S.F. 436 Section 1. LEGISLATIVE FINDINGS. The general assembly 1 finds and declares the following: 2 1. Health carriers, health benefit plans, and utilization 3 review organizations are increasingly making use of step 4 therapy protocols under which covered persons are required to 5 try one or more prescription drugs before coverage is provided 6 for another prescription drug selected by the covered person’s 7 health care professional. 8 2. Such step therapy protocols, where they are based on 9 well-developed scientific standards and administered in a 10 flexible manner that takes into account the individual needs 11 of covered persons, can play an important part in controlling 12 health care costs. 13 3. In some cases, requiring a covered person to follow 14 a step therapy protocol may have adverse and even dangerous 15 consequences for the covered person, who may either not realize 16 a benefit from taking a particular prescription drug or may 17 suffer harm from taking an inappropriate prescription drug. 18 4. Without uniform policies in the state for step therapy 19 protocols, all covered persons may not receive equivalent or 20 the most appropriate treatment. 21 5. It is imperative that step therapy protocols in the state 22 preserve the health care professional’s right to make treatment 23 decisions that are in the best interest of the covered person. 24 6. It is a matter of public interest that the general 25 assembly require health carriers, health benefit plans, and 26 utilization review organizations to base step therapy protocols 27 on appropriate clinical practice guidelines or published peer 28 review data developed by independent experts with knowledge 29 of the condition or conditions under consideration; that 30 covered persons be excepted from step therapy protocols when 31 inappropriate or otherwise not in the best interest of the 32 covered persons; and that covered persons have access to a 33 fair, transparent, and independent process for allowing a 34 covered person or a health care professional to request an 35 -1- LSB 2354SV (2) 87 av/nh 1/ 12

S.F. 436 exception to a step therapy protocol when the covered person’s 1 health care professional deems appropriate. 2 Sec. 2. NEW SECTION . 514F.7 Use of step therapy protocols. 3 1. Definitions. For the purposes of this section: 4 a. “Authorized representative” means the same as defined in 5 section 514J.102. 6 b. “Clinical practice guidelines” means a systematically 7 developed statement to assist health care professionals and 8 covered persons in making decisions about appropriate health 9 care for specific clinical circumstances and conditions. 10 c. “Clinical review criteria” means the same as defined in 11 section 514J.102. 12 d. “Covered person” means the same as defined in section 13 514J.102. 14 e. “Health benefit plan” means the same as defined in 15 section 514J.102. 16 f. “Health care professional” means the same as defined in 17 section 514J.102. 18 g. “Health care services” means the same as defined in 19 section 514J.102. 20 h. “Health carrier” means an entity subject to the 21 insurance laws and regulations of this state, or subject 22 to the jurisdiction of the commissioner, including an 23 insurance company offering sickness and accident plans, a 24 health maintenance organization, a nonprofit health service 25 corporation, a plan established pursuant to chapter 509A 26 for public employees, or any other entity providing a plan 27 of health insurance, health care benefits, or health care 28 services. “Health carrier” includes an organized delivery 29 system. “Health carrier” does not include a managed care 30 organization as defined in 441 IAC 73.1 when the managed care 31 organization is acting pursuant to a contract with the Iowa 32 department of human services to provide services to Medicaid 33 recipients. 34 i. “Medical necessity” means health care services and 35 -2- LSB 2354SV (2) 87 av/nh 2/ 12

S.F. 436 supplies that under the applicable standard of care are 1 appropriate for any of the following: 2 (1) To improve or preserve health, life, or function. 3 (2) To slow the deterioration of health, life, or function. 4 (3) For the early screening, prevention, evaluation, 5 diagnosis, or treatment of a disease, condition, illness, or 6 injury. 7 j. “Step therapy override exception” means a step therapy 8 protocol should be overridden in favor of immediate coverage of 9 the prescription drug selected by a health care professional. 10 This determination is based on a review of the covered person’s 11 or health care professional’s request for an override, along 12 with supporting rationale and documentation. 13 k. “Step therapy protocol” means a protocol or program that 14 establishes a specific sequence in which prescription drugs for 15 a specified medical condition and medically appropriate for 16 a particular covered person are covered under a pharmacy or 17 medical benefit by a health carrier, a health benefit plan, or 18 a utilization review organization, including self-administered 19 drugs and drugs administered by a health care professional. 20 l. “Utilization review” means a program or process by which 21 an evaluation is made of the necessity, appropriateness, and 22 efficiency of the use of health care services, procedures, or 23 facilities given or proposed to be given to an individual. 24 Such evaluation does not apply to requests by an individual or 25 provider for a clarification, guarantee, or statement of an 26 individual’s health insurance coverage or benefits provided 27 under a health benefit plan, nor to claims adjudication. 28 Unless it is specifically stated, verification of benefits, 29 preauthorization, or a prospective or concurrent utilization 30 review program or process shall not be construed as a guarantee 31 or statement of insurance coverage or benefits for any 32 individual under a health benefit plan. 33 m. “Utilization review organization” means an entity that 34 performs utilization review, other than a health carrier 35 -3- LSB 2354SV (2) 87 av/nh 3/ 12

