New California Laws Slice Drug Costs, Force Insurers to Cover Substance Abuse Disorders

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Quinci LeGardye | California Black Media

Two new California laws that took effect Jan. 1 aim to make access to quality health care more equitable and affordable.

SB 855, written by Sen. Scott Wiener (D-San Francisco) and signed into law by Gov. Gavin Newsom in September, expanded the California Mental Health Parity Law, requiring California health plans to provide full coverage for medically necessary treatment of all mental health and substance-use disorders defined by the American Psychiatric Association.

Under that law, “medically necessary treatment” is defined as a covered service that is consistent with generally accepted standards set by professional associations. SB 855 also prohibits an insurer from limiting benefits for chronic conditions to only cover short-term or acute treatment.

Prior to the new law’s implementation, insurers in California were only mandated to cover treatment for nine specified mental health disorders, and no substance-use disorders. There was also no standard definition from “medically necessary treatment,” which allowed for broad interpretation of what benefits were necessary. SB 855 ensures that there is parity in California health plans, meaning that coverage for mental health and substance-use disorders is comparable to physical health coverage.

The law goes into effect in the midst of a nationwide mental health crisis that the COVID-19 pandemic has accelerated. Like the physical effects of the virus, the psychological toll of it has been disproportionately impacting communities of color. An August survey by the Centers for Disease Control and Prevention (CDC) found that people of color – including African Americans — reported having experienced worse mental health outcomes than White respondents. Other groups experiencing worse mental health outcomes included younger adults, essential workers, low-wage workers and unpaid caregivers, all demographics among which Blacks account for significant numbers.

In addition to creating more parity in health care across the state, SB 855 provides standards for affordability in mental health care. Now, if medically necessary, and mental health or substance-use treatment is not available in-network, insurers are required to provide the necessary out-of-network services and any follow-up services at the in-network price.

“No one should have to suffer from mental illness or substance use disorder without support, resources and medical care. No one should have to forgo mental healthcare until they have deteriorated to the point where they’re in crisis and in the ER. And no one should have to go into debt to pay for substance use disorder or mental health treatment,” said Wiener in a January statement.

SB 852, written by Sen. Richard Pan, MD (D-Sacramento) requires the California Health and Human Services Agency (CHHSA) to enter partnerships or contracts to make affordable generic prescription drugs, including at least one form of insulin. The law requires that each drug is made available at a transparent price and without rebates, unless the rebate is federally required.

The details of SB 852 emphasize the importance of new generic drugs being affordable. It requires CHHSA to only enter into partnerships to produce a generic drug at a price that results in savings, improves patient access to affordable medications and targets shortages of generic drugs in the market. It also prioritizes generic drugs that have the greatest impact on lowering drug costs to patients, such as those for chronic and high-cost conditions, as well as drugs that can be delivered through mail order.

Drug prices have steadily rose throughout the past decade, slowly becoming more unaffordable. In a 2019 Consumer Reports survey of 1,015 adults, 30 % of respondents said the out-of-pocket cost for a drug they regularly took increased in the year prior, with 12 % saying the increase was over $100. Also, those who saw the cost increase dramatically were nearly twice as likely to forgo the prescription or cut back on other essentials to afford it.

Increasing prescription costs and access to critical medicine has been a concern for California legislators even before the COVID-19 pandemic exacerbated the issue. Gov. Gavin Newsom’s initial 2020-21 Annual Budget, proposed in January 2020 before the onset of the pandemic, included plans to establish a state-sponsored generic drug label. According to a September 2020 statement, the state has already begun to identify possible target medications.

“The cost of health care is way too high. Our bill will help inject competition back into the generic drug marketplace – taking pricing power away from big pharmaceutical companies and returning it to consumers,” said Gov. Newsom. “California is using our market power and our moral power to demand fairer prices for prescription drugs. I am proud to sign this legislation affirming our ground-breaking leadership in breaking down market barriers to affordable prescription drugs.”

“Prescription drugs don’t work if people cannot afford to take them. I thank the Governor for his leadership to assure Californians will be able to have access to a reliable supply of affordable generic medications. With the signing of SB 852, California leads the country again in pursuing innovative ideas to increase health care access and affordability, this time for prescription drugs,” said Sen. Pan.

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