BILL NUMBER: AB 339 AMENDED
BILL TEXT
AMENDED IN SENATE JULY 7, 2015
AMENDED IN SENATE JUNE 24, 2015
AMENDED IN ASSEMBLY JUNE 1, 2015
AMENDED IN ASSEMBLY MAY 20, 2015
AMENDED IN ASSEMBLY MAY 4, 2015
AMENDED IN ASSEMBLY APRIL 7, 2015
INTRODUCED BY Assembly Member Gordon
(Coauthor: Assembly Member Atkins)
FEBRUARY 13, 2015
An act to amend Sections 1367.24 and 1367.205 of, and to add
Section 1342.71 Sections 1342.71, 1367.41,
and 1367.42 to, the Health and Safety Code, and to amend
Section 10123.192 of, and to add Sections 10123.193 and 10123.201 to,
the Insurance Code, relating to health care coverage.
LEGISLATIVE COUNSEL'S DIGEST
AB 339, as amended, Gordon. Health care coverage: outpatient
prescription drugs.
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 requires a health care service plan or insurer that
provides prescription drug benefits and maintains one or more drug
formularies to make specified information regarding the formularies
available to the public and other specified entities. Existing law
also specifies requirements for those plans and insurers regarding
coverage and cost sharing of specified prescription drugs.
This bill would require require, with
respect to a nongrandfathered group health care service plan
contract or health insurance policy that is offered, renewed, or
amended on or after July 1, 2016, and a nongrandfathered individual
health care service plan contract or health insurance policy that is
offered, renewed, or amended on or after January 1, 2017, and that
provides coverage for outpatient prescription drugs, to
provide coverage for medically necessary prescription drugs,
including those for which there is not a therapeutic equivalent. The
bill would require copayments, coinsurance, and other cost sharing
for these drugs to be reasonable, and would require that
the copayment, coinsurance, or any other form of cost sharing for a
covered outpatient prescription drug for an individual prescription
not exceed 1/24 of the annual
out-of-pocket limit applicable to individual coverage
$250, except as specified, for a supply of up to 30 days.
The bill would require these cost sharing limitations for a
plan contract or policy that is a high deductible health plan to
apply only once an enrollee's or insured's deductible has been
satisfied for the year. The bill would make these
cost-sharing limits applicable only to covered outpatient
prescription drugs that constitute essential health benefits, as
defined. The bill would require a plan contract or policy to cover
a single-tablet and extended release
prescription drug regimens, unless the plan or insurer can
demonstrate that multitablet and nonextended release drug regimens,
respectively, are clinically equally or more effective,
regimen for combination drug treatments that include
anti retrovirals, as specified. The bill would
prohibit, except as specified, a plan contract or policy from placing
prescription medications that treat a specific condition on
the more than 50% of drugs approved by the United
States Food and Drug Administration that are in the same drug class
into the 2 highest cost tiers of a drug formulary. The bill
would require a plan contract or policy to use specified definitions
for each tier of a drug formulary. The bill would make related
findings and declarations.
This bill would require a health insurer that provides coverage
for outpatient prescription drugs to provide coverage for medically
necessary prescription drugs, including those for which there is not
a therapeutic equivalent, and, for an insurer, would require
copayments, coinsurance, and other cost sharing for outpatient
prescription drugs to be reasonable.
Existing law requires every health care service plan that provides
prescription drug benefits to maintain an expeditious process by
which prescribing providers may obtain authorization for a medically
necessary nonformulary prescription drug, and requires these plans to
maintain specified information that is required to be made available
to the Director of the Department of Managed Health Care upon
request.
This bill would also impose these requirements on a health insurer
that provides prescription drug benefits, as provided. The bill
would require a plan or insurer to respond to authorization requests
for nonformulary prescription drugs within specified timeframes. The
bill would authorize a plan or an
insurer to require step therapy, as defined, when more than one drug
is appropriate for the treatment of a medical condition, subject to
specified requirements. The bill would require a plan or
an insurer that requires step therapy to have an
expeditious process in place to authorize exceptions to step therapy
when medically necessary and to conform effectively and efficiently
with continuity of care requirements. The bill, with regard to an
enrollee or insured changing plans or
policies, would prohibit a new plan or
insurer from requiring the enrollee or insured to repeat step therapy
when that person is already being treated for a medical condition by
a prescription drug, as specified. The bill, except as specified,
would require a plan or insurer that provides essential health
benefits to allow an enrollee or insured to access his or her
prescription drug benefits at an in-network retail pharmacy, and
would authorize a plan or insurer to charge an enrollee or insured a
different cost sharing for obtaining a covered drug at a retail
pharmacy, and would require that cost-sharing amount to count towards
the plan's or insurer's annual out-of-pocket limitation, as
specified.
This bill would require a plan or insurer to maintain a pharmacy
and therapeutics committee that is responsible for developing,
maintaining, and overseeing any drug formulary list, as provided. The
bill would require the committee to, among other things, evaluate
and analyze treatment protocols and procedures related to the plan's
or insurer's drug formulary at least annually.
Existing law requires the Department of Managed Health Care and
the Department of Insurance to jointly develop a standard formulary
template by January 1, 2017, and requires plans and insurers to use
that template to display formularies, as specified. Existing law
requires the standard formulary template to include specified
information.
This bill would require the standard formulary template to include
additional specified information, including which medications are
covered, including both generic and brand name.
Because a willful violation of the bill's requirements relative to
health care service plans would be a crime, this 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.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 1342.71 is added to the Health and Safety Code,
to read:
1342.71. (a) The Legislature hereby finds and declares all
of the following:
(1) The federal Patient Protection and Affordable Care Act, its
implementing regulations and guidance, and related state law prohibit
discrimination based on a person's expected length of life, present
or predicted disability, degree of medical dependency, quality of
life, or other health conditions, including benefit designs that have
the effect of discouraging the enrollment of individuals with
significant health needs.
