SENATE AMENDED
PRIOR PRINTER'S NOS. 3155, 3226 PRINTER'S NO. 3655
No. 2442 Session of 1992
INTRODUCED BY STUBAN, TIGUE, DeWEESE, EVANS, ITKIN, KUKOVICH,
JOSEPHS, STABACK, STEELMAN, WAMBACH, MUNDY, CAPPABIANCA,
HERMAN, PESCI, VAN HORNE, MARKOSEK, DALEY, KOSINSKI,
BATTISTO, LLOYD, TRELLO, STURLA, FAIRCHILD, HANNA, HAYDEN,
HARPER, LaGROTTA, RUDY, BOWLEY, SCRIMENTI, WILLIAMS, VEON,
GIGLIOTTI, STETLER, McNALLY, TRICH, OLASZ, BISHOP, MELIO,
STISH, RITTER, PETRONE, HALUSKA, BELARDI, CORRIGAN, JAMES,
TELEK AND ROEBUCK, MARCH 9, 1992
SENATOR PETERSON, PUBLIC HEALTH AND WELFARE, IN SENATE, AS
AMENDED MAY 19, 1992
AN ACT
1 Amending the act of August 14, 1991 (P.L.342, No.36), entitled
2 "An act providing for the preservation of the State Lottery
3 Fund; further providing for pharmaceutical assistance for the
4 elderly; further providing for transportation assistance to
5 the elderly; providing for pharmaceutical purchasing;
6 conferring powers and duties upon the Department of Aging,
7 the Department of Revenue and the Department of
8 Transportation; imposing penalties; and making repeals,"
9 further providing for responsibilities of the Department of
10 Aging, for pharmaceutical purchasing, for legislative intent,
11 for definitions and for rebate agreements; providing for
12 pharmaceutical purchasing discounts and for new best prices;
13 and further providing for prudent pharmaceutical purchasing
14 contracts and expiration.
15 The General Assembly of the Commonwealth of Pennsylvania
16 hereby enacts as follows:
17 Section 1. Section 303(h)(5), (9), (10), (11), (12), (13), <--
18 (14), (15), (16), (17) and (18) of the act of August 14, 1991
19 (P.L.342, No.36), known as the Lottery Fund Preservation Act,
20 are amended and the subsection is amended by adding paragraphs
1 to read:
2 Section 303. Responsibilities of department.
3 * * *
4 (h) Program criteria.--The program shall include the
5 following criteria:
6 * * *
7 (5) The system established shall include a participant
8 copayment schedule of $4 for each prescription. The copayment
9 shall increase or decrease on the annual basis by the average
10 percent change of ingredient costs for all prescription drugs
11 plus a differential to raise the copayment to the next
12 highest 25¢ increment. In addition, the department may
13 approve a request for increase or decrease in the level of
14 copayment based upon the financial experience and projections
15 of the program and after consultation with the board. The
16 department is prohibited from approving adjustments to the
17 copayment on more than a semiannual basis. [The department
18 shall evaluate the feasibility of instituting a bifurcated
19 copayment differentiating between noninnovator multiple-
20 source drugs and single-source or innovator multiple-source
21 drugs. The department shall report its findings to the Aging
22 and Youth Committee of the Senate and the Aging and Youth
23 Committee of the House of Representatives by July 1, 1992.
24 The department shall, by July 1, 1992, institute a bifurcated
25 copayment unless the findings demonstrate that a bifurcated
26 copayment is not cost effective. As used in this paragraph,
27 the terms "innovator multiple-source drugs," "noninnovator
28 multiple-source drugs" and "single-source drugs" shall have
29 the meanings given to them in section 502.]
30 * * *
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1 [(9) For purposes of this chapter, the eligible claimant <--
2 shall be liable to pay a fixed differential whenever a more
3 expensive brand name drug is requested by the claimant when
4 the physician permitted substitution of a less expensive
5 generically equivalent drug approved under the provisions of
6 the act of November 24, 1976 (P.L.1163, No.259), referred to
7 as the Generic Equivalent Drug Law.
