HOUSE BILL NO. 595
INTRODUCED BY B. NEWMAN
A BILL FOR AN ACT ENTITLED: "AN ACT PROVIDING FOR VOLUNTARY REBATES BY DRUG MANUFACTURERS AND LABELERS ON SALES OF PRESCRIPTION DRUGS; PROVIDING FOR THE USE OF THE REBATES TO LOWER THE PRICE OF PRESCRIPTION DRUGS SOLD TO MONTANA RESIDENTS BY RETAIL PHARMACIES; PROVIDING DEFINITIONS; ESTABLISHING THE RX PROGRAM; REGULATING THE PRICES AT WHICH PARTICIPATING RETAIL PHARMACIES MAY SELL PRESCRIPTION DRUGS; PROVIDING FOR THE ADMINISTRATION OF THE RX PROGRAM BY THE DEPARTMENT OF PUBLIC HEALTH AND HUMAN SERVICES; ESTABLISHING A SPECIAL REVENUE ACCOUNT; REQUIRING REPORTS; REQUIRING COORDINATION WITH OTHER PROGRAMS; REQUIRING RULEMAKING BY THE DEPARTMENT; REQUIRING THE DEPARTMENT TO SEEK NECESSARY FEDERAL WAIVERS; PROVIDING A STATUTORY APPROPRIATION; AMENDING SECTION 17-7-502, MCA; AND PROVIDING EFFECTIVE DATES."
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
Section 1. Section 17-7-502, MCA, is amended to read:
"17-7-502. Statutory appropriations -- definition -- requisites for validity. (1) A statutory appropriation is an appropriation made by permanent law that authorizes spending by a state agency without the need for a biennial legislative appropriation or budget amendment.
(2) Except as provided in subsection (4), to be effective, a statutory appropriation must comply with both of the following provisions:
(a) The law containing the statutory authority must be listed in subsection (3).
(b) The law or portion of the law making a statutory appropriation must specifically state that a statutory appropriation is made as provided in this section.
(3) The following laws are the only laws containing statutory appropriations: 2-17-105; 3-5-901; 5-13-403; 10-3-203; 10-3-310; 10-3-312; 10-3-314; 10-4-301; 15-1-111; 15-23-706; 15-31-702; 15-34-115; 15-35-108; 15-36-324; 15-37-117; 15-38-202; 15-65-121; 15-70-101; 16-1-404; 16-1-406; 16-1-411; 17-3-106; 17-3-212; 17-3-222; 17-6-101; 17-7-304; 18-11-112; 19-3-319; 19-6-709; 19-9-702; 19-13-604; 19-17-301; 19-18-512; 19-19-305; 19-19-506; 19-20-604; 20-8-107; 20-26-1503; 22-3-1004; 23-5-136; 23-5-306; 23-5-409; 23-5-610; 23-5-612; 23-5-631; 23-7-301; 23-7-402; 37-43-204; 37-51-501; 39-71-503; 42-2-105; 44-12-206; 44-13-102; 50-4-623; [section 11]; 53-6-703; 53-24-206; 67-3-205; 75-1-1101; 75-5-1108; 75-6-214; 75-11-313; 77-1-505; 80-2-222; 80-4-416; 80-11-518; 81-5-111; 82-11-161; 87-1-513; 90-3-1003; 90-6-710; and 90-9-306.
(4) There is a statutory appropriation to pay the principal, interest, premiums, and costs of issuing, paying, and securing all bonds, notes, or other obligations, as due, that have been authorized and issued pursuant to the laws of Montana. Agencies that have entered into agreements authorized by the laws of Montana to pay the state treasurer, for deposit in accordance with 17-2-101 through 17-2-107, as determined by the state treasurer, an amount sufficient to pay the principal and interest as due on the bonds or notes have statutory appropriation authority for the payments. (In subsection (3): pursuant to sec. 7, Ch. 567, L. 1991, the inclusion of 19-6-709 terminates upon death of last recipient eligible for supplemental benefit; pursuant to Ch. 422, L. 1997, the inclusion of 15-1-111 terminates on July 1, 2008, which is the date that section is repealed; pursuant to sec. 10, Ch. 360, L. 1999, the inclusion of 19-20-604 terminates when the amortization period for the teachers' retirement system's unfunded liability is 10 years or less; pursuant to sec. 4, Ch. 497, L. 1999, the inclusion of 15-38-202 terminates July 1, 2014; and pursuant to sec. 10(2), Ch. 10, Sp. L. May 2000, the inclusion of 15-35-108 and 90-6-710 terminates June 30, 2005.)"
NEW SECTION. Section 2. Short title. [Sections 2 through 15] may be cited as the "Montana Prescription Drug Fair Pricing Act".
NEW SECTION. Section 3. Legislative findings. The legislature finds the following:
(1) Approximately one in four residents of Montana has no, or wholly inadequate, prescription drug insurance coverage. These uninsured residents pay excessive prices for prescription drugs, far higher prices than are paid by managed care organizations, insurance companies, and the federal government for the same medicines and dosages. In many cases, these excessive drug prices have the effect of denying residents access to medically necessary care and threaten their health and safety.
(2) Many residents require repeated doctor or medical clinic appointments, having gotten sicker because they cannot afford to take the prescriptions prescribed for them. Many residents are admitted to or treated at hospitals each year because they cannot afford the drugs prescribed for them that could have prevented the need for hospitalization. Many others enter expensive institutional care settings because they cannot afford their necessary prescription drugs that could have supported them outside of an institution. In each of these circumstances, state medical assistance programs, including the medicaid program, literally pay the price.
(3) One major reason uninsured residents pay so much for prescription drugs is that, unlike insured residents, they have no prescription benefits manager negotiating a fair price with the drug companies on their behalf.
(4) State government currently provides prescription drugs and acts as a prescription benefit manager through a variety of health plans and assistance programs.
(5) State government is the only agent that, as a practical matter, can play an effective role as a market participant on behalf of all residents who are uninsured or underinsured. The state can and should act as a prescription benefit manager, negotiating voluntary drug rebates and using these funds to reimburse retail pharmacies for offering lower drug prices.
NEW SECTION. Section 4. Purpose. Recognizing that the state already acts as a prescription benefit manager for a variety of health plans and assistance programs, [sections 2 through 15] are enacted to provide lower prices for prescription drugs by expanding the state's role as a participant in the prescription drug marketplace through negotiating voluntary rebates from drug companies and using the rebates to make prescription drugs more affordable to Montana residents. A program including these provisions will improve public health and welfare, promote the economic strength of our society, and substantially benefit state health assistance programs, including the medicaid program.
NEW SECTION. Section 5. Definitions. As used in [sections 2 through 15], unless the context indicates otherwise, the following definitions apply:
(1) "Board of pharmacy" means the board created by 2-15-1843.
(2) "Department" means the department of public health and human services provided for in 2-15-2201.
(3) "Director" means the director of the department.
(4) "Labeler" means an individual or other entity that receives prescription drugs from a manufacturer or prescription drug wholesaler and repackages those drugs for later retail sale and that uses a labeler code obtained from the federal food and drug administration pursuant to 21 CFR 207.20.
(5) "Manufacturer" means a manufacturer of prescription drugs and includes a subsidiary or affiliate of the manufacturer.
(6) "Participating retail pharmacy" or "retail pharmacy" means a pharmacy or other business located in this state that:
(a) has been licensed to dispense prescription drugs in this state; and
(b) has chosen to participate in the Rx program.
NEW SECTION. Section 6. Rx program -- establishment -- rebate agreement and amount -- rulemaking -- failure to agree to rebate. (1) The Rx program is established within the department.
(2) A drug manufacturer or labeler that sells prescription drugs in the state may voluntarily elect to enter into a rebate agreement with the department.
(3) The director shall negotiate the terms of the rebate with a manufacturer or labeler, taking into consideration the rebate calculated under the medicaid rebate program pursuant to 42 U.S.C. 1396r-8, the average wholesale price of prescription drugs, and any other available information on prescription drug prices and price discounts.
(4) If the director and a drug manufacturer or labeler fail to reach agreement on the terms of a rebate, the director shall prompt a review of whether to place those manufacturer's or labeler's products on the prior authorization list for the state medicaid program and take similar actions involving prior authorization or formularies for any other state-funded prescription drug program. The department shall adopt rules creating clear procedures for the implementation of this subsection. The names of manufacturers and labelers that do not enter into rebate agreements are public information, and the department shall release the information to the public. The department shall also publicize to doctors, pharmacists, and other health professionals information about the relative cost of drugs produced by manufacturers and labelers that enter into rebate agreements compared to those that do not enter into rebate agreements.
NEW SECTION. Section 7. Discounted prices for Rx program participants. (1) A participating retail pharmacy shall discount the price of prescription drugs sold to Rx program participants.
(2) The department shall establish by rule discounted prices for drugs covered by a rebate agreement and shall promote the use of effective and reduced-cost drugs, taking into consideration reduced prescription drug prices in state and federal drug programs, differential dispensing fees, administrative overhead, and incentive payments.
(3) (a) Beginning July 1, 2001, a participating retail pharmacy shall offer prescription drugs at or below the average wholesale price, minus 6%, plus a dispensing fee determined by the department.
(b) The price at which prescription drugs will be sold pursuant to subsection (3)(a) must be calculated by the department, and the dispensing fee may not be less than that provided under the Montana medicaid program.
(c) The average wholesale price is 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.
(4) No later than January 1, 2002, a participating retail pharmacy shall offer prescription drugs at or below the prices specified by subsection (3)(a), minus the amount of any rebate paid by the state to the retail pharmacy. These discounted prices must be calculated by the department. In determining the discounted prices, the department shall consider an average of all rebates weighted by sales of drugs subject to these rebates over the most recent 12-month period for which the information is available.
NEW SECTION. Section 8. Eligibility of individuals to participate in program. All residents of the state are eligible to participate in the Rx program. The department shall establish simplified procedures for issuing Rx program enrollment cards to eligible residents. The department shall undertake outreach efforts to build public awareness of the Rx program and to maximize enrollment by eligible residents.
NEW SECTION. Section 9. Operation of Rx program. (1) The board of pharmacy shall adopt rules requiring disclosure by retail pharmacies to Rx program participants of the amount of savings in the cost of prescription drugs provided as a result of the Rx program. The rules must protect information that is proprietary in nature.
(2) The department may not impose transaction charges on retail pharmacies that submit claims or receive payments under the Rx program.
(3) A retail pharmacy shall submit claims to the department to verify the amount charged to Rx program participants.
(4) On a weekly or biweekly basis, the department shall reimburse a retail pharmacy for discounted prices provided to Rx program participants and for dispensing fees set by the department.
(5) The department shall collect from the retail pharmacies utilization data necessary to calculate the amount of the rebate from the manufacturer or labeler. The department shall protect the confidentiality of all information subject to confidentiality protection under state or federal law, rule, or regulation.
NEW SECTION. Section 10. Discrepencies in rebate amount. (1) Differences claimed between a retail pharmacy, a manufacturer or labeler, and the department in the amount of a rebate that must be paid by a manufacturer or labeler must be resolved using the process established in this section.
(2) If there is a discrepancy in the manufacturer's or labeler's favor between the amount claimed by a retail pharmacy and the amount rebated by the manufacturer or labeler, the department, at the department's expense, may hire a mutually agreed-upon independent auditor. The auditor shall audit the amount claimed by the retail pharmacy compared to the amount rebated by the manufacturer or labeler. If a discrepancy still exists following the audit, the manufacturer or labeler shall justify the reason for the discrepancy or make payment to the department for any additional amount due.
(3) If there is a discrepancy against the interest of the manufacturer or labeler in the information provided by the department to the manufacturer or labeler regarding the manufacturer's or labeler's rebate, the manufacturer or labeler, at the manufacturer's or labeler's expense, may hire a mutually agreed-upon independent auditor to verify the accuracy of the data supplied to the department. The auditor shall audit the information provided by the department and the rebate and utilization data provided by the manufacturer or labeler. If a discrepancy still exists following the audit, the department shall justify the reason for the discrepancy or refund to the manufacturer or labeler any excess payment made by the manufacturer or labeler.
(4) Following completion of the procedures established in subsection (2) or (3), either the department or the manufacturer or labeler may request a hearing before the department to determine the correct amount of the rebate to be paid pursuant to a rebate agreement. A hearing conducted pursuant to this section must be held pursuant to the contested case procedure of the Montana Administrative Procedure Act. The person requesting the hearing shall provide documents supporting the request.
NEW SECTION. Section 11. Special revenue account. (1) There is an account in the state special revenue fund established in 17-2-102 to be used for the purposes of the Rx program.
(2) There must be deposited in the account rebates paid by manufacturers or labelers pursuant to [sections 2 through 15]. Money in the account is statutorily appropriated, as provided in 17-7-502, to the department and may be used by the department only to:
(a) reimburse retail pharmacies for discounted prescription drugs provided to participants in the Rx program; and
(b) pay the department for the costs of administering the program, including contracted services, professional fees, and other reasonable program costs of the department incurred in the administration of [sections 2 through 15].
(3) Interest or other income on money in the account accrues to the account.
NEW SECTION. Section 12. Report required. The department shall report to the legislature at the time and in the manner provided in 5-11-210 on the implementation of [sections 2 through 15], including the number of participating retail pharmacies and the financial status of the Rx program. The report may also include action that could be taken by the legislature to increase access to reasonably priced prescription drugs.
NEW SECTION. Section 13. Coordination with other programs. If the director believes that it is beneficial to both the Rx program and another state program, including the state medicaid program, to combine drug pricing negotiations to maximize drug rebates, the director shall combine negotiations.
NEW SECTION. Section 14. Rulemaking. The department shall adopt rules to implement the provisions of [sections 2 through 15].
NEW SECTION. Section 15. Department to seek necessary waivers. The department shall seek any waivers of federal law or regulations necessary to implement [sections 2 through 15].
NEW SECTION. Section 16. Codification instruction. [Sections 2 through 15] are intended to be codified as an integral part of Title 50, and the provisions of Title 50 apply to [sections 2 through 15].
NEW SECTION. Section 17. Effective dates. (1) Except as provided in subsection (2), [this act] is effective July 1, 2001.
(2) [Sections 7(2), 9(1), 14, and 16 and this section] are effective on passage and approval.
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