New DMHC Regulations Mandate HMO Coverage of Some Prescription Drugs

The Department of Managed Health Care on Tuesday issued what it described as the nation's first regulations requiring HMOs to provide broad coverage of medically necessary prescription drugs, the Los Angeles Times reports (Girion, Los Angeles Times, 1/5). The regulations implement state legislation to address lawsuits by two HMOs that sought the right to deny coverage of the sexual-dysfunction drug Viagra and the weight-loss drug Xenical. The regulations, which apply only to HMO plans that provide prescription drug coverage, would:

Require health plans to cover any drug considered medically necessary, even if it is not on the plan's approved medication list. Disputes over medical necessity would be decided by an independent medical review board (Silber, Contra Costa Times, 1/5).

Require HMOs to seek prior approval from state DMHC to limit access to prescription drugs, instead of deciding coverage on a case-by-case basis and forcing patients to appeal (Los Angeles Times, 1/5).

Allow HMOs to deny coverage for prescription drugs prescribed for cosmetic reasons or for nonmedical conditions, including hair growth, sexual or athletic performance and weight loss, except in the case of morbid obesity.

Allow health plans to require that patients first try less-expensive or over-the-counter alternatives to a drug. If such treatments are not effective, the regulations mandate coverage of the more expensive medications (Contra Costa Times, 1/5).

Require health plans to list on their Web sites and in evidence-of-coverage handouts all drug exclusions and limitations.

Require that patient copayments be approved by state DMHC in advance and that they not exceed 50% of an HMO's cost for medications. DMHC also would evaluate the effect of any copay increases on the overall affordability and accessibility of an HMO's coverage (Los Angeles Times, 1/5).

DMHC Director Cindy Ehnes said, "With these new regulations, there will be no doubt in a patient's mind as to which drugs are covered, and the vast majority of prescription drugs will be available to California HMO consumers" (Los Angeles Times, 1/5). She added, "This establishes ... that patient health is ultimately the bottom line" (Osterman, Sacramento Bee, 1/5). Ehnes said that the regulations will undergo a public review period before implementation later this year.

HMO Response

According to the Los Angeles Times, a "big issue" for HMOs is "whether they'll be able to maintain tiered drug lists" that require higher payments for certain drugs for which there are less expensive but equally effective alternatives available.

Bobby Pena, a spokesperson for the California Association of Health Plans, said, "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." He added, "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" (Los Angeles Times, 1/5).

Leanne Gassaway, a lobbyist with CAHP, said, "We're concerned that this regulation will open the floodgates to providing coverage for all drugs" (Sacramento Bee, 1/5).

Other Reaction

Patient advocates praised the spirit of the proposed regulations but raised concerns that "vague language" could allow HMOs to increase prescription drug copays. Jerry Flanagan, a spokesperson for the Foundation for Consumer & Taxpayer Rights, said, "The regulations allow insurers to limit access to drugs by increasing copay costs," adding, "By making cost a factor, [DMHC] has undermined the intent of the original law."

Anthony Wright, executive director of Health Access California, said the coalition "will be working to support the regulations." However, he added that the rules should include language that explicitly prohibits HMOs from charging high copays, which limit access. The coalition "will continue to work on this cost issue," he said.

Jack Lewin, CEO of the California Medical Association, said, "This is a very positive step forward. 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."

Sen. Jackie Speier (D-San Mateo), who sponsored the original 2002 law, said she was "pleased with almost everything" in the proposed rules, adding, "Patients need to feel confident that when their doctor prescribes a necessary drug, their insurance will cover it at an affordable price. Patient health is the bottom line" (Los Angeles Times, 1/5). The proposed regulations are available online. Note: You must have Adobe Acrobat Reader to access the regulations.

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