8 (10) The differential will be charged regardless of the
9 availability of a less expensive generic equivalent in the
10 providing pharmacy. In no case will the claimant bear the
11 cost of the differential when the generic equivalent is not
12 available.
13 (11) The department shall establish a pharmacist
14 consultation reimbursement program for a period of not less
15 than six months, following which the department may continue
16 or discontinue the program. This program shall provide an
17 additional $1 supplemental dispensing fee whenever a
18 pharmacy's documented intervention resulted in a physician
19 changing a prescription for a more expensive brand name
20 product to a prescription allowing substitution of a less
21 expensive generically equivalent drug. This supplemental
22 dispensing fee shall provide the only exception to paragraph
23 (8).
24 (12)] (9) Notwithstanding any other statute or
25 regulation, if an approved United States Food and Drug
26 Administration "A"-rated generic therapeutically equivalent
27 drug is available for dispensing to a claimant, the provider
28 shall dispense the generic therapeutically equivalent drug to
29 the claimant. The department shall not reimburse providers
30 for brand name drugs except in the following circumstances:
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1 (i) There is no "A"-rated generic therapeutically
2 equivalent drug available on the market. This
3 subparagraph does not apply to the lack of availability
4 of an "A"-rated generic therapeutically equivalent drug
5 in the providing pharmacy.
6 (ii) An "A"-rated generic therapeutically equivalent
7 drug is deemed by the department, in consultation with a
8 utilization review committee, to have a narrow
9 therapeutic index for safe and effective dispensing in
10 the community setting. The department shall notify
11 providing pharmacies of prescription drugs under this
12 subparagraph on a regular basis.
13 (iii) The Department of Health has determined that a
14 drug shall not be recognized as a generic therapeutically
15 equivalent drug for purpose of substitution under section
16 5(b) of the act of November 24, 1976 (P.L.1163, No.259),
17 referred to as the Generic Equivalent Drug Law.
18 (10) If a claimant chooses not to accept the generic
19 therapeutically equivalent drug required by paragraph (9),
20 the claimant shall be liable for the entire cost of the brand
21 name drug and the copayment less the average wholesale cost
22 of the least expensive generic therapeutically equivalent
23 drug present at the providing pharmacy. The average wholesale
24 cost of the least expensive generic therapeutically
25 equivalent drug present at the providing pharmacy shall be
26 reimbursed by the program. If no generic therapeutically
27 equivalent drug is present in the providing pharmacy, no
28 reimbursement shall be provided by the program. This
29 paragraph shall not apply if a prescriber can demonstrate to
30 the department that:
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1 (i) The claimant is in danger of an adverse reaction
2 from use of the generic therapeutically equivalent drug
3 required by paragraph (9).
4 (ii) Use of the prescribed brand name drug would
5 eliminate the danger of the adverse reaction.
6 (11) (12) Prescription benefits for any single
7 prescription shall be limited to a 30-day supply of the
8 prescription drug or 100 units, whichever is less, except
9 that, in the case of diagnosis for acute conditions, the
10 limitation shall be a 15-day supply.
11 [(13)] (12) The department may establish a restricted
12 formulary of the drugs which will not be reimbursed by the
13 program. This formulary shall include only experimental drugs
14 and drugs on the Drug Efficacy Study Implementation List
15 prepared by the Health Care Finance Administration. A medical
16 exception may be permitted by the department for
17 reimbursement of a drug on the Drug Efficacy Study
18 Implementation List upon declaration of its necessity on the
19 prescription by the treating physician; except that, for DESI
20 drugs for which the FDA has issued a Notice for Opportunity
21 Hearing (NOOH) for the purpose of withdrawing the New Drug
22 Application approved for that drug, reimbursement coverage
23 shall be discontinued under the provisions of this chapter.
