AB 374
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Date of Hearing: April 28, 2015
ASSEMBLY COMMITTEE ON HEALTH
Rob Bonta, Chair
AB 374 (Nazarian) – As Amended March 2, 2015
SUBJECT: Health care coverage: prescription drugs.
SUMMARY: Prohibits a health care service plan (plan) or insurer from applying a step therapy
protocol (STP) when a patient has made a “step therapy override determination request,”, if the
patient's physician determines that step therapy would not be medically appropriate.
Specifically, this bill:
1) Requires a carrier to “expeditiously grant” the step therapy override determination request by
a patient with adequate supporting rationale and documentation from the prescribing
physician, if any of the following apply:
a) The drug required by the carrier is contraindicated or will likely cause an adverse reaction
by, or physical or mental harm to, the patient;
b) The drug required by the carrier is expected to be ineffective based on the known relevant
physical or mental characteristics of the patient and the known characteristics of the drug;
c) The drug required by the carrier is not in the best interest of the patient, based on medical
appropriateness;
d) The patient's condition is currently stable on a medication selected by their health care
provider; or,
e) The drug required by the carrier has not been approved by the federal Food and Drug
Administration (FDA) for the patient's condition
2) Upon granting a step therapy override determination, the carrier must authorize coverage for
the drug prescribed by the patient's provider, if that drug is covered in the patient's policy or
contract.
3) Specifies that this section does not prevent a carrier from requiring a patient to try a generic
equivalent drug prior to providing coverage for the branded prescription.
EXISTING LAW:
1) Provides for regulation of health insurers by the California Department of Insurance (CDI)
under the Insurance Code, and provides for the regulation of plans by the Department of
Managed Health Care (DMHC), pursuant to the Knox-Keene Health Care Service Plan Act
of 1975 (Knox-Keene Act).
2) Requires carriers to provide certain benefits, but does not require carriers to cover
prescription drugs. Establishes various requirements on carriers if they do offer prescription
drug coverage.
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3) Allows, pursuant to DMHC regulations, a plan to require step therapy and requires a plan to
have an expeditious process in place to authorize exceptions to step therapy when medically
necessary. Prohibits, in situations where an enrollee changes plans, the new plan from
requiring the enrollee to repeat step therapy when that enrollee is already being treated for a
medical condition by a prescription drug provided that the drug is appropriately prescribed
and is considered safe and effective for the enrollee's condition.
4) Requires any plan denial pursuant to 3) above to provide the enrollee with the reasons for the
denial and notify the enrollee of the right to file a grievance and/or Independent Medical
Review (IMR) if the enrollee objects to the denial; including any alternative drug or
treatment offered by the plan.
5) Prohibits carriers that cover prescription drugs from limiting or excluding coverage for a
drug on the basis that the drug is prescribed for a use different from the use for which the
drug has been approved by the FDA, provided that specified conditions have been met,
including that the drug is prescribed by a participating licensed health care professional for
the treatment of a chronic and seriously debilitating condition, the drug is medically
necessary to treat that condition, and the drug is on the plan formulary.
6) Establishes the Patient Protection and Affordable Care Act (ACA), which imposes various
requirements, some of which take effect on January 1, 2014, on states, carriers, employers,
and individuals regarding health care coverage.
7) Requires, under the ACA, carriers that offer coverage in the small group or individual market
to ensure coverage includes essential health benefits (EHBs), as defined. Provides that the
EHB package will be determined by the federal Department of Health and Human Services
(HHS) Secretary and must include, at a minimum, ambulatory patient services, emergency
services, hospitalizations, and prescription drugs, among other things.
FISCAL EFFECT: This bill has not been analyzed by a fiscal committee.
