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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 3/7/05
HB
SHORT TITLE Pharmacy Benefit Management Company Oversight SB SM 32
ANALYST Hanika-Ortiz
APPROPRIATION
Appropriation Contained Estimated Additional Impact Recurring
or Non-Rec
Fund
Affected
FY05
FY06
FY05
FY06
$0.1
Recurring
General
Fund
Duplicates HJM 98
SOURCES OF INFORMATION
LFC Files
SUMMARY
Synopsis of Bill
Senate Memorial 32 requests the New Mexico Health Policy Commission (HPC) to convene a
task force to study the need for regulation and oversight of Pharmacy Benefit Managers (PBMs).
Significant Issues
PBMs are largely unregulated, except for regulations governing pharmacy businesses, and ad-
minister and manage the purchase, dispensing and reimbursement of prescription drugs for pub-
lic and private insurance plans. PBMs handle prescription drug benefits for an estimated ninety-
five percent of all patients with prescription drug insurance. Many PBMs own and operate their
own mail order pharmacies.
The State relies on the services of PBMs to negotiate discounted prices for prescription drugs,
develop formularies of covered drugs, establish and maintain adequate networks of pharmacies
and manage utilization of drugs through prior authorization or utilization reviews. Prescription
drug pricing involves many different prices, rebates and discounts and involves many different
parties in the purchasing and dispensing of the product.
pg_0002
Senate Memorial 32-- Page 2
PERFORMANCE IMPLICATIONS
The HPC will lead the task force that will study the extent to which PBMs interact with covered
individuals and the value and propriety of those interactions. The task force will also evaluate the
positive and negative aspects of disclosure of financial and utilization information. The study
will include a complete listing of the approaches other states have taken in regulating the PBM
business, including the status of current legal actions.
FISCAL IMPLICATIONS
The cost of prescription drugs in New Mexico is estimated to be $804 million in 2004. The State
government pays for prescription drugs for more than 500 thousand people covered through
Medicaid programs, incarcerated in state prisons and for state employees and retirees.
The memorial suggests a task force study to study if it is in the best interest of the state to have
full knowledge of the pricing structure, negotiated discounts and supplementary payments that
PBM’s receive from prescription drug manufacturers in order to ensure that the lowest possible
prescription price is passed along to beneficiaries.
The memorial will also address disclosure of financial arrangements, conflicts of interest and the
sharing of data about utilization management generally covered in contracts between entities.
Agencies are being asked to participate with existing staff and resources.
ADMINISTRATIVE IMPLICATIONS
The findings and recommendations of the study will be presented to the interim legislative
Health and Human Services Committee in October of 2005.
OTHER SUBSTANTIVE ISSUES
Recent state and federal lawsuits have been filed alleging the possibility of serious conflict of
interest, understated savings from deals with prescription drug manufacturers and the use of in-
formation about utilization and prescribing patterns for marketing purposes rather than for bene-
fiting patient health.
AHO/yr