24 [(14)] (13) The department may not enter into a contract
25 with a private contractor for an exclusive mail-order system
26 for the delivery of prescription drugs under this program.
27 Only mail-order pharmacy services provided by pharmacies
28 which are licensed by the Commonwealth and which have their
29 principal place of business within this Commonwealth may
30 participate as providers under the program. The department
19920H2442B3655 - 5 -
1 shall develop and promulgate specific regulations governing
2 the practice of mail-order pharmacy and other enrolled
3 providers to include the following minimum standards of
4 practice to ensure the health, safety and welfare of program
5 participants:
6 (i) The appropriate method or methods by which such
7 pharmacies shall verify the identity of the program
8 recipient and the authenticity of prescriptions received.
9 (ii) The appropriate method or methods by which such
10 pharmacies shall mail or deliver prescription drugs to
11 program recipients ensuring, to the maximum extent
12 possible, that the intended program recipient is the
13 actual ultimate recipient of any prescription dispensed
14 by such pharmacies.
15 (iii) The appropriate method or methods by which
16 such pharmacies shall communicate with program
17 participants in emergency situations.
18 [(15)] (14) The program must be in place and operational
19 within 90 days of the effective date of the contract.
20 [(16)] (15) For-profit third party insurers and not-for-
21 profit prescription plans shall reimburse the department for
22 any payments made to a providing pharmacy on behalf of a
23 claimant covered by such a third party.
24 [(17)] (16) Any [health care professional] person <--
25 rendering service as a member of a utilization review
26 committee for this program shall not be liable for any civil
27 damages as a result of any acts or omissions in rendering the
28 service as a member of any such committee except any acts or
29 omissions intentionally designed to harm or any grossly
30 negligent acts or omissions which result in harm to the
19920H2442B3655 - 6 -
1 person receiving such service.
2 [(18)] (17) Any officer or employee of the department <--
3 rendering service as a member of a utilization review
4 committee for this program shall not be liable for any civil
5 damages as a result of any acts or omissions in rendering the
6 service as a member of any such committee or as a result of
7 any decision or action in connection with the program except
8 any acts or omissions intentionally designed to harm or any
9 grossly negligent acts or omissions which result in harm to
10 the person receiving such service.
11 (18) (19) The dispensing of an "A"-rated generic <--
12 therapeutically equivalent drug in accordance with this
13 chapter shall not be deemed incorrect substitution under
14 section 6(a) of the Generic Equivalent Drug Law.
15 (19) (20) The department shall annually verify the <--
16 income of eligible claimants. [Verification shall be <--
17 accomplished by a targeted sampling of 5% of the eligible
18 claimants.] THE DEPARTMENT SHALL VERIFY THE INCOME OF <--
19 ELIGIBLE CLAIMANTS BY REQUIRING INCOME DOCUMENTATION FROM THE
20 CLAIMANTS. AN APPLICATION FOR BENEFITS UNDER THIS CHAPTER
21 SHALL CONSTITUTE A WAIVER TO THE DEPARTMENT OF ALL RELEVANT
22 CONFIDENTIALITY REQUIREMENTS RELATING TO THE CLAIMANT'S
23 PENNSYLVANIA STATE INCOME TAX INFORMATION IN THE POSSESSION
