FOR CAUCUS & FLOOR ACTION
REVISED
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ARIZONA STATE SENATE
RESEARCH STAFF
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KATHY SEEGLITZ ASSISTANT RESEARCH ANALYST HEALTH COMMITTEE Telephone: (602) 542-3171 Facsimile: (602) 542-7833 |
DATE: April 19, 2001
SUBJECT: Strike Everything Amendment to H.B. 2424
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Purpose
Allows an eligible person to receive a financial subsidy from AHCCCS for prescription drugs that is equal to the average rebate pharmaceutical manufacturers pay the Arizona Health Care Cost Containment System (AHCCCS). Creates a prescription medication subsidy pilot program under AHCCCS. Contains appropriations for both programs.
Background
According to the State Health Insurance Assistance Program, as of January 1, 2001, some health care insurers dropped coverage of their Medicare health maintenance organization (HMO) plans for approximately 31,000 Arizona Medicare beneficiaries. Medicare HMOs continue to serve Maricopa, Pima, Pinal and Santa Cruz counties. The remaining plans have set maximum brand-name drug benefits or have removed brand names from formularies, raised co-payment requirements or have eliminated prescription medication benefits completely.
According to 1999 federal Health Care Financing Administration (HCFA) national health expenditure data, the costs of prescription medications grew 17 percent in 1999. Also, the average cost per senior was $1,196 per year. In response to the prescription medication needs of seniors and disabled individuals, particularly those with low-incomes, 23 states have implemented some type of pharmaceutical assistance program.
Pharmaceutical benefits management companies (PBMs) are intermediaries that administer prescription drug programs for third party payers, managed care organizations and others. A PBM’s primary function is to design formularies, handle reimbursements, manage and review drug utilization and negotiate rebates and discounts from pharmaceutical manufacturers and retail pharmacies. According to a report by the Kaiser Family Foundation, PBMs manage over 70 percent of all retail pharmacy prescriptions involving third party payers.
The strike everything amendment to H.B. 2424 creates a pilot program to provide limited prescription medication coverage to Medicare beneficiaries whose incomes are between 100 and 200 percent of the federal poverty level (FPL); $8,590-$17,180 for a household of one; and who reside in a county without Medicare HMO prescription drug coverage. The prescription medication subsidy pilot program requires an eligible person to spend a specified amount on medications during the calendar year to receive a 50% discount on additional prescription medication purchases during the same calendar year. The amendment appropriates $8.8 million from the state general fund to AHCCCS over the next two fiscal years for the program.
Additionally, the strike everything amendment allows, beginning January 1, 2002, an eligible person to receive a financial subsidy from AHCCCS for prescription drugs equal to the average rebate pharmaceutical manufacturers pay AHCCCS pursuant to federal law. Eligibility is limited to persons who do not qualify for AHCCCS, have a household income of up to 300 percent FPL ($25,770 for a household of one) and do not have prescription medication coverage. The amendment appropriates $4 million in FY 2001-2002 from the medically needy account to AHCCCS for start up costs for the program and the state match for the initial reimbursement to participating pharmacies.
Provisions
Prescription Drug Subsidy Program
1. Allows, beginning January 1, 2002 and upon HCFA approval, an eligible person to receive a financial subsidy from AHCCCS for prescription drugs that is equal to the average rebate pharmaceutical manufacturers pay AHCCCS pursuant to federal law.
2. Limits eligibility to persons who do not qualify for AHCCCS, have a household income of up to 300 percent FPL and do not have prescription drug coverage.
3. Requires AHCCCS to apply for a waiver from HCFA by October 1, 2001 and allows AHCCCS to negotiate for expanded coverage if the waiver request is denied.
4. Prescribes a formula for participating pharmacies to charge for prescription drugs to eligible persons.
5. Requires AHCCCS to reimburse pharmacies at the amount of the average rebate paid by pharmaceutical manufacturers for each prescription drug.
6. Allows AHCCCS to charge an annual fee to cover administrative costs.
7. Establishes the Arizona prescription discount fund consisting of annual fees, rebate payments from pharmaceutical manufacturers, legislative appropriations and federal matching funds.
8. Requires fund monies to be used for the program and specifies the fund monies are continuously appropriated and nonlapsing, unless HCFA denies the waiver by June 30, 2003.
9. Appropriates $4 million in FY 2001-2002 from the medically needy account to the AHCCCS administration for the prescription drug subsidy program, including start up costs and initial reimbursement to participating pharmacies.
Prescription Medication Coverage Pilot Program
10. Establishes, subject to the availability of monies, an AHCCCS pilot program to provide limited prescription medication subsidies for eligible persons.
11. Requires an eligible person to qualify for Medicare; have an income between 100 percent and 200 percent FPL; and be a resident of either a county without a Medicare HMO or with a Medicare HMO that does not provide prescription benefits.
12. Allows AHCCCS to contract with a PBM to provide the prescription drug coverage.
13. Requires a person to pay an enrollment fee established by AHCCCS in order to receive an enrollment card.
14. Specifies an enrollment card expires one year from the date of issue except cards issued after July 1, 2002 expire by July 1, 2003.
15. Prohibits AHCCCS from issuing enrollment cards after December 30, 2002.
16. Requires use of enrollment cards to track pharmacy purchases and to provide benefits at pharmacies after the deductible is paid.
17. Requires AHCCCS to cover one-half of the cost of a person’s prescription medication that exceeds the following deductibles each calendar year:
- For persons between 100-150% FPL – $500 per calendar year.
- For persons between 150-200% FPL – $1,000 per calendar year.
18. Requires, beginning December 30, 2001, AHCCCS to adjust the deductible each calendar year by 50 percent of the medical inflation rate.
19. Allows AHCCCS to reduce the deductible up to $300 if less than 75 percent of the previous year’s appropriation has not been spent.
20. Requires AHCCCS or the PBM to reimburse pharmacies upon receipt of claims.
21. Limits reimbursement to prescription medications approved by the federal drug administration and purchased within the United States.
22. Requires AHCCCS to use a simplified eligibility form to screen eligible persons for other programs.
23. Prohibits AHCCCS or the PBM from purchasing or distributing medication under the program.
24. Requires AHCCCS or the PBM to reimburse eligible persons retroactively to January 1, 2001.
25. Establishes the prescription medication coverage fund consisting of enrollment fees and legislative appropriations.
26. Appropriates $3.9 million in FY 2001-2002 and $4.1 million in FY 2002-2003 from the state general fund to AHCCCS for the prescription medication subsidy pilot program.
27. Appropriates $400,000 in FY 2001-2002 and FY 2002-2003 from the state general fund to AHCCCS for administrative costs associated with implementing the program.
28. Prohibits AHCCCS from paying claims until the next fiscal year if FY 2001-2002 monies are exhausted.
29. Exempts the appropriations from lapsing.
30. Repeals the program on October 1, 2003 or on enactment of federal legislation that provides prescription medication coverage greater or equal to that provided by the state program.
31. Requires AHCCCS to provide reimbursement until the expiration of any active enrollment cards.
32. Requires AHCCCS to deposit any unspent monies in the state general fund when the program is repealed.
Miscellaneous
33. Defines “federal poverty guidelines”.
34. Exempts AHCCCS from the administrative rule making process for the program and requires AHCCCS to provide the public with at least two opportunities to comment on the proposed rules.
35. Provides for a general effective date.
Amendments
Adopted by Committee
1. Adopted the strike everything amendment.
Senate
Action
APPROP 4/18/01 DPA/SE 7-2-3
KS/ac