(2) The Legislature intends to build on existing state and federal
law to ensure that health coverage benefit designs do not have an
unreasonable discriminatory impact on chronically ill individuals,
and to ensure affordability of outpatient prescription drugs.
(3) Assignment of all or most prescription medications that treat
a specific medical condition to the highest cost tiers of a formulary
may effectively discourage enrollment by chronically ill
individuals, and may result in lower adherence to a prescription drug
treatment regimen.
(b) A nongrandfathered group health care service plan
contract that is offered, amended, or renewed on or after July 1,
2016, shall comply with this section. A nongrandfathered individual
health care service plan contract that is offered, amended, or
renewed on or after January 1, 2017, shall comply with this section.
The cost-sharing limits established by this section apply only to
outpatient prescription drugs covered by the contract that constitute
essential health benefits, as defined in Section 1367.005. This
section does not apply to Medi-Cal managed care contracts.
(b) (1) A health care service plan that provides coverage for
outpatient prescription drugs shall cover medically necessary
prescription drugs.
(2) A health care service plan that provides coverage for
outpatient prescription drugs shall cover a medically necessary
prescription drug for which there is not a therapeutic equivalent.
(c) Copayments, coinsurance, and other cost sharing for outpatient
prescription drugs shall be reasonable so as to allow access to
medically necessary outpatient prescription drugs. In proposing cost
sharing, the health care service plan shall consider the impact of
cost sharing on medication adherence as demonstrated in peer-reviewed
literature.
(d)
(c) Consistent with federal law and guidance, and
notwithstanding Section 1342.7 and any regulations adopted pursuant
to that section, a health care service plan that provides coverage
for outpatient prescription drugs shall demonstrate that the
formulary or formularies maintained by the health care service plan
do not discourage the enrollment of individuals with health
conditions and do not reduce the generosity of the benefit for
enrollees with a particular condition.
(1) A For combination drug treatments that
include anti retrovirals, a health care service
plan contract shall cover a single-tablet drug regimen that is as
effective as a multitablet regimen unless the health care service
plan is able to demonstrate to the director, consistent with clinical
guidelines and peer-reviewed scientific and medical literature, that
the multitablet regimen is clinically equally or more effective and
more likely to result in adherence to a drug regimen. A
health care service plan contract shall cover an extended release
prescription drug that is clinically equally or more effective than a
nonextended release product unless the health care service plan is
able to demonstrate to the director, consistent with clinical
guidelines and peer-reviewed scientific and medical literature, that
the nonextended release product is clinically equally or more
effective than the extended release product.
(2) A health care service plan contract shall not place most or
all of the prescription medications that treat a specific condition
on the highest cost tiers of a formulary unless the health care
service plan can demonstrate that such placement does not reduce the
generosity of the benefits for enrollees with a particular condition.
If there is more than one treatment that is the standard of care for
a specific condition, the health care service plan shall not place
most or all prescription medications that treat that condition on the
highest cost tiers. This shall not apply to any medication for which
there is a therapeutic equivalent available on a lower cost tier.
(2) No more than 50 percent of drugs approved by the United States
Food and Drug Administration (FDA) that are in the same drug class
may be assigned to the two highest cost tiers of a drug formulary.
All health care service plan formularies shall include at least one
drug in the lower cost tiers if all FDA-approved drugs in the same
drug class would otherwise qualify for the highest cost tiers and at
least three drugs in that class are available as FDA-approved drugs .
The drug or drugs assigned to the lower cost tiers pursuant to this
paragraph shall be the drug or drugs that were most often prescribed
during the immediately preceding plan year, based on the health care
service plan's experience.
(3) For coverage offered in the individual market, the health care
service plan shall demonstrate that the formulary or formularies
maintained for coverage in the individual market are the same or
comparable to those maintained for coverage in the group market.
(4) A health care service plan shall demonstrate to the director
that any limitation or utilization management is consistent with and
based on clinical guidelines and peer-reviewed scientific and medical
literature.
(e)
(d) (1) With respect to an individual or group health
care service plan contract subject to Section 1367.006, 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 shall not exceed
one-twenty-fourth of the annual out-of-pocket limit applicable to
individual coverage under Section 1367.006 for a supply of up to 30
days. two hundred fifty dollars ($250), except as
provided in paragraphs (2) and (3).
(2) With respect to products with actuarial value at, or
equivalent to, the bronze level, cost sharing for a covered
outpatient prescription drug for an individual prescription for a
supply of up to 30 days shall not exceed five hundred dollars ($500).
(2)
(3) For a health care service plan contract that is a
"high deductible health plan" under the definition set forth in
Section 223(c)(2) of Title 26 of the United States Code, paragraph
(1) of this subdivision shall apply only once an enrollee's
deductible has been satisfied for the year.
(f)
(e) (1) If a health care service plan contract
maintains a drug formulary grouped into tiers, including a fourth
tier or specialty 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 preferred generic drugs and
preferred brand name drugs if the cost to the health care service
plan for a preferred brand name drug is comparable to those for
generic drugs. most generic drugs and low cost
preferred brand 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 and efficacy and not solely based on the cost of the
prescription drug. drug, and which generally
have a preferred and often less costly therapeutic alternative at a
lower tier.
(C) Tier three shall consist of nonpreferred brand name drugs that
are recommended by the health care service plan's pharmacy and
therapeutics committee based on safety and efficacy and not solely
based on the cost of the prescription drug.
(D) Tier four shall consist of specialty drugs
that are biologics, which, according to the
drugs that the federal Food and Drug Administration or the
manufacturer, require distribution
manufacturer requires to be distributed through a specialty
pharmacy or the pharmacy, drugs that require
the enrollee to have special training for
self-administration or special monitoring. Specialty drugs may
include prescription drugs that cost more than the Medicare Part D
threshold if those drugs are recommended for Tier four by the health
care service plan's pharmacy and therapeutics committee based on
safety and efficacy, but placement shall not be solely based on the
cost of the prescription drug. or clinical monitoring
for self-administration, or drugs that cost the health plan more than
six hundred dollars ($600) net of rebates.