24 OF THE DEPARTMENT OF REVENUE. THE DEPARTMENT OF REVENUE SHALL
25 PROVIDE THE DEPARTMENT WITH THE NECESSARY INCOME INFORMATION
26 SHOWN ON THE CLAIMANT'S PENNSYLVANIA STATE INCOME TAX RETURN
27 SOLELY FOR INCOME VERIFICATION PURPOSES. IT SHALL BE UNLAWFUL
28 FOR ANY OFFICER, AGENT OR EMPLOYEE OF THE DEPARTMENT TO
29 DIVULGE OR MAKE KNOWN IN ANY MANNER WHATSOEVER ANY
30 INFORMATION GAINED THROUGH ACCESS TO THE DEPARTMENT OF
19920H2442B3655 - 7 -
1 REVENUE INFORMATION EXCEPT FOR OFFICIAL INCOME VERIFICATION
2 PURPOSES UNDER THIS CHAPTER. A PERSON WHO VIOLATES THIS ACT
3 COMMITS A MISDEMEANOR AND SHALL, UPON CONVICTION, BE
4 SENTENCED TO PAY A FINE OF NOT MORE THAN $1,000 OR TO
5 IMPRISONMENT FOR NOT MORE THAN ONE YEAR, OR BOTH, TOGETHER
6 WITH THE COST OF PROSECUTION AND, IF THE OFFENDER IS AN
7 OFFICER OR EMPLOYEE OF THE COMMONWEALTH, HE SHALL BE
8 DISMISSED FROM OFFICE OR DISCHARGED FROM EMPLOYMENT. TO THE
9 EXTENT POSSIBLE, THE DEPARTMENT AND THE DEPARTMENT OF PUBLIC
10 WELFARE SHALL COORDINATE EFFORTS TO FACILITATE THE
11 APPLICATION AND ENROLLMENT OF ELIGIBLE OLDER PEOPLE IN THE
12 MEDICAID HEALTHY HORIZONS PROGRAM BY PROCESSING THESE
13 APPLICATIONS AT SENIOR CITIZENS CENTERS AND OTHER APPROPRIATE
14 FACILITIES PROVIDING SERVICES TO THE ELDERLY.
15 (20) (21) The retail price of the prescription shall be <--
16 indicated on the label of the prescription container OR BE <--
17 FURNISHED BY SEPARATE RECEIPT.
18 * * *
19 Section 2. Section 307 of the act is amended to read:
20 Section 307. Prescription drug education program.
21 The department, in cooperation with the Department of Health,
22 shall develop and implement a Statewide prescription drug
23 education program designed to inform older adults of the dangers
24 of prescription drug abuse and misuse. The prescription drug
25 education program shall include, but not be limited to,
26 information concerning the following:
27 (1) The hazards of prescription drug overdose.
28 (2) The potential dangers of mixing prescription drugs.
29 (3) The danger of retaining unused prescription drugs
30 after the need to take them no longer exists.
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1 (4) The necessity to carefully question physicians and
2 pharmacists concerning the effects of taking prescription
3 drugs, including the differences between brand name drugs and
4 generically equivalent drugs.
5 (5) The advisability of maintaining a prescription drug
6 profile or other record of prescription drug dosage and
7 frequency of dosage.
8 (6) The desirability of advising family members of the
9 types and proper dosage of prescription drugs which are being
10 taken.
11 (7) The dangers of taking prescription drugs in excess
12 of prescribed dosages.
13 (8) The need to obtain complete, detailed directions
14 from the physician or pharmacist concerning the time period a
15 prescription drug should be taken.
16 Section 3. Section 501 of the act is amended by adding a
17 paragraph to read:
18 Section 501. Declaration of policy.
19 The General Assembly finds and declares as follows:
20 * * *
21 (6) Drug price inflation INCREASE has caused a dramatic <--
22 AN increase in the amount of public funds expended by the <--
23 PACE Program and the General Assistance Program.
24 Section 4. The definition of "average manufacturer price" in
25 section 502 of the act is amended and the section is amended by
26 adding a definition to read:
27 Section 502. Definitions.
28 The following words and phrases when used in this chapter
29 shall have the meanings given to them in this section unless the
30 context clearly indicates otherwise:
19920H2442B3655 - 9 -
1 "Average manufacturer price (AMP)." With respect to a
2 covered prescription drug of the manufacturer for a calendar
3 quarter, the average unit price paid to the manufacturer for the
4 drug [in this Commonwealth] by wholesalers for drugs distributed
5 to the retail pharmacy class of trade, except for direct sales
6 to hospitals, health maintenance organizations and to
7 wholesalers where the drug is relabeled under that distributor's
8 national drug code number. Federal Supply Schedule prices shall
9 not be included in the calculation of AMP. The term includes
10 cash discounts and all other price reductions, other than
11 rebates under this act and section 1927 of Title XIX of the
12 Social Security Act (Public Law 74-271, 42 U.S.C. § 301 et
13 seq.), added November 5, 1990 (Public Law 101-508, Title IV,
14 section 4401(a)(3), 104 Stat. 1388-143), which reduce the actual
15 price paid. For bundled or capitated sales, the allocation of
16 the discount shall be made proportionately to the dollar value
17 of the units of each covered prescription drug sold under the
18 bundled or capitated arrangement. The AMP for a quarter shall be
19 adjusted by the manufacturer if cumulative discounts or other
20 arrangements subsequently adjust the prices actually realized.
21 * * *
22 "Consumer Price Index-Urban." The Consumer Price Index for
23 All Urban Consumers compiled by the Bureau of Labor Statistics
24 of the United States Department of Labor.
25 * * *
26 Section 5. Sections 503(e) and 505(a) and (b) of the act are
27 amended to read:
28 Section 503. Rebate agreement.
29 * * *
30 [(e) Drug formulary.--[There] EXCEPT AS PROVIDED IN SECTION <--
19920H2442B3655 - 10 -
1 303(H)(12), THERE shall be no drug formulary, prior or
2 retroactive approval system or any similar restriction imposed
3 on the coverage of outpatient drugs made by manufacturers who
4 have entered into agreements with the Commonwealth to pay
5 rebates for drugs utilized in the PACE program, provided that
6 such outpatient drugs [were] ARE approved for marketing by the <--
7 Food and Drug Administration [prior to July 1, 1991].] <--
8 Section 505. Amount of rebate.
9 (a) Single-source drugs and innovator multiple-source
10 drugs.--With respect to single-source drugs and innovator
11 multiple-source drugs, each manufacturer shall remit a rebate to
12 the Commonwealth. Except as otherwise provided in this section,
13 the amount of the rebate to the Commonwealth per calendar
14 quarter with respect to each dosage form and strength of single-
15 source drugs and innovator multiple-source drugs shall be [equal
16 to] as follows:
17 (1) For quarters beginning after December 31, 1990, and
18 ending before July 1, 1992, the product of the total number
19 of units of each dosage form and strength reimbursed by the
20 PACE Program and the General Assistance Program in the
21 quarter and the difference between the average manufacturer
22 price and 87.5% of that price, after deducting customary
23 prompt payment discounts, for the quarter[, which rebate
24 shall be applicable for quarters beginning on and after
25 January 1, 1991].
26 (2) For quarters beginning after June 30, 1992, the
27 product of the total number of units of each dosage form and
28 strength reimbursed by the PACE Program and the General
29 Assistance Program in the quarter and the difference between
30 the average manufacturer price and 85% of that price, after
19920H2442B3655 - 11 -
1 deducting customary prompt payment discounts, for the
2 quarter.
3 (b) Rebate for other drugs.--
4 (1) The amount of the rebate to the Commonwealth for a
5 calendar quarter with respect to covered prescription drugs
6 which are noninnovator multiple-source drugs shall be equal
7 to the product of:
8 (i) the applicable percentage of the average
9 manufacturer price, after deducting customary prompt
10 payment discounts, for each dosage form and strength of
11 such drugs for the quarter; and
12 (ii) the number of units of such form and dosage
13 reimbursed by the PACE Program and the General Assistance
14 Program in the quarter.
15 (2) For the purposes of paragraph (1), the following
16 shall apply:
17 (i) The applicable percentage for calendar quarters
18 beginning after January 1, 1991, and ending before July
19 1, 1992, is 10%.
20 (ii) The applicable percentage for calendar quarters
21 beginning after June 30, 1992, is 11%.
22 * * *
23 Section 6. The act is amended by adding sections to read:
24 Section 505.1. Excessive pharmaceutical price inflation
25 discount.
