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

SPONSOR Jennings

ORIGINAL DATE

LAST UPDATED

1/29/08

HB

SHORT TITLE

Prescription Drug Program Expenditures

SB 354

ANALYST C. Sanchez

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

$3303.0

$474.0

Recurring

Pharmacy

(Parenthesis ( ) Indicate Expenditure Decreases)

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY08

FY09

FY10 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total $14.0

$474.0

$14.0 $502.0 Recurring Pharmacy

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Regulation and licensing Department (RLD)

NM Health Policy Commission (NMHPC)

SUMMARY

Synopsis of Bill

Senate Bill 354 appropriates all fees collected from wholesale drug distributors, drug

manufacturers and drug warehouses to be used for funding a prescription drug program serving

persons pursuant to the Medical Insurance Pool Act.

Current statute provides that amounts paid into the Pharmacy Fund prior to October 1, 2005

shall be used for a prescription drug program for persons over the age of sixty-five.

SB354 appropriates amounts paid into the Pharmacy Fund to the Board of Pharmacy for a

prescription drug program serving persons pursuant to the Medical Insurance Pool Act.

Senate Bill 354 – Page

2

FISCAL IMPLICATIONS

The appropriation of all fees collected from the wholesalers/manufacturers does not have a limit

and therefore all fees collected from that category would be utilized for the funding of the New

Mexico Medical Insurance Pool prescription drug program.

A person is eligible for a pool policy only if on the effective date of coverage or renewal of

coverage the person is a New Mexico resident, and:

(1) is not eligible as an insured or covered dependent for any health plans that provide

coverage for comprehensive major medical or comprehensive physician and hospital

services;

(2) is currently paying a rate for a health plan that is higher than 125% of the pool's

standard rate;

(3) has a mental health diagnosis and has individual health insurance coverage that

does not include coverage for mental health services;

(4) has been rejected for coverage for comprehensive major medical or comprehensive

physician and hospital services;

(5) is only eligible for a health plan with a rider, waiver or restrictive provision for that

particular individual based on a specific condition;

(6) has a medical condition that is listed on the pool's pre-qualifying conditions;

(7) has as of the date the individual seeks coverage from the pool an aggregate of 18 or

more months of creditable coverage, the most recent of which was under a group health

plan, governmental plan or church plan as defined; or

(8) is entitled to continuation coverage pursuant to Section 59A-23E-19 NMSA 1978.

According to a 2006 FIR for SB726, Transfer of Prescription Drug Funds, a joint powers

agreement was in place through 2005 to fund a senior drug program administered through the

New Mexico Medical Insurance Pool (NMMIP). The Pharmacy Board had collected and set

aside $3,271,585.98. However, there were far fewer persons than expected enrolled in the

program, with the result that NMMIP had only billed the board a total of $39,696 through July

2005. The total due to NMMIP was somewhat higher, reflecting additional reimbursements

through the end of 2005.

As a result, after meeting its obligations to NMMIP, the Pharmacy Fund has approximately $3.2

million available for another prescription drug program for persons over the age of sixty-five.

Complicating the matter, the board has never (until now – see below) been given budgetary

authority to spend the money collected for this purpose and has not been able to reimburse the

NMMIP for its expenditures. As of 2/6/06, the Pharmacy Board indicated that an attempt was

being made to amend House Bill 2 in the Senate to provide the necessary authority for the

Pharmacy Board to reimburse NMMIP and to transfer the remaining funds to the ALTSD for a

senior prescription drug program.

The Pharmacy Board currently has 657 licensees in this category. The current fee, set by rule, is

$700 for a 2-year permit. The Board typically issues approximately 40 new licenses in this

category each year. The fees collected from these new licensees would also be used to fund the

prescription drug program.

Senate Bill 354 – Page

3

Operating Revenue Loss

$700 X 657 = 459,900 from current registrants every two years.

$350 X 40 new each year = 14,000 per year

The fees from drug wholesalers/manufacturers typically have provided one third of the Pharmacy

Board’s operating revenue each year. The Board would have to drastically increase its fees for all

the other licensees in order to maintain its current level of services.

SIGNIFICANT ISSUES

The fees from drug wholesalers/manufacturers resulted from legislation passed in 2004, were

increased to $5,000 per year. The increased fee was collected for two years (August 1, 2004

through October 1, 2005). The total collected was 3.3 million dollars. The legislation specified

the money was to be used for a senior prescription drug benefit for persons older than 65 until

the Federal Medicare Part D program began. The Federal program began Jan 1, 2006. The

number of persons utilizing the NMMIP drug program was initially 20 persons. The program

now has 10 persons enrolled. Those persons chose to remain in the program because the benefits

exceed those provided by Medicare Part D.

The Board currently has approximately $3,096,000 remaining in the Pharmacy Fund from the

fees collected in 2004-2005.

OTHER SUBSTANTIVE ISSUES

There is currently a prescription drug coverage program under Medicare so making the fund

available beyond that population is sound policy. The revised language broadens the

applicability, as well as, requires participation and oversight by the Pharmacy Board.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

The Board needs the ability to continue funding the NMMIP prescription drug program utilizing

the money collected in 2004 and 2005 from drug wholesalers and manufacturers. Without some

legislation that allows the Pharmacy Board to utilize those funds for the intended purpose the

funds will remain in the Pharmacy Fund.

CS/bb