SUMMARY
This bill requires health plans and insurers that provide prescription drug benefits to comply with three provisions for products sold and contracts issued after January 1, 2016. Specifically, this bill:
1) Requires a plan that imposes a mandatory mail-order restriction for some or all covered prescription drugs to establish a process for enrollees to opt out of that restriction, and allows a plan to require the use of specific contracting pharmacies.
2) Prohibits plans from denying coverage for a refill for purposes of placing all enrollee's medications on the same schedule, and requires the application of prorated cost-sharing to refills that are for purposes of such synchronization and that meet other criteria.
3) Prohibits plans from denying coverage for the early refill of covered ophthalmic products at 70% of the predicted days of use.
COMMENTS
1) Purpose. According to the author, this bill is aimed at improving patient medication adherence and health outcomes through streamlining the medication refill process using three strategies. The author states that by creating processes that support and improve patient access to medications, patients experience better health outcomes and improved quality of life. Furthermore, patients who pick up their medications at their local pharmacy have the opportunity to talk with the pharmacist about how to properly take their medications and to understand the positive benefits of taking their medication.
2) Background. This bill contains three separate provisions.
a) Mandatory mail order opt-out. Pharmacy benefit managers and plans that provide prescription drug benefits generally contract with, or own, mail-order pharmacies in addition to community pharmacies. According to these entities, providing certain drugs through mail-order arrangements can sometimes be cost-efficient and clinically beneficial, as there is greater assurance of medication adherence and a greater ability to direct utilization to certain drugs, offering cost savings based on negotiated prices and rebates. The Centers for Medicaid and Medicare Services (CMS), however, requires participating Medicare Part D pharmacy benefit plans to allow patients to opt out of mandatory mail order. Truly mandatory mail order with no opportunity to opt out does not appear widespread at this time. Most plans that use mandatory mail order programs for certain drugs allow enrollees to opt out. However, even some plans offering opt-out processes would not be compliant with this bill and would have to change their processes in order to comply. For example, this bill would prohibit plans from requiring enrollees to sign a form in order to opt out.
b) Prohibition on denial of refills for synchronization purposes. This bill requires plans and insurers to allow enrollees to refill prescriptions at less than the full amount, for purposes of synchronizing medications (putting a patient's medications on the same schedule). CMS requires participating Medicare Part D pharmacy benefit plans to allow patients to receive "short fills" at a prorated cost-sharing amount, similar to this bill.
c) Topical ophthalmics. Also aligning with a Medicare requirement, this bill allow for early refills of covered ophthalmic products - generally eye drops--at 70% of the predicted days of use. This provision is intended to account for potential spillage.
3) Support. California Pharmacists Association and California Healthcare Institute, co-sponsors of this bill, write in support that lack of medication adherence results in lost opportunities to treat patients and improving adherence requires a multi-faceted approach, including the strategies outlined in this bill. Patient advocate groups also support this bill.
4) Opposition. Health plans, insurers and pharmacy benefit managers oppose this bill, concerned about the costs and administrative complexity of the proposed changes. Health plans and insurers view this bill as micromanaging the prescription refill process. Blue Shield of California (BSC) argues this bill will eviscerate the benefits members realize from mandatory mail order programs.
5) Staff Comments. The mandatory mail-order provision of this bill raises questions of the balance between consumer choice about where to pick up drugs, versus the provision of pharmaceutical benefits in the most cost-effective way. Given the emergence of costly specialty drugs that account for a small percentage of prescriptions but a large portion of overall drug spending, it appears this bill may result in increased cost pressure, particularly in future years as plans seek new strategies to mitigate the cost of prescription drug benefits. Removing the ability of plans to use mandatory mail-order for certain drugs may have significant costs over the long term.
Furthermore, in addition to requiring a way to opt out of mandatory mail-order, this bill may be interpreted as a requirement to go further and prohibit the use of limited networks of pharmacies for the provision of certain drugs. In other words, when someone opts out of mail order, it may restrict a plan's ability to direct enrollees to certain pharmacies over others. This bill states, "the opt-out process may require the use of a plan's participating pharmacy that, at the discretion of the plan, is suited to special handling of the prescription drug and patient care." However, the inclusion of this language may preclude arrangements currently in use that are not in place due to special handling or patient care requirements, but exist purely for purposes of cost efficiency. For example, under current law and practice, a plan can require enrollees to fill certain high-cost prescriptions at, for example, Pharmacy X, even though a plan might have contracts with numerous other pharmacies for provision of other drugs. By contracting with Pharmacy X to be the sole provider for the high-cost Drug A, the plan is able to reduce costs by procuring Drug A at volume discounts and/or negotiating rebates. Although it is not explicitly stated, this bill may require the plan to allow the enrollee to choose any community pharmacy contracted with the plan for provision of any drug, except for drugs the plan believes require special handling and patient care. If this is required, it may increase costs by undermining negotiated pricing agreements. If the intent is to allow the use of limited pharmacy networks as they are currently used, as a means to manage drug costs, this should be clarified.
Overall, if the opt-out provisions become law, consumers may gain choice at the front end, but they will likely pay some price for it through increased costs for benefits. Given the mandatory nature of the bill's opt-out provisions, these costs will not be apparent and consumers and employers will not have the option to avoid these costs or weigh potential benefits against the costs, since they will be embedded in the benefit design. Plans and insurers that provide prescription drug benefits are still required to provide adequate access to drugs to as a condition of state licensure. Given this, it is far from obvious that prohibiting strategies that may mitigate growth in drug spending truly benefits consumers over the long run, when considering the potential for increased benefit costs. |
This bill has been amended and implications of the mandatory mail order provisions have been clarified since the California Health Benefits Review Program (CHBRP) analyzed it. Cost estimates from CHBRP have been modified, and costs are estimated as follows:
1) Potential one-time costs to DMHC of $200,000 for plan licensing, regulatory, and enforcement costs (Managed Care Fund). Ongoing costs are likely to be minor.
2) Minor one-time costs to CDI, in the range of $30,000 (Insurance Fund) for oversight and enforcement.
3) Costs of at least $6,000 annually for provision of services through CalPERS benefit plans (GF/federal/special/local funds). About 60% of this cost is state cost, while the rest is a local cost. This range is based on assumptions related to cost-sharing and percentage of visits billed.
4) State expenditures for Medi-Cal Managed Care Plans are estimated to increase by at least $154,000 annually.
5) Increased employer-funded premium costs in the private insurance market of at least $845,000 annually.
6) Increased premium expenditures by employees and individuals purchasing insurance of at least $500,000 annually, as well as increased out-of-pocket expenditures of at least $1.8 million.
7) To the extent this bill precludes the ability of plans and insurers to direct enrollees, for certain drugs, to mandatory mail order or to networks of specific pharmacies with which plans have pricing agreements for certain drugs, there could be significant cost pressures to the market beyond that estimated by CHBRP. This cost pressure is likely to grow over time, as this bill will limit the ability of pharmaceutical benefits managers to use mandatory mail order, and may limit the use of narrower networks of pharmacies for certain high-cost drugs. |