(2) This section does not require a health care service plan
contract to include a fourth tier, but if a health care
service plan contract includes a fourth tier, the health care service
plan contract shall comply with this section. tier.
(3) This section does not require the health care service plan's
pharmacy and therapeutics committee to consider the cost of the
prescription drug to the health care service plan.
(g)
(f) A health care service plan contract shall ensure
that the placement of prescription drugs on formulary tiers is
not based solely on the cost of the prescription drug to the
health care service plan, but is based on clinically
indicated, reasonable medical management practices.
(h)
(g) This section shall not be construed to require a
health care service plan to impose cost sharing. This section shall
not be construed to require cost sharing for prescription drugs that
state or federal law otherwise requires to be provided without cost
sharing.
(i)
(h) This section does not require or authorize a health
care service plan that contracts with the State Department of Health
Care Services to provide services to Medi-Cal beneficiaries to
provide coverage for prescription drugs that are not required
pursuant to those programs or contracts, or to limit or exclude any
prescription drugs that are required by those programs or contracts.
SEC. 2. Section 1367.24 of the Health and Safety Code is amended
to read:
1367.24. (a) (1) Every health care service plan that provides
prescription drug benefits shall maintain an expeditious process by
which prescribing providers may obtain authorization for a medically
necessary nonformulary prescription drug. On or before July 1, 1999,
every health care service plan that provides prescription drug
benefits shall file with the department a description of its process
for responding to authorization requests for nonformulary drugs. Any
changes to this process shall be filed with the department pursuant
to Section 1352. The plan shall provide that the enrollee, the
enrollee's designee, or the enrollee's prescribing provider may seek
an authorization for a nonformulary prescription drug.
(2) Each plan shall respond to an authorization request within 72
hours following receipt of the authorization request for a nonurgent
authorization. If the plan grants the authorization request, the plan
shall provide coverage of the nonformulary drug for the duration of
the prescription, including refills.
(3) Each plan shall provide that an urgent authorization may be
obtained within 24 hours if an enrollee is suffering from a health
condition that may seriously jeopardize the enrollee's life, health,
or ability to regain maximum function, or if an enrollee is
undergoing a current course of treatment using a nonformulary
prescription drug. A plan that grants an exception based on these
urgent circumstances shall provide coverage of the nonformulary
prescription drug for the duration of that urgent condition.
(4) If a plan imposes step therapy, the plan shall provide an
expeditious process to authorize an exception to step therapy when
medically necessary and to conform effectively and efficiently with
continuity of care requirements of this chapter and federal law, and
any regulations issued thereunder. The process to authorize an
exception to step therapy shall be consistent with this section,
including the timelines provided in this section.
(5)
(4) Each plan shall provide a written description of
its most current process to its prescribing providers. For purposes
of this section, a prescribing provider shall include a provider
authorized to write a prescription, pursuant to subdivision (a) of
Section 4040 of the Business and Professions Code, to treat a medical
condition of an enrollee.
(b) Any plan that disapproves a request made pursuant to
subdivision (a) by a prescribing provider to obtain authorization for
a nonformulary drug shall provide the reasons for the disapproval in
a notice provided to the enrollee. The notice shall indicate that
the enrollee may file a grievance with the plan if the enrollee
objects to the disapproval, including any alternative drug or
treatment offered by the plan. The notice shall comply with
subdivision (b) of Section 1368.02.
(c) The process described in subdivision (a) by which prescribing
providers may obtain authorization for medically necessary
nonformulary drugs shall not apply to a nonformulary drug that has
been prescribed for an enrollee in conformance with the provisions of
Section 1367.22.
(d) (1) A plan shall maintain a pharmacy and therapeutics
committee that shall be responsible for developing, maintaining, and
overseeing any drug formulary list. If the plan delegates
responsibility for the formulary to any entity, the obligation of the
plan to comply with this chapter shall not be waived.
(2) The pharmacy and therapeutics committee board membership shall
conform with both of the following:
(A) Represent a sufficient number of clinical specialties to
adequately meet the needs of enrollees.
(B) Consist of a majority of individuals who are practicing
physicians, practicing pharmacists, and other practicing health
professionals who are licensed to prescribe drugs.
(3) Members of the board shall abstain from voting on any issue in
which the member has a conflict of interest with respect to the
issuer or a pharmaceutical manufacturer.
(4) At least 20 percent of the board membership shall not have a
conflict of interest with respect to the issuer or any pharmaceutical
manufacturer.
(5) The pharmacy and therapeutics committee shall meet at least
quarterly and shall maintain written documentation of the rationale
for its decisions regarding the development of, or revisions to, the
formulary drug list.
(6) The pharmacy and therapeutics committee shall do all of the
following:
(A) Develop and document procedures to ensure appropriate drug
review and inclusion.
(B) Base clinical decisions on the strength of the scientific
evidence and standards of practice, including assessing peer-reviewed
medical literature, pharmacoeconomic studies, outcomes research
data, and other related information.
(C) Consider the therapeutic advantages of drugs in terms of
safety and efficacy when selecting formulary drugs.
(D) Review policies that guide exceptions and other utilization
management processes, including drug utilization review, quantity
limits, and therapeutic interchange.
(E) Evaluate and analyze treatment protocols and procedures
related to the plan's formulary at least annually.
(F) Review and approve all clinical prior authorization criteria,
step therapy protocols, and quantity limit restrictions applied to
each covered drug.
(G) Review new federal Food and Drug Administration-approved drugs
and new uses for existing drugs.
(H) Ensure the plan's formulary drug list or lists cover a range
of drugs across a broad distribution of therapeutic categories and
classes and recommended drug treatment regimens that treat all
disease states and does not discourage enrollment by any group of
enrollees.
