(1) Outpatient prescription drugs are self-administered drugs approved by the Federal Food and Drug Administration for sale to the public through retail or mail-order pharmacies that require prescriptions and are not provided for use on an inpatient basis. For purposes of this section “inpatient basis” has the meaning indicated in Section 1300.67(b), and “self-administered” means those drugs that need not be administered in a clinical setting or by a licensed health care provider.

(2) Coverage for outpatient prescription drugs shall also include coverage for disposable devices that are medically necessary for the administration of a covered outpatient prescription drug, such as spacers and inhalers for the administration of aerosol outpatient prescription drugs, and syringes for self-injectible outpatient prescription drugs that are not dispensed in pre-filled syringes. For purposes of this section, the term “disposable” includes devices that may be used more than once before disposal. This section does not create an obligation for a plan to provide coverage for a durable medical equipment benefit.

(1) A prescription drug benefit offered by a plan shall comply with the requirements of the Knox-Keene Act and the regulations promulgated by the Director of the Department of Managed Health Care, including but not limited to Sections 1342, 1343.5, 1342.7, 1363, 1363.01, 1363.03, 1363.5, 1367(e), 1367(g), 1367(h), 1367.01, 1367.20, 1367.21, 1367.22 and 1367.24 of the Act and Section 1300.67.4(a)(3)(A) of these rules.

(2) All clinical aspects of a plan's prescription drug benefit shall be developed by qualified medical and pharmacy professionals in accordance with good professional practice. The plan shall establish and document an internal process for ongoing review by qualified medical and pharmacy professionals of the clinical aspects of the prescription drug benefit, including review of limitations and exclusions, and the safety, efficacy, and utilization of outpatient prescription drugs.

(3) Plans seeking to establish limitations or exclusions on outpatient prescription drug benefits shall do so consistent with up-to-date evidence-based outcomes and current published, peer-reviewed medical and pharmaceutical literature.

(4) A plan that provides coverage for prescription drugs through a mail order pharmacy shall have written policies and procedures documenting that the plan's mail order arrangements are in compliance with the requirements of the Act and this section, and applicable California and federal laws regarding pharmacists and pharmacy services. The mail order pharmacy process shall conform effectively and efficiently with a plan's processes for prior authorization for coverage of medically necessary drugs as required by the Act, and shall include standards for timely delivery and a contingency mechanism for providing the drug if a mail order provider fails to meet the delivery standards.

(5) In reviewing copayments, coinsurance, deductibles, limitations, or exclusions for compliance with Section 1367(e) and (h) of the Act, and Section 1300.67.4(a)(3)(A) of these rules, the Department's approval or disapproval may be based upon all relevant factors, including but not limited to:

(1) A plan's prescription drug benefit shall provide that if the pharmacy's retail price for a prescription drug is less than the applicable copayment amount, the enrollee shall not be required to pay any more than the retail price.

(2) Proposed copayment structures or ranges, coinsurance, or deductibles submitted to the Director for approval shall be based upon a methodology that is fully described and documented, and that complies with the standards set forth in this Section. A plan may use actual cost data on prescription drugs or, for contracted services or products, nationally recognized data sources used by the plan in developing the contract rates.

(3) A copayment or percentage coinsurance shall not exceed 50 percent of the cost to the plan as described in subsection (c)(5) and (6). A percentage coinsurance shall meet one of the following additional requirements:

(4) In addition to compliance with this subsection (c), copayments and coinsurances shall comply with the standards identified at subsection (b), including that they shall be reasonable so as to allow access to medically necessary outpatient prescription drugs, and the Department's determination may be based on all relevant factors as provided in subsection (b)(5).

(5) The “cost to the plan” means the actual cost incurred by the plan or its contracting provider to acquire and dispense a covered outpatient prescription drug, without subtracting or otherwise considering any copayment or coinsurance amount to be paid by enrollees. The cost to the plan may include average cost calculations as described in this section, and shall include all discounts and other prospective cost and pricing arrangements, as applicable. Plans shall account for any rebates and other retrospective cost and pricing arrangements for outpatient prescription drugs by verifying that the rebates and other retrospective cost and pricing arrangements for outpatient prescription drugs are applied by the plan to reduce costs for the plan's subscribers.

(6) Compliance with the requirement not to exceed 50 percent of the actual cost to the plan may be met by various methods including the three methods described below. A plan may propose a different method, which shall be filed with the Department prior to implementation by the plan and supported by information and documentation sufficient to satisfy the Department as to the validity of the calculation methodology.

