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F I S C A L I M P A C T R E P O R T
SPONSOR Feldman
DATE TYPED 2/18/05
HB
SHORT TITLE Pharmacy Benefits Manager Regulation Act
SB 532
ANALYST Hanika-Ortiz
APPROPRIATION
Appropriation Contained Estimated Additional Impact Recurring
or Non-Rec
Fund
Affected
FY05
FY06
FY05
FY06
See Narrative
Recurring
Pharmacy
Benefits
Manager Fund
See Narrative
Recurring
Insurance
Department
Suspense Fund
REVENUE
Estimated Revenue
Subsequent
Years Impact
Recurring
or Non-Rec
Fund
Affected
FY05
FY06
See Narrative
Recurring Pharmacy Benefits
Manger Fund
See Narrative
Recurring Insurance Depart-
ment Suspense
Fund
SOURCES OF INFORMATION
LFC Files
Responses Received From
Pharmacy Board
Human Services Department (HSD)
Health Policy Commission (HPC)
SUMMARY
Synopsis of Bill
SB 532 amends sections of the Insurance Code and creates the Pharmacy Benefit Manager Regu-
lation Act which establishes new regulatory authority for the Insurance Division of the Public
pg_0002
Senate Bill 532- Page 2
Regulation Commission (PRC) over Pharmacy Benefits Mangers (PBMs). Authority is given to
the PRC to establish rules, participation fees, audit procedures, disclosures, confidentiality poli-
cies, enforcement authority and prohibited practices for PBMs that have New Mexico contracts.
The purpose of the Act is to promote, preserve, and protect the public health, safety, and welfare
through effective regulation and licensing of PBM companies.
Significant Issues
PBMs administer prescription drug benefits for managed care companies, large employers, and
government agencies. HPC notes that under provision established in SB 532, PBM’s will func-
tion under, and be monitored by, the Superintendent of Insurance.
In SB 532, under the new Pharmacy Benefits Manager Regulation Act:
Sections 1 and 2 cite the title of the Act and provide definitions.
Section 3 defines license requirements and events for a license to be revoked, suspended or de-
nied for renewal.
Section 4 requires the Superintendent to promulgate rules with regard to business and financial
issues.
Section 5 provides regulations regarding contract and performance expectations in providing
pharmacist services to pharmacies, including time limits for contract execution and payments.
Section 6 provides disclosure procedures for rebates, utilization discounts, and other revenues
received from pharmaceutical companies.
Section 7 states consumer contact as limited unless otherwise authorized.
Section 8 defines confidentiality policy including liability for damages resulting from disclosure.
Section 9 defines audit request and performance procedures.
Section 10 requires drug substitutions to be in accordance with the Drug Product Selection Act.
Section 11 defines enforcement procedures for non-compliance, and opportunities for due proc-
ess.
Section 12 relates remedy for civil action for enforcement under the Act.
Section 13 creates the PBM Fund in the State Treasury from collected fees and penalties, to be
used to administer the Act.
Section 14 clarifies fee distribution of 50% to HSD for a preferred drug list, and 50% to Fund.
Section 15 establishes an amended fee schedule.
Section 16 clarifies fees received do not override Subsection Z of Section 59A-6-1 NMSA 1978.
pg_0003
Senate Bill 532- Page 3
PERFORMANCE IMPLICATIONS
HSD notes SB 532 relates to the state’s pharmaceutical buying power performance measures.
PBMs reduce pharmaceutical costs through direct negotiations with retail pharmacies and with
drug manufacturers for rebates and other discounts.
FISCAL IMPLICATIONS
HSD reports insurance companies are assessed 4% for premiums paid to their organizations.
Once Medicare Part D Drug plans are created, they will not be included in those assessments be-
cause PBMs will administer Medicare Part D drug plans. HSD believes this may create a loss of
revenue for the state, especially in the Medicaid program. SB 532 would assess a licensure fee to
all PBMs through the Division of Insurance to make up for that loss and to help develop and
maintain a required preferred drug list, as well as provide funding for oversight.
SB 532 creates the Pharmacy Benefits Manager Fund in the state treasury and provides for con-
tinuing appropriations. The LFC objects to including continuing appropriation language in the
statutory provisions for newly created funds. Earmarking reduces the ability of the legislature to
establish spending priorities.
Fees and penalties pursuant to the Pharmacy Benefits Manager Regulation Act will be deposited
into the newly created Pharmacy Benefits Manger Fund in the State Treasury. Money in the
Fund will be appropriated to the Insurance Division of the PRC to administer the Pharmacy
Benefits Manager Regulation Act. Money in either fund shall not revert to the General Fund.
ADMINISTRATIVE IMPLICATIONS
HSC reports the need to collect and evaluate data on Medicare individuals to ensure coordination
of care and disease management initiatives.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
Relates to The Prescription Drug Information Act of 2003, requiring PBMs doing business New
Mexico disclose the price paid to drug manufacturers.
Duplicate of HB 622, Pharmacy Benefits Manager Regulation Act
TECHNICAL ISSUES
The Pharmacy Board has the following concerns:
Page 2 (C) The maintenance drug definition is not clear on whether or not “as needed” or “prn”
medications are considered maintenance drugs.
P 8-9 (8) Information obtained by the superintendent. A provision should be included for disclos-
ing such information to the Pharmacy Board.
Page 10 (10) Pharmacists are the actual persons substituting one drug for another. This is regu-
lated by the Pharmacy Board. PBM’s do not substitute drugs. They do sometimes require phar-
pg_0004
Senate Bill 532- Page 4
macists to do so during the point of sale online adjudication process, or they require a prior au-
thorization in order for the pharmacist to dispense the drug prescribed.
OTHER SUBSTANTIVE ISSUES
Caremark opposes SB 532 and believes that transparency legislation requiring PBMs to disclose
rebates, discounts, or other revenues may increase costs for consumers and payors and decreases
competition. They believe once rebates become public, manufacturers and pharmacies know
what their competitor’s discounts are, and may have little incentive to compete on price and re-
imbursement. Caremark believes keeping pricing terms confidential is critical to ensuring com-
petition continues among PBM’s, manufacturers, and pharmacies, which may result in lower
overall prescription drug benefit costs for health plan sponsors and consumers.
WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL.
PBMs will have no direct regulatory oversight which could compromise public health and safety.
AHO/lg