S.F. 436 performing utilization review for its own health benefit plans. 1 2. Establishment of step therapy protocols. 2 a. A health carrier, health benefit plan, or utilization 3 review organization shall do all of the following when 4 establishing a step therapy protocol: 5 (1) Use clinical review criteria based on clinical practice 6 guidelines that meet all of the following requirements: 7 (a) Recommend that particular prescription drugs be taken 8 in the specific sequence required by the step therapy protocol. 9 (b) Are developed and endorsed by a multidisciplinary panel 10 of experts that manages conflicts of interest among members 11 of the panel’s writing and review groups by doing all of the 12 following: 13 (i) Requiring members to disclose any potential conflicts 14 of interest with entities, including health carriers, 15 health benefit plans, utilization review organizations, and 16 pharmaceutical manufacturers, and requiring members to recuse 17 themselves from voting if there is a conflict of interest. 18 (ii) Using a methodologist to work with the panel’s writing 19 groups to provide objectivity in data analysis and ranking of 20 evidence through the preparation of evidence tables and by 21 facilitating consensus. 22 (iii) Offering opportunities for public review and 23 comments. 24 (c) Are based on high-quality studies, research, and 25 medical practice. 26 (d) Are created through an explicit and transparent process 27 that does all of the following: 28 (i) Minimizes biases and conflicts of interest. 29 (ii) Explains the relationship between treatment options 30 and outcomes. 31 (iii) Rates the quality of the evidence supporting the 32 recommendations. 33 (iv) Considers relevant patient subgroups and preferences. 34 (e) Are continually updated through a review of new 35 -4- LSB 2354SV (2) 87 av/nh 4/ 12

S.F. 436 evidence, research, and newly developed treatments. 1 (2) Take into account the needs of atypical covered person 2 populations and diagnoses when establishing clinical review 3 criteria. 4 (3) Notwithstanding subparagraph (1), peer-reviewed 5 publications may be substituted for the use of clinical 6 practice guidelines in establishing a step therapy protocol. 7 b. This subsection shall not be construed to require 8 health carriers, health benefit plans, utilization review 9 organizations, or the state to establish a new entity to 10 develop clinical review criteria for step therapy protocols. 11 c. A health carrier, health benefit plan, or utilization 12 review organization shall, upon written request of an insured 13 or prospective insured, provide specific written clinical 14 review criteria relating to a particular condition or disease, 15 including clinical review criteria relating to a request for a 16 step therapy override exception and, where appropriate, other 17 clinical information which the health carrier, health benefit 18 plan, or utilization review organization might consider in its 19 utilization review or in making a determination to approve 20 or deny a request for a step therapy override exception, 21 including a description of how the information will be used in 22 the utilization review process or in making a determination 23 to approve or deny a request for a step therapy override 24 exception. However, to the extent that such information is 25 proprietary to the health carrier, health benefit plan, or 26 utilization review organization, the insured or prospective 27 insured shall only use the information for the purposes of 28 assisting the insured or prospective insured in evaluating the 29 covered services provided by the health carrier, health benefit 30 plan, or utilization review organization. Such clinical review 31 criteria and other clinical information shall also be made 32 available to a health care professional, upon written request 33 made by the health care professional on behalf of an insured 34 or prospective insured. 35 -5- LSB 2354SV (2) 87 av/nh 5/ 12

S.F. 436 3. Exceptions process transparency. 1 a. When coverage of a prescription drug for the 2 treatment of any medical condition is restricted for use 3 by a health carrier, health benefit plan, or utilization 4 review organization through the use of a step therapy 5 protocol, the covered person and the prescribing health 6 care professional shall have access to a clear, readily 7 accessible, and convenient process to request a step therapy 8 override exception. A health carrier, health benefit plan, or 9 utilization review organization may use its existing medical 10 exceptions process to satisfy this requirement. The process 11 used shall be easily accessible on the internet site of the 12 health carrier, health benefit plan, or utilization review 13 organization. 14 b. A step therapy override exception shall be approved 15 expeditiously by a health carrier, health benefit plan, 16 or utilization review organization if any of the following 17 circumstances apply: 18 (1) The prescription drug required under the step therapy 19 protocol is contraindicated or is likely to cause an adverse 20 reaction or physical or mental harm to the covered person. 21 (2) The prescription drug required under the step therapy 22 protocol is expected to be ineffective based on the known 23 clinical characteristics of the covered person and the known 24 characteristics of the prescription drug regimen. 25 (3) The covered person has tried the prescription drug 26 required under the step therapy protocol while under the 27 covered person’s current or a previous health benefit plan, 28 or another prescription drug in the same pharmacologic class 29 or with the same mechanism of action, and such prescription 30 drug was discontinued due to lack of efficacy or effectiveness, 31 diminished effect, or an adverse event. 32 (4) The prescription drug required under the step therapy 33 protocol is not in the best interest of the covered person, 34 based on medical necessity. 35 -6- LSB 2354SV (2) 87 av/nh 6/ 12

