THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY EACHUS, DeWEESE, STURLA, McCALL, BROWN, K. SMITH, MUNDY, KORTZ, GRUCELA, BISHOP, M. O'BRIEN, SANTONI, HARHAI, DEASY, READSHAW, HARKINS, BOYLE, PASHINSKI, CARROLL, CALTAGIRONE, GEORGE, HESS, MELIO, McILVAINE SMITH, BRIGGS, DONATUCCI, LONGIETTI, McGEEHAN, MANN, KULA, STABACK AND YOUNGBLOOD, JUNE 12, 2009

REFERRED TO COMMITTEE ON AGING AND OLDER ADULT SERVICES, JUNE 12, 2009  

AN ACT

Amending the act of August 26, 1971 (P.L.351, No.91), entitled

"An act providing for a State Lottery and administration

thereof; authorizing the creation of a State Lottery

Commission; prescribing its powers and duties; disposition of

funds; violations and penalties therefor; exemption of prizes

from State and local taxation and making an appropriation,"

providing for the definitions of "acquisition cost," "Federal

upper payment limits" and "usual charge" or "