PRINTER'S NO. 2113
No. 1518 Session of 2000
INTRODUCED BY O'PAKE, STOUT, COSTA, LAVALLE, WAGNER, KUKOVICH,
BELL, TILGHMAN, STAPLETON, MUSTO, BOSCOLA AND KASUNIC,
SEPTEMBER 15, 2000
REFERRED TO PUBLIC HEALTH AND WELFARE, SEPTEMBER 15, 2000
AN ACT
1 Establishing a prescription drug program; conferring powers and
2 duties on the Department of Public Welfare and the State
3 Board of Pharmacy; establishing the Dedicated Pharmacy Fund;
4 providing for reduction of prescription drug prices;
5 establishing the Prescription Drug Advisory Commission; and
6 imposing penalties.
7 The General Assembly of the Commonwealth of Pennsylvania
8 hereby enacts as follows:
9 CHAPTER 1
10 PRELIMINARY PROVISIONS
11 Section 101. Short title.
12 This act shall be known and may be cited as the
13 Pharmaceutical Reform Act.
14 Section 102. Definitions.
15 The following words and phrases when used in this act shall
16 have the meanings given to them in this section unless the
17 context clearly indicates otherwise:
18 "Board." The State Board of Pharmacy of the Commonwealth.
19 "Commission." The Prescription Drug Advisory Commission
1 established in section 502.
2 "Department." The Department of Public Welfare of the
3 Commonwealth.
4 "Labeler." A person that receives prescription drugs from a
5 manufacturer or wholesaler and repackages those drugs for later
6 retail sale and that has a labeler code from the Food and Drug
7 Administration under 21 CFR 207.20 (relating to who must
8 register and submit a drug list).
9 "Secretary." The Secretary of Public Welfare of the
10 Commonwealth.
11 CHAPTER 3
12 PRESCRIPTION PROGRAM
13 Section 301. Definitions.
14 The following words and phrases when used in this chapter
15 shall have the meanings given to them in this section unless the
16 context clearly indicates otherwise:
17 "Average wholesale price." The wholesale price charged on a
18 specific commodity which is assigned by the drug manufacturer
19 and is listed in a nationally recognized drug pricing file.
20 "Fund." The Dedicated Pharmacy Fund established in section
21 309.
22 "Initial discounted price." A price which is less than or
23 equal to the average wholesale price minus 6% of that price,
24 plus the dispensing fee provided under Article IV(f) of the act
25 of June 13, 1967 (P.L.31, No.21), known as the Public Welfare
26 Code.
27 "Manufacturer." A manufacturer of prescription drugs. The
28 term includes a subsidiary or affiliate of a manufacturer.
29 "Participating retail pharmacy." A retail pharmacy located
30 in this Commonwealth or another business licensed to dispense
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1 prescription drugs in this Commonwealth, that participates in
2 the program and that provides discounted prices to residents
3 under section 305.
4 "Pharmacy benefit manager." An entity that procures
5 prescription drugs at a negotiated rate under a contract.
6 "Program." The Prescription Drug Program established in
7 section 302.
8 "Qualified resident." A resident of this Commonwealth who is
9 enrolled in the program.
10 "Secondary discounted price." A price which is equal to or
11 less than the initial discounted price minus the amount of any
12 rebate paid by the Commonwealth to the participating retail
13 pharmacy.
14 Section 302. Program.
15 (a) Establishment.--The Prescription Drug Pharmacy Program
16 is established to reduce prescription drug prices for residents
17 of this Commonwealth. The program is designed to utilize
18 manufacturer rebates and pharmacy discounts to reduce
19 prescription drug prices. In implementing the program, the
20 Commonwealth shall serve as a pharmacy benefit manager.
21 (b) Goals.--The General Assembly finds that affordability is
22 critical in providing access to prescription drugs for
23 Pennsylvania residents. This chapter is enacted to enable the
24 Commonwealth to act as a pharmacy benefit manager in order to
25 make prescription drugs more affordable for qualified residents,
26 thereby increasing the overall health of Pennsylvania residents,
27 promoting healthy communities and protecting the public health
28 and welfare. It is not the intention of the General Assembly to
29 discourage employers from providing prescription drug benefits
30 for their employees.
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1 Section 303. Rebate agreement.
2 A drug manufacturer or labeler that sells prescription drugs
3 in this Commonwealth through any publicly supported
4 pharmaceutical assistance program shall enter into a rebate
5 agreement with the department for this program. The rebate
6 agreement must require the manufacturer or labeler to make
7 rebate payments to the department each calendar quarter or
8 according to a schedule established by the department.
