LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session March 21, 2001 TO: Honorable Patricia Gray, Chair, House Committee on Public Health FROM: John Keel, Director, Legislative Budget Board IN RE: HB2999 by Uresti (Relating to creating a prescription drug purchasing program.), As Introduced ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds for * * HB2999, As Introduced: negative impact of $(3,564,750,000) * * 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 $(1,425,900,000) * * 2003 (2,138,850,000) * * 2004 (2,851,800,000) * * 2005 (2,851,800,000) * * 2006 (2,851,800,000) * **************************************************** All Funds, Five-Year Impact: *************************************************************************** *Fiscal Probable Savings/(Cost) from Probable Revenue Gain/(Loss) * * Year General Revenue Fund from New General Revenue * * 0001 Dedicated * * 2002 $(1,425,900,000) $71,295,000 * * 2003 (2,138,850,000) 106,942,500 * * 2004 (2,851,800,000) 142,590,000 * * 2005 (2,851,800,000) 142,590,000 * * 2006 (2,851,800,000) 142,590,000 * *************************************************************************** Technology Impact One-time automation costs are assumed for the Department of Human Services (DHS) for 500 hours at $110 per hour. One-time automation costs are assumed for the Department of Health (TDH) totaling $5,000,000. Ongoing transaction processing costs totaling $3,000,000 per year are assumed for TDH. Fiscal Analysis The bill would create a state-financed Prescription Drug Program within TDH to lower prescription drug prices for uninsured and underinsured residents of the state. All residents of the state would be eligible to participate in the program. The bill would allow a manufacturer or labeler to enter into voluntary rebate agreement with the TDH. The bill would create the Prescription Drug Account as a dedicated account in the General Revenue Fund. The account would consist of money received from manufacturer or labeler rebates and any appropriations or allocations designed for the fund. The bill specifies that the Legislature may appropriate funds only to TDH to reimburse participating retail pharmacies for discounted prices provided to program participants, and TDH for the costs of administering the program. Further, interest earned from investment of the account's funds would be deposited to the account. Methodology 1. It is assumed that the following number of Texans would participate in the new program: 2.5 million in FY 2002, 3.75 million in FY 2003, and 5 million in each subsequent year. Participants would receive one prescription per month at a cost of $47.53 per prescription per month. Cost and utilization levels are assumed to remain constant. 2. It is assumed the prescription drug cost would include rebate amounts for participating pharmacies. 3. It is assumed the voluntary rebates entered into with manufacturers or wholesalers would equal 5% of the prescription purchase price paid by the State. Rebate funding would be deposited to the newly created General Revenue-Dedicated Prescription Drug Account. It is assumed this funding would be appropriated to TDH as a method of financing for the Prescription Drug Program. Local Government Impact Implementation of the Prescription Drug Program could have a positive financial impact on local governments by reducing local expenditures on prescriptions for the indigent, to the extent local governments provide such benefits. Source Agencies: 515 Texas State Board of Pharmacy, 529 Health and Human Services Commission, 304 Comptroller of Public Accounts, 501 Texas Department of Health LBB Staff: JK, HD, PP, SW