May 20, Dear Senator Speier:

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Branden Walters
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1 May 20, 2005 The Honorable Jackie Speier California State Senator Senate Committee on Banking, Finance, & Insurance State Capitol, Room 2032 Sacramento, CA Dear Senator Speier: This letter formally responds to a request from Brian Perkins of the Senate Committee on Banking, Finance, and Insurance received on April 28, CHBRP was asked to reanalyze SB 913 in light of amendments discussed and accepted at the Committee s hearing on April 27, The bill was officially amended and placed on the Senate website on May 2, CHBRP carefully examined these amendments and concluded that due to their extensive nature, we would be unable to produce a new report within the short period before the Appropriations Committee hears the bill. I informed Soren Tjernell, also from your staff of this decision on May 2 nd. As promised, I am sending this letter to elaborate on that decision and to provide an outline of the issues that an analysis of the amended version of SB 913 would need to address. The Amendments The introduced version of SB 913 (analyzed by CHBRP in its April 16 report 1 ) would have prohibited health care service plans and health insurers from designating a preferred medication among biological drugs for the treatment of rheumatic disease. The bill would have prevented any variation in cost-sharing or other requirements that health plans might have imposed in order to direct patients to particular biological medications. In addition, this version of the bill did not include any language regarding non-biological medications for the treatment of rheumatic disease. SB 913, as amended on May 2 nd, would no longer prohibit health care service plans and health insurers from designating a preferred status for non-biologicals. This bill now states that no health care service plan shall require a step therapy pharmacy management protocol that makes a distinction between biologic therapies. The amendments further state that the Legislature s intent is to assist persons with rheumatic disease to have access to a class of therapies called biologics, when their physician prescribes a biologic therapy, without their health care service plan requiring them first to try and fail on a non-biologic therapy. CHBRP staff and faculty consulted with the bill s author, health care service plans, health insurers, patient advocates and experts in pharmaceutical benefit design from our National Advisory Council. Consequently, we identified the following implications of SB 913, as amended on May 2 nd: 1

2 1. SB 913 would prohibit the use of prior authorization restrictions that require physicians to justify why the use of the requested biologic drug is medically necessary for a patient. 2. SB 913 would prohibit the use of step-therapy protocols that require the patient to use an alternative drug and fail to improve before the prescription for a biological drug is authorized. 3. The bill is silent on the amount of cost sharing that may be specified by health care service plans or health insurers. However, as outlined in the CHBRP analysis of the introduced version of SB 913, regulations are currently being promulgated by the Department of Managed Health Care (DMHC), which would set standards for co-payments for Knox Keene licensed health care service plans only. The proposed regulations would prohibit co-payments from exceeding 50 percent of the actual cost to the plan of the drug. Other requirements related to patient cost sharing may be found on the DMHC website The bill is silent on the use of preferred status by health care service plans. 5. The bill is silent on the ability of health care service plans to exclude any or all biological drugs from their formularies. Analyzing the Amendments Impact on Effectiveness Because the amended version of SB 913 would prohibit health care service plans and health insurers from requiring that patients start and fail on a non-biological therapy before being given authorization for a biological drug, the relative effectiveness and safety of the two classes of drugs would need to become a consideration in order to fully analyze the impact of the SB 913 amendments. Although not examined directly in CHBRP s original analysis of SB 913, other evidence, outlined below, suggests that current clinical practice guidelines support the use of non-biologicals before the use of biologicals. Current standard of care for pharmaceutical treatment of rheumatoid arthritis is based on the most recent clinical guidelines issued by the American College of Rheumatology (American College of Rheumatology Subcommittee on Rheumatoid Arthritis Guidelines. Guidelines for the Management of Rheumatoid Arthritis, 2002 Update. Arthritis and Rheumatism. (2002) 46, pp ) The guidelines recommend that patients should be started on disease-modifying anti-rheumatic drug (DMARD) therapy within 3 months of new diagnosis of rheumatoid arthritis and that initiation of biologic therapies should be reserved for patients who have a suboptimum response to DMARD treatment. A suboptimum response to DMARD therapy is defined as intolerance, a lack of satisfactory efficacy with dosage of up to 25mg/week or a contraindication to the drug (i.e. drug allergy). Similar guidelines have been issued by the British Society for Rheumatology. 3 As stated in CHBRP s analysis of the introduced version of SB 913, All drugs have side effects and contain an element of risk. Consideration of the effectiveness of any therapy must include a discussion (Ledingham J and C. Deighton on behalf of the British Society for Rheumatology Standards, Guidelines and Audit Work Group (SGAWG). Update on the British Society for Rheumatology guidelines for prescribing TNF-alpha blockers in adults with rheumatoid arthritis (update of previous guidelines of April 2001). Rheumatology 2005; 44: Advance Access publication 5 January 2005).

