HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: HB 885 Prescription Drugs Used in the Treatment of Schizophrenia for Medicaid Recipients
SPONSOR(S): McFarland
TIED BILLS: IDEN./SIM. BILLS: SB 534
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Finance & Facilities Subcommittee 15 Y, 0 N Lloyd Lloyd
2) Health Care Appropriations Subcommittee 12 Y, 0 N Nobles Clark
3) Health & Human Services Committee 17 Y, 0 N Lloyd Calamas
SUMMARY ANALYSIS
The Florida Medicaid program administered by the Agency for Health Care Administration (AHCA) provides
prescription drug coverage to approximately 5 million Floridians. Prescription drugs reimbursed in the Medicaid
program are subject to federally negotiated manufacturer rebates, and state-negotiated supplemental rebates.
The Florida Medicaid Preferred Drug List (PDL), established by AHCA based on recommendations from the
Medicaid Pharmacy and Therapeutics Committee, is a list of the most cost-effective drugs in each therapeutic
class. The PDL is developed by considering clinical efficacy, safety, and cost.
Under current law, Medicaid requires prior authorization and step therapy for drugs not listed on the PDL. Step
therapy requires recipients to first try a PDL-listed drug before obtaining a non-PDL drug, subject to a list of
clinical exceptions, which must be documented by the prescriber to obtain prior authorization.
HB 885 adds additional exceptions to the Medicaid step therapy policy for drugs used to treat schizophrenia,
schizotypal or delusional disorders, where:
 Prior authorization was granted previously for the same drug; and
 The medication was dispensed to the patient in the last 12 months.
The bill will have an indeterminate but insignificant negative, recurring fiscal impact on AHCA. There is no
fiscal impact on local government.
The bill provides an effective date of July 1, 2022.
This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives .
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DATE: 2/23/2022
 FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Background
Florida Medicaid
Medicaid is the health care safety net for low-income Floridians. Medicaid is a partnership of the federal
and state governments established to provide coverage for health services for eligible persons. The
program is administered by the Agency for Health Care Administration (AHCA) and financed by federal
and state funds.
The structure of each state’s Medicaid program varies, but what states must pay for is largely
determined by the federal government, as a condition of receiving federal funds. 1 The federal
government sets the minimum mandatory populations to be included in every program, and the
minimum mandatory benefits to be covered. These mandatory benefits include physician services,
hospital services, home health services, and family planning, but do not include prescription drugs.2
States can add benefits, with federal approval. Florida has added many optional benefits, including
prescription drug coverage.3
The Florida Medicaid program covers approximately 5 million low-income individuals, including
approximately 2.5 million, or 58.4%, of the children in Florida.4 Medicaid is the second largest single
program in the state, behind public education, representing approximately one-third of the total Fiscal
Year 2021-2022 state budget.5 Florida’s program is the 4th largest in the nation by enrollment and, for
FY 2019-2020, the program is the 5th largest in terms of expenditures.6
Florida delivers medical assistance to most Medicaid recipients - approximately 78% - using a
comprehensive managed care model.7 While current law requires provision of all Medicaid covered
services for these recipients through this managed care model, 8 AHCA retains control over prescription
drug benefits for both the managed care and the remaining fee-for-service populations.
Medicaid Prescribed Drug Benefits – Cost Control
Federal law requires state Medicaid programs to cover every drug for which the federal Department of
Health and Human Services (HHS) has negotiated a manufacturer rebate.9 Florida law requires AHCA
to have a spending control program for this benefit, including a state-negotiated supplemental rebate,
which is in addition to the federal rebate.10 AHCA contracts with a pharmacy benefit manager to
negotiate those rebates. Total federal and state rebate revenue for Fiscal Year 2021-2022 is projected
to be $2.15 billion, which is 58 percent of the total Medicaid prescription drug spend of $3.7 billion this
year. These revenues are reinvested in the Medicaid program.
1 Title 42 U.S.C. §§ 1396-1396w-5; Title 42 C.F.R. Part 430-456 (§§ 430.0-456.725).
2 S. 409.905, F.S.
3
S. 409.906, F.S.
4 Agency for Health Care Administration, Florida Statewide Medicaid Monthly Enrollment Report, Dec. 2021, available at
https://ahca.myflorida.com/medicaid/Finance/data_analytics/enrollment_report/index.shtml (last visited Jan. 18, 2022). United States
Census Bureau, QuickFacts, Florida, https://www.census.gov/quickfacts/fact/table/FL/PST045221 (last visited Jan. 18, 2022).
5 Ch. 2020-111, L.O.F. See also Fiscal Analysis in Brief: 2021 Legislative Session, available at
http://edr.state.fl.us/content/revenues/reports/fiscal-analysis-in-brief/FiscalAnalysisinBrief2021.pdf (last visited Jan. 6, 2022).
