HOUSE AMENDED
        PRIOR PRINTER'S NOS. 1704, 1868, 1910         PRINTER'S NO. 1985

THE GENERAL ASSEMBLY OF PENNSYLVANIA


SENATE BILL

No. 1188 Session of 2006


        INTRODUCED BY VANCE, BROWNE, ORIE, ARMSTRONG, BOSCOLA, CONTI,
           CORMAN, COSTA, EARLL, ERICKSON, FONTANA, GORDNER, GREENLEAF,
           JUBELIRER, KITCHEN, LAVALLE, LOGAN, MADIGAN, MELLOW, MUSTO,
           O'PAKE, PILEGGI, PIPPY, RAFFERTY, REGOLA, RHOADES, SCARNATI,
           STACK, WAUGH, WENGER, D. WHITE, M. WHITE, C. WILLIAMS,
           WONDERLING, WOZNIAK, FERLO, TOMLINSON, ROBBINS AND
           WASHINGTON, APRIL 17, 2006

        AS AMENDED ON THIRD CONSIDERATION, HOUSE OF REPRESENTATIVES,
           JULY 1, 2006

                                     AN ACT

     1  Amending the act of August 26, 1971 (P.L.351, No.91), entitled
     2     "An act providing for a State Lottery and administration
     3     thereof; authorizing the creation of a State Lottery
     4     Commission; prescribing its powers and duties; disposition of
     5     funds; violations and penalties therefor; exemption of prizes
     6     from State and local taxation and making an appropriation,"
     7     further providing for definitions, for physician, certified
     8     registered nurse practitioner and pharmacy participation, for
     9     reduced assistance, for program generally, for restricted
    10     formulary, for reimbursement, for income verification, for
    11     contracts and for the pharmaceutical assistance contract for
    12     the elderly needs enhancement tier, for pharmacy best
    13     practices and cost controls review; further providing for
    14     penalties; establishing the coordination of Federal and State
    15     benefits; providing for continued eligibility under certain
    16     circumstances; and making editorial changes.

    17     The General Assembly of the Commonwealth of Pennsylvania
    18  hereby enacts as follows:
    19     Section 1.  Chapter 5 of the act of August 26, 1971 (P.L.351,
    20  No.91), known as the State Lottery Law, is amended by adding a
    21  subchapter heading to read:


     1                            SUBCHAPTER A
     2                       PRELIMINARY PROVISIONS
     3     Section 1.1.  The definitions of "eligible claimant,"
     4  "maximum annual income" and "program" in section 502 of the act,
     5  amended or added November 21, 1996 (P.L.741, No.134) and
     6  November 26, 2003 (P.L.212, No.37), are amended and the section
     7  is amended by adding definitions to read:
     8  Section 502.  Definitions.
     9     The following words and phrases when used in this chapter
    10  shall have the meanings given to them in this section unless the
    11  context clearly indicates otherwise:
    12     * * *
    13     "Claimant."  An eligible person who is enrolled in the
    14  program.
    15     * * *
    16     "Eligible [claimant] person."  A resident of the Commonwealth
    17  for no less than 90 days, who is 65 years of age [and over] or
    18  older, whose annual income is less than the maximum annual
    19  income and who is not otherwise qualified for public assistance
    20  under the act of June 13, 1967 (P.L.31, No.21), known as the
    21  Public Welfare Code.
    22     * * *
    23     "Maximum annual income."  For PACE eligibility, the term
    24  shall mean annual income which shall not exceed $14,500 in the
    25  case of single persons nor $17,700 in the case of the combined
    26  annual income of persons married to each other. For PACENET
    27  eligibility, the term shall mean the annual income limits
    28  established under section 519. Persons may, in reporting income
    29  to the Department of Aging, round the amount of each source of
    30  income and the income total to the nearest whole dollar, whereby
    20060S1188B1985                  - 2 -     

     1  any amount which is less than 50¢ is eliminated.
     2     "Medicare advantage."  A plan of health benefits coverage
     3  offered under a policy, contract or plan by an organization
     4  certified under 42 U.S.C. § 1395w-26 (relating to establishment
     5  of standards) and formerly referred to as Medicare+Choice.
     6     "MEDICARE ADVANTAGE PRESCRIPTION DRUG PLAN."  A MEDICARE       <--
     7  ADVANTAGE PLAN THAT PROVIDES QUALIFIED PRESCRIPTION DRUG
     8  COVERAGE AS SET FORTH IN THE MEDICARE PRESCRIPTION DRUG,
     9  IMPROVEMENT, AND MODERNIZATION ACT OF 2003 (PUBLIC LAW 108-173,
    10  117 STAT. 2066).
    11     * * *
    12     "Part D."  A Federal program to offer voluntary prescription
    13  drug benefits to Medicare enrollees, as set forth in the
    14  Medicare Prescription Drug, Improvement, and Modernization Act
    15  of 2003 (Public Law 108-173, 117 Stat. 2066).
    16     "Part D plan" or "PDP."  A prescription drug plan approved
    17  under the Medicare Prescription Drug, Improvement, and
    18  Modernization Act of 2003 (Public Law 108-173, 117 Stat. 2066)
    19  in the PDP region that includes this Commonwealth, and approved
    20  by the Department of Aging of the Commonwealth and the Centers
    21  for Medicare and Medicaid Services of the United States for
    22  coordination of benefits with the programs established under
    23  this chapter.
    24     * * *
    25     "Program."  The Pharmaceutical Assistance Contract for the
    26  Elderly (PACE) and the Pharmaceutical Assistance Contract for
    27  the Elderly Needs Enhancement Tier (PACENET) as established by
    28  this chapter[, unless otherwise specified].
    29     * * *
    30     "Regional benchmark premium."  The average Part D premium
    20060S1188B1985                  - 3 -     

