AB 347, SB 535 & AB 342: Laws improve delivery of health care

The COVID-19 pandemic highlighted the great need for timely access to health care. Unfortunately, the COVID-19 virus made obtaining screening and diagnosis of diseases, like cancer, difficult. The results of delays in identification of diseases and procurement of needed medication will continue to be evaluated over the upcoming months and years, but in the meantime, the 2021 California Legislature acted to improve timely access to cancer testing and medical treatment.

"Utilization management" refers to a set of techniques to manage health care costs by assessing the appropriateness of care prior to its provision. Specifically, the California Legislature took aim at three utilization management strategies employed by health plans and insurers to contain health care costs: (1) a process called "step therapy"; (2) prior authorization approvals; and (3) out-of-pocket cost sharing for preventive screenings. Below is an analysis of the Legislature's actions intended to improve delivery of care for Californians.

Step therapy, often referred to as the "fail first" process used by insurance carriers, requires an enrollee or insured to try a first-line medication (often a generic alternative) prior to receiving coverage for a second-line medication (often a brand-name medication). Patients sometimes suffer under using a different medication than what was prescribed due to this policy before they can access the prescribed medication. The California Legislature enacted a law in 2015 which created a process for doctors to request an exception to a health plan or health insurer's step therapy requirement when a patient's case warranted a different medicine, with denials being appealable. Provisions in the law required plans to "respond" to requests within 24 hours of exigent circumstances and 72 hours in nonexigent cases (Health and Safety Code Section 1367.241). However, over time insurers began requesting more information and therefore met the letter of the law by "responding" to exemption requests by doctors but not always providing final decisions on patients' medical exemptions. This has resulted in requests languishing or being abandoned.

Assemblymember Joaquin Arambula championed Assembly Bill 347, which clarifies the time frames used in step therapy requests and will require an exception to be expeditiously granted and coverage determination to be provided within Section 1367.241 timeframes if a prescribing provider submits justification and supporting clinical documentation. A failure by the plan or insurer to respond will result in the request deemed as approved. The bill also sets out clear criteria in a new Section 1367.206 to support an exemption request that includes information such as: (1) when the required drug is likely to cause an adverse reaction or mental harm; (2) if a drug is expected to be or previously was ineffective for the patient (including same pharmacologic class drugs); (3) if a drug will worsen a comorbid condition; (4) if a drug will decrease a patient's reasonable functional ability in daily activities; and (5) whether a drug poses a significant barrier to the patient's plan of care or if the patient is stable on the drug while on previous coverage. The bill took effect January 1, 2022.

Prior authorization, aka prior approval, requires doctors to obtain advance approval from a health plan or insurer before a particular service is determined as eligible for payment coverage. Unfortunately, like the delays in step therapy outlined above, getting approval for certain screening and testing, especially in the oncology space, can delay critical health treatments for days or weeks and result in negative health outcomes for patients.

Senator Monique Limón championed Senate Bill 535 which intends to tackle a discreet but serious issue when severely ill cancer patients seek to have their tumor tested for biomarkers to identify if a precision medicine is available for use to treat their disease. The bill prohibits prior authorization for a patient with advanced or metastatic stage 3 or 4 cancer. The bill also prohibits prior authorization for biomarker testing on cancer progression or recurrence for patients with advanced or metastatic stage 3 or 4 cancer. The bill has a delayed implementation date of July 1, 2022 to allow health plans and insurers to adjust policies and policy language appropriately.

Precision medicine is a targeted therapy founded on the genetic and molecular understanding of a patient's disease. Biomarker testing helps match patients to effective, individualized treatments based on identification of actionable genomic alterations (biomarkers). Targeted therapies for individual biomarkers are approved by the Food and Drug Administration with a companion diagnostic or biomarker test to identify a patient's specific biomarker. Without the biomarker test, a patient cannot access the targeted therapy for their specific biomarker. Currently, both the biomarker test and the precision medicine can require a prior authorization each, sometimes resulting in delay of treatment. When health providers encounter delays for advanced cancer patients, they may start them on an immediate therapy, such as chemotherapy, which can result in a missed opportunity to use a more targeted therapy that may result in better health outcomes for the patient. Ironically, while prior authorization is a tool used to keep medical costs down for insurers, studies are beginning to show how precision medicine has the potential to reduce overall health care system costs.

Due to concern voiced by health plans and insurers that enormous panels of biomarker testing unassociated with an approved medication would unnecessarily be ordered and drive costs up, SB 535 was drafted to clarify that the biomarker testing had to be ordered by the doctor with an existing FDA-approved precision medicine for the specific type of cancer in mind. Precision medicine is sadly not available to treat all cancers. Patient advocates also voiced concerns that the bill may inadvertently impact clinical trials exploring biomarkers and new cancer treatment. Therefore, the bill clarified it does not affect a patient's right to biomarker testing as part of an approved clinical trial, protected in Health and Safety Code Section 1370.6 and Section 10145.4 of the Insurance Code.

Finally, another way insurers try to contain health costs is through cost sharing between a plan and patient. Assemblymember Mike Gipson championed AB 342, effective January 1, 2022, which prohibits cost sharing for a colonoscopy when an initial result from a noninvasive method, such as a stool test, meets the level that the United States Preventive Services Task Force finds as presented "sufficient evidence" to recommend the additional screening. The task force is an independent panel of national experts in prevention and evidence-based medicine and makes recommendations about clinical preventive services. The task force also provides reports to Congress and their guidelines are used nationally by state health departments and advocacy organizations Gipson's AB 342 also allows plans to require cost-sharing for items or services delivered by an out-of-network provider.

Colorectal cancer is the third leading cause of cancer death for women and men in California. Black adults have the highest incidence of and mortality from colorectal cancer compared with other races and ethnicities. This form of cancer is very preventable when detected early. Unfortunately, studies have shown that people are generally less likely to seek health services, including preventive screenings such as a colonoscopy, when they have to pay out-of-pocket for the procedure. Not unexpectedly, early detection of colorectal cancer can reduce treatment costs by reducing advanced stage patients who need much more costly treatment later in the progression of the disease. AB 342 is the third effort to address this issue by Gipson, having had his initial broader effort, AB 1763, vetoed by Gov. Jerry Brown in 2016.

As the life sciences sector continues to provide new and better treatments, we expect issues regarding step therapy, prior authorization, and cost-sharing to continue garnering attention both at the state and federal level. We hope this initial analysis has been helpful to you and would be happy to discuss. 