S.F. 436 (5) The covered person is stable on a prescription drug 1 selected by the covered person’s health care professional for 2 the medical condition under consideration while on the current 3 or a previous health benefit plan. 4 c. Upon approval of a step therapy override exception, the 5 health carrier, health benefit plan, or utilization review 6 organization shall expeditiously authorize coverage for the 7 prescription drug selected by the covered person’s prescribing 8 health care professional. 9 d. A health carrier, health benefit plan, or utilization 10 review organization shall make a determination to approve or 11 deny a request for a step therapy override exception within 12 five calendar days of receipt of the request for an exception 13 or appeal of a denial of such a request. In cases where exigent 14 circumstances exist, a health carrier, health benefit plan, or 15 utilization review organization shall make a determination to 16 approve or deny the request for an exception or appeal of a 17 denial of such a request within seventy-two hours of receipt 18 of the request for an exception or appeal of a denial of such a 19 request. If a determination to approve or deny the request for 20 an exception or appeal of a denial of such a request is not made 21 within the applicable time period, the request for an exception 22 or appeal of a denial of such a request shall be deemed to be 23 approved. 24 e. If a determination is made to deny a request for 25 a step therapy override exception, the health carrier, 26 health benefit plan, or utilization review organization 27 shall provide the covered person or the covered person’s 28 authorized representative and the covered person’s prescribing 29 health care professional with the reason for the denial and 30 information regarding the procedure to appeal the denial. Any 31 determination to deny a request for a step therapy override 32 exception may be appealed by a covered person or the covered 33 person’s authorized representative. 34 f. A health carrier, health benefit plan, or utilization 35 -7- LSB 2354SV (2) 87 av/nh 7/ 12

S.F. 436 review organization shall uphold or reverse a denial of a 1 request for a step therapy override exception within five 2 calendar days of receipt of an appeal of the denial. In cases 3 where exigent circumstances exist as provided in paragraph “d” , 4 a health carrier, health benefit plan, or utilization review 5 organization shall make a determination to uphold or reverse a 6 denial of such a request within seventy-two hours of receipt of 7 an appeal of the denial. If the denial of a request for a step 8 therapy override exception is not upheld or reversed on appeal 9 within the applicable time period, the denial shall be deemed 10 to be reversed and the request for an override exception shall 11 be deemed to be approved. 12 g. If a denial of a request for a step therapy override 13 exception is upheld on appeal, the health carrier, health 14 benefit plan, or utilization review organization shall 15 provide the covered person or the covered person’s authorized 16 representative and the patient’s prescribing health care 17 professional with the reason for upholding the denial on appeal 18 and information regarding the procedure to request external 19 review of the denial pursuant to chapter 514J. Any denial of a 20 request for a step therapy override exception that is upheld 21 on appeal shall be considered a final adverse determination 22 for purposes of chapter 514J and is eligible for a request for 23 external review by a covered person or the covered person’s 24 authorized representative pursuant to chapter 514J. 25 4. Limitations. This section shall not be construed to do 26 either of the following: 27 a. Prevent a health carrier, health benefit plan, or 28 utilization review organization from requiring a covered person 29 to try an AB-rated generic equivalent prescription drug prior 30 to providing coverage for the equivalent branded prescription 31 drug. 32 b. Prevent a health care professional from prescribing 33 a prescription drug that is determined to be medically 34 appropriate. 35 -8- LSB 2354SV (2) 87 av/nh 8/ 12