(1) A plan may impose prior authorization requirements on prescription drug benefits, consistent with the requirements of the Act and regulations.

(2) When there is more than one drug that is appropriate for the treatment of a medical condition, a plan may require step therapy. A plan that requires step therapy shall have an expeditious process in place to authorize exceptions to step therapy when medically necessary and to conform effectively and efficiently with continuity of care requirements of the Act and regulations. In circumstances where an enrollee is changing plans, the new plan may not require the enrollee to repeat step therapy when that enrollee is already being treated for a medical condition by a prescription drug provided that the drug is appropriately prescribed and is considered safe and effective for the enrollee's condition. Nothing in this section shall preclude the new plan from imposing a prior authorization requirement pursuant to Section 1367.24 for the continued coverage of a prescription drug prescribed pursuant to step therapy imposed by the former plan, or preclude the prescribing provider from prescribing another drug covered by the new plan that is medically appropriate for the enrollee. For purposes of this section, “step therapy” means a type of protocol that specifies the sequence in which different prescription drugs for a given medical condition and medically appropriate for a particular patient are to be prescribed.

(3) A plan shall provide coverage for the medically necessary dosage and quantity of the drug prescribed for the treatment of a medical condition consistent with professionally recognized standards of practice.

(4) Plans may require enrollees who are prescribed drugs for smoking cessation to be enrolled in or to have completed a smoking cessation program, if covered by the plan prior to or concurrent with receiving the prescription drug.

(5) Other limitations that the Department may approve pursuant to Section 1342.7 of the Act and this section.

(1) When prescribed for cosmetic purposes. For purposes of this section “cosmetic” means drugs solely prescribed for the purpose of altering or affecting normal structures of the body to improve appearance rather than function.

(2) When prescribed solely for the treatment of hair loss, sexual dysfunction, athletic performance, cosmetic purposes, anti-aging for cosmetic purposes, and mental performance. Drugs for mental performance shall not be excluded from coverage when they are used to treat diagnosed mental illness or medical conditions affecting memory, including, but not limited to, treatment of the conditions or symptoms of dementia or Alzheimer's disease.

(3) When prescribed solely for the purposes of losing weight, except when medically necessary for the treatment of morbid obesity. Plans may require enrollees who are prescribed drugs for morbid obesity to be enrolled in a comprehensive weight loss program, if covered by the plan, for a reasonable period of time prior to or concurrent with receiving the prescription drug.

(4) When prescribed solely for the purpose of shortening the duration of the common cold.

(5) Drugs that are available over the counter. A plan shall not exclude coverage of an entire class of prescription drugs when one drug within that class becomes available over the counter. A plan that seeks to exclude coverage for an entire class of drugs when more than one drug within that class become available over the counter, shall first file a notice of material modification and obtain the Department's prior approval in accordance with Section 1342.7 of the Act and this regulation.

(6) Replacement of lost or stolen drugs.

(7) Drugs when prescribed by non-contracting providers for non-covered procedures and which are not authorized by a plan or a plan provider except when coverage is otherwise required in the context of emergency services.

(8) Other categories of prescription drugs approved by the Department pursuant to Section 1342.7 of the Act and this section.

(1) Any exclusion or limitation on a prescription drug benefit that is not described at subsections (d) or (e) may not be applied to any plan's prescription drug benefit unless a plan has filed a notice of material modification with the Department and received approval by Order to apply the exclusion or limitation. The Order of approval may be issued subject to specified terms and conditions, or for specified periods, as the Department may determine are necessary and appropriate. Following issuance of an Order approving an exclusion or limitation, any other licensed plan may apply the same exclusion or limitation to its prescription drug benefit if it files an amendment with the Department not less than 30 days prior to implementation of the exclusion or limitation, and represents that it is exactly the same as that previously approved by Order, provides specific reference to the Order number and date issued, and addresses any specified terms and conditions upon such Order, as applicable.

(2) A plan may meet the material modification filing requirements of subsection (g)(1) with respect to exclusions and limitations contained in contracts issued, renewed or amended on or before January 1, 2007, by filing within six months of the effective date of this regulation a report disclosing and describing all such exclusions and limitations on prescription drug benefits covered under all subscriber contracts subject to the requirements of Section 1342.7 of the Act. The Department will provide an expeditious review of the exclusions and limitations disclosed in the report.