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The San Francisco Chronicle

Prescription drug issue goes to state Senate; Watchdog agency would get more say over HMO coverage

by Victoria Colliver
Aug 08, 2002

A Senate bill introduced this week would give the state more muscle in the battle between patients and HMOs over prescription drug coverage denials.

The bill, SB842, authored by Sen. Jackie Speier, D-Hillsborough, clarifies the state's authority to regulate which drugs are covered when a plan has a drug benefit. It stems from recent court battles the state HMO watchdog agency has lost over the coverage of such drugs as Viagra for sexual dysfunction and Xenical, a weight-loss drug.

"What (the bill) says is that if an HMO tells a customer they're covered for medications, they (the HMO) can't surprise them by denying medications that are life-saving or for serious conditions," said Daniel Zingale, head of the Department of Managed Health Care, the state agency that regulates health maintenance organizations.

The agency has lost two court battles over the issue, most recently a state appellate court decision in June that sided with Kaiser Permanente over its refusal to cover Viagra. Earlier, the department lost its effort to compel Blue Shield of California to cover Xenical for a morbidly obese woman whose employer contract specifically excluded weight-loss drugs.

In both cases, the court said the agency lacked the authority to force the plans to cover the specific drugs.

Speier said the bill essentially clarifies what she believes is existing law. "This is a way of making sure there are not arbitrary, capricious decisions being made by the HMO to deny medically necessary pharmaceutical drugs to an enrollee," she said.

While the bill doesn't spell out which drugs should be covered, it gives the state the ability to oversee a plan's drug coverage and review cases in which a drug is excluded.

The HMOs worry the legislation could open a floodgate, forcing them to cover more so-called lifestyle drugs, or drugs for serious but not life-threatening conditions that are often used for cosmetic or recreational purposes.

"It's very difficult to determine where lifestyle becomes medically necessary," said Walter Zelman, president of the California Association of Health Plans, the state trade group for health insurers.

If insurers are forced to cover more of these drugs, they will have to pass on these costs in the form of higher premiums, Zelman said.

"Prescription drugs are the fastest-rising component of health care costs, and premiums are already rising at double-digit numbers. Adding a new mandate to cover drugs will only make the harsh reality even harsher," he said.

Both Zingale and Speier said the new bill is not a mandate because it doesn't compel the HMOs to cover any additional drugs, nor does it require them to provide a drug benefit at all. Zingale said it simply gives the agency the authority to regulate HMO drug coverage just as it regulates other aspects of the HMO.

Consumer groups said the legislation would empower the state to fight on behalf of patients.

"From the consumer point of view, this is a necessary step to take back what the HMOs have won through their legal wrangling," said Jerry Flanagan, health care advocate for the Foundation for Taxpayer and Consumer Rights. "Without this legislation, there is truly no regulatory tool to protect consumers."