TO: | Honorable Dianne White Delisi, Chair, House Committee on State Health Care Expenditures, Select |
FROM: | John Keel, Director, Legislative Budget Board |
IN RE: | HB2016 by Menendez (Relating to operation of the Medicaid vendor drug program, including the adoption of a preferred drug list and the negotiation of supplemental drug rebates.), As Introduced |
Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
---|---|
2004 | $26,559,881 |
2005 | $64,311,964 |
2006 | $64,261,143 |
2007 | $64,261,143 |
2008 | $64,261,143 |
Fiscal Year | Probable Savings fromGR MATCH FOR MEDICAID 758 |
Probable (Cost) fromGR MATCH FOR MEDICAID 758 |
Probable Savings/(Cost) fromFEDERAL FUNDS 555 |
Probable Revenue Gain/(Loss) fromFEDERAL FUNDS 555 |
---|---|---|---|---|
2004 | $33,710,905 | ($19,791,664) | $36,960,925 | $31,870,098 |
2005 | $66,811,964 | ($44,259,358) | $39,169,648 | $63,884,460 |
2006 | $66,761,143 | ($44,227,594) | $35,987,255 | $64,153,131 |
2007 | $66,761,143 | ($44,227,594) | $35,987,255 | $64,153,131 |
2008 | $66,761,143 | ($44,227,594) | $35,987,255 | $64,153,131 |
Fiscal Year | Probable Revenue Gain fromVENDOR DRUG REBATES-MEDICAID 706 |
---|---|
2004 | $12,640,640 |
2005 | $41,759,358 |
2006 | $41,727,594 |
2007 | $41,727,594 |
2008 | $41,727,594 |
The bill is similar to recommendation HHS 8, "Improve Purchasing of Prescription Drugs" from the Comptroller's e-Texas report, "Limited Government, Unlimited Opportunity".
The bill would require the Health and Human Services Commission (HHSC) to contract with a Pharmacy Benefit Manager (PBM) to establish a preferred drug list and negotiate rebates and discount prices for prescription drugs within Medicaid Vendor Drug Program. If the manufacturer does not agree to rebates or discount prices, the PBM would be required to place their products on a list requiring prior authorization in Medicaid. The bill differs with e-Texas HHS-8 in that HIV/AIDS mental health-related drugs are exempted from the preferred drug list.
To estimate the cost and savings associated with the implementation of a preferred drug list, Medicaid Vendor Drug Program expenditures are held at fiscal year 2003 levels, $721,723,593 in General Revenue.
It is assumed that HIV/AIDS and mental health-related drugs comprise approximately 17.2 percent of all Vendor Drug Program drug expenditures.
It is assumed that the program would be implemented by March 1, 2004.
The market shift created through prior authorization is assumed based upon an 80 percent redirection to a 20 percent less expensive drug, approximately $43.9 million per year. Supplemental rebates are assumed to be negotiated at 7.4 percent and are calculated after reducing the drug expenditures by the savings due to redirection. It is assumed that supplemental rebates would be expended to offset program costs.
It is assumed that the administration of the program would require a Pharmacy Benefit Manager (PBM) to maintain the Preferred Drug List, manage the prior authorization process, perform pharmacy liaison functions, and other administrative tasks. The PBM-associated costs are estimated to be $5 million per year.
Source Agencies: | 301 Office of the Governor, 304 Comptroller of Public Accounts, 529 Health and Human Services Commission
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LBB Staff: | JK, JO, EB, KF, AJ
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