(I) Ensure the plan's formulary drug list or lists provide
appropriate access to drugs that are included in broadly accepted
treatment guidelines and that are indicative of general best
practices at the time.
(e) (1) A health care service plan may impose prior authorization
requirements on prescription drug benefits, consistent with the
requirements of this chapter.
(2) (A) When there is more than one drug that is appropriate for
the treatment of a medical condition, a plan may require step
therapy. A plan that requires step therapy shall comply with the
requirements specified in paragraph (4) of subdivision (a).
(B) In circumstances where an enrollee is changing plans, the new
plan shall not require 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.
Nothing in this section shall preclude the new plan from imposing a
prior authorization requirement pursuant to this section for the
continued coverage of a prescription drug prescribed pursuant to step
therapy imposed by the former plan, or preclude the prescribing
provider from prescribing another drug covered by the new plan that
is medically appropriate for the enrollee.
(3) A plan shall provide coverage for the medically necessary
dosage and quantity of the drug prescribed for the treatment of a
medical condition consistent with professionally recognized standards
of practice.
(4) A plan that provides essential health benefits shall allow an
enrollee to access prescription drug benefits at an in-network retail
pharmacy unless the prescription drug is subject to restricted
distribution by the federal Food and Drug Administration or requires
special handling, provider coordination, or patient education that
cannot be provided by a retail pharmacy. A health care service plan
that provides essential health benefits may charge an enrollee a
different cost sharing for obtaining a covered drug at a retail
pharmacy, but all cost sharing shall count toward the plan's annual
limitation on cost sharing consistent with Section 1367.006.
(f)
(d) The process described in subdivision (a) by which
enrollees may obtain medically necessary nonformulary drugs,
including specified timelines for responding to prescribing provider
authorization requests, shall be described in evidence of coverage
and disclosure forms, as required by subdivision (a) of Section 1363,
issued on or after July 1, 1999.
(g)
(e) Every health care service plan that provides
prescription drug benefits shall maintain, as part of its books and
records under Section 1381, all of the following information, which
shall be made available to the director upon request:
(1) The complete drug formulary or formularies of the plan, if the
plan maintains a formulary, including a list of the prescription
drugs on the formulary of the plan by major therapeutic category with
an indication of whether any drugs are preferred over other drugs.
(2) Records developed by the pharmacy and therapeutic committee of
the plan, or by others responsible for developing, modifying, and
overseeing formularies, including medical groups, individual practice
associations, and contracting pharmaceutical benefit management
companies, used to guide the drugs prescribed for the enrollees of
the plan, that fully describe the reasoning behind formulary
decisions.
(3) Any plan arrangements with prescribing providers, medical
groups, individual practice associations, pharmacists, contracting
pharmaceutical benefit management companies, or other entities that
are associated with activities of the plan to encourage formulary
compliance or otherwise manage prescription drug benefits.
(h)
(f) If a plan provides prescription drug benefits, the
department shall, as part of its periodic onsite medical survey of
each plan undertaken pursuant to Section 1380, review the performance
of the plan in providing those benefits, including, but not limited
to, a review of the procedures and information maintained pursuant to
this section, and describe the performance of the plan as part of
its report issued pursuant to Section 1380.
(i)
(g) The director shall not publicly disclose any
information reviewed pursuant to this section that is determined by
the director to be confidential pursuant to state law.
(j)
(h) For purposes of this section, the
following definitions shall apply:
(1) "Authorization"
"authorization " means approval by
the health care service plan to provide payment for the prescription
drug.
(2) "Step therapy" means a type of protocol that specifies the
sequence in which different prescription drugs for a given medical
condition and medically appropriate for a particular patient are to
be prescribed.
(k)
(i) (1) Nonformulary prescription drugs shall include
any drug for which an enrollee's copayment or out-of-pocket costs are
different than the copayment for a formulary prescription drug,
except as otherwise provided by law or regulation or in cases in
which the drug has been excluded in the plan contract pursuant to
Section 1342.7.
(2) If a nonformulary drug is authorized consistent with this
section, the cost sharing shall be the same as for a formulary drug
consistent with subdivision (e) of Section 1342.71.
(j) Nothing in this section shall be construed to affect an
enrollee's or subscriber's eligibility to submit a grievance to the
department for review under Section 1368 or to apply to the
department for an independent medical review under Section 1370.4 or
Article 5.55 (commencing with Section 1374.30) of this chapter.
(l)
(k) Nothing in this section shall be construed to
restrict or impair the application of any other provision of this
chapter, including, but not limited to, Section 1367, which includes
among its requirements that a health care service plan furnish
services in a manner providing continuity of care and demonstrate
that medical decisions are rendered by qualified medical providers
unhindered by fiscal and administrative management.
SEC. 3. Section 1367.41 is added to the
Health and Safety Code , immediately following
Section 1367.4 , to read:
1367.41. (a) A plan shall maintain a pharmacy and therapeutics
committee that shall be responsible for developing, maintaining, and
overseeing any drug formulary list. If the plan delegates
responsibility for the formulary to any entity, the obligation of the
plan to comply with this chapter shall not be waived.
(b) The pharmacy and therapeutics committee board membership shall
conform with both of the following:
(1) Represent a sufficient number of clinical specialties to
adequately meet the needs of enrollees.
(2) Consist of a majority of individuals who are practicing
physicians, practicing pharmacists, and other practicing health
professionals who are licensed to prescribe drugs.
(c) Members of the board shall abstain from voting on any issue in
which the member has a conflict of interest with respect to the
issuer or a pharmaceutical manufacturer.
(d) At least 20 percent of the board membership shall not have a
conflict of interest with respect to the issuer or any pharmaceutical
manufacturer.
(e) The pharmacy and therapeutics committee shall meet at least
quarterly and shall maintain written documentation of the rationale
for its decisions regarding the development of, or revisions to, the
formulary drug list.
(f) The pharmacy and therapeutics committee shall do all of the
following:
(1) Develop and document procedures to ensure appropriate drug
review and inclusion.