COMMENTS:
1) PURPOSE OF THIS BILL. According to the author, use of step therapy leads to an
exacerbation of a patient’s condition, causing irreversible deterioration or damage to the
patient, such as limiting their daily functions and ability to remain a productive member of
the workforce and society. The author writes that the insurer is not the treating physician and
cannot possible know the individual circumstances or pain a particular patient may be
experiencing. It does not make logical sense for the plan to have complete and ultimate
control on the medications a patient is allowed to try. The author asserts that a determination
about whether a STP is appropriate should take into account the individual needs and
circumstances of the patient, along with the professional judgment of the prescribing
physician.
2) STEP THERAPY PROTOCOLS. According to the California Health Benefits Review
Program (CHBRP), step therapy, or fail-first protocols, may be implemented as methods of
utilization management in a variety of ways and are known by a number of terms. Step
therapy, when implemented by carriers, requires an enrollee to try a first-line medication
(often a generic alternative) prior to receiving coverage for a second-line medication (often a
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brand-name medication). Step edit is a process by which a prescription, submitted for
payment authorization, is electronically reviewed at point-of-service for use of a prior, firstline medication. A fail-first protocol may also be the basis for part or all of a precertification
or prior authorization protocol, which may also require the prescribing provider to confirm to
the plan or insurer that an alternate medication or medications have been unsuccessfully tried
by the patient before the coverage for the prescribed medication is approved. However, not
all prior authorization protocols have a fail-first component. Some prior authorization
protocols are based on other criteria, such as intended use to treat a specific medical problem
or diagnosis, or confirmation that the patient meets other criteria such as age or specified
comorbidities.
There is a wide variation in the presence of STPs among plans. According to CHBRP,
approximately 3% of covered enrollees have no outpatient drug benefits, and 34% have drug
benefits that are not subject to STPs. Of the remaining 63% of enrollees with outpatient drug
coverage, the number of drugs subjected to STP varies from two to more than 100.
3) CURRENT PROTOCOLS FOR STEP THERAPY EXCEPTIONS. Existing law
provides protections for insured patients. Under state regulation, a plan that requires step
therapy must have an expeditious process in place to authorize exceptions to step therapy
when medically necessary. Step therapy overrides follow a procedure by which a prescriber
submits clinical documentation to the plan or insurer documenting why an enrollee should be
allowed to skip one or more of a protocol's steps. Reasons prescribers use to justify such an
step therapy override include:
a) The enrollee has already tried step-required drug(s) unsuccessfully, or
b) The step-required drug is contraindicated for that enrollee due to drug-drug interactions,
drug-disease interactions, or drug allergy or intolerance.
In many plans, the step therapy override process is the same as the prior authorization
process. Step therapy override requests may take several days to be reviewed by the plan or
insurer. For prior authorization, DMHC-regulated plans are required to respond and issue
authorization determinations within two business days. CDI-regulated insurers are required
to issue nonurgent authorization determinations within five business days. Urgent
determinations must be made within 72 hours. Existing regulations also state that a plan or
insurer must notify the patient of their right to appeal the dispute through IMR.
4) CHBRP ANALYSIS. AB 1996 (Thomson), Chapter 795, Statutes of 2002, requests the
University of California to assess legislation proposing a mandated benefit or service and
prepare a written analysis with relevant data on the medical, economic, and public health
impacts of proposed plan and health insurance benefit mandate legislation. Below are major
findings of CHBRP's analysis:
a) Enrollees covered. In 2016, approximately 24.6 million Californians will have stateregulated health insurance that would be subject to this bill.
b) EHBs. This bill would not exceed EHBs, because the mandate is applicable to particular
terms or conditions, but does not require new benefit coverage.
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c) Medical effectiveness. CHBRP found insufficient evidence to conclude whether STP
overrides affect health outcomes. The absence of evidence is not evidence of no effect.
d) Benefit coverage. The terms and conditions of 27% of enrollees would change to
become fully compliant with this bill’s override approval criteria.
e) Override criteria. CHBRP found that all enrollees in DMHC-regulated plans or CDIregulated policies with drug benefits subject to step therapy protocols have override
procedures in place. This bill would require plans and policies to grant step therapy
overrides in five circumstances, as specified, when the prescriber provides specific
documentation. CHBRP found that most override policies already consider the specific
criteria laid forth by this bill, and therefore are already partially compliant with this bill.
