HB 704-FN – AS INTRODUCED

2005 SESSION

05-0283

01/09

HOUSE BILL 704-FN

AN ACT establishing the New Hampshire Rx advantage program and continually appropriating a special fund.

SPONSORS: Rep. DeJoie, Merr 11; Rep. N. Allan, Hills 26; Rep. Bergin, Hills 6; Rep. Marshall Quandt, Rock 13; Sen. Larsen, Dist 15; Sen. Hassan, Dist 23; Sen. D'Allesandro, Dist 20

COMMITTEE: Health, Human Services and Elderly Affairs

ANALYSIS

This bill establishes the New Hampshire Rx advantage program for prescription drugs. Under this bill, participating pharmacies shall sell prescription drugs to qualified residents at a discounted price. The bill grants rulemaking authority to the New Hampshire pharmacy board and the commissioner of the department of health and human services for the purposes of the bill.

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Explanation: Matter added to current law appears in bold italics.

Matter removed from current law appears [in brackets and struckthrough.]

Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

05-0283

01/09

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Five

AN ACT establishing the New Hampshire Rx advantage program and continually appropriating a special fund.

Be it Enacted by the Senate and House of Representatives in General Court convened:

1 Statement of Purpose. The general court finds that affordability is critical in providing access to prescription drugs for New Hampshire residents. Therefore, the general court hereby establishes the New Hampshire Rx advantage program for qualified New Hampshire residents, thereby increasing the overall health of New Hampshire residents, promoting healthy communities, and protecting the public health and welfare. It is the intent of this act to integrate the New Hampshire Rx advantage program as part of any statewide program for the uninsured. It is not the intent of this act to discourage employers from offering or paying for prescription drug benefits for their employees or to replace employer-sponsored prescription drug benefit plans that provide benefits comparable to those made available to qualified New Hampshire residents under this act.

2 New Chapter; New Hampshire Rx Advantage Program. Amend RSA by inserting after chapter 161-J the following new chapter:

CHAPTER 161-K

NEW HAMPSHIRE RX ADVANTAGE PROGRAM

161-K:1 Definitions. In this chapter:

I. “Average wholesale price” means the wholesale price charged on a specific commodity that is assigned by the drug manufacturer and is listed in a nationally recognized drug pricing file.

II. “Commissioner” means the commissioner of the department of health and human services.

III. “Covered drugs” means drugs that are on the New Hampshire preferred drug list.

IV. “Department” means the department of health and human services.

V. “Fund” means the New Hampshire Rx advantage program fund, established in RSA 161-K:5.

VI. “Initial discounted price” for a drug means the amount that participating retail pharmacies may charge qualified residents participating in the program for that drug.

VII. “Labeler” means an entity or person that receives prescription drugs from a manufacturer or wholesaler and repackages those drugs for later retail sale and that has a labeler code from the federal Food and Drug Administration under 21 C.F.R. 207.20(1999).

VIII. “Participating retail pharmacy” or “retail pharmacy” means a retail pharmacy located in this state, or another business licensed to dispense prescription drugs in this state, that participates in the program.

IX. “Program” means the New Hampshire Rx advantage program established under this chapter.

X. “Qualified resident” means a resident of this state who has a family income equal to or less than 350 percent of the federal poverty level and who is enrolled in the program. “Qualified resident” also means a resident of this state whose family incurs unreimbursed expenses for prescription drugs that equal 5 percent or more of family income or whose total unreimbursed medical expenses equal 15 percent or more of family income. For purposes of this definition, the cost of drugs provided under this chapter shall be considered an expense incurred by the family for eligibility determination purposes.

XI. “Secondary discounted price” means the initial discounted price minus any further discounts paid for out of the fund.

161-K:2 New Hampshire Rx Advantage Program Established. The department shall establish the New Hampshire Rx advantage program. The department may coordinate this program with other programs and may take actions to enhance efficiency, reduce the cost of prescription drugs, and maximize the benefits to the programs and enrollees, including providing the benefits of this program to enrollees in other programs. The components of the program shall be as follows:

I. A drug manufacturer or labeler that sells prescription drugs in this state through any other publicly-supported pharmaceutical assistance program shall enter into a rebate agreement with the department for this program. The rebate agreement shall require the manufacturer or labeler to make rebate payments to the state each calendar quarter or according to a schedule established by the department.

II. The commissioner shall negotiate the amount of the rebate required from a manufacturer or labeler in accordance with this paragraph.