(2) Base clinical decisions on the strength of the scientific
evidence and standards of practice, including assessing peer-reviewed
medical literature, pharmacoeconomic studies, outcomes research
data, and other related information.
(3) Consider the therapeutic advantages of drugs in terms of
safety and efficacy when selecting formulary drugs.
(4) Review policies that guide exceptions and other utilization
management processes, including drug utilization review, quantity
limits, and therapeutic interchange.
(5) Evaluate and analyze treatment protocols and procedures
related to the plan's formulary at least annually.
(6) Review and approve all clinical prior authorization criteria,
step therapy protocols, and quantity limit restrictions applied to
each covered drug.
(7) Review new federal Food
and Drug Administration-approved drugs and new uses for existing
drugs.
(8) Ensure that the plan's formulary drug list or lists cover a
range of drugs across a broad distribution of therapeutic categories
and classes and recommended drug treatment regimens that treat all
disease states and do not discourage enrollment by any group of
enrollees.
(9) Ensure that the plan's formulary drug list or lists provide
appropriate access to drugs that are included in broadly accepted
treatment guidelines and that are indicative of general best
practices at the time.
SEC. 4. Section 1367.42 is added to the
Health and Safety Code , to read:
1367.42. (a) A plan that provides essential health benefits shall
allow an enrollee to access prescription drug benefits at an
in-network retail pharmacy unless the prescription drug is subject to
restricted distribution by the federal Food and Drug Administration
or requires special handling, provider coordination, or patient
education that cannot be provided by a retail pharmacy.
(b) A nongrandfathered individual or small group health plan
contract may charge an enrollee a different cost sharing for
obtaining a covered drug at a retail pharmacy, but all cost sharing
shall count toward the plan's annual limitation on cost sharing
consistent with Section 1367.006.
SEC. 3. SEC. 5. Section 1367.205 of
the Health and Safety Code is amended to read:
1367.205. (a) In addition to the list required to be provided
under Section 1367.20, a health care service plan that provides
prescription drug benefits and maintains one or more drug formularies
shall do all of the following:
(1) Post the formulary or formularies for each product offered by
the plan on the plan's Internet Web site in a manner that is
accessible and searchable by potential enrollees, enrollees,
providers, the general public, the department, and federal agencies
as required by federal law or regulations.
(2) Update the formularies posted pursuant to paragraph (1) with
any change to those formularies on a monthly basis.
(3) No later than six months after the date that a standard
formulary template is developed under subdivision (b), use that
template to display the formulary or formularies for each product
offered by the plan.
(b) (1) By January 1, 2017, the department and the Department of
Insurance shall jointly, and with input from interested parties from
at least one public meeting, develop a standard formulary template
for purposes of paragraph (3) of subdivision (a). In developing the
template, the department and Department of Insurance shall take into
consideration existing requirements for reporting of formulary
information established by the federal Centers for Medicare and
Medicaid Services. To the extent feasible, in developing the
template, the department and the Department of Insurance shall
evaluate a way to include on the template, in addition to the
information required to be included under paragraph (2), cost-sharing
information for drugs subject to coinsurance.
(2) The standard formulary template shall include the notification
described in subdivision (c) of Section 1363.01, and as applied to a
particular formulary for a product offered by a plan, shall do all
of the following:
(A) Include information on cost sharing tiers and utilization
controls, including prior authorization or step therapy requirements,
for each drug covered by the product.
(B) Indicate any drugs on the formulary that are preferred over
other drugs on the formulary.
(C) Include information to educate enrollees about the differences
between drugs administered or provided under a health care service
plan's medical benefit and drugs prescribed under a health care
service plan's prescription drug benefit and about how to obtain
coverage information regarding drugs that are not covered under the
plan's prescription drug benefit.
(D) Include information to educate enrollees that health care
service plans that provide prescription drug benefits are required to
have a method for enrollees to obtain prescription drugs not listed
in the health plan drug formulary if the drugs are deemed medically
necessary by a clinician pursuant to Section 1367.24.
(E) Include information on which medications are covered,
including both generic and brand name.
(F) Include information on what tier of the plan's drug formulary
each medication is in.
(c) For purposes of this section, "formulary" means the complete
list of drugs preferred for use and eligible for coverage under a
health care service plan product and includes the drugs covered under
the pharmacy benefit of the product.
SEC. 4. SEC. 6. Section 10123.192 of
the Insurance Code is amended to read:
10123.192. (a) A health insurer that provides prescription drug
benefits and maintains one or more drug formularies shall do all of
the following:
(1) Post the formulary or formularies for each product offered by
the insurer on the insurer's Internet Web site in a manner that is
accessible and searchable by potential insureds, insureds, providers,
the general public, the department, and federal agencies as required
by federal law or regulations.
(2) Update the formularies posted pursuant to paragraph (1) with
any change to those formularies on a monthly basis.
(3) No later than six months after the date that a standard
formulary template is developed under subdivision (b), use that
template to display the formulary or formularies for each product
offered by the insurer.
(b) (1) By January 1, 2017, the department and the Department of
Managed Health Care shall jointly, and with input from interested
parties from at least one public meeting, develop a standard
formulary template for purposes of paragraph (3) of subdivision (a).
In developing the template, the department and Department of Managed
Health Care shall take into consideration existing requirements for
reporting of formulary information established by the federal Centers
for Medicare and Medicaid Services. To the extent feasible, in
developing the template, the department and the Department of Managed
Health Care shall evaluate a way to include on the template, in
addition to the information required to be included under paragraph
(2), cost-sharing information for drugs subject to coinsurance.
(2) The standard formulary template shall include a notification
that the presence of a drug on the insurer's formulary does not
guarantee that an insured will be prescribed that drug by his or her
prescribing provider for a particular medical condition. As applied
to a particular formulary for a product offered by an insurer, the
standard formulary template shall do all of the following:
(A) Include information on cost sharing tiers and utilization
controls, including prior authorization or step therapy requirements,
for each drug covered by the product.