However, not all override procedures are fully compliant with the five criteria specified
by this bill.
f) Utilization. Filled prescriptions would be unchanged, although use of initially prescribed
drugs would increase and use of step therapy drugs would decrease. Annual step therapy
overrides granted would increase by 4%. The change would affect expenditures because
initially prescribed drugs are frequently more expensive than step therapy required drugs.
this bill would not affect cost-sharing terms and condition and that it would not require
coverage of drugs not on the plan/policy formulary.
g) Impact on expenditures. CHBRP estimates that premium impacts related to an increase
in approved override requests would be 0.008%, or $10.8 million total. In DMHCregulated plans, CHBRP estimates that premium increases would range from $0.03 (large
group) to $0.07 (individual) per member per month (PMPM). In CDI-regulated policies,
estimated premium increases range from $0.06 (large group and individual) to $0.13
(small group) PMPM.
5) SUPPORT. The Association of Northern California Oncologists states that it is not always
clinically appropriate to mandate a patient take a similar drug that is not a generic equivalent.
The decision as to which medication should be prescribed should be left solely in the hand of
the physician, in consultation with the patient. California Affiliates of Susan G. Komen write
that most STPs rely on generalized information regarding patients and their treatments, as
opposed to taking into account unique patient experiences and responses to treatments.
Furthermore, due to the lack of standardized override process, and varying formularies
among plans, physicians face considerable challenges identifying drugs that are subject to
step therapy, and patients face barriers to accessing timely and appropriate treatments.
6) OPPOSITION. America's Health Insurance Plans states that step therapy for prescription
drugs is one utilization protocol that health insurers use to control health care costs and
ensure patient safety. This bill would place overly broad restrictions on the use of step
therapy, hindering health insurers' use of this important tool and limiting its effectiveness.
The California Chamber of Commerce opposes this bill, stating that it would contribute to
the problem of rising health care costs by unnecessarily increasing utilization of more
expensive prescription medications; its impact on premiums and co-payments will grow in
future years as more and more high-priced pharmaceutical drugs enter the market.
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7) OPPOSE UNLESS AMENDED. The For Grace Foundation, sponsor of several previous
iterations of step therapy bills, opposes this bill stating that it does not respond to the
governor's veto message on AB 369 (Huffman) of 2012. This bill hands over all of the STP
authority to the doctors, thus flying in the face of Governor Brown's 2012 veto. For Grace
states that they would change to a support position if the bill was amended to restrict the STP
to two “fails” (as Medicare does) and gave the physician no authority in their
implementation.
8) RELATED LEGISLATION.
a) AB 68 (Waldron) establishes that a prescriber’s reasonable professional judgment
prevails over the policies and utilization controls of the Medi-Cal program, including the
utilization controls of a Medi-Cal managed care plan, in prescribing a pharmaceutical that
is in the seizure or epilepsy drug class. AB 68 was approved by in Assembly Health
Committee on April 21, 2015 with a vote of 19-0 and is now pending in Assembly
Appropriations Committee.
b) AB 73 (Waldron) establishes that a prescriber's reasonable professional judgment
prevails over the policies and utilization controls of the Medi-Cal program, including the
utilization controls of a Medi-Cal managed care plan, in prescribing a pharmaceutical
from specified therapeutic drug classes. AB 73 is pending in this Committee.