(a) The commissioner shall take into consideration the rebate calculated under the Medicaid Rebate Program pursuant to 42 U.S.C. section 1396r-8, the average wholesale price of prescription drugs, and any other information on prescription drug prices and price discounts.

(b) The commissioner shall use the commissioner’s best efforts to obtain an initial rebate amount equal to or greater than the rebate calculated under rebates pursuant to 42 U.S.C. section 1396r-8.

(c) With respect to the rebate taking effect no later than October 1, 2005, the commissioner shall use the commissioner’s best efforts to obtain an amount equal to or greater than the amount of any discount, rebate, or price reduction for prescription drugs provided to the federal government.

III. Each participating retail pharmacy shall sell covered drugs to qualified residents at the lower of the initial discounted price and the secondary discounted price as such prices are determined by the department pursuant to this chapter.

(a) The department shall establish discounted prices for drugs covered by a rebate agreement and shall promote the use of efficacious and reduced-cost drugs, taking into consideration reduced prices for state and federally-capped drug programs, differential dispensing fees, administrative overhead, and incentive payments.

(b) Beginning January 1, 2006, a participating retail pharmacy shall offer the initial discounted price.

(c) No later than October 1, 2005, a participating retail pharmacy shall offer the secondary discounted price if available.

161-K:3 Retail Pharmacies; Rules; Operation of Program.

I. The New Hampshire pharmacy board, established in RSA 318, shall adopt rules, pursuant to RSA 541-A, requiring disclosure by participating retail pharmacies to qualified residents relative to the amount of savings provided as a result of the program. The rules shall include protection of any information that is proprietary in nature.

II. The department shall not impose transaction charges under this program on retail pharmacies that submit claims or receive payments under the program.

III. A participating retail pharmacy shall submit claims to the department to verify the amount charged to qualified residents.

IV. On a weekly or biweekly basis, the department shall reimburse a participating retail pharmacy for the difference between the initial discounted price and the secondary discounted price provided to qualified residents under the program.

V. The department shall conduct ongoing quality assurance activities.

161-K:4 Nonparticipating Manufacturers and Labelers. The names of manufacturers and labelers who do and do not enter into rebate agreements pursuant to this chapter shall be public information. The department shall release such information to health care providers and the public annually, beginning 6 months after the effective date of this chapter. The department shall impose prior authorization requirements in the program, as permitted by law, to the extent the department determines it is appropriate to do so in order to encourage manufacturer and labeler participation in the program and if the additional prior authorization requirements remain consistent with the goals of the program and the requirements of the federal Social Security Act, Title 19.

161-K:5 New Hampshire Rx Advantage Program Fund. There is hereby established in the office of the state treasurer a fund to be known as the New Hampshire Rx advantage program fund. The fund shall receive revenue from manufacturers and labelers who pay rebates as provided in 161-K:2, II and any appropriations or allocations designated for the fund. The purposes of the fund shall be to reimburse retail pharmacies for discounted prices provided to qualified residents; to reimburse the department for contracted services including pharmacy claims processing fees, administrative and associated computer costs, and other reasonable program costs; and to benefit any state sanctioned low cost drug program subsequently established. Moneys in the fund shall be nonlapsing and continually appropriated to the department. Interest on fund balances shall accrue to the fund. Surplus funds in the fund shall be used for the benefit of the program.

161-K:6 Rulemaking. The commissioner shall adopt rules pursuant to RSA 541-A, relative to:

I. Procedures for determining eligibility for the benefits under the program.

II. Procedures for issuing program enrollment cards.

III. Outreach efforts to build public awareness of the program and to maximize enrollment of eligible residents.

IV. Content and format of any forms required under this chapter.

V. Procedures for entering into rebate agreements with drug manufacturers or labelers.

VI. Manner of releasing information to the public under RSA 161-K:4.

161-K:7 Annual Report Required. The commissioner shall make an annual report beginning January 1, 2007 relative to the enrollment and financial status of the program, including any recommendations for legislation, to the speaker of the house of representatives, the president of the senate, and the governor.

3 New Paragraph; Pharmacy Board; Rulemaking. Amend RSA 318:5-a by inserting after paragraph XV the following new paragraph:

XVI. Rules for disclosure and confidentiality relative to the New Hampshire Rx advantage program, pursuant to RSA 161-K:3.

4 New Subparagraph; New Hampshire Rx Advantage Program Fund. Amend RSA 6:12, I by inserting after subparagraph (234) the following new subparagraph:

(235) Moneys deposited in the New Hampshire Rx advantage program fund pursuant to RSA 161-K:5.