6 The Henry J. Kaiser Family Foundation, State Health Facts, Total Medicaid Spending FY 2020 and Total Monthly Medicaid an d CHIP
Enrollment Jun. 2021, available at http://kff.org/statedata/ (last visited Jan. 18, 2022).
7 S. 409.964, F.S.
8 S. 409.964, F.S.
9 Title 42 U.S.C. § 1396r-8. State Medicaid programs are authorized to cover non-rebated drugs with HHS approval, under certain
circumstances.
10 S. 409.912(5)(a), F.S.
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 Also part of the spending control program is a Medicaid Preferred Drug List (PDL). The PDL is a list of
drugs which are the most cost-effective options in each therapeutic class.11 AHCA establishes the PDL
based on the clinical efficacy and safety of the drug, as well as the price of the drug and the price of
competing products, taking into account the federal and state rebates. 12 In developing the PDL, AHCA
must consider the recommendations of the Medicaid Pharmacy and Therapeutics Committee, a
committee of clinicians which reviews drugs for clinical efficacy, safety and cost-effectiveness.13
Another component of the spending control program is prior authorization. Current law allows AHCA to
condition reimbursement on prior authorization; that is, the prescriber or dispenser must obtain AHCA
(or managed care plan) approval prior to dispensing, or Medicaid will not pay for the drug. 14 AHCA may
require prior authorization:15
 For an indication not approved in labeling;
 To comply with clinical guidelines; or
 If the product has the potential for overuse, misuse, or abuse.
In the prior authorization process, the prescriber may be required to provide the rationale and
supporting medical evidence for the use of a drug. 16 For prior authorized PDL drugs, the prior
authorization system must guarantee a response within 24 hours, and cover a 72-hour supply of the
drug if that time is exceeded.17
Coverage of Prescription Drugs for Schizophrenia, Schizotypal and Delusional Disorders
The Medicaid PDL includes numerous generic and brand name drugs for the treatment of
schizophrenia, schizotypal or delusional disorders. If the drug is not on the PDL, the prescriber must
obtain prior authorization before dispensing the medication.
When conducting prior authorization for mental health medications, AHCA uses guidelines developed
by the University of South Florida18, and includes those guidelines with the prior authorization criteria it
publishes online for prescribers.19
In 2018-2020, 108,670 Medicaid recipients had diagnosed schizophrenia, schizotypal or delusional
disorders. For that period, 6,313 requests for prior authorization were made for medications to treat
those conditions. Of those, 74 were denied, and 457 resulted in a change in therapy. In that time,
Medicaid spent $497,270,227 on medications to treat schizophrenia, schizotypal or delusional
disorders, for 2.37 million claims, including 2.3 million PDL drug claims and 50,836 non-PDL drug
claims.20
Prescribed Drug Step Therapy
11
S. 409.912(5)(a), F.S. See, Florida Medicaid Preferred Drug List, Agency for Health Care Administration, Jan. 14, 2022, available at
https://ahca.myflorida.com/medicaid/prescribed_drug/pharm_thera/fmpdl.shtml (last visited Feb. 6, 2022).
12 SS. 409.912(5)(a)7., 409.91195(7), F.S.
13 S. 409.91195, F.S. The P&T Committee is comprised of 11 gubernatorial appointees, including four physicians, five pharmacists and
a consumer member. It must meet at least quarterly, and must review all drug classes every 12 months. Meetings are open to th e
public, and the committee is required to receive public testimony from interested parties; however, portions of meetings duri ng which
rebates and other trade secrets are discussed are closed, pursuant to s. 409.91196, F.S., and 42 U.S.C. 1396r -8(b)(3)(D).
14 S. 409.91195(5), F.S.
15 S. 409.912(5)(a)12., F.S.
16 Id.
17 S. 409.912(5)(a), F.S.
18 University of South Florida, Florida Center for Behavioral Health Improvements and Solutions, Psychotherapeutic Medication
Guidelines, 2019-2020, available at Florida Center for Behavioral Health Improvements and Solutions (floridabhcenter.org) (last visited
Feb. 6, 2022).
19 Agency for Health Care Administration, Drug Criteria, available at Drug Criteria (myflorida.com) (last visited Feb. 6, 2022); Agency for
Health Care Administration, Agency Legislative Bill Analysis for SB 534, Nov. 22, 2021.
20 Email correspondence, Agency for Health Care Administration, Feb. 2, 2022 (on file with the Finance and Facilities Subcommittee )
Total spend include both fee-for-service and managed care expenditures.
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 Both commercial and government sector health coverage apply utilization management techniques to
reduce costs, maximize volume pricing arrangements, and prevent catastrophic medical events. Step
therapy, is one such technique, commonly used with prescription drug benefits. Step therapy policies
require enrollees to first try a preferred drug or service before obtaining an alternate drug or service for
a particular medical condition.
Step therapy is commonly used in conjunction with prior authorization policies, which require providers
to obtain approval from an insurer before a patient may receive specified prescription drugs under the
plan. For example, most insurers have a formulary or preferred drug list, which is an established list of
one or more prescription drugs within a therapeutic class deemed clinically equivalent and cost
effective. Prior authorization would limit an insured’s ability to obtain another drug within the therapeutic
class that is not part of the PDL without the insurer authorizing that drug.
Step therapy policies require an insured to try one drug first to treat his or her medical condition before
they will cover another drug for that condition. For example, if Drug A and Drug B both treat a medical
condition, a plan may require doctors to prescribe the most cost effective drug, Drug A, first. If Drug A
does not work for a beneficiary, then the plan will cover Drug B. Step therapy is also known as “fail-
first”, as the insurer restricts coverage of expensive therapies unless patients have already failed
treatment with a lower-cost alternative.
Step therapy and prior authorization are enforcement mechanisms for an insurer’s preferred drug list or
formulary. They ensure that actual transaction volumes and manufacturer rebate levels align with the
actuarial assumptions that generated the price of the insurance coverage, while accommodating
clinically justified exceptions.
Researchers report that there is mixed evidence on the impact of step therapy policies. 21 A review of
the literature found that there is little good empirical evidence for or against cost savings and utilization
reduction.22 Some studies suggest that step therapy policies have been effective at reducing drug costs
without increasing the use of other medical services, 23 while other studies have found that step therapy
can increase total utilization costs over time because of increased inpatient admissions and emergency
department visits.24
Commercial Insurance Step Therapy Regulation
Currently, Florida law limits the use of step therapy in commercial health insurance. Insurers and health
maintenance organizations (HMOs) may not require a step therapy protocol for a covered individual if
they:
 Were previously approved to receive a specific drug through completion of a step therapy
protocol by another health insurance plan; and,
 Can provide documentation from the other health insurance plan indicating that the specific
drug was paid for on the individual’s behalf within the past 90 days.25
Medicaid Step Therapy Requirements
While Florida Medicaid covers all federally-rebated drugs, the use of drugs which are not on the PDL is
subject to additional scrutiny. Current law requires reimbursement for non-PDL drugs to be subject to a
step-therapy prior authorization process; specifically, PDL-listed drugs must have been used at some
21 Rahul K. Nayak and Steven D. Pearson, The Ethics Of 'Fail First’: Guidelines and Practical Scenarios for Step Therapy Coverage
Policies, Health Affairs 33, No.10 (2014):1779-1785, https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2014.0516 (last visited Nov.
28, 2021).
22 Motheral, B.R., Pharmaceutical Step Therapy Interventions: A Critical Review of the Literature , Journal of Managed Care Pharmacy
17, no. 2 (2011) 143-55, http://www.jmcp.org/doi/pdf/10.18553/jmcp.2011.17.2.143 (last visited Nov. 23, 2021).
23 Supra note 21 at pg. 1780.
24 Id.
25 Ss. 627.42393, 641.31(46), F.S.
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 point within the last 12 months before a non-listed drug can be used.26 The step-therapy policy does not
apply if the prescriber provides medical or clinical documentation showing: 27
 There is no drug on the PDL to treat the disease or medical condition which is an acceptable
clinical alternative;
 The alternatives have been ineffective in the treatment of the beneficiary’s disease; or
 Based on historic evidence and known characteristics of the patient and the drug, the drug is
likely to be ineffective, or the number of doses has been ineffective.
Effect of Proposed Changes
The bill amends current Medicaid law related to the use of step therapy for prescription drug benefits.
Specifically, it creates an additional exception to the requirement to use step therapy for non-PDL drugs
for medications used to treat schizophrenia, schizotypal or delusional disorders. The exception applies
if the prescriber provides clinical documentation that the product is medically necessary because the
patient had recently used it within the Medicaid program; that is:
 Prior authorization was granted previously for the same drug; and
 The medication was dispensed to the patient in the last 12 months.
A significant reduction in the use of PDL drugs will result in lower manufacturer rebate revenue to
AHCA. It is currently unknown how many Medicaid recipients were subject to step therapy for
prescription drugs to treat these conditions. However, the vast majority of prior authorization requests
for non-PDL drugs are approved, which indicates the number may be insignificant. Similarly, while 457
prior authorization requests resulted in a change in therapy (over a three-year period), it is unknown
how many were for drugs to treat these conditions or how many were due to the step therapy policy.
The bill provides an effective date of July 1, 2022.
B. SECTION DIRECTORY:
Section 1: Amends s. 409.912, F.S., related to cost-effective purchasing of health care.
Section 2: Provides an effective date of July 1, 2022.
II. FISCAL ANALYSIS & ECONOMIC IMPACT STATEMENT
A. FISCAL IMPACT ON STATE GOVERNMENT:
1. Revenues:
Limitations on the use of step therapy may result in lower drug manufacturer rebates rendered to
AHCA, in an indeterminate amount.
2. Expenditures:
None.
B. FISCAL IMPACT ON LOCAL GOVERNMENTS:
1. Revenues: