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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 2/12/05

HB

SHORT TITLE Create Pharmacy and Therapeutics Committee

SB 588

ANALYST Collard

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

$50.0

Recurring General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to SB 488, SJM 8

SOURCES OF INFORMATION

LFC Files

Responses Received From

Human Services Department (HSD)

New Mexico Medical Board

Regulation and Licensing Department Pharmacy Board (RLD)

Health Policy Commission (HPC)

SUMMARY

Synopsis of Bill

Senate Bill 588 creates a Pharmacy and Therapeutics (P&T) Committee appointed by the secre-

tary of the Department of Health (DOH) comprised of eleven pharmacists, physicians and other

licensed prescribers, with specified term limits. The committee is responsible for conducting

drug utilization reviews; conducting pharmacoeconomic research and analyzing the clinical

safety, efficacy and effectiveness of drugs within a therapeutic class of drugs; consulting with

appropriate specialists for each therapeutic class of drugs; recommending continuing education

activities and develop communication protocols; conducting other activities as needed to ensure

optimal therapeutic and cost-effective drug utilization; making recommendations to affected state

agencies on the development of a preferred drug list (PDL) required by Section 27-2-12.13

NMSA; and providing advice to HSD regarding the Medicaid PDL program. Additionally, the

bill requires the above-mentioned state entities to utilize the findings of the P&T committee and

prohibits HSD from using a contractor-developed PDL, in whole or in part. Finally, the bill ap-

Senate Bill 588 -- Page 2

propriates $50 thousand from the general fund for this purpose.

Significant Issues

HSD notes Section 3B, a new section of the public assistance act, restricts the ability of HSD to

contract for administration of a PDL, even as an interim measure. HSD currently contracts for

the administration of its PDL and estimates that this will save $3.5 million in state funds this year

and at least $7 million in state funds next year. The bill thus prohibits HSD from acting in a fis-

cally responsible manner, and would necessitate additional reductions to benefits and/or

reimbursement rates in order to make up for the $7 million.

HSD also notes the bill places restrictions on the Medicaid program within HSD, but places the

administration of the committee in DOH.

The bill would prohibit not only the current contract that HSD is using in order to more effec-

tively manage its pharmacy program, but would prohibit plans HSD has to expand this cost-

effectiveness program in FY06. HSD indicates the department is currently in the process

(through a Request for Proposals) of procuring services to manage and administer pharmacy

benefits for the Medicaid fee-for-service population. This new contract would address issues

such as drug over-utilization, inappropriate therapeutic duplication, possible under-utilization,

and the assurance of medical necessity of drug items.

HSD notes some of the bill’s provisions (perform drug utilization review, contract with evi-

dence-based practice centers, etc.) could be eligible for Medicaid Federal Financial Participation

(FFP). Since the bill only calls for a pharmacist or designee from HSD to be a member of the

P&T Committee and is otherwise under DOH, such savings cannot be realized.

HSD is concerned about potential conflicts of interest of committee members related to pharma-

ceutical companies or participation in drug formulary decision-making processes with other enti-

ties and notes it is not addressed.

The Medical Board indicates a large amount of work will be required by the committee to con-

duct the required research into the safety, efficacy and effectiveness of drugs within a therapeutic

class. It appears the work of this committee will be ongoing, but the administrative support and

per diem in future years will not be funded, unless as part of an ongoing DOH budget request. It

is anticipated that the work of the committee will result in cost savings related to drug purchas-

ing.

PERFORMANCE IMPLICATIONS

HSD indicates the bill would remove the ability of HSD to contract the administration of the

PDL as is being done currently in its initial phase. Because the administrative control of drug

over-utilization, inappropriate therapeutic duplication, possible under-utilization, assurance of

medical necessity of drug items, etc., the ability of HSD to act in a fiscally responsible manner

would be significantly restricted.

Senate Bill 588 -- Page 3

FISCAL IMPLICATIONS

The appropriation of $50 thousand contained in this bill is a recurring expense to the general

fund. Any unexpended or unencumbered balance remaining at the end of FY06 shall revert to the

general fund.

HSD notes the following implications:

General

Fund

Federal

Matching

Funds

Total

MEDICAID EXPENDITURES due to restriction on HSD

to contract for management of a Preferred Drug List as an

interim measure toward final PDL development

4,509.0

11,658.0 16,167.0

MEDICAID CONTRACTS due to restriction on HSD to

contract for management of a Preferred Drug List as an

interim measure toward final PDL development

150.0

150.0 300.0

HSD STAFF - Support positions to manage PDL recom-

mendations and a medical consultant

90.0

270.0 360.0

TOTALS

$4,749.0 $12,078.0 $16,827.0

HSD notes no funding is appropriated for contracting with an evidence-based practice center or

developing the information technology infrastructure needed to perform complex drug utilization

data drill down, aggregation and analysis.

RELATIONSHIP

Senate Bill 588 relates to Senate Bill 488 in that SB 588 creates an 11-member committee dupli-

cating the 9 member board created in SB 488. Both the committee and board are charged with

the same duties and membership.

Additionally, other cost-management strategies are the subject of Senate Joint Memorial 8,

which asks the Aging and Long-Term Services Department, the Office of the Attorney General

and the Board of Pharmacy to create a task force to study the feasibility, legality and safety of

importing prescription drugs from Canada and Mexico, taking into account the studies conducted

by other states.

TECHNICAL ISSUES

HSD notes cost-effectiveness is included in the P&T Committees “other activities” in Section

2A(5). Cost-effectiveness is a cornerstone of pharmacoeconomic research, but section 2A(2)

only calls for research and analysis of clinical safety, efficacy and effectiveness.

HPC notes, while the proposed board is charged to “recommend therapeutic classes of drugs…

to be included in the preferred drug list” and to “identify appropriate exclusions from the pre-

ferred drug list”, no criteria or performance measures are specified. Additionally, “therapeutic

class”, “appropriate exclusions”, and “medical appropriateness” are not defined in the bill.

Senate Bill 588 -- Page 4

OTHER SUBSTANTIVE ISSUES

The Medical Board notes this legislation appears to be in response to requirements in Section 27-

2-12.13 NMSA for a “preferred drug list” to be used by the Medicaid program and all state

health care programs purchasing prescription drugs. This committee will serve as the fact-

finding and decision-making entity to recommend the preferred drug list.

HPC indicates there is no requirement that the P&T Committee seek input from enrollees or vul-

nerable populations such as elderly or disabled people and no requirement of any mechanism to

ensure public participation or advice.

HPC also notes the bill does not appear to be inconsistent with the federal requirement for a sin-

gle administrative entity for state Medicaid programs.

It should be noted the Department of Health deferred to HSD for this analysis.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL.

RLD indicates pharmacists in New Mexico still would not be able to perform therapeuti-

cal/pharmacological drug substitutions. Therapeutic equivalent substitutions would still occur

based on the Federal Food and Drug Administration’s approved therapeutic equivalents.

The Medical Board notes there would be a potential lack of a broad-based group of professionals

researching and recommending drugs for use by individuals in state-funded programs.

KBC/sb