     1  calculated annually by the Centers for Medicare and Medicaid
     2  Services of the United States for PDPs in the PDP region that
     3  includes this Commonwealth.
     4     Section 1.2.  Chapter 5 of the act is amended by adding a
     5  subchapter heading to read:
     6                            SUBCHAPTER B
     7                              PROGRAMS
     8     Section 2.  Section 504 of the act, amended November 26, 2003
     9  (P.L.212, No.37), is amended to read:
    10  Section 504.  Physician, certified registered nurse practitioner
    11                 and pharmacy participation.
    12     Any physician, certified registered nurse practitioner,
    13  pharmacist, pharmacy or corporation owned in whole or in part by
    14  a physician, certified registered nurse practitioner or
    15  pharmacist enrolled as a provider in the program or who has
    16  prescribed medication for a claimant [in the program] who is
    17  precluded or excluded for cause from the Department of Public
    18  Welfare's Medical Assistance Program shall be precluded or
    19  excluded from participation in the program. No physician or
    20  certified registered nurse practitioner precluded or excluded
    21  from the Department of Public Welfare's Medical Assistance
    22  Program shall have claims resulting from prescriptions paid for
    23  by the program.
    24     Section 3.  Section 506 of the act, added November 21, 1996    <--
    25  (P.L.741, No.134), is amended to read:
    26     SECTION 3.  SECTIONS 505 AND 506 OF THE ACT, ADDED NOVEMBER    <--
    27  21, 1996 (P.L.741, NO.134), ARE AMENDED TO READ:
    28  SECTION 505.  DRUG UTILIZATION REVIEW SYSTEM.
    29     (A)  ESTABLISHMENT.--THE DEPARTMENT SHALL ENSURE THAT A
    30  STATE-OF-THE-ART THERAPEUTIC DRUG UTILIZATION REVIEW SYSTEM IS
    20060S1188B1985                  - 4 -     

     1  ESTABLISHED TO MONITOR AND CORRECT MISUTILIZATION OF DRUG
     2  THERAPIES.
     3     (B)  REVIEW.--THE DEPARTMENT SHALL REVIEW UTILIZATION DATA
     4  PROVIDED FROM A PDP TO MONITOR INCREASES IN DRUG UTILIZATION
     5  AMONG CLAIMANTS AND DETERMINE IF DISEASE MANAGEMENT INTERVENTION
     6  IS NEEDED.
     7  Section 506.  Reduced assistance.
     8     Any [eligible] claimant whose prescription drug costs are
     9  covered in part by any other plan of assistance or insurance,
    10  including Part D, may be required to receive reduced assistance
    11  under the provisions of this [chapter] subchapter or be subject
    12  to coordination of benefits under this chapter.
    13     Section 4.  Section 509 of the act, amended November 26, 2003
    14  (P.L.212, No.37), is amended to read:
    15  Section 509.  Program generally.
    16     The program shall include the following:
    17         (1)  Participating pharmacies shall be paid within 21
    18     days of the contracting firm receiving the appropriate
    19     substantiation of the transaction. Pharmacies shall be
    20     entitled to interest for payment not made within the 21-day
    21     period at a rate approved by the board.
    22         (2)  Collection of the copayment by pharmacies shall be
    23     mandatory.
    24         (3)  [Senior citizens participating in the program]
    25     Claimants are not required to maintain records of each
    26     transaction.
    27         (4)  A system of rebates or reimbursements to [eligible]
    28     claimants for pharmaceutical expenses shall be prohibited.
    29         (5)  PACE shall include participant copayment schedules
    30     for each prescription, including a copayment for generic or
    20060S1188B1985                  - 5 -     

     1     multiple-source drugs that is less than the copayment for
     2     single-source drugs. The department shall annually calculate
     3     the copayment schedules based on the Prescription Drugs and
     4     Medical Supplies Consumer Price Index. When the aggregate
     5     impact of the Prescription Drugs and Medical Supplies
     6     Consumer Price Index equals or exceeds $1, the department
     7     shall adjust the copayment schedules. Each copayment schedule
     8     shall not be increased by more than $1 in a calendar year.
     9         (6)  The program payment shall be the lower of the
    10     following amounts determined as follows:
    11             (i)  [90%] 88% of the average wholesale cost of the    <--
    12         prescription drug dispensed:
    13                 (A)  with the addition of a dispensing fee of the
    14             greater of:
    15                     (I)  $4 per prescription; or
    16                     (II)  the amount set by the department by
    17                 regulation;
    18                 (B)  the subtraction of the copayment; and
    19                 (C)  if required, the subtraction of the generic
    20             differential; or
    21             (ii)  the pharmacy's usual charge for the drug
    22         dispensed with the subtraction of the copayment and, if
    23         required, the subtraction of the generic differential; or
    24             (iii)  if a generic drug, the most current Federal
    25         upper payment limits established in the Medicaid Program
    26         under 42 CFR § 447.332 (relating to upper limits for
    27         multiple source drugs), plus a dispensing fee of $4 or
    28         the amount set by the department by regulation, whichever
    29         is greater minus the copayment. The department shall
    30         update the average wholesale costs and the Federal upper
    20060S1188B1985                  - 6 -     

     1         payment limits at least every 30 days.
     2         (7)  In no case shall the Commonwealth or any [person
     3     enrolled in the program] claimant be charged more than the
     4     price of the drug at the particular pharmacy on the date of
     5     the sale.
     6         (8)  The Governor may, based upon certified State Lottery
     7     Fund revenue that is provided to both the chairman and
     8     minority chairman of the Appropriations Committee of the
     9     Senate and the chairman and minority chairman of the
    10     Appropriations Committee of the House of Representatives, and
    11     after consultation with the board, decrease the eligibility
    12     limits established in this [chapter] subchapter.
    13     Section 5.  Section 510 of the act, amended or added November
    14  21, 1996 (P.L.741, No.134) and November 30, 2004 (P.L.1722,
    15  No.219), is amended to read:
    16  Section 510.  Generic drugs.
    17     (a)  In general.--Notwithstanding any other statute or
    18  regulation, a brand name product shall be dispensed and not
    19  substituted with an A-rated generic therapeutically equivalent
    20  drug if it is less expensive to the program. If a less expensive
    21  A-rated generic therapeutically equivalent drug is available for
    22  dispensing to a claimant, the provider shall dispense the A-
    23  rated generic therapeutically equivalent drug to the claimant.
    24  The department shall reimburse providers based upon the most
    25  current listing of Federal upper payment limits established in
    26  the Medicaid Program under 42 CFR § 447.332 (relating to upper
    27  limits for multiple source drugs), plus a dispensing fee as set
    28  forth in section 509(6). The department shall update the average
    29  wholesale costs and the Federal upper payment limits on a
    30  regular basis, at least every 30 days. The department shall not
    20060S1188B1985                  - 7 -     