5 Effective Date. This act shall take effect 60 days after its passage.

LBAO

05-0283

Revised 2/28/05

HB 704 FISCAL NOTE

AN ACT establishing the New Hampshire Rx advantage program and continually appropriating a special fund.

FISCAL IMPACT:

The Department of Health and Human Services and Board of Pharmacy indicate this bill will increase state expenditures and revenues by an indeterminable amount in FY 2006 and in each year thereafter. There will be no fiscal impact on county and local revenue or expenditures.

METHODOLOGY:

The Department of Health and Human Services made the following assumptions:

• This bill creates a state-sponsored pharmacy program, similar to programs started in Maine and Hawaii. Pharmacies that choose to participate in the program will provide “Medicaid-level” prices on certain “preferred” prescription drugs for residents with household incomes under 350% of the federal poverty level, and whose family incurs unreimbursed expenses for prescription drugs that equal 5% or more of family income, or whose total unreimbursed medical expenses equal 15% or more of family income. The state will negotiate rebates with pharmaceutical manufacturers to support the cost of the program and provide additional savings to enrollees.

• This program would be implemented in two phases. In the first phase, which would start in FY 2006, pharmacies agreeing to participate would provide discounted prices to enrollees. Based on Maine’s experience, rates paid to pharmacies may need to be slightly higher than the Medicaid rates in order to induce pharmacies to participate. The current rates paid by the Maine program are slightly higher than New Hampshire’s Medicaid rates, and only one-third of the pharmacies in Maine participate in the program. In the second phase, which would start in FY 2007, the state would negotiate rebates with pharmaceutical manufacturers based on a preferred drug list. The preferred drugs would include pharmaceuticals for which the manufacturers have agreed to offer rebates. Based on Hawaii’s experience, the pharmaceutical manufacturers would consider negotiating rebates when enrollment in the program reaches a threshold of 50,000 people. The Department assumed the program would reach this threshold in FY 2007, and used an enrollment of 50,000 to estimate the expenditures and revenues. Rebates would be deposited in the Rx Plus Fund and used to fund the program, and any excess revenue would eventually provide additional point of sale savings to enrollees.

• State appropriations will be necessary to start the program. The Department assumed that eventually the program would reach a break-even point and costs would be funded by the rebates. Rebates would not be sufficient to cover the start up and operating costs for the first two or three years. Manufacturer’s rebates are not available until several months after the medications are dispensed, and the revenue would increase gradually as enrollment increases.

• The Department assumed the program will not be required to repay the initial state general fund appropriation. Initial costs would include outreach and marketing, development of an enrollment system, and program staff. Based on staffing in the Hawaii program, staff would include a program director, an outreach specialist and five administrative staff to perform data-entry and process enrollment applications.

• In addition, costs will be incurred to support the second phase of the program. Systems and administrative capacity would be necessary to collect the pharmacy data needed to support the rebate calculations and claims, and to distribute excess rebate funds to pharmacies for rebate-based point of sale discounts. The Department assumed a Pharmacy Benefits Manager (PBM) under contract with the state would perform the functions. These costs cannot be determined without detailed discussions with potential vendors.

Based on these assumptions, the Department estimated the following costs to start and operate the program in the first year:

Marketing $300,000

Enrollment System $400,000

Program Staff: Seven employees, benefits and current expenses $350,000

Second Phase costs through PBM Unknown

The Department assumed the program would begin to receive rebate revenue in FY 2007, which would start to offset the ongoing operating costs. The Department estimated the rebate revenues as follows:

	FY 2006	FY 2007	FY 2008	FY 2009
Estimated Rebate Revenue	$ 0	$285,000	$780,000	$1,650,000

Due to the uncertainties concerning enrollment, ongoing costs, and the cost of PBM contract, the Department cannot accurately estimate the revenue and expenditures in future years or determine when the program will break-even and rebate revenue will fund all of the operating costs. The amounts presented are a best estimate based on the assumptions made.

The Department indicated information from Maine’s program suggests enrollees are saving about 15% off the retail prices on brand name drugs, and 60% off retail prices on generic drugs.

The Board of Pharmacy states this bill will require the Board to schedule 3 meetings in FY 2006 and 1 meeting in FY 2007 to promulgate rules. Each meeting will cost $300 (6 board members x $50 per diem), therefore, this bill will increase Board expenditures by $900 in FY 2006 and $300 in FY 2007.