3 about the potential risks involved with the treatment, relative to its potential benefits. Table 4 (below) from the CHBRP analysis summarizes the common side effects and uncommon adverse events reported for the four biological treatments and the DMARD methotrexate. A full analysis of the amended version of SB 913 would need to review all of the evidence underlying the clinical guidelines, including the relative safety of biological and non-biological drugs. Table 4. Side Effects and Complications of Therapy Treatment Common Side Effects Uncommon Complications Adalimubab Injection site infection or Infections (tuberculosis) irritation Malignancies Systemic lupus erythematosus syndrome Adverse effects on patients with heart disease Demyelination/neurological complications Hematologic complications Anakinra Injection site infection or Infections (upper respiratory, sinusitis, pneumonia, cellulitis) irritation Low white blood cell count Etanercept Injection site infection or irritation Infections (upper respiratory infection, sinusitis, pyelonephritis (kidney), bronchitis, pneumonia, cellulitis, sepsis) Death from serious infection Malignancies Systemic lupus erythematosus Adverse effects on patients with heart disease Multiple sclerosis-like changes/neurological complications Hematologic complications Infliximab Dyspnea (shortness of breath) Infections (histoplasmosis, coccidiolycosis, or reactivation of tuberculosis) Urticaria (skin irritation) Infusion reaction Headache Malignancies Upper respiratory Systemic lupus erythematosus infections Adverse effects on patients with heart disease Nausea Multiple sclerosis-like changes/neurological complications Hematologic complications Methotrexate Bone marrow suppression (DMARD) Liver dysfunction Sources: Braun, Brandt, et al (2003, 2005), Bresnihan (2001), Calabrese et al. (2002), Clark et al. (2004), Fleischman et al. (2002), Gomez-Reino et al. (2003), Ledingham (2005), Luong et al. (2000), Moreland et al. (2001), Mpofu et al. (2005), Scheinfeld et al. (2004). Analyzing the Impact of the Amendments on Costs and Public Health The CHBRP analysis of the introduced version of SB 913 predicts an increase in the unit costs of drugs by 6 percent because insurers and health plans would no longer have the ability to negotiate volume discounts with drug manufacturers by steering patients to preferred medications. In the amended version of the bill, health care service plans and health insurers would be allowed to designate preferred medications, thus eliminating the projected six percent increase in costs. Determining the impact of the new provisions of SB 913 is complicated. There are a number of cost and public health issues that would need to be addressed in an analysis of these provisions. These issues include, but may not be limited to the following:

4 1. Would there be a change in physician s practice patterns when treating patients with rheumatic disease? Would the number of patients with rheumatoid disease using biological drugs increase overall and/or during the earlier stages of disease? 2. Would direct to consumer advertising (DTC) increase as a result of the bill leading to higher patient demands for particular biological drugs that treat rheumatic disease? How would DTC affect demand for the class of biological drugs that treat rheumatic disease overall? How would DTC affect the demand for non-biological drugs? 3. Would the legislation lead to unintended consequences such as an increase in the off-label use of biological drugs or shortages in particular medications (this occurred a few years ago with etanercept)? 4. What effect would any of these trends have on the per unit costs of each biological and non-biological drug used to treat rheumatic disease? 5. Would health care service plans change patient cost sharing obligations for medications to treat rheumatic disease (biological, non-biological or both)? If so, how? 6. Combining impacts on per unit costs together with changes in utilization, how would health care expenditures and premiums change compared to the baseline amounts that are currently in place? 7. What would be the short-term and long-term health effects of changes in the treatment of rheumatic disease for the California population? Again, due to time constraints, CHBRP is unable complete an analysis that would fully address all of the effectiveness, cost, and public health issues related to the amended version of SB 913. However, we believe that the information in this letter should be useful while considering the current version of SB 913. My colleagues and I appreciate the opportunity to answer any questions. Please feel free to contact me at your convenience. Sincerely, Michael E. Gluck, PhD Director Encl.cc: Senator Joe Simitian, Author, Senate Bill 913 Senator Deborah Ortiz, Chair, Senate Committee on Health Assemblymember Wilma Chan, Chair, Assembly Committee on Health Terry Boughton, Chief Consultant, Assembly Committee on Health Jack Hailey, Staff Director, Senate Committee on Health

5 Soren Tjernell, Consultant, Senate Banking, Finance, and Insurance Committee Assemblymember Russ Bogh, Assembly Republican Caucus Chair Senator Dave Cox, Vice Chair Senate Banking, Finance, and Insurance Committee Assemblymember Greg Aghazarian, Vice Chair, Assembly Committee on Health Senator George Runner, Vice Chair, Senate Health Committee Assemblymember Juan Vargas, Chair, Assembly Insurance Committee Assemblymember John Benoit, Vice Chair, Assembly Insurance Committee Senator Carole Migden, Chair, Senate Appropriations Committee Senator Sam Aanestad, Vice Chair, Senate Appropriations Committee Assemblymember Judy Chu, Chair, Assembly Appropriations Committee Assemblymember Sharon Runner, Vice Chair, Assembly Appropriations Committee Melanie Moreno, Consultant, Assembly Health Committee Scott Bain, Principal Consultant, Assembly Appropriations Committee George F. Cate, Consultant, Senate Appropriations Committee Robert Dynes, President, University of California, Office of the President (UCOP) Bruce Darling, Senior Vice President, University Affairs, UCOP M.R.C. Greenwood, Provost and Senior Vice President, Academic Affairs UCOP Steve Arditti, Assistant Vice President and Director of State Governmental Relations, UCOP Kris Kuzmich, Legislative Director, State Governmental Relations, UCOP Susan Dentzer, NewsHour Health Correspondent,and CHBRP National Advisory Council, Chair Michael V. Drake, MD, Vice President, Health Affairs, UCOP

RHEUMATOID ARTHRITIS DRUGS

Rheumatology Biologics Criteria from the Exceptional Access Program RHEUMATOID ARTHRITIS DRUGS DRUG NAME BRS REIMBURSED DOSAGE FORM/ STRENGTH Adalimumab Humira 40 mg/0.8 syringe and 40mg/0.8 pen for Anakinra