(B) Indicate any drugs on the formulary that are preferred over
other drugs on the formulary.
(C) Include information to educate insureds about the differences
between drugs administered or provided under a health insurer's
medical benefit and drugs prescribed under a health insurer's
prescription drug benefit and about how to obtain coverage
information about drugs that are not covered under the health insurer'
s prescription drug benefit.
(D) Include information to educate insureds that health insurers
that provide prescription drug benefits are required to have a method
for insureds to obtain prescription drugs not listed in the health
insurer's drug formulary if the drugs are deemed to be medically
necessary by a clinician pursuant to Section 1367.24 of the Health
and Safety Code, as required by clause (iv) of subparagraph (A) of
paragraph (2) of subdivision (a) of Section 10112.27.
(E) Include information on which medications are covered,
including both generic and brand name.
(F) Include information on what tier of the health insurer's drug
formulary each medication is in.
(c) The commissioner may adopt regulations as may be necessary to
carry out the purposes of this section. In adopting regulations, the
commissioner shall comply with Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code.
(d) For purposes of this section, "formulary" means the complete
list of drugs preferred for use and eligible for coverage under a
health insurance product and includes the drugs covered under the
pharmacy benefit of the product.
SEC. 5. SEC. 7. Section 10123.193 is
added to the Insurance Code, to read:
10123.193. (a) The Legislature hereby finds and
declares all of the following:
(1) The federal Patient Protection and Affordable Care Act, its
implementing regulations and guidance, and related state law prohibit
discrimination based on a person's expected length of life, present
or predicted disability, degree of medical dependency, quality of
life, or other health conditions, including benefit designs that have
the effect of discouraging the enrollment of individuals with
significant health needs.
(2) The Legislature intends to build on existing state and federal
law to ensure that health coverage benefit designs do not have an
unreasonable discriminatory impact on chronically ill individuals,
and to ensure affordability of outpatient prescription drugs.
(3) Assignment of all or most prescription medications that treat
a specific medical condition to the highest cost tiers of a formulary
may effectively discourage enrollment by chronically ill
individuals, and may result in lower adherence to a prescription drug
treatment regimen.
(b) A nongrandfathered group policy of health insurance
that is offered, amended, or renewed on or after July 1, 2016, shall
comply with this section. A nongrandfathered individual policy of
health insurance that is offered, amended, or renewed on or after
January 1, 2017, shall comply with this section. The cost-sharing
limits established by this section apply only to outpatient
prescription drugs covered by the policy that constitute essential
health benefits, as defined by Section 10112.27.
(b)
(c) (1) A policy of health insurance that provides
coverage for outpatient prescription drugs shall cover medically
necessary prescription drugs.
(2) A policy of health insurance that provides coverage for
outpatient prescription drugs shall cover a medically necessary
prescription drug for which there is not a therapeutic equivalent.
(c)
(d) Copayments, coinsurance, and other cost sharing for
outpatient prescription drugs shall be reasonable so as to allow
access to medically necessary outpatient prescription drugs.
In proposing cost sharing, the health insurer shall consider the
impact of cost sharing on medication adherence as demonstrated in
peer-reviewed literature.
(d)
(e) Consistent with federal law and guidance, a policy
of health insurance that provides coverage for outpatient
prescription drugs shall demonstrate that the formulary or
formularies maintained by the health insurer do not discourage the
enrollment of individuals with health conditions and do not reduce
the generosity of the benefit for insureds with a particular
condition.
(1) A For combination drug treatments that
include antiretrovirals, a policy of health insurance shall
cover a single-tablet drug regimen that is as effective as a
multitablet regimen unless the health insurer is able to demonstrate
to the commissioner, consistent with clinical guidelines and
peer-reviewed scientific and medical literature, that the multitablet
regimen is clinically equally or more effective and more likely to
result in adherence to a drug regimen. A policy of health
insurance shall cover an extended release prescription drug that is
clinically equally or more effective than a nonextended release
product unless the health insurer is able to demonstrate to the
commissioner, consistent with clinical guidelines and peer-reviewed
scientific and medical literature, that the nonextended release
product is clinically equally or more effective than the extended
release product.
(2) A policy of health insurance shall not place most or all of
the prescription medications that treat a specific condition on the
highest cost tiers of a formulary unless the health insurer can
demonstrate that such placement does not reduce the generosity of the
benefits for insureds with a particular condition. If there is more
than one treatment that is the standard of care for a specific
condition, the health insurer shall not place most or all
prescription medications that treat that condition on the highest
cost tiers. This shall not apply to any medication for which there is
a therapeutic equivalent available on a lower cost tier.
(2) No more than 50 percent of drugs approved by the United States
Food and Drug Administration (FDA) that are in the same drug class
may be assigned to the two highest cost tiers of a drug formulary.
All health insurer formularies shall include at least one drug in the
lower cost tiers if all FDA-approved drugs in the same drug class
would otherwise qualify for the highest cost tiers and at least three
drugs in that class are available as FDA-approved drugs. The drug or
drugs assigned to the lower cost tiers pursuant to this paragraph
shall be the drug or drugs that were most often prescribed during the
immediately preceding plan year, based on the health insurer's
experience.
(3) For coverage offered in the individual market, the health
insurer shall demonstrate that the formulary or formularies
maintained for coverage in the individual market are the same or
comparable to those maintained for coverage in the group market.
(4) A health insurer shall demonstrate to the commissioner that
any limitation or utilization management is consistent with and based
on clinical guidelines and peer-reviewed scientific and medical
literature.
(e)
(f) (1) With respect to an individual or group policy
of health insurance subject to Section 10112.28, 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 shall not exceed
one-twenty-fourth of the annual out-of-pocket limit applicable to
individual coverage under Section 10112.28 for a supply of up to 30
days. two hundred fifty dollars ($250), except as
provided in paragraphs (2) and (3).
