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F I S C A L I M P A C T R E P O R T

SPONSOR Lujan, B.

ORIGINAL DATE

LAST UPDATED

1/31/06

2/10/06 HB 515/aHFl#1

SHORT TITLE Discount Prescription Drug Program

SB

ANALYST Lewis

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY06 FY07 FY08 2-Year

Total Cost

Recurring or

Non-Recurring

Fund

Affected

Total

55.1

45.1

100.2 Recurring General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates SB 460.

SOURCES OF INFORMATION

LFC Files

Responses Received From

Retiree Health Care Authority (RHCA)

Human Services Department (HSD)

Aging and Long-Term Services Department (ALTSD)

Health Policy Commission (HPC)

SUMMARY

FOR THE PUBLIC EMPLOYEE BENEFITS OVERSIGHT SUBCOMMITTEE

Synopsis of HFlA#1

The House Floor amendment repeals Sec. 27-1-15 NMSA 1978 (being Laws 2005, Chapter 160,

Section 1), which directed the Human Services Department, with the cooperation and assistance

of the Department of Health and the Aging and Long-Term Services Department, to establish a

prescription drug discount card program for New Mexico citizens who are under age 65 and do

not have any other prescription drug benefit, thus removing a conflict noted by the agencies in

their analysis.

Synopsis of Original Bill

House Bill 515 changes the name of the Senior Prescription Drug Program to the Discount Pre-

scription Drug Program and eliminates the age requirement for participation in the program.

House Bill 515/aHFl#1 – Page

2

FISCAL IMPLICATIONS

According to the Retiree Health Care Authority (RHCA), direct fiscal impact to RHCA from this

amendment would be additional staff time required to enroll members and raise public awareness

of the program. RHCA estimates that one additional FTE would be required (an Eligibility Inter-

viewer, Government Programs – Advanced (Pay Range 55)), at a midpoint annual salary of

$35,100. The cost of communicating the program expansion is estimated at $20,000 in FY07,

and $10,000 thereafter for general communication. The telephonic enrollment system will con-

tinue to cost about $10,000 per year.

SIGNIFICANT ISSUES

By eliminating the age requirement of 65 years, this bill would make all residents of New Mex-

ico eligible to participate in the Discount Prescription Drug Program.

According to the Retiree Health Care Authority (RHCA), RHCA’s current contract with Express

Scripts, Inc. (ESI) for the Senior Prescription Drug Program (SPDP) does not provide for any

direct compensation from the agency. Members pay 100% of the discounted costs for drugs. No

manufacturer rebates are generated from sales. ESI collects a dispensing fee of $1.50 per mail

order prescription and pays RHCA an administrative fee of $2.00 per drug claim adjudicated

through the mail service pharmacy (650 mail order prescriptions were filled in CY05).

Although RHCA is authorized to assess an annual enrollment fee of up to $60 per member, it has

never needed to do so. RHCA has received a $10,000 General Appropriation annually to admin-

ister this program; and telephonic enrollment system fees average about $800 per month, or

about $10,000 per year. Currently, RHCA staffs the SPDP, and the RHCA fund is reimbursed

from the SPDP fund.

RHCA notes that Medicare Part D provides a prescription drug benefit for those 65 and over who

have no other benefit. However,

there are gaps in coverage;

not all can afford the premium; and

those under 65 are not eligible.

The Discount Prescription Drug Program would assist in all three cases.

RHCA also notes that the Interagency Benefits Advisory Committee is currently in the RFP

process for a Pharmacy Benefit Manager (PBM), effective 7/1/06, with the award expected to be

announced any day. The SPDP was included in the RFP.

The Human Services Department (HSD) notes that this bill is similar to Senate Bill 689, enacted

in 2005, that directs HSD, with the cooperation and assistance of the Department of Health

(DOH) and the Aging and Long-Term Services Department (ALTSD), to establish a prescription

drug discount card program for New Mexico citizens who are under age 65 and do not have any

other prescription drug benefit. According to HSD, that program is in the process of being im-

plemented. And ALTSD notes that the agencies are currently analyzing proposals from several

entities interested in marketing a discount card program for individuals and families who are un-

der the age of 65.

HSD notes that this bill both duplicates and conflicts with that prior legislation, and argues that

House Bill 515/aHFl#1 – Page

3

the Retiree Health Care Authority is not the appropriate agency to be administering a discount

prescription drug program. HSD asserts that the program would be more appropriately adminis-

trated through collaboration between The Aging and Long-Term Services Department, the Hu-

man Services Department and the Department of Health.

Also taking note of the 2005 legislation described above by HSD, the Health Policy Commission

(HPC) asks, “Is it the intent of the bill to move this program from HSD to the Retiree Health

Care Authority.”

ADMINISTRATIVE IMPLICATIONS

RHCA notes that, in addition to the

one FTE recommended above, additional time would be re-

quired of RHCA administrators to implement the expansion and oversee the program.

OTHER SUBSTANTIVE ISSUES

An advantage to this bill’s expansion of the RHCA-administered Discount Prescription Drug

Program, as compared to the alternative HSD program, is that the RHCA program would be

available even to those New Mexicans who already have some prescription drug benefit. By con-

trast, the HSD program will not be available to anyone with an existing prescription benefit, no

matter how limited that benefit may be.

Furthermore, while the RHCA program is already up and successfully running, the HSD plan has

not yet launched. None of the agency analyses suggest that there would be any specific cost or

other benefit to having two separate programs offering similar benefits to the two different age

groups.

ALTERNATIVES

HSD, DOH, and ALTSD will continue to work on the process of creating and implementing a

discount card program for individuals under the age of 65.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

RHCA’s discount card program will remain limited to individuals over age 65 program.

ML/yr