State Proposes HMO Drug Regulations

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The rules are meant to implement a 2002 law protecting prescription coverage. Co-payment size remains an issue.

Los Angeles Times

California regulators proposed prescription drug protections for HMO members Tuesday, describing the rules as the nation’s first to mandate broad coverage of medically necessary medications.

Although they hailed the thrust of the draft regulations, patient advocates said they feared vague language could allow health maintenance organizations to raise drug co-payments beyond the reach of many consumers, contradicting the spirit of the 2002 law the rules are supposed to implement.

HMO representatives said they were still assessing whether the proposed rules preserved the health plans’ ability to charge more for higher-cost drugs when others would do as good a job.

The regulations are intended to ensure that HMOs cover drugs prescribed by doctors for medical conditions, said Cindy Ehnes, director-designate of the state Department of Managed Health Care, which drafted the proposed rules. They would allow health plans to make only a few categorical exclusions, such as cosmetic drugs and weight-loss medications for people who haven’t been diagnosed as morbidly obese.

Describing herself as the mother of an asthmatic dependent on access to prescription drugs, Ehnes said she was pleased to help produce what could be a model of uniform standards to assist health plans in developing lists of covered drugs.

“With these new regulations there will be no doubt in a patient’s mind as to which drugs are covered,” Ehnes said, “and the vast majority of prescription drugs will be available to California HMO consumers.”

For HMOs, a big issue is whether they’ll be able to maintain tiered drug lists that translate into higher charges for more expensive drugs when equally effective generics and other cheaper medications are available.

“Once you determine that there are a handful of drugs with similar quality and efficacy, then we believe it’s a health plan’s role to pay attention to costs for purchasers and consumers,” said Bobby Peña, a spokesman for the California Assn. of Health Plans, which represents HMOs. “As we are reviewing the regulations over the next week or so, we want to advocate not only for quality and efficacy but also for cost.”

The regulations would require health plans to seek prior approval from the Department of Managed Health Care to limit access to particular drugs, as opposed to deciding coverage disputes case by case when patients complain, Ehnes said. Health plans also would be required to list all drug exclusions and limitations on their websites and in evidence-of-coverage handouts.

Such mandates would put “a little bit of teeth in the DMHC” and would allow patients to know what they can expect before they sign up for a particular health plan, said Jack Lewin, chief executive of the California Medical Assn., which represents the state’s doctors.

“This is a very positive step forward,” he said. “The new regulations allow a wide array of choice and assure that the right medication is available for the right patient. At the same time, there is no disincentive for the use of generics or a lower-cost drug that has the same effectiveness.”

State Sen. Jackie Speier (D-Hillsborough) sponsored the drug protection law in 2002 after HMOs scored court victories in suits challenging the department’s power to regulate their drug coverage.

Apparently alluding to criticism of certain aspects of the proposed regulations, Speier said Tuesday that she was “pleased with almost everything.

“Patients need to feel confident that when their doctor prescribes a necessary drug, their insurance will cover it at an affordable price,” she said.

“Patient health is the bottom line.”

Given HMOs’ previous legal wins over the department, the new rules firmly establishing its authority over prescriptions is a huge victory for patients, said Anthony Wright, executive director of Health Access California, a coalition of 200 consumer and community groups.

But, he said, the coalition wants language that will clearly prohibit HMOs from charging so much for some drugs that they are, in effect, denying access.

“The fact that we have a law and now regulations on the notion of access — and it’s hard to divorce access from cost — these are all improvements and we will be working to support the regulations,” Wright said. “We certainly support this movement forward and will continue to work on this cost issue.”

The proposed rules require that patient co-payments must be approved in advance and can’t exceed 50% of an HMO’s cost for a medication, Ehnes said. In addition, the department would evaluate the effect of any co-payment increases on the overall affordability and accessibility of an HMO’s coverage.

Consumer advocates said that standard was too vague.

“The regulations allow insurers to limit access to drugs by increasing co-pay costs,” said Jerry Flanagan, a spokesman for the Foundation for Consumer & Taxpayer Rights. “By making cost a factor, the Department of Managed Health Care has undermined the intent of the original law.”

The draft rules are now subject to public review. Ehnes said the department would take criticism into account and submit a revised set of regulations for public review before implementing them later this year.

The regulations would apply only to HMO plans that provide prescription coverage.

California law allows HMOs to sell policies that don’t include a drug benefit. But most of the 22 million Californians belonging to managed care plans receive some sort of drug coverage.

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