LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session March 20, 2001 TO: Honorable Patricia Gray, Chair, House Committee on Public Health FROM: John Keel, Director, Legislative Budget Board IN RE: HB416 by Maxey (Relating to requiring drug wholesalers to provide certain information to the Texas Department of Health.), As Introduced ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds for * * HB416, As Introduced: positive impact of $6,287,761 through the * * biennium ending August 31, 2003. * * * * The bill would make no appropriation but could provide the legal * * basis for an appropriation of funds to implement the provisions of * * the bill. * ************************************************************************** General Revenue-Related Funds, Five-Year Impact: **************************************************** * Fiscal Year Probable Net Positive/(Negative) * * Impact to General Revenue Related * * Funds * * 2002 $1,945,508 * * 2003 4,342,253 * * 2004 4,490,834 * * 2005 4,643,335 * * 2006 4,801,016 * **************************************************** All Funds, Five-Year Impact: *************************************************************************** *Fiscal Probable Probable Probable Probable * * Year Savings/(Cost) Savings/(Cost) Savings/(Cost) Savings/(Cost) * * from GR Match from GR Match from Federal from Federal * * for Medicaid for Medicaid Funds - Federal Funds - Federal * * 0758 0758 0555 0555 * * 2002 $(148,000) $2,616,885 $(148,000) $3,958,202 * * 2003 0 5,427,816 0 8,168,918 * * 2004 0 5,613,542 0 8,444,916 * * 2005 0 5,804,169 0 8,731,692 * * 2006 0 6,001,270 0 9,028,206 * *************************************************************************** ***************************************************** * Fiscal Year Probable Revenue Gain/(Loss) from * * Vendor Drug Rebates (State Share) * * 0706 * * 2002 $(523,377) * * 2003 (1,085,563) * * 2004 (1,122,708) * * 2005 (1,160,834) * * 2006 (1,200,254) * ***************************************************** Technology Impact One-time automation costs at the Department of Health (TDH) are assumed to include 1,000 hours at $76 per hour. One-time automation costs at the Department of Human Services (DHS) are assumed to include 2,000 hours at $110 per hour. The federal share of automation expenses would be 50%. Fiscal Analysis The bill would require wholesale drug distributors to file annually with TDH information showing the purchase price the distributor pays for each drug the distributor sells in this state. The bill would allow TDH and the Office of the Attorney General to investigate the distributor to determine the accuracy of information. The bill would become effective September 1, 2001. Methodology It is assumed the availability of detailed cost information will allow the Medicaid Vendor Drug program (operated by TDH) to negotiate a 1% discount off of the current pricing structure, effective March 2001. The unadjusted average cost (price) per prescription paid by the program in FY 2001 is assumed to be $47.33. No increases are assumed for future years. The estimated number of annual Medicaid prescriptions totals 27,784,015 in FY 2002, 28,727,517 in FY 2003, 29,703,059 in FY 2004, 30,711,729 in FY 2005, and 31,754,651 in FY 2006. Savings would accrue to federal funds and State General Revenue Match for Medicaid. The federal share would total 60.20% in FY 2002, 60.08% in FY 2003, and 60.07% in each subsequent year. Approximately 20% of the General Revenue for the Vendor Drug program is provided through manufacturer rebates. A reduction in General Revenue costs would in turn reduce revenue (Vendor Drug Rebates). This reduction would partially offset the savings identified above. Potentially, the bill could result in savings to other prescription drug programs operated by TDH and other state agencies. The fiscal impact to other programs has not been estimated. Local Government Impact No fiscal implication to units of local government is anticipated. Source Agencies: 302 Office of the Attorney General, 501 Texas Department of Health LBB Staff: JK, HD, PP, SW