(2) With respect to products with actuarial value at or equivalent
to the bronze level, cost sharing for a covered outpatient
prescription drug for an individual prescription for a supply of up
to 30 days shall not exceed five hundred dollars ($500).
(2)
(3) For a policy of health insurance that is a "high
deductible health plan" under the definition set forth in Section 223
(c)(2) of Title 26 of the United States Code, paragraph (1) of this
subdivision shall apply only once an insured's deductible has been
satisfied for the year.
(f)
(g) (1) If a policy of health insurance maintains a
drug formulary grouped into tiers, including a fourth tier or
specialty tier, a policy of health insurance shall use the following
definitions for each tier of the drug formulary:
(A) Tier one shall consist of preferred generic drugs and
preferred brand name drugs if the cost to the health insurer for a
preferred brand name drug is comparable to those for generic drugs.
most generic drugs and low -cost preferred
brand drugs.
(B) Tier two shall consist of nonpreferred generic drugs,
preferred brand name drugs, and any other drugs recommended by the
health insurer's pharmacy and therapeutics committee based on safety
and efficacy and not solely based on the cost of the prescription
drug.
(C) Tier three shall consist of nonpreferred brand name drugs that
are recommended by the health insurer's pharmacy and therapeutics
committee based on safety and efficacy and not solely based on the
cost of the prescription drug. drug, and
which generally have a preferred and often less costly therapeutic
alternative at a lower tier.
(D) Tier four shall consist of specialty drugs
that are biologics, which, according to the
drugs that the federal Food and Drug Administration or the
manufacturer, require distribution
manufacturer requires to be distributed through a specialty
pharmacy or the pharmacy, drugs that require
the insured to have special training for
self-administration or special monitoring. Specialty drugs may
include prescription drugs that cost more than the Medicare Part D
threshold if those drugs are recommended for Tier four by the health
insurer's pharmacy and therapeutics committee based on safety and
efficacy, but placement shall not be solely based on the cost of the
prescription drug. or clinical monitoring for
self-administration, or drugs that cost the health insurer more than
six hundred dollars ($600) net of rebates.
(2) This section does not require a policy of health insurance to
include a fourth tier, but if a policy of health insurance
includes a fourth tier, the policy of health insurance shall comply
with this section. tier.
(3) This section does not require the health insurer's pharmacy
and therapeutics committee to consider the cost of the prescription
drug to the health insurer.
(g)
(h) This section shall not be construed to require a
health insurer to impose cost sharing. This section shall not be
construed to require cost sharing for prescription drugs that state
or federal law otherwise requires to be provided without cost
sharing.
(h)
(i) A policy of health insurance shall ensure that the
placement of prescription drugs on formulary tiers is not
based solely on the cost of the prescription drug to the health
insurer, but is based on clinically indicated, reasonable
medical management practices.
SEC. 6. SEC. 8. Section 10123.201 is
added to the Insurance Code, to read:
10123.201. (a) (1) Every health insurer that provides
prescription drug benefits shall maintain an expeditious process by
which prescribing providers may obtain authorization for a medically
necessary nonformulary prescription drug. On or before July 1, 2016,
every insurer that provides prescription drug benefits shall file
with the commissioner a description of its process for responding to
authorization requests for nonformulary drugs. Any changes to this
process shall be filed with the commissioner. The insurer shall
provide that the insured, the insured's designee, or the insured's
prescribing provider may seek an authorization for a nonformulary
prescription drug.
(2) Each insurer shall respond to an authorization request within
72 hours following receipt of the authorization request for a
nonurgent authorization. If the insurer grants the authorization
request, the insurer shall provide coverage of the nonformulary drug
for the duration of the prescription, including refills.
(3) Each insurer shall provide that an urgent authorization may be
obtained within 24 hours if an insured is suffering from a health
condition that may seriously jeopardize the insured's life, health,
or ability to regain maximum function, or if an insured is undergoing
a current course of treatment using a nonformulary prescription
drug. An insurer that grants an exception based on these urgent
circumstances shall provide coverage of the nonformulary prescription
drug for the duration of that urgent condition.
(4) If an insurer imposes step therapy, the insurer shall provide
an expeditious process to authorize an exception to step therapy when
medically necessary and to conform effectively and efficiently with
continuity of care requirements of this part and federal law, and any
regulations issued thereunder. The process to authorize an exception
to step therapy shall be consistent with this section, including the
timelines provided in this section.
(5) Each insurer shall provide a written description of its most
current process to its prescribing providers. For purposes of this
section, a prescribing provider shall include a provider authorized
to write a prescription, pursuant to subdivision (a) of Section 4040
of the Business and Professions Code, to treat a medical condition of
an insured.
(b) Any insurer that disapproves a request made pursuant to
subdivision (a) by a prescribing provider to obtain authorization for
a nonformulary drug shall provide the reasons for the disapproval in
a notice provided to the insured. The notice shall indicate that the
insured may file a grievance with the insurer if the insured objects
to the disapproval, including any alternative drug or treatment
offered by the insurer. The notice shall comply with Section
10133.661.
(c) (1) An insurer shall maintain a pharmacy and therapeutics
committee that shall be responsible for developing, maintaining, and
overseeing any drug formulary list. If the insurer delegates
responsibility for the formulary to any entity, the obligation of the
insurer to comply with this part shall not be waived.
(2) The pharmacy and therapeutics committee board membership shall
conform with both of the following:
(A) Represent a sufficient number of clinical specialties to
adequately meet the needs of insureds.
(B) Consist of a majority of individuals who are practicing
physicians, practicing pharmacists, and other practicing health
professionals who are licensed to prescribe drugs.
(3) Members of the board shall abstain from voting on any issue in
which the member has a conflict of interest with respect to the
issuer or a pharmaceutical manufacturer.
(4) At least 20 percent of the board membership shall not have a
conflict of interest with respect to the issuer or any pharmaceutical
manufacturer.