     1  reimburse providers for brand name products except in the
     2  following circumstances:
     3         (1)  There is no A-rated generic therapeutically
     4     equivalent drug available on the market. This paragraph does
     5     not apply to the lack of availability of an A-rated generic
     6     therapeutically equivalent drug in the providing pharmacy
     7     unless it can be shown to the department that the provider
     8     made reasonable attempts to obtain the A-rated generic
     9     therapeutically equivalent drug or that there was an
    10     unforeseeable demand and depletion of the supply of the A-
    11     rated generic therapeutically equivalent drug. In either
    12     case, the department shall reimburse the provider for [90%]    <--
    13     88% of the average wholesale cost plus a dispensing fee based  <--
    14     on the least expensive A-rated generic therapeutically
    15     equivalent drug for the brand drug dispensed.
    16         (2)  An A-rated generic therapeutically equivalent drug
    17     is deemed by the department, in consultation with a
    18     utilization review committee, to have too narrow a
    19     therapeutic index for safe and effective dispensing in the
    20     community setting. The department shall notify providing
    21     pharmacies of A-rated generic therapeutically equivalent
    22     drugs that are identified pursuant to this paragraph on a
    23     regular basis.
    24         (3)  The Department of Health has determined that a drug
    25     shall not be recognized as an A-rated generic therapeutically
    26     equivalent drug for purpose of substitution under section
    27     5(b) of the act of November 24, 1976 (P.L.1163, No.259),
    28     referred to as the Generic Equivalent Drug Law.
    29         (4)  At the time of dispensing, the provider has a
    30     prescription on which the brand name drug dispensed is billed
    20060S1188B1985                  - 8 -     

     1     to the program by the provider at a usual and customary
     2     charge which is equal to or less than the least expensive
     3     usual and customary charge of any A-rated generic
     4     therapeutically equivalent drug reasonably available on the
     5     market to the provider.
     6         (5)  The brand name drug is less expensive to the
     7     program.
     8     (b)  Generic not accepted.--If a claimant chooses not to
     9  accept the A-rated generic therapeutically equivalent drug
    10  required by subsection (a), the claimant shall be liable for the
    11  copayment and 70% of the average wholesale cost of the brand
    12  name drug.
    13     (c)  Generic drugs not deemed incorrect substitution.--The
    14  dispensing of an A-rated generic therapeutically equivalent drug
    15  in accordance with this [chapter] subchapter shall not be deemed
    16  incorrect substitution under section 6(a) of the Generic
    17  Equivalent Drug Law.
    18     (d)  Medical exception.--A medical exception process shall be
    19  established by the department, which shall be published as a
    20  notice in the Pennsylvania Bulletin and distributed to providers
    21  and recipients in the program.
    22     Section 6.  Sections 512 and 515 of the act, amended November  <--
    23  26, 2003 (P.L.212, No.37), are amended to read:
    24     SECTION 6.  SECTION 512 OF THE ACT, AMENDED NOVEMBER 26, 2003  <--
    25  (P.L.212, NO.37), IS AMENDED TO READ:
    26  Section 512.  [Restricted formulary] FORMULARY.                   <--
    27     The department may establish a [restricted] formulary of the   <--
    28  drugs which will not be reimbursed by the program. This
    29  formulary shall include [only] experimental drugs and drugs on    <--
    30  the Drug Efficacy Study Implementation List prepared by CMS. A
    20060S1188B1985                  - 9 -     

     1  medical exception may be permitted by the department for
     2  reimbursement of a drug on the Drug Efficacy Study
     3  Implementation List upon declaration of its necessity on the
     4  prescription by the treating physician or certified registered
     5  nurse practitioner, except that, for DESI drugs for which the
     6  FDA has issued a Notice for Opportunity Hearing (NOOH) for the
     7  purpose of withdrawing the New Drug Application approved for
     8  that drug, reimbursement coverage shall be discontinued under
     9  the provisions of this [chapter] subchapter.
    10     SECTION 6.1.  SECTION 513 OF THE ACT, ADDED NOVEMBER 21, 1996  <--
    11  (P.L.741, NO.134), IS AMENDED TO READ:
    12  SECTION 513.  MAIL ORDER SYSTEM.
    13     (A)  THE DEPARTMENT MAY NOT ENTER INTO A CONTRACT WITH A
    14  PRIVATE CONTRACTOR FOR AN EXCLUSIVE MAIL-ORDER SYSTEM FOR THE
    15  DELIVERY OF PRESCRIPTION DRUGS UNDER THIS PROGRAM. ONLY MAIL-
    16  ORDER PHARMACY SERVICES PROVIDED BY PHARMACIES WHICH ARE
    17  LICENSED BY THE COMMONWEALTH AND WHICH HAVE THEIR PRINCIPAL
    18  PLACE OF BUSINESS WITHIN THIS COMMONWEALTH MAY PARTICIPATE AS
    19  PROVIDERS UNDER THE PROGRAM. THE DEPARTMENT SHALL DEVELOP AND
    20  PROMULGATE SPECIFIC REGULATIONS GOVERNING THE PRACTICE OF MAIL-
    21  ORDER PHARMACY AND OTHER ENROLLED PROVIDERS TO INCLUDE THE
    22  FOLLOWING MINIMUM STANDARDS OF PRACTICE TO ENSURE THE HEALTH,
    23  SAFETY AND WELFARE OF PROGRAM PARTICIPANTS:
    24         (1)  THE APPROPRIATE METHOD OR METHODS BY WHICH SUCH
    25     PHARMACIES SHALL VERIFY THE IDENTITY OF THE PROGRAM RECIPIENT
    26     AND THE AUTHENTICITY OF PRESCRIPTIONS RECEIVED.
    27         (2)  THE APPROPRIATE METHOD OR METHODS BY WHICH SUCH
    28     PHARMACIES SHALL MAIL OR DELIVER PRESCRIPTION DRUGS TO
    29     PROGRAM RECIPIENTS ENSURING, TO THE MAXIMUM EXTENT POSSIBLE,
    30     THAT THE INTENDED PROGRAM RECIPIENT IS THE ACTUAL ULTIMATE
    20060S1188B1985                 - 10 -     