9 Section 304. Rebate amount.
10 The department shall negotiate the amount of the rebate
11 required from a manufacturer or labeler in accordance with the
12 following:
13 (1) The department shall take into consideration the
14 rebate calculated under the Medicaid rebate program under
15 section 1927 of the Social Security Act (49 Stat. 620, 42
16 U.S.C. § 1396r-8), the average wholesale price of
17 prescription drugs and any other information on prescription
18 drug prices and price discounts.
19 (2) The department shall use its best efforts to obtain
20 an initial rebate amount equal to or greater than the rebate
21 calculated under the Medicaid rebate program under section
22 1927 of the Social Security Act (42 U.S.C. § 1396r-8).
23 (3) With respect to the rebate taking effect by October
24 1, 2002, the department shall use its best efforts to obtain
25 an amount equal to or greater than the amount of any
26 discount, rebate or price reduction for prescription drugs
27 provided to the Federal Government.
28 Section 305. Discounted prices for qualified residents.
29 (a) Requirement.--A participating retail pharmacy that sells
30 prescription drugs covered by a rebate agreement under section
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1 303 shall discount the retail price of such drugs sold to
2 qualified residents.
3 (b) Department.--The department shall establish discounted
4 prices for drugs covered by a rebate agreement and shall promote
5 the use of efficacious and reduced-cost drugs, taking into
6 consideration reduced prices for federally and State capped drug
7 programs, differential dispensing fees, administrative overhead
8 and incentive payments. In determining the amount of discounted
9 prices, the department shall consider an average of all rebates
10 provided pursuant to section 304, weighted by sales of drugs
11 subject to these rebates over the most recent 12-month period
12 for which the information is available.
13 (c) Date.--
14 (1) Beginning January 1, 2002, a participating retail
15 pharmacy shall offer the initial discounted price.
16 (2) No later than October 1, 2002, a participating
17 retail pharmacy shall offer the secondary discounted price.
18 Section 306. Operation of program.
19 The following apply to participating retail pharmacies:
20 (1) The board shall promulgate regulations requiring
21 participating retail pharmacies to disclose to qualified
22 residents the discount provided as a result of the program.
23 The regulations shall consider and protect information that
24 is proprietary in nature.
25 (2) The department may not impose transaction charges
26 under this program on retail pharmacies that submit claims or
27 receive payments under the program.
28 (3) A participating retail pharmacy shall submit claims
29 to the department to verify the amount charged to qualified
30 residents under section 305.
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1 (4) On a semimonthly basis, the department shall
2 reimburse a participating retail pharmacy for discounted
3 prices provided to qualified residents under section 303.
4 (5) The department shall collect data from participating
5 pharmacies submitting claims to calculate the rebate from the
6 manufacturer or labeler. Data under this paragraph shall not
7 be considered to be of public record.
8 Section 307. Action with regard to nonparticipating
9 manufacturers and labelers.
10 The names of manufactures and labelers that do not enter into
11 rebate agreements pursuant to this chapter are public
12 information. The department shall impose prior authorization
13 requirements in medical assistance under Article IV(f) of the
14 act of June 13, 1967 (P.L.31, No.21), known as the Public
15 Welfare Code, for the dispensing of prescription drugs provided
16 by those manufacturers and labelers.
17 Section 308. Discrepancies in rebate amounts.
18 Discrepancies in rebate amounts shall be resolved as follows:
19 (1) If there is a discrepancy in the manufacturer's or
20 labeler's favor between the amount claimed by a pharmacy and
21 the amount rebated by the manufacturer or labeler, the
22 department, at the department's expense, may hire a mutually
23 agreed-upon independent auditor. If a discrepancy still
24 exists following the audit, the manufacturer or labeler shall
25 justify the reason for the discrepancy or make payment to the
26 department for any additional amount due.
27 (2) If there is a discrepancy against the interest of
28 the manufacturer or labeler in the information provided by
29 the department to the manufacturer or labeler regarding the
30 manufacturer's or labeler's rebate, the manufacturer or
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1 labeler, at the manufacturer's or labeler's expense, may hire
2 a mutually agreed-upon independent auditor to verify the
3 accuracy of the data supplied to the department. If a
4 discrepancy still exists following the audit, the department
5 shall justify the reason for the discrepancy or refund to the
6 manufacturer any excess payment made by the manufacturer or
7 labeler.
8 Section 309. Fund.
9 The Dedicated Pharmacy Fund is established to receive revenue
10 from manufacturers and labelers who pay rebates as provided in
11 section 304 and any appropriations or allocations designated to
12 the fund. The purposes of the fund are as follows:
13 (1) Reimburse retail pharmacies for discounted prices
14 provided to qualified residents pursuant to section 305.