26 (a) General rule.--A discount shall be provided to the
27 department for all covered prescription drugs. The discount
28 shall be calculated as follows:
29 (1) For each quarter for which a rebate under section
30 505(a) and (b) is to be paid after December 31, 1991, the
19920H2442B3655 - 12 -
1 average manufacturer price for each dosage form and strength
2 of a covered prescription drug shall be compared to the
3 average manufacturer price for the same form and strength in
4 the previous calendar year; and a percentage increase shall
5 be calculated.
6 (2) For each quarter under paragraph (1), the average
7 percentage increase in the Consumer Price Index-Urban over
8 the same quarter in the previous calendar year shall be
9 calculated.
10 (3) If the calculation under paragraph (1) is greater
11 than the calculation under paragraph (2), the discount amount
12 for each quarter shall be equal to the product of:
13 (i) the difference between the calculations under
14 paragraphs (1) and (2); and
15 (ii) the total number of units of each dosage form
16 and strength reimbursed by the PACE Program and General
17 Assistance Program and the average manufacturer price
18 reported by the manufacturer under section 504(c)(1).
19 (b) New by-marketed drugs.--For covered prescription drugs
20 that have not been marketed for a full calendar year, subsection
21 (a) shall apply after the covered prescription drug has been on
22 the market for four consecutive quarters. The drug's initial
23 average manufacturer price shall be based on the first day of
24 the first quarter that the drug was marketed.
25 Section 505.2. Lowered best price.
26 (a) General rule.--If the rebate under section 505 and the
27 discount under section 505.1 would establish a lowered Federal
28 best price, as defined in section 1927(c)(1)(C) of the Social
29 Security Act (Public Law 74-271, 42 U.S.C. § 1396r-8(c)(1)(C)),
30 the manufacturer shall be liable for a total rebate and discount
19920H2442B3655 - 13 -
1 in an amount that does not reduce the Federal best price for
2 that covered prescription drug.
3 (b) Procedure.--If a manufacturer asserts a lowered Federal
4 best price under subsection (a), it must provide substantial
5 evidence of the existing best price within 30 days of the end of
6 the quarter for which the price is asserted.
7 (c) Civil penalty.--A manufacturer which provides false
8 information under this section shall be liable for a civil
9 penalty in the amount of $50,000. Each item of false information
10 constitutes a separate violation.
11 Section 7. Sections 508 and 509 of the act are amended to
12 read:
13 [Section 508. Existing agreements.
14 Any rebate agreement between the department and a
15 manufacturer entered into prior to the effective date of this
16 chapter shall remain in effect and be considered a rebate
17 agreement in compliance with this chapter until the agreement
18 expires or until either party terminates the agreement.
19 Section 509. Expiration of chapter.
20 This chapter shall expire July 1, 1992, unless reenacted by
21 the General Assembly.]
22 Section 8. The act is amended by adding a section to read:
23 Section 901.1. Rules and regulations.
24 All rules and regulations promulgated under this act shall be
25 subject to the act of June 25, 1982 (P.L.633, No.181), known as
26 the Regulatory Review Act., and to legislative review by the <--
27 Aging and Youth Committee of the Senate and the Aging and Youth
28 Committee of the House of Representatives.
29 Section 9. The House of Representatives GENERAL ASSEMBLY, <--
30 recognizing the oversight role that the Legislative Budget and
19920H2442B3655 - 14 -
1 Finance Committee has with regard to the programs and services
2 of the Department of Aging, directs the Legislative Budget and
3 Finance Committee to conduct a study of the State lottery as it
4 impacts upon the future of programs and services for older
5 Pennsylvanians and the possible need for legislative action and
6 make a report to the House of Representatives GENERAL ASSEMBLY <--
7 no later than December 31, 1992.
8 Section 10. The addition of sections 505.1 and 505.2 of the
9 act shall be retroactive to January 1, 1992.
10 Section 11. This act shall take effect immediately.
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