S.F. 436 Sec. 3. APPLICABILITY. This Act is applicable to a health 1 benefit plan that is delivered, issued for delivery, continued, 2 or renewed in this state on or after January 1, 2018. 3 EXPLANATION 4 The inclusion of this explanation does not constitute agreement with 5 the explanation’s substance by the members of the general assembly. 6 This bill relates to the use of step therapy protocols 7 for prescription drugs by health carriers, health benefit 8 plans, and utilization review organizations, and includes 9 applicability provisions. 10 The bill includes legislative findings that step therapy 11 protocols are increasingly being used by health carriers, 12 health benefit plans, and utilization review organizations to 13 control health care costs, that step therapy protocols that 14 are based on well-developed scientific standards and flexibly 15 administered can play an important role in controlling health 16 care costs, but that in some cases use of such protocols can 17 have adverse or dangerous consequences for the person for whom 18 the drugs are prescribed. The bill includes findings that 19 uniform policies for the use of such protocols that preserve a 20 health care professional’s right to make treatment decisions 21 and that provide for exceptions to the use of such protocols 22 are in the public interest. 23 The bill defines a “step therapy protocol” as a protocol 24 or program that establishes a specific sequence in which 25 prescription drugs for a specified medical condition and 26 medically appropriate for a particular covered person are 27 covered under a pharmacy or medical benefit by a health 28 carrier, a health benefit plan, or a utilization review 29 organization including self-administered drugs and drugs 30 administered by a health care professional. 31 The bill requires that a step therapy protocol be 32 established using clinical review criteria that are based 33 on specified clinical practice guidelines. A step therapy 34 protocol should take into account the needs of atypical 35 -9- LSB 2354SV (2) 87 av/nh 9/ 12

S.F. 436 populations and diagnoses. The bill does not require a health 1 carrier, health benefit plan, utilization review organization, 2 or the state to establish a new entity to develop clinical 3 review criteria for such protocols. 4 Upon written request of an insured or prospective insured, 5 or upon written request of a health care professional on behalf 6 of such a person, a health carrier, health benefit plan, 7 or utilization review organization shall provide specific 8 written clinical review criteria relating to a particular 9 condition or disease, including criteria relating to a request 10 for a step therapy override exception which might be used in 11 utilization review or in making a determination to approve or 12 deny a request for a step therapy override exception. If the 13 information provided is proprietary the insured or prospective 14 insured shall use it only for purposes of evaluating covered 15 services. 16 The bill also provides that when a step therapy protocol 17 is in use, the person participating in a health benefit plan 18 or the person’s prescribing health care professional must 19 have access to a clear, readily accessible, and convenient 20 process to request a step therapy override exception. A “step 21 therapy override exception” means a step therapy protocol 22 should be overridden in favor of immediate coverage of the 23 prescription drug selected by the prescribing health care 24 professional, based on a review of the request along with 25 supporting rationale and documentation. The bill provides that 26 the request for an exception shall be granted if specified 27 circumstances are determined to exist and coverage for the drug 28 selected by the prescribing health care professional shall be 29 authorized. 30 A request for a step therapy override exception must be 31 approved or denied by the health carrier, health benefit plan, 32 or utilization review organization utilizing the step therapy 33 protocol within five calendar days of receipt of the request 34 or appeal of a denial of such a request, or within 72 hours 35 -10- LSB 2354SV (2) 87 av/nh 10/ 12

S.F. 436 of receipt of the request or appeal of a denial of such a 1 request where exigent circumstances exist. The health carrier, 2 health benefit plan, or utilization review organization can 3 use its existing medical exceptions procedure to satisfy this 4 requirement. If a determination to approve or deny the request 5 or appeal of a denial of such a request is not made within the 6 applicable time period, the request is deemed to be approved. 7 If a determination is made to deny the request for a step 8 therapy override exception, the health carrier, health benefit 9 plan, or utilization review organization shall provide the 10 person making the request with the reason for the denial and 11 information about the procedure to appeal the denial. Any 12 denial of such a request is eligible for appeal. 13 Upon appeal, the health carrier, health benefit plan, or 14 utilization review organization shall make a determination 15 to uphold or reverse the denial within five calendar days, 16 or within 72 hours in the case of exigent circumstances, of 17 receiving the appeal. If the denial is not upheld or reversed 18 on appeal within the applicable time period, the denial is 19 deemed to be reversed and the request for an exception is 20 deemed to be approved. 21 If a denial of a request for a step therapy override 22 exception is upheld on appeal, the person making the appeal 23 shall be provided with the reason for upholding the denial 24 on appeal and information regarding the procedure to request 25 external review of the denial pursuant to Code chapter 514J. 26 A denial of a request for such an exception that is upheld on 27 appeal shall be considered a final adverse determination for 28 purposes of Code chapter 514J and is eligible for a request for 29 external review pursuant to Code chapter 514J. 30 The bill shall not be construed to prevent a health carrier, 31 health benefit plan, or utilization review organization from 32 requiring a person to try an AB-rated generic equivalent 33 prescription drug prior to providing coverage for the 34 equivalent branded prescription drug, or to prevent a health 35 -11- LSB 2354SV (2) 87 av/nh 11/ 12