15 (2) Reimburse the department for contracted services,
16 administrative and associated computer costs, professional
17 fees paid to participating retail pharmacies and other
18 reasonable program costs.
19 Section 310. Annual summary report.
20 The department shall annually report the enrollment and
21 financial status of the program to the General Assembly by the
22 second week in January.
23 Section 311. Obligations of department.
24 (a) General rule.--The department shall establish simplified
25 procedures for determining eligibility and issuing enrollment
26 cards to qualified residents, and shall undertake outreach
27 efforts to build public awareness of the program and maximize
28 enrollment. The department may adjust the requirements and terms
29 of the program to accommodate any new federally funded
30 prescription drug programs.
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1 (b) Waivers.--The department may seek any waivers of Federal
2 law necessary to implement the provisions of this chapter.
3 CHAPTER 5
4 PRESCRIPTION DRUG PRICE REDUCTION ACT
5 Section 501. Purpose.
6 The General Assembly finds that affordability is critical in
7 providing access to prescription drugs. This chapter is enacted
8 as a positive measure to make prescription drugs more affordable
9 for qualified residents, thereby increasing the overall health
10 of residents, promoting healthy communities and protecting the
11 public health and welfare of residents.
12 Section 502. Commission.
13 (a) Establishment.--The Prescription Drug Advisory
14 Commission is established to do all of the following:
15 (1) Review access to and the pricing of prescription
16 drugs for residents of this Commonwealth.
17 (2) Advise the commissioner on prescription drug pricing
18 and to provide periodic reports to the Governor, the General
19 Assembly and the commissioner.
20 (b) Membership.--The commission shall consist of the
21 following 11 members:
22 (1) Four legislative appointees, who must be residents
23 of this Commonwealth:
24 (i) One appointed by the President pro tempore of
25 the Senate.
26 (ii) One appointed by the Minority Leader of the
27 Senate.
28 (iii) One appointed by the Speaker of the House of
29 Representatives.
30 (iv) One appointed by the Minority Leader of the
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1 House of Representatives.
2 (2) Six gubernatorial appointees:
3 (i) Two practitioners of the healing art licensed to
4 prescribe medication.
5 (ii) Two pharmacists.
6 (iii) One individual who is over 55 years of age and
7 who resides in this Commonwealth.
8 (iv) One individual who resides in and works in this
9 Commonwealth.
10 (3) The secretary or a designee.
11 (c) Terms.--
12 (1) A member under subsection (a)(1) shall serve a term
13 of two years.
14 (2) A member under subsection (a)(2) shall serve a term
15 of four years.
16 (3) The secretary shall serve ex officio.
17 (d) Meetings; chair.--
18 (1) The commission shall meet at least four times per
19 year.
20 (2) The members shall select a chair from among the
21 members.
22 (3) Additional meetings may be called by the chair.
23 (e) Powers and duties.--The commission has the following
24 powers and duties:
25 (1) To review access to prescription drugs for residents
26 of this Commonwealth, including pricing and affordability
27 information.
28 (2) To review access to prescription drugs and
29 prescription drug prices, including:
30 (i) Insurance and third-party payments for
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1 prescription drugs.
2 (ii) The need for maximum retail prices.
3 (3) If maximum retail prices are established, the
4 procedures for:
5 (i) adoption and periodic review of maximum retail
6 prices;
7 (ii) establishing maximum retail prices for new
8 prescription drugs and reviewing maximum retail prices of
9 selected drugs; and
10 (iii) phasing out or terminating maximum retail
11 prices.
12 (4) To propose regulations of the department necessary
13 to implement this chapter.
14 (5) To annually report to the Governor and the General
15 Assembly by the second week in January, including in the
16 report any recommendations for action regarding access to and
17 the pricing of prescription drugs.
18 (f) Staffing.--The department shall provide staffing for the
19 commission.
20 (g) Compensation.--Public members not otherwise compensated
21 by their employers or other entities whom they represent are
22 entitled to reimbursement of necessary expenses and a per diem
23 equal to the legislative per diem for their attendance at
24 authorized meetings of the commission.
25 Section 503. Emergency drug pricing.
26 (a) General rule.--In order to achieve the public health
27 purposes listed in section 501, maximum retail prices for
28 prescription drugs may be established as follows:
29 (1) By July 1, 2001, the department shall promulgate
30 regulations establishing the procedures for all of the
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1 following:
2 (i) Adoption and periodic review of maximum retail
3 prices.
4 (ii) Establishing maximum retail prices for new
5 prescription drugs and reviewing maximum retail prices of
6 selected drugs.
7 (iii) Phasing out or terminating maximum retail
8 prices.
9 (2) By January 5, 2002, the secretary shall determine
10 whether the cost of prescription drugs provided to qualified
11 residents under the program is reasonably comparable to the
12 lowest cost paid for the same drugs delivered or dispensed in
13 this Commonwealth. In making this determination the following
14 provisions apply:
15 (i) The secretary shall review prescription drug use
16 in medical assistance under Article IV(f) of the act of
17 June 13, 1967 (P.L.31, No.21), known as the Public
18 Welfare Code, using data from the most recent six-month
19 period for which data is available.
20 (ii) Using the data reviewed in subparagraph (i),
21 the secretary shall determine the 100 drugs for which the
22 most units were provided and the 100 drugs for which the
23 total cost was the highest.
24 (iii) For each prescription drug listed in
25 subparagraph (ii), the secretary shall determine the cost
26 for each drug for qualified residents needing those drugs
27 under the program on a certain date. The average cost for
28 each drug shall be calculated.
29 (iv) For each prescription drug listed in
30 subparagraph (ii), the secretary shall determine the
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1 lowest cost for each drug paid by a purchaser on the date
2 which is used for subparagraph (iii), taking into
3 consideration the Federal supply schedule and prices paid
4 by pharmaceutical benefits managers and by large
5 purchasers and excluding drugs purchased through the
6 program. The average cost for each such drug shall be
7 calculated.
8 (v) If the average cost for a prescription drug
9 under the program, as determined in subparagraph (iii),
10 is not reasonably comparable to the average lowest cost
11 for the same drug or drugs as determined in subparagraph
12 (iv), the secretary shall establish maximum retail prices
13 for prescription drugs sold in this Commonwealth. Maximum
14 prescription drug prices established under this
15 subparagraph must take effect July 1, 2002.
16 (vi) In establishing maximum retail prices under
17 this paragraph, the secretary shall consider the advice
18 of the commission.
19 (b) Select prescription drugs.--In making a determination
20 under subsection (a), the secretary may rely on pricing
21 information on a selected number of prescription drugs if that
22 list is representative of the prescription drug needs of the
23 residents of this Commonwealth and is made public as part of the
24 process of establishing maximum retail prices.
25 (c) Public health or welfare.--The secretary may take
26 actions necessary if there is a severe limitation or shortage of
27 or lack of access to prescription drugs in this Commonwealth
28 which could threaten or endanger the public health or welfare.
29 Section 504. Penalty.
30 (a) Assessment.--The department may assess an administrative
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1 penalty of up to $5,000 for a violation of maximum pricing under
2 this chapter.
3 (b) Procedure.--A penalty under this section is subject to 2
4 Pa.C.S. Ch. 5 Subch. A (relating to practice and procedure of
5 Commonwealth agencies) and Ch. 7 Subch. A (relating to judicial
6 review of Commonwealth agency action).
7 CHAPTER 7
8 PROFITEERING
9 Section 701. Prohibition.
10 (a) Scope.--This section applies to all of the following:
11 (1) Manufacturers.
12 (2) Distributers.
13 (3) Labelers.
14 (b) Conduct.--A person listed in subsection (a) may not do
15 any of the following:
16 (1) Charge an unconscionable price.
17 (2) Utilize contract terms which lead to an unreasonable
18 profit.
19 (3) Restrict sale or distribution of prescription drugs
20 in this Commonwealth.
21 Section 702. Remedy.
22 (a) Law.--For a violation of section 701, the following
23 apply:
24 (1) The Commonwealth may bring an action in a court of
25 competent jurisdiction to recover:
26 (i) a civil penalty of up to $100,000; or
27 (ii) three times the amount of actual damages
28 resulting from the violation.
29 (2) A person may bring an action in a court of competent
30 jurisdiction to recover three times the amount of actual
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1 damages resulting from the violation.
2 (b) Equity.--For a violation of section 701, the
3 Commonwealth or a person may bring an action in a court of
4 competent jurisdiction to enjoin the violation.
5 (c) Combination.--Remedies under subsections (a) and (b) are
6 not exclusive of each other.
7 CHAPTER 50
8 MISCELLANEOUS PROVISIONS
9 Section 5001. Effective date.
10 This act shall take effect as follows:
11 (1) The following provisions shall take effect
12 immediately:
13 (i) Section 305(b).
14 (ii) This section.
15 (2) Chapter 7 shall take effect in one year.
16 (3) The remainder of this act shall take effect in 60
17 days.
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