9) PREVIOUS LEGISLATION.
a) AB 889 (Frazier) of 2013 would have prohibited plans and health insurers from requiring
a patient to try and fail on two medications before allowing the patient access to the
medication originally prescribed by the patient's medical provider. AB 889 was held on
the Suspense File in Senate Appropriations Committee.
b) AB 369 (Huffman) of 2012 would have prohibited plans and health insurers that restrict
medications for the treatment of pain from requiring a patient to try and fail on more than
two pain medications before allowing the patient access to the pain medication, or
generically equivalent drug, prescribed by the provider. The Governor vetoed AB 369
because it did not strike “the right balance between physician discretion and health plan
or insurer oversight. A doctor's judgment and a health plan's clinical protocols both have
a role in ensuring the prudent prescribing of pain medications. Independent medical
reviews are available to resolve differences in clinical judgment when they occur, even
on an expedited basis. If current law does not suffice - and I am not certain that it
doesn't, any limitations on the practice of “step therapy” should better reflect a health
plan or insurer's legitimate role in determining the allowable steps.”
c) AB 1826 (Huffman) of 2010 would have required plans and health insurers that cover
outpatient prescription drug benefits to provide coverage for a drug that has been
prescribed for the treatment of pain. AB 1826 would have prohibited health plans and
insurers from requiring the subscriber or enrollee to first use an alternative prescription
drug or an over-the-counter drug, as specified. Held on the Suspense File in the Senate
Appropriations Committee.
d) AB 1144 (Price) of 2009 would have required plans and health insurers that provide
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prescription drug benefits to submit written reports about step therapy each year to
DMHC and CDI. Held on the Suspense File in the Assembly Appropriations Committee.
10) POLICY COMMENT.
a) Does this bill achieve the author's goal? This bill seeks to address concerns raised by
the Governor in his veto message of a prior bill by establishing a set of circumstances
under which a plan/insurer must agree to bypass step therapy, rather than imposing
blanket restrictions on its use. As drafted, this bill requires override approval when the
prescriber provides the medical documentation, without explicitly giving the carrier any
option to review or deny the request. It is unclear whether this is, also, a blanket
restriction on the use of STPs.
b) Expeditious review? Current law already has an appeal review process to override step
therapy requirements. Expeditious is not defined in the Knox-Keene Act or in regulation,
giving plans leeway to take into account the severity of the condition in the timing of
their response. Because this bill uses the same phrase “expeditious review,” it is not clear
how setting up a new process for step therapy appeals would offer any improvement on
current law.
11) SUGGESTED AMENDMENT. This bill requires that all override requests be approved
after the physician has submitted their medical opinion, without review or response from the
plan or insurer. If the author intends to have the request actually be a request, an amendment
should be taken to reflect that.
(b) A step therapy override determination request by a patient with adequate
supporting rationale and documentation from the prescribing physician shall be
expeditiously reviewed granted by the plan if any of the following apply
REGISTERED SUPPORT / OPPOSITION:
Support
Arthritis Foundation (cosponsor)
California Rheumatology Alliance (cosponsor)
Union of American Physicians and Dentists (cosponsor)
American Cancer Society Cancer Action Network
American GI Forum Education Foundation of Santa Maria
Association of Northern California Oncologists
Bay Area Women's Health Advocacy Council
Biocom
California Affiliates of Susan G. Komen
California Association of Area Agencies on Aging
California Healthcare Institute
California Primary Care Association
California Psychological Association
California School Employees Association, AFL-CIO
Chronic Care Coalition
Congress of California Seniors
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Latina Breast Cancer Agency
Leukemia and Lymphoma Society
Medical Oncology Association of Southern California
Mental Health America of California
National Alliance on Mental Illness
National Association of Social Workers, California Chapter
Neuropathy Action Foundation
Osteopathic Physicians and Surgeons of California
Pharmaceuticals Research and Manufacturers of America
Western Center on Law and Poverty
Opposition
America's Health Insurance Plans
Association of California Life and Health Insurance Companies
Blue Shield of California
California Association of Health Plans
California Chamber of Commerce
CSAC Excess Insurance Authority
Express Scripts
For Grace (unless amended)
Simi Valley Chamber of Commerce
Southwest California Legislative Council
Analysis Prepared by: Dharia McGrew / HEALTH / (916) 319-2097