     1     RECIPIENT OF ANY PRESCRIPTION DISPENSED BY SUCH PHARMACIES.
     2         (3)  THE APPROPRIATE METHOD OR METHODS BY WHICH SUCH
     3     PHARMACIES SHALL COMMUNICATE WITH PROGRAM PARTICIPANTS IN
     4     EMERGENCY SITUATIONS.
     5     (B)  NOTWITHSTANDING ANY PROVISION OF LAW TO THE CONTRARY, A
     6  CLAIMANT MAY USE ANY AND ALL PHARMACY SERVICES OFFERED BY A PDP
     7  OR MEDICARE ADVANTAGE PRESCRIPTION DRUG PLAN TO RECEIVE DRUGS
     8  AND SHALL BE PERMITTED TO CONTINUE TO USE THOSE SERVICES
     9  THROUGHOUT THE NONCOVERAGE PHASE.
    10     (C)  NOTHING IN THIS SECTION SHALL REQUIRE A CLAIMANT TO USE
    11  MAIL-ORDER SERVICES.
    12     SECTION 6.2.  SECTION 515 OF THE ACT, AMENDED NOVEMBER 26,
    13  2003 (P.L.212, NO.37), IS AMENDED TO READ:
    14  Section 515.  Reimbursement.
    15     For-profit third-party insurers, health maintenance
    16  organizations, preferred provider organizations [and], not-for-
    17  profit prescription plans, Medicare advantage plans and PDPs
    18  shall be responsible for any payments made to a providing
    19  pharmacy on behalf of a claimant covered by such a third party.
    20  Final determination as to the existence of third-party coverage
    21  shall be the responsibility of the department.
    22     Section 7.  Sections 517 and 518 of the act, added November
    23  21, 1996 (P.L.741, No.134), are amended to read:
    24  Section 517.  Income verification.
    25     (a)  Procedure.--The department shall annually verify the
    26  income of [eligible] claimants. The department shall verify the
    27  income of [eligible] claimants by requiring income documentation
    28  from the claimants. An application for benefits under this
    29  [chapter] subchapter shall constitute a waiver to the department
    30  of all relevant confidentiality requirements relating to the
    20060S1188B1985                 - 11 -     

     1  claimant's Pennsylvania State income tax information in the
     2  possession of the Department of Revenue. The Department of
     3  Revenue shall provide the department with the necessary income
     4  information shown on the claimant's Pennsylvania State income
     5  tax return solely for income verification purposes.
     6     (b)  Information confidential.--It shall be unlawful for any
     7  officer, agent or employee of the department to divulge or make
     8  known in any manner whatsoever any information gained through
     9  access to the Department of Revenue information except for
    10  official income verification purposes under this [chapter]
    11  subchapter or as authorized under section 535.
    12     (c)  Penalty.--A person who violates this [act] section
    13  commits a misdemeanor and shall, upon conviction, be sentenced
    14  to pay a fine of not more than $1,000 or to imprisonment for not
    15  more than one year, or both, together with the cost of
    16  prosecution, and, if the offender is an officer or employee of
    17  the Commonwealth, he shall be dismissed from office or
    18  discharged from employment.
    19     (d)  Coordination with Department of Public Welfare.--To the
    20  extent possible, the department and the Department of Public
    21  Welfare shall coordinate efforts to facilitate the application
    22  and enrollment of eligible older people in the Medicaid Healthy
    23  Horizons Program by processing these applications at senior
    24  citizens centers and other appropriate facilities providing
    25  services to the elderly.
    26  Section 518.  Contract.
    27     The department is authorized to enter into a contract
    28  providing for prescription drugs to [eligible persons] claimants
    29  pursuant to this [chapter] subchapter. The department shall
    30  select a proposal that includes, but is not limited to, the
    20060S1188B1985                 - 12 -     

     1  criteria set forth in this [chapter] subchapter.
     2     Section 8.  Section 519 of the act, amended November 26, 2003
     3  (P.L.212, No.37), is amended to read:
     4  Section 519.  The Pharmaceutical Assistance Contract for the
     5                 Elderly Needs Enhancement Tier.
     6     (a)  Establishment.--There is hereby established within the
     7  department a program to be known as the Pharmaceutical
     8  Assistance Contract for the Elderly Needs Enhancement Tier
     9  [(PACENET)].                                                      <--
    10     (b)  PACENET eligibility.--A [claimant] person with an annual
    11  income of not less than $14,500 and not more than $23,500 in the
    12  case of a single person and of not less than $17,700 and not
    13  more than $31,500 in the case of the combined income of persons
    14  married to each other shall be eligible for enhanced
    15  pharmaceutical assistance under this section. A person may, in
    16  reporting income to the department, round the amount of each
    17  source of income and the income total to the nearest whole
    18  dollar, whereby any amount which is less than 50¢ is eliminated.
    19     [(c)  Deductible.--Upon enrollment in PACENET, eligible
    20  claimants in the income ranges set forth in subsection (b) shall
    21  be required to meet a deductible in unreimbursed prescription
    22  drug expenses of $40 per person per month. The $40 monthly
    23  deductible shall be cumulative and shall be applied to
    24  subsequent months to determine eligibility. The cumulative
    25  deductible shall be determined on an enrollment year basis for
    26  an annual total deductible not to exceed $480 in a year. To
    27  qualify for the deductible set forth in this subsection the
    28  prescription drug must be purchased for the use of the eligible
    29  claimant from a provider as defined in this chapter. The
    30  department, after consultation with the board, may approve an
    20060S1188B1985                 - 13 -     

