstrates the overall impact of drug costs on health care premiums. Requires drug manufacturers to notify specified purchasers, in writing at least 90 days prior to the planned effective date, if it is increasing the wholesale acquisition cost of a prescription drug by specified amounts. Requires drug manufacturers to notify the Office of Statewide Health Planning and Development (but now the California Department of Health Care Access and Information (HCAI)) three days after FDA approval when introducing a new drug to market, as specified. Requires drug manufacturers to provide specified information to HCAI related to the drug’s price.
   6. AB 339, requires health plans and insurers that provide coverage for outpatient prescription drugs to have formularies that do not discourage the enrollment of individuals with health conditions, and requires combination antiretroviral drug treatment coverage of a single-tablet that is as effective as a multitablet regimen for treatment of HIV/AIDS, as specified. AB 339 places in state law, federal requirements related to pharmacy and therapeutics committees, access to in-network retail pharmacies, standardized formulary requirements, formulary tier requirements, and copayment caps of $250 and $500 for a supply of up to 30 days for an individual prescription, as specified. Sunsets on January 1, 2020.

REGISTERED SUPPORT / OPPOSITION:

Support

Health Access California (sponsor)

American Federation of State, County and Municipal Employees, Afl-cio
California Chronic Care Coalition
Calpirg, California Public Interest Research Group
Community Health Councils
End the Epidemics: Californians Mobilizing to End Hiv, Viral Hepatitis, Stis, and Overdose
Equality California
Harm Reduction Institute
National Multiple Sclerosis Society, Ms-can
Radiant Health Centers
San Francisco Aids Foundation
The Leukemia & Lymphoma Society
Western Center on Law & Poverty, INC.

Opposition

None on file.

Analysis Prepared by: Kristene Mapile / HEALTH / (916) 319-2097