(5) The pharmacy and therapeutics committee shall meet at least
quarterly and shall maintain written documentation of the rationale
for its decisions regarding the development of, or revisions to, the
formulary drug list.
(6) The pharmacy and therapeutics committee shall do all of the
following:
(A) Develop and document procedures to ensure appropriate drug
review and inclusion.
(B) Base clinical decisions on the strength of the scientific
evidence and standards of practice, including assessing peer-reviewed
medical literature, pharmacoeconomic studies, outcomes research
data, and other related information.
(C) Consider the therapeutic advantages of drugs in terms of
safety and efficacy when selecting formulary drugs.
(D) Review policies that guide exceptions and other utilization
management processes, including drug utilization review, quantity
limits, and therapeutic interchange.
(E) Evaluate and analyze treatment protocols and procedures
related to the insurer's formulary at least annually.
(F) Review and approve all clinical prior authorization criteria,
step therapy protocols, and quantity limit restrictions applied to
each covered drug.
(G) Review new federal Food and Drug Administration-approved drugs
and new uses for existing drugs.
(H) Ensure the insurer's formulary drug list or lists cover a
range of drugs across a broad distribution of therapeutic categories
and classes and recommended drug treatment regimens that treat all
disease states and does not discourage enrollment by any group of
insureds.
(I) Ensure the insurer's formulary drug list or lists provide
appropriate access to drugs that are included in broadly accepted
treatment guidelines and that are indicative of general best
practices at the time.
(d) (1) A health insurer may impose prior authorization
requirements on prescription drug benefits, consistent with the
requirements of this part.
(2) (A) When there is more than one drug that is appropriate for
the treatment of a medical condition, a health insurer may require
step therapy. A health insurer that requires step therapy shall
comply with the requirements specified in paragraph (4) of
subdivision (a).
(B) In circumstances where an insured is changing policies, the
new policy shall not require the insureds to repeat step therapy when
that insured 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 insured's condition.
Nothing in this section shall preclude the new policy from imposing a
prior authorization requirement pursuant to subdivision (a) for the
continued coverage of a prescription drug prescribed pursuant to step
therapy imposed by the former policy, or preclude the prescribing
provider from prescribing another drug covered by the new policy that
is medically appropriate for the insured.
(3) An insurer shall provide coverage for the medically necessary
dosage and quantity of the drug prescribed for the treatment of a
medical condition consistent with professionally recognized standards
of practice.
(4) An insurer that provides essential health benefits shall allow
an insured to access prescription drug benefits at an in-network
retail pharmacy unless the prescription drug is subject to restricted
distribution by the federal Food and Drug Administration or requires
special handling, provider coordination, or patient education that
cannot be provided by a retail pharmacy. An insurer that provides
essential health benefits may charge an insured a different cost
sharing for obtaining a covered drug at a retail pharmacy, but all
cost sharing shall count toward the policy's annual limitation on
cost sharing consistent with Section 10112.28.
(e) The process described in subdivision (a) by which insureds may
obtain medically necessary nonformulary drugs, including specified
timelines for
responding to prescribing provider authorization requests, shall be
described in evidence of coverage and disclosure forms, as required
by Section 10603, issued on or after January 1, 2016.
(f) Every health insurer that provides prescription drug benefits
shall maintain all of the following information, which shall be made
available to the commissioner upon request:
(1) The complete drug formulary or formularies of the insurer, if
the insurer maintains a formulary, including a list of the
prescription drugs on the formulary of the insurer by major
therapeutic category with an indication of whether any drugs are
preferred over other drugs.
(2) Records developed by the pharmacy and therapeutic committee of
the insurer, or by others responsible for developing, modifying, and
overseeing formularies, including medical groups, individual
practice associations, and contracting pharmaceutical benefit
management companies, used to guide the drugs prescribed for the
insureds of the insurer, that fully describe the reasoning behind
formulary decisions.
(3) Any insurer arrangements with prescribing providers, medical
groups, individual practice associations, pharmacists, contracting
pharmaceutical benefit management companies, or other entities that
are associated with activities of the insurer to encourage formulary
compliance or otherwise manage prescription drug benefits.
(g) If an insurer provides prescription drug benefits, the
commissioner shall, as part of its market conduct examination, review
the performance of the insurer in providing those benefits,
including, but not limited to, a review of the procedures and
information maintained pursuant to this section, and describe the
performance of the insurer as part of its report issued as part of
its market conduct examination.
(h) The commissioner shall not publicly disclose any information
reviewed pursuant to this section that is determined by the
commissioner to be confidential pursuant to state law.
(i) For purposes of this section, the following definitions shall
apply:
(1) "Authorization" means approval by the health insurer to
provide payment for the prescription drug.
(2) "Step therapy" means a type of protocol that specifies the
sequence in which different prescription drugs for a given medical
condition and medically appropriate for a particular patient are to
be prescribed.
(j) (1) Nonformulary prescription drugs shall include any drug for
which an insured's copayment or out-of-pocket costs are different
than the copayment for a formulary prescription drug, except as
otherwise provided by law or regulation.
(2) If a nonformulary drug is authorized consistent with this
section, the cost sharing shall be the same as for a formulary drug
consistent with subdivision (e) of Section 10123.193.
(k) Nothing in this section shall be construed to affect an
insured's or policyholder's eligibility to submit a complaint to the
department for review or to apply to the department for an
independent medical review.
(k)
(l) Nothing in this section shall be construed to
restrict or impair the application of any other provision of this
part.
SEC. 7. SEC. 9. No reimbursement is
required by this act pursuant to Section 6 of Article XIII B of the
California Constitution because the only costs that may be incurred
by a local agency or school district will be incurred because this
act creates a new crime or infraction, eliminates a crime or
infraction, or changes the penalty for a crime or infraction, within
the meaning of Section 17556 of the Government Code, or changes the
definition of a crime within the meaning of Section 6 of Article XIII
B of the California Constitution.