     1  adjustment in the deductible on an annual basis.]
     2     (c.1)  Premium.--In those instances in which a PACENET
     3  claimant does not enroll in Part D IS NOT ENROLLED IN PART D      <--
     4  PURSUANT TO SECTION 533, the claimant shall be required to pay a
     5  monthly premium equivalent to the regional benchmark premium.
     6     (d)  Copayment.--
     7         (1)  For [eligible] claimants under this section, the
     8     copayment schedule shall be:
     9             (i)  eight dollars for noninnovator multiple source
    10         drugs as defined in section 702; or
    11             (ii)  fifteen dollars for single-source drugs and
    12         innovator multiple-source drugs as defined in section
    13         702.
    14         (2)  The department shall annually calculate the
    15     copayment schedules based on the Prescription Drugs and
    16     Medical Supplies Consumer Price Index. When the aggregate
    17     impact of the Prescription Drugs and Medical Supplies
    18     Consumer Price Index equals or exceeds $1, the department
    19     shall adjust the copayment schedules. Each copayment schedule
    20     shall not be increased by more than $1 in a calendar year.
    21     Section 9.  Section 520.1 of the act, added November 26, 2003
    22  (P.L.212, No.37), is amended to read:
    23  [Section 520.1.  Pharmacy best practices and cost controls
    24                     review.
    25     (a)  Review process.--The secretary shall review and
    26  recommend pharmacy best practices and cost control mechanisms
    27  that maintain high quality in prescription drug therapies but
    28  are designed to reduce the cost of providing prescription drugs
    29  for PACE and PACENET enrollees, including:
    30         (1)  A list of covered prescription drugs with
    20060S1188B1985                 - 14 -     

     1     recommended copayment schedules. In developing the schedules,
     2     the department shall take into account the standards
     3     published in the United States Pharmacopeia Drug Information.
     4         (2)  A drug utilization review procedure, incorporating a
     5     prescription review process for copayment schedules.
     6         (3)  A step therapy program that safely and effectively
     7     utilizes in a sequential manner the least costly
     8     pharmacological therapy to treat the symptoms of or effect a
     9     cure for the medical condition or illness for which the
    10     therapy is prescribed.
    11         (4)  Education programs designed to provide information
    12     and education on the therapeutic and cost-effective
    13     utilization of prescription drugs to physicians, pharmacists,
    14     certified registered nurse practitioners and other health
    15     care professionals authorized to prescribe and dispense
    16     prescription drugs.
    17     (b)  Report and recommendations.--No later than two years
    18  from the effective date of this section, the department shall
    19  submit a report with recommendations to the Aging and Youth
    20  Committee, the Appropriations Committee and the Public Health
    21  and Welfare Committee of the Senate and the Aging and Older
    22  Adult Services Committee, the Appropriations Committee and the
    23  Health and Human Services Committee of the House of
    24  Representatives. The report shall include information regarding
    25  the efficacy of the pharmacy best practices and control
    26  mechanisms set forth in subsection (a), including recommended
    27  copayment schedules with impacted classes of drugs, exceptions,
    28  cost effectiveness, improved drug utilization and therapies,
    29  movement of market share and increased utilization of generic
    30  drugs.]
    20060S1188B1985                 - 15 -     

     1     Section 10.  Section 521 of the act, amended or added
     2  November 21, 1996 (P.L.741, No.134) and November 26, 2003
     3  (P.L.212, No.37), is amended to read:
     4  Section 521.  Penalties.
     5     (a)  Prohibited acts.--It shall be unlawful for any person to
     6  submit a false or fraudulent claim or application under this
     7  [chapter] subchapter, including, but not limited to:
     8         (1)  aiding or abetting another in the submission of a
     9     false or fraudulent claim or application;
    10         (2)  receiving benefits or reimbursement under a private,
    11     Federal or State program for prescription assistance and
    12     claiming or receiving duplicative benefits hereunder;
    13         (3)  soliciting, receiving, offering or paying any
    14     kickback, bribe or rebate, in cash or in kind, from or to any
    15     person in connection with the furnishing of services under
    16     this [chapter] subchapter;
    17         (4)  engaging in a pattern of submitting claims that
    18     repeatedly uses incorrect National Drug Code numbers [for the
    19     purpose of obtaining wrongful enhanced reimbursement]; or
    20         (5)  otherwise violating any provision of this [chapter]
    21     subchapter.
    22     (b)  Civil penalty.--In addition to any appropriate criminal
    23  penalty for prohibited acts under this [chapter] subchapter
    24  whether or not that act constitutes a crime under 18 Pa.C.S.
    25  (relating to crimes and offenses), a provider who violates this
    26  section may be liable for a civil penalty in an amount not less
    27  than $500 and not more than $10,000 for each violation of this
    28  act which shall be collected by the department. Each violation
    29  constitutes a separate offense. If the department collects three
    30  or more civil penalties against the same provider, the provider
    20060S1188B1985                 - 16 -     

     1  shall be ineligible to participate in either PACE or PACENET for
     2  a period of one year. If more than three civil penalties are
     3  collected from any provider, the department may determine that
     4  the provider is permanently ineligible to participate in PACE or
     5  PACENET.
     6     (c)  Suspension of license.--The license of any provider who
     7  has been found guilty under this [chapter] subchapter shall be
     8  suspended for a period of one year. The license of any provider
     9  who has committed three or more violations of this [chapter]
    10  subchapter may be suspended for a period of one year.
    11     (d)  Reparation.--Any provider, [recipient] claimant or other
    12  person who is found guilty of a crime for violating this
    13  [chapter] subchapter shall repay three times the value of the
    14  material gain received. In addition to the civil penalty
    15  authorized pursuant to subsection (b), the department may
    16  require the provider, [recipient] claimant or other person to
    17  repay up to three times the value of any material gain to PACE
    18  or PACENET.
    19     Section 11.  Chapter 5 of the act is amended by adding a
    20  subchapter to read:
    21                            SUBCHAPTER C
    22             COORDINATION OF FEDERAL AND STATE BENEFITS
    23  Section 531.  Definitions.
    24     The following words and phrases when used in this subchapter
    25  shall have the meanings given to them in this section unless the
    26  context clearly indicates otherwise:
    27     "LIS."  Low-income subsidy assistance from Part D provided by
    28  the Medicare Prescription Drug, Improvement, and Modernization
    29  Act of 2003 (Public Law 108-173, 117 Stat. 2066) to help pay for
    30  annual premiums, deductibles and copayments charged to
    20060S1188B1985                 - 17 -     

