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ARIZONA STATE SENATE
RESEARCH STAFF
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JASON BEZOZO SENIOR
LEGISLATIVE RESEARCH
ANALYST HEALTH COMMITTEE Telephone: (602) 542-3171 Facsimile: (602) 542-7833 |
HEALTH COMMITTEE
DATE: March 7, 2002
SUBJECT: Strike Everything
Amendment to S.B. 1091 – prescription medication;
rebates; cards
Purpose
Requires the Arizona Health Care Cost Containment System (AHCCCS) administration to contract with a pharmacy benefits manager (PBM) to negotiate discounts for drugs covered under the acute care program and the children’s health insurance program (CHIP). Establishes a board to develop a formulary of discounted drugs and creates a program allowing all Medicare beneficiaries to purchase drugs on the formulary at the negotiated discount prices.
Background
Congress has established several drug discount programs, such as the Medicaid drug rebate program, each designed to reduce the cost of drugs for federal purchasers. One such program is the federal supply schedule – a catalog of prices including pharmaceuticals – that allows federal agencies to purchase drugs off contracts that require pharmaceutical manufacturers to match the prices of their most favored customers. Federal supply schedule prices are not limited by ceiling prices, thus the cost of pharmaceuticals on the federal supply schedule may increase.
According to a report on federal drug discount programs, Congress created a federal ceiling price in 1992 for the four largest federal purchasers of drugs – the Department of Defense, the Department of Veterans Affairs (VA), the Public Health Service and the Coast Guard. For reimbursement of drugs from these four federal agencies and state Medicaid plans, the federal ceiling price program requires a pharmaceutical manufacturer to enter into a pricing agreement with the VA that is based on a minimum discount for covered drugs. This discount is approximately equal to 47.9 percent of the average wholesale price (the price manufacturers suggest wholesalers charge pharmacies).
The strike everything amendment to S.B. 1091 requires the AHCCCS administration to contract with a PBM to negotiate discount prices for drugs with pharmaceutical manufacturers and labelers. The negotiated discounts must not be less than the discounts provided under the federal ceiling price program. On July 1, 2003, the responsibility of covering prescription medications for the acute care program and CHIP transfers from the AHCCCS health plans to the PBM. The amendment also establishes a board to develop a formulary of drugs with discount agreements and a list of nonformulary drugs that require prior authorization. In addition, the amendment creates a prescription card program on July 1, 2003, providing access to formulary drugs at the negotiated discount prices to residents who are Medicare beneficiaries.
A fiscal note has been requested from the Joint Legislative Budget Committee.
Provisions
Drug Discount Agreements
1. Requires the AHCCCS administration to contract with a PBM to cover prescription drugs for the acute care program and CHIP beginning on July 1, 2003.
2. Requires the PBM to negotiate discount prices for drugs with manufacturers and labelers.
3. Allows pharmaceutical manufacturers or labelers to negotiate drug discounts that are not less than the discounts provided under the federal ceiling price program for the acute care program, CHIP and the prescription card program.
4. Requires the AHCCCS administration and the Arizona Preferred Medications Formulary Review Board (Board) to review the negotiations and discounts.
5. Requires the Board to place a drug on a closed formulary for the acute care program, CHIP and the prescription card program if the manufacturer or labeler negotiates a discount.
6. Requires the Board to place a drug on a prior authorization list if the PBM and manufacturer or labeler fails to agree on a discount or the discount results in a higher price than the discount provided under the federal ceiling price program.
7. Authorizes the AHCCCS Director to adopt rules for the prior authorization of medications and for implementing the discount agreements.
8. Requires AHCCCS to release to the public the names of manufacturers and labelers that do not enter into discount agreements.
9. Authorizes the Department of Administration to enter into an intergovernmental agreement with AHCCCS for discounts on drugs for state employees if it is beneficial to the State.
Prescription Card Program
10. Requires, on July 1, 2003, AHCCCS to establish a prescription card program to provide discounts on formulary drugs to Medicare beneficiaries.
11. Requires AHCCCS or the PBM to contract with wholesalers and retail pharmacies to deliver discounted drugs to participants.
12. Requires the discounts under the prescription card program to equal the negotiated discounts for the acute care program and CHIP. Allows participating retail pharmacies to collect and retain a dispensing fee and collect an administrative fee for the AHCCCS administration.
13. Specifies residents who are eligible for Medicare are eligible for the prescription card program except for persons who are eligible for the acute care program or CHIP.
14. Requires an applicant to verify the person’s ineligibility for the acute care program and CHIP.
15. Requires AHCCCS to establish enrollment procedures and provide outreach.
16. Authorizes AHCCCS or the PBM to charge participants an annual fee.
17. Requires AHCCCS to adopt rules requiring participating retail pharmacies to disclose to participants the amount of savings due to the prescription card program. Requires the rules to protect proprietary information.
18. Requires, on a monthly basis, participating retail pharmacies to verify the amounts charged to participants and provide AHCCCS or the PBM with utilization data.
19. Requires AHCCCS and the PBM to protect the confidentiality of all information protected by law.
20. Prohibits a manufacturer or labeler that negotiates drug discounts from charging a wholesaler or participating retail pharmacy a fee for a drug that is more than the negotiated discount price.
21. Requires AHCCCS to submit an annual report on the prescription card program, including the savings from the discounts, beginning on December 15, 2003 to the Governor, the President of the Senate and the Speaker of the House of Representatives.
22. Allows AHCCCS to seek federal waivers to implement the prescription card program.
23. Establishes the Arizona preferred medications discount fund, consisting of annual and administrative fees, and specifies monies in the fund are for administering the prescription card program, continuously appropriated and nonlapsing.
24. Specifies eligibility for the prescription card program does not make a person automatically eligible for other AHCCCS programs.
Arizona Preferred Medications Formulary Review Board
25. Establishes the Board consisting of the following members:
a. two licensed physicians, who are appointed by the Governor.
b. two licensed pharmacists, who are appointed by the Governor.
c. one representative of a senior citizen organization, who is appointed by the Governor.
d. one representative of the PBM, who is appointed by the Governor.
e. the AHCCCS Director or the Director’s designee.
26. Requires the Board to develop a closed formulary of all drugs under a discount agreement and develop a prior authorization list of all nonformulary drugs.
27. Authorizes the Board to provide input to the PBM on prior authorization procedures.
28. Prescribes staggered three-year terms, including initial terms, for public members.
29. Specifies public members are ineligible for compensation but are eligible for reimbursement of subsistence and travel expenses.
30. Requires AHCCCS to provide administrative support to the Board.
Miscellaneous
31. Appropriates $1 million in FY 2002-2003 from the medically needy account to the AHCCCS administration for start-up costs. Reverts unexpended and unencumbered monies on July 1, 2003.
32. Exempts the AHCCCS administration from the formal rule making process for two years.
33. Provides definitions.
34. Provides for a general effective date except as specified.
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