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(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to HB 2, HB 298, HB 299, HB300, HB 301, HB 302, HB 303, SB 98, SB 140, SB 143, and SB 144

Duplicates HB 297

SOURCES OF INFORMATION

Human Services Department

Health Policy Commission

State Agency on Aging

SUMMARY

Synopsis of Bill

HB 297 appropriates $5 million non-recurring from the general fund to the Human Services Department (HSD) to design and implement a prescription drug discount plan under the state's Medicaid program that would provide prescription drugs only. The bill contains an emergency clause.

Significant Issues

Eligibility for the program would include New Mexico residency, lack of a prescription drug benefit, and having an income that is less than 300% of the federal poverty level. Income definitions would be the same as those used to determine Medicaid eligibility. Clients would pay an annual enrollment fee of $24.

SB 142 would require HSD to apply for an 1115 waiver no later than July 1, 2001.

SB 142 would require that the enrollment fees and drug manufacturer rebates be deposited into the general fund.

HSD would be required to publish in its monthly statistical report the number of program members, the amount of participating pharmacies, the total paid for prescription drugs under the program, the amount of rebates received, the volume of the top 50 prescriptions filled by type, and the average amount paid for each type.

FISCAL IMPLICATIONS

SB 142 appropriates $5,000.0 non-recurring in general funds for FY 01 and FY 02 which will be distributed as follows:

• $4,750.0 to make payments to pharmacies for prescription drugs filled under the program.
• $250.0 to apply for any necessary federal waiver and to administer the program.

The FTE discussed below will result in a recurring expense throughout the length of the program.

Expenditures of this appropriation is contingent upon the department receiving a waiver from the federal health care financing department of certain state plan provisions required pursuant to Title 19 of the federal Social Security Act.

Any unexpended or unencumbered balance remaining at the end of the fiscal year 2002 shall revert to the general fund.

The question needs to be asked could this general fund appropriation could result in leveraging $14 million in federal funds?

HSD reports on the difficulty of determining the fiscal impact by noting that the department does not have access to data on potential enrollment and utilization, and it is unlikely that pharmacies would be willing to provide such information without additional payments to compensate for administrative overhead.

ADMINISTRATIVE IMPLICATIONS

The following concerns were expressed by HSD:

• Medicaid drug pricing and claims processing structures are complex and therefore

a target date of July 2001 for waiver submission is problematic.

• Lawsuits filed by drug manufactures will require additional funding for attorney fees. (Pharmaceutical Research and Manufacturers of America legally challenged program implementation in Vermont.)

• One FTE for implementation and administration of the program would be insufficient. HSD would require staff to implement and administer the systems, do data analysis, conduct pharmacy outreach, oversee a pharmacy help desk, and perform audits to ensure accurate cost accounting and billing.

Based on previous waivers submitted by HSD the process may take 6 months to a year to complete.

RELATIONSHIP

HB 2, General Appropriations Act of 2001

HB 298, Indians: Prescription Drugs

HB 299, Health Insurance

HB300, Prescription Drug Senior Program

HB 301 Prescriptions: Fair Pricing Act

HB 302 Prescription Drug Program: Seniors

HB 303 Standard Co-Payments: Prescriptions

SB 98, General Appropriations Bill of 2001

SB 140, Indian Prescription Drug Purchasing

SB 143, Prescription Drug Senior Program

SB 144, Prescription Drug Bulk Purchasing

Duplicates HB 297

OTHER SUBSTANTIVE ISSUES

Comments provided by HSD list the following as problematic issues for the department:

• Section 3, paragraph C, indicates that the department will use the same methodology for income eligibility as that of the Medicaid program. However, the Medicaid program uses two basic income methodologies: one based on the Supplemental Security Income (SSI) cash assistance program, and one based on the former Aid to Families with Dependent Children (AFDC) program.

This could be addressed in the bill by eliminating paragraph C since the income maximum is discussed in Section 3, paragraph B or by amending Section 3, paragraph C by eliminating lines 6 thru 9.

• Section 4, paragraph C would require the state to provide pharmacies with a "list of current Medicaid prices for all prescription drugs and the average rebates provided for each drug based on the figures used by the department in the previous three months." This requirement would be difficult or impossible to comply with, due to several factors. Medicaid drug pricing is the lower of three possible amounts: the Upper Payment Limit (UPL) amounts set by the federal government, the usual and customary price, and the billed amount. Covered drugs are dynamic, and can change from day to day. The rebate amounts can fluctuate, and the amounts are not available prospectively. There are currently over 130,000 drug items, with prices that can change weekly. Given that volume of information, it is unlikely that any pharmacies would participate in the program under the suggested scenario.

These concerns could be addressed by amending Section 4, paragraph C to indicate that

the department shall provide the data that pharmacies require to implement the program (see HPC comments below). The language of SB 142 should provide the greatest amount of flexibility to allow HSD to implement a workable system.

The State Agency on Aging indicates that persons with very limited drug benefits or those who had exhausted benefits would not be covered by the legislation. The Agency goes on to say that

even if the State negotiates a good rebate price from a drug manufacturer, what safeguards keep that supplier from shifting a cost burden onto other customers?

The following data was provided by the HPC:

• The Federal Poverty Level 300% is $25,050 for single person, and $51,150 for a family of four.
• The 1999 Census Bureau Current Population Survey estimates 25.8% uninsured New Mexicans, compared to a national rate of 15.5%.
• 50.4% of all New Mexico workers and family members had employment-based insurance coverage, which means the other half of working New Mexicans were not covered through their employers.
• According to the Health Policy Commission 1999 Household Survey, 67% of 3,900 households surveyed needed access to prescription drugs, yet 70% of those surveyed had no way to pay for those drugs.
• Uninsured people pay the highest cost for drugs.
• Pharmacy costs have increased 15-20% between 1990 and 1998, according to the National Business Coalition on Health.
• Seventeen states have begun pharmacy assistance programs, beginning with Maine in 1975, according to recent AARP statistics.
• The Medicaid program has income, resource and/or categorical requirements, which may be used for determining prescription drug program eligibility.
• Pharmacies may be required to fill out more paperwork and deal with the bureaucracy of submitting claims and waiting for rebates.

HPC also provided the following information on discounts and rebates:

• The Medicaid "best price" is determined by the federal government.
• Federal Qualified Heath Centers purchase drugs at established discount, of which the formula for discount is determined by the federal government through the federal supply schedule - prices adjusted quarterly.
• Inter-agency Purchasing Cooperative, which requires four agencies to complete a single process for the procurement of health benefits (including pharmacy), and negotiates a "best price" from prescription drug carriers (pharmacy insurance companies).

• The Health Insurance Alliance is a purchasing cooperative, but is a "select" cooperative for the people they cover as enrollees, and discounts are negotiated by Pharmacy Benefit Managers for the carriers.

BD/ar