     1  individuals enrolled in Part D by prescription plans approved
     2  under that act.
     3     "Medicare Advantage Prescription Drug Plan."  A Medicare       <--
     4  advantage plan that provides qualified prescription drug
     5  coverage as set forth in the Medicare Prescription Drug,
     6  Improvement, and Modernization Act of 2003 (Public Law 108-173,
     7  117 Stat. 2066).
     8     "Noncoverage phase."  The deductible phase or the difference
     9  between Part D initial coverage and catastrophic coverage for
    10  certain Part D enrollees, as set forth in section 1860D-2 of the
    11  Medicare Prescription Drug, Improvement, and Modernization Act
    12  of 2003 (Public Law 108-173, 117 Stat. 2066).
    13     "Part D eligible individual."  An eligible person who is
    14  entitled to benefits under Part A of Medicare, or enrolled in
    15  Part B of Medicare, as specified in section 1860D-1 of the
    16  Medicare Prescription Drug, Improvement, and Modernization Act
    17  of 2003 (Public Law 108-173, 117 Stat. 2066).
    18     "Part D enrollee."  A claimant enrolled in a Part D plan.
    19     "Part D provider."  A pharmacy or other prescription drug
    20  dispenser authorized by a Part D enrollee's Part D plan.
    21  Section 532.  Purpose.
    22     The benefits available to a claimant enrolled in the program
    23  under Subchapter B shall be a supplement to the benefits
    24  available under Part D. The department may require claimants to
    25  utilize Part D benefits prior to utilizing benefits provided
    26  under either program and shall coordinate the benefits of the
    27  programs with those provided under Part D.
    28  Section 533.  Powers of the department; notifications.            <--
    29     (a)  Powers.--The department may:
    30         (1)  Identify the Part D plan or plans with which the
    20060S1188B1985                 - 18 -     

     1     department has entered into a contract under section 534 that
     2     meet the prescription drug needs and pharmacy preferences of
     3     a claimant.
     4         (2)  Recommend that the claimant enroll in the Part D
     5     plan that meets the prescription drug needs and pharmacy
     6     preferences of the claimant in the most cost-effective manner
     7     for the Commonwealth.
     8         (3)  Initiate enrollment on behalf of the claimant in the
     9     Part D plan recommended by the department unless the claimant
    10     notifies the department that the claimant does not wish to
    11     enroll in the Part D plan.
    12         (4)  File and pursue appeals with a claimant's Part D
    13     plan to convert noncovered drugs to covered drugs or
    14     nonpreferred brand drugs to preferred drugs.
    15         (5)  Assist claimants the department believes to be
    16     eligible for the LIS in making an application to the Social
    17     Security Administration.
    18     (b)  Notifications.--When recommending enrollment in a Part D
    19  plan to claimants, the department shall provide at least ten
    20  days for the claimant to decline enrollment and shall notify
    21  claimants of:
    22         (1)  The ability to decline enrollment in a Part D plan.
    23         (2)  The ability to file and pursue appeals to a Part D
    24     plan on their own behalf.
    25         (3)  The possibility that their choice of plan may affect
    26     their medical coverage if they are enrolled in a Medicare
    27     Advantage Plan.
    28  SECTION 533.  POWERS OF THE DEPARTMENT.                           <--
    29     THE DEPARTMENT SHALL:
    30         (1)  IDENTIFY THE PART D PLAN OR PLANS WITH WHICH THE
    20060S1188B1985                 - 19 -     

     1     DEPARTMENT HAS ENTERED INTO A CONTRACT UNDER SECTION 534 THAT
     2     MEET THE PRESCRIPTION DRUG NEEDS AND PHARMACY PREFERENCES OF
     3     A CLAIMANT.
     4         (2)  RECOMMEND THAT THE CLAIMANT ENROLL IN THE PART D
     5     PLAN OR PROGRAM THAT MEETS THE PRESCRIPTION DRUG NEEDS AND
     6     PHARMACY PREFERENCES OF THE CLAIMANT IN THE MOST COST-
     7     EFFECTIVE MANNER FOR THE COMMONWEALTH.
     8         (3)  INITIATE ENROLLMENT ON BEHALF OF THE CLAIMANT IN THE
     9     PART D PLAN RECOMMENDED BY THE DEPARTMENT UNLESS THE CLAIMANT
    10     NOTIFIES THE DEPARTMENT THAT THE CLAIMANT WISHES TO ENROLL IN
    11     ANOTHER PART D PLAN.
    12         (4)  FILE AND PURSUE APPEALS IN ACCORDANCE WITH CMS
    13     REGULATIONS WITH A CLAIMANT'S PART D PLAN ON THE CLAIMANT'S
    14     BEHALF TO REQUEST EXCEPTIONS TO THE PLAN'S TIERED COST-
    15     SHARING STRUCTURE OR TO REQUEST A NONFORMULARY PART D DRUG.
    16         (5)  ASSIST CLAIMANTS THE DEPARTMENT BELIEVES TO BE
    17     ELIGIBLE FOR THE LIS IN MAKING AN APPLICATION TO THE SOCIAL
    18     SECURITY ADMINISTRATION.
    19         (6)  PROVIDE AT LEAST TEN DAYS FOR THE CLAIMANT TO
    20     DECLINE ENROLLMENT IN THE RECOMMENDED PLAN.
    21         (7)  DEVELOP AND DISTRIBUTE LANGUAGE, WHEN RECOMMENDING
    22     ENROLLMENT, NOTIFYING CLAIMANTS OF:
    23             (I)  THE ABILITY TO DECLINE ENROLLMENT IN THE
    24         RECOMMENDED PART D PLAN.
    25             (II)  THE ABILITY TO FILE AND PURSUE APPEALS TO THE
    26         RECOMMENDED PART D PLAN ON THEIR OWN BEHALF.
    27             (III)  THE POSSIBILITY THAT THEIR CHOICE OF PLAN MAY
    28         AFFECT THEIR MEDICAL COVERAGE IF THEY ARE ENROLLED IN A
    29         MEDICARE ADVANTAGE PLAN, IF APPLICABLE.
    30  Section 534.  Coordination of benefits.
    20060S1188B1985                 - 20 -     

     1     (a)  General coordination.--In addition to the specific
     2  provisions of subsection (b), the department shall establish
     3  standards and minimum requirements it deems necessary to allow
     4  for the coordination of benefits between the program and Part D.
     5     (b)  Specific coordination provisions.--The following
     6  provisions shall apply to claimants who are also Part D
     7  enrollees:
     8         (1)  The primary payor shall be the PDP or the Medicare
     9     Advantage Prescription Drug Plan, as appropriate.
    10         (2)  Part D enrollees shall be required to utilize
    11     providers authorized by their PDPs or Medicare Advantage
    12     Prescription Drug Plans.
    13         (3)  The program shall pay the premium assessed by a PACE
    14     enrollee's PDP or, with respect to the prescription drug
    15     plan, Medicare Advantage Prescription Drug Plan in an amount
    16     not to exceed the regional benchmark premium and any
    17     copayments in excess of those set forth in section 509.
    18         (4)  Part D enrollees enrolled in PACENET shall pay the
    19     Part D premiums charged by their PDP or, with respect to the
    20     prescription drug plan, Medicare Advantage Prescription Drug
    21     Plan and the program shall pay any copayments in excess of
    22     those set forth in section 519.
    23         (5)  For Part D enrollees enrolled in PACE who are not
    24     eligible for LIS, PACE shall reimburse Part D providers for
    25     prescription drugs in any noncoverage phase of Part D. For
    26     Part D enrollees enrolled in PACENET, PACENET shall reimburse
    27     Part D providers for prescription drugs in any noncoverage
    28     phase of Part D.
    29         (6)  The provisions of Chapter 7 shall apply to all
    30     payments made by the program in the noncoverage phase.
    20060S1188B1985                 - 21 -     

     1         (7)  The department shall advise a claimant on the
     2     various benefits and drugs provided by each PDP approved by
     3     the department as follows:
     4             (i)  Analyze the claimant's eligibility for and
     5         assist the claimant in applying for LIS.
     6             (ii)  Identify the claimant's prescription drug needs
     7         and preferred pharmacy.
     8             (iii)  Assist the claimant in enrolling in the PDP
     9         that best fits the claimant's prescription drug needs.
    10             (iv)  File and pursue appeals with the claimant's PDP  <--
    11         to convert noncovered drugs to covered drugs or
    12         nonpreferred brand drugs to preferred drugs.
    13             (IV)  FILE AND PURSUE APPEALS IN ACCORDANCE WITH CMS   <--
    14         REGULATIONS WITH A CLAIMANT'S PART D PLAN ON THE
    15         CLAIMANT'S BEHALF TO REQUEST EXCEPTIONS TO THE PLAN'S
    16         TIERED COST-SHARING STRUCTURE OR TO REQUEST A
    17         NONFORMULARY PART D DRUG.
    18         (8)  NOTWITHSTANDING THE PROVISIONS OF SECTIONS 511 AND
    19     513(A), FOR PURPOSES OF COORDINATION OF BENEFITS WITH
    20     MEDICARE PART D PLANS, AND TO MINIMIZE DISRUPTION TO
    21     ENROLLEES, THE PROGRAM SHALL BE AUTHORIZED TO REIMBURSE PART
    22     D PROVIDERS, INCLUDING MAIL-ORDER PHARMACIES, FOR MORE THAN A
    23     30-DAY SUPPLY OF PRESCRIPTION DRUGS.
    24     (c)  Contracts.--The department is authorized to enter into
    25  contracts with Part D plans to provide for prescription drugs to
    26  Part D enrollees through Part D pursuant to this subchapter. A
    27  Part D plan selected by the department shall meet all of the
    28  following requirements:
    29         (1)  The Part D plan has a retail pharmacy network that
    30     includes at least 90% of the pharmacies in the PACE network.
    20060S1188B1985                 - 22 -     

     1         (2)  The Part D plan has a premium at or below the
     2     regional benchmark premium.
     3     (d)  Rebates.--The department may only receive rebates as
     4  provided in Chapter 7 where the program is the only payor for a
     5  Part D enrollee's covered prescription drugs.
     6  Section 535.  Financial resource information.
     7     (a)  Procedure.--The department may obtain information on the
     8  financial resources of a Part D eligible individual for the
     9  purpose of determining the individual's potential eligibility
    10  for the LIS. The authority granted under this subsection shall
    11  be exercised only with respect to a Part D eligible individual
    12  who has income which is below the applicable threshold
    13  established by the Medicare Prescription Drug, Improvement, and
    14  Modernization Act of 2003 (Public Law 108-173, 117 Stat. 2066)
    15  for qualification under the LIS.
    16     (b)  Waiver.--An application by a Part D eligible individual
    17  for enrollment in the program shall constitute a waiver to the
    18  department of relevant confidentiality requirements relating to
    19  the prospective claimant's financial resources in the possession
    20  of any Commonwealth agency or third party when the information
    21  is required for the purposes listed under subsection (a). This
    22  waiver shall extend to the application phase and throughout the
    23  entire time the claimant is in the program.
    24     (c)  Information confidential.--
    25         (1)  It shall be unlawful for an officer, agent or
    26     employee of the department to divulge or make known
    27     information obtained from a Commonwealth agency or third
    28     party except for the purposes under subsection (a).
    29         (2)  A person that violates this subsection commits a
    30     misdemeanor of the third degree and shall, upon conviction,
    20060S1188B1985                 - 23 -     

     1     be sentenced to pay a fine of not more than $1,000 or to
     2     imprisonment for not more than one year, or both, and to pay
     3     the cost of prosecution. If the offender is an officer or
     4     employee of the Commonwealth, the offender shall be dismissed
     5     from office or discharged from employment.
     6     (D)  UPON REQUEST OF THE CLAIMANT, THE DEPARTMENT SHALL        <--
     7  PROVIDE A COPY OF ANY AND ALL FILINGS THAT ARE PROCESSED OR
     8  SUBMITTED UNDER THIS SUBCHAPTER.
     9  Section 536.  Reimbursement.
    10     For-profit insurers, health maintenance organizations,
    11  preferred provider organizations, not-for-profit prescription
    12  plans, Medicare Advantage plans and PDPs shall be responsible
    13  for any payments made to a pharmacy on behalf of a Part D
    14  enrollee covered by any such third party. Final determination as
    15  to the existence of third-party coverage shall be the
    16  responsibility of the department.
    17  SECTION 537.  COLLECTION.                                         <--
    18     THE DEPARTMENT SHALL HAVE THE AUTHORITY TO COLLECT ANY
    19  AMOUNTS FROM THE PAYMENT BY THE DEPARTMENT OF PHARMACY CLAIMS
    20  THAT ARE THE RESPONSIBILITY OF A PDP OR MEDICARE ADVANTAGE
    21  PRESCRIPTION DRUG PLAN AS A PRIMARY PAYOR PURSUANT TO SECTION
    22  534(B)(1).
    23     Section 12.  Section 706 of the act, added November 21, 1996
    24  (P.L.741, No.134), is amended to read:
    25  Section 706.  Excessive pharmaceutical price inflation discount.
    26     (a)  General rule.--A discount shall be provided to the
    27  department for all covered prescription drugs except those
    28  excluded under subsection (d). The discount shall be calculated
    29  as follows:
    30         (1)  For each quarter for which a rebate under section
    20060S1188B1985                 - 24 -     

     1     705(a) and (b) is to be paid after December 31, 1991, and
     2     before January 1, 1997, the average manufacturer price for
     3     each dosage form and strength of a covered prescription drug
     4     shall be compared to the average manufacturer price for the
     5     same form and strength in the previous calendar year, and a
     6     percentage increase shall be calculated.
     7         (2)  For each quarter under paragraph (1), the average
     8     percentage increase in the Producer Price Index for
     9     Pharmaceuticals over the same quarter in the previous
    10     calendar year shall be calculated.
    11         (3)  If the calculation under paragraph (1) is greater
    12     than the calculation under paragraph (2), the discount amount
    13     for each quarter shall be equal to the product of:
    14             (i)  the difference between the calculations under
    15         paragraphs (1) and (2); and
    16             (ii)  the total number of units of each dosage form
    17         and strength reimbursed by PACE and General Assistance
    18         and the average manufacturer price reported by the
    19         manufacturer under section 704(c)(1).
    20     (b)  Revised general rule.--A discount shall be provided to
    21  the department for all covered prescription drugs EXCEPT THOSE    <--
    22  EXCLUDED UNDER SUBSECTION (D). The discount shall be calculated
    23  as follows:
    24         (1)  For each quarter for which a rebate under section
    25     705(a) and (c) is to be paid after December 31, 1996, the
    26     average manufacturer price for each dosage form and strength
    27     of a covered prescription drug shall be compared to the
    28     average manufacturer price for the same form and strength in
    29     the previous calendar year and a percentage increase shall be
    30     calculated.
    20060S1188B1985                 - 25 -     

     1         (2)  For each quarter under paragraph (1), the average
     2     percentage increase in the Consumer Price Index-Urban over
     3     the same quarter in the previous calendar year shall be
     4     calculated.
     5         (3)  If the calculation under paragraph (1) is greater
     6     than the calculation under paragraph (2), the discount amount
     7     for each quarter shall be equal to the product of:
     8             (i)  the difference between the calculations under
     9         paragraphs (1) and (2); and
    10             (ii)  the total number of units of each dosage form
    11         and strength reimbursed by PACE, PACENET and designated
    12         pharmaceutical programs and the average manufacturer
    13         price reported by the manufacturer under section
    14         704(c)(1).
    15     (c)  New bimarketed drugs.--For covered prescription drugs
    16  that have not been marketed for a full calendar year, subsection
    17  (a) shall apply after the covered prescription drug has been on
    18  the market for four consecutive quarters. The drug's initial
    19  average manufacturer price shall be based on the first day of
    20  the first quarter that the drug was marketed.
    21     (d)  Applicability.--This section shall not apply to a
    22  noninnovator multiple-source prescription drug or generic
    23  prescription drug.
    24     Section 13.  Section 2103 of the act, added November 26, 2003
    25  (P.L.212, No.37), is amended to read:
    26  Section 2103.  Federal programs.
    27     If the Federal Government enacts pharmacy programs similar to
    28  PACE or PACENET, the State programs shall be construed to only
    29  supplement the Federal pharmacy programs.[, and all] All persons
    30  qualified for coverage under [the] a Federal pharmacy program
    20060S1188B1985                 - 26 -     

     1  [shall], including the prescription drug benefit program
     2  provided by the Medicare Prescription Drug, Improvement, and
     3  Modernization Act of 2003 (Public Law 108-173, 117 Stat. 2066),
     4  may be required by the department to utilize [that] the Federal
     5  program before utilizing any State program.
     6     Section 14.  (a)  Notwithstanding any other provision of law
     7  to the contrary, persons who, as of December 31, 2004 2005, are   <--
     8  enrolled in the PACE or PACENET program as defined in section
     9  502 of the act shall remain eligible for the PACE or PACENET
    10  program if the maximum income limit is exceeded due solely to a
    11  Social Security cost-of-living adjustment.
    12     (b)  Funding, to the extent authorized by section
    13  306(b)(1)(vii) of the act of June 26, 2001 (P.L.755, No.77),
    14  known as the Tobacco Settlement Act, shall continue to be
    15  appropriated to the Pharmaceutical Assistance Contract for the
    16  Elderly Fund to support the program expansions contained in this
    17  section. The Department of Aging shall also designate funds from
    18  the fund to continue eligibility under this section; however,
    19  these funds shall not exceed the funding designated under
    20  section 306(b)(1)(vii) of the Tobacco Settlement Act. If
    21  eligibility under this section requires that funds from the fund
    22  exceed those from section 306(b)(1)(vii) of the Tobacco
    23  Settlement Act, then the Department of Aging is authorized to
    24  determine eligibility requirements.
    25     (c)  Eligibility in the PACE and PACENET programs pursuant to  <--
    26  this section shall expire December 31, 2007.
    27     (C)  ELIGIBILITY IN THE PACE PROGRAM PURSUANT TO THIS SECTION  <--
    28  SHALL EXPIRE DECEMBER 31, 2006.
    29     (D)  ELIGIBILITY IN THE PACENET PROGRAM PURSUANT TO THIS
    30  SECTION SHALL EXPIRE DECEMBER 31, 2007.
    20060S1188B1985                 - 27 -     

     1     Section 15.  This act shall take effect immediately.           <--
     2     SECTION 15.  THIS ACT SHALL TAKE EFFECT AS FOLLOWS:            <--
     3         (1)  THE AMENDMENT OF SECTION 512 OF THE ACT SHALL TAKE
     4     EFFECT JANUARY 1, 2008.
     5         (2)  THE AMENDMENT OF SECTION 706 OF THE ACT SHALL TAKE
     6     EFFECT JANUARY 1, 2007.
     7         (3)  THE REMAINDER OF THIS ACT SHALL TAKE EFFECT
     8     IMMEDIATELY.















    D3L72MSP/20060S1188B1985        - 28 -
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