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: HB417 by Maxey (Relating to requiring drug manufacturers
to provide certain information to the Texas Department of
Health.), As Introduced
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB417, As Introduced: positive impact of $12,723,521 through the *
* biennium ending August 31, 2003. *
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General Revenue-Related Funds, Five-Year Impact:
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* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $4,039,015 *
* 2003 8,684,506 *
* 2004 8,981,667 *
* 2005 9,286,671 *
* 2006 9,602,032 *
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All Funds, Five-Year Impact:
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*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 $5,233,769 $(148,000) $7,916,405 $(148,000) *
* 2003 10,855,632 0 16,337,835 0 *
* 2004 11,227,084 0 16,889,831 0 *
* 2005 11,608,339 0 17,463,384 0 *
* 2006 12,002,540 0 18,056,384 0 *
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* Fiscal Year Probable Revenue Gain/(Loss) from *
* Vendor Drug Rebates (State Share) *
* 0706 *
* 2002 $(1,046,754) *
* 2003 (2,171,126) *
* 2004 (2,245,417) *
* 2005 (2,321,668) *
* 2006 (2,400,508) *
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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 a person who manufactures a drug that is sold in
the state to file annually with TDH the average manufacturer price for
the drug and the price that each wholesaler in the state pays the
manufacturer to purchase the drug. The bill would allow TDH and the
Office of the Attorney General to investigate the manufacturer to
determine the accuracy of information. The bill would take effect
September 1, 2001.
Methodology
It is assumed the availability of detailed price and cost information
would allow the Medicaid Vendor Drug program (operated by TDH) to
negotiate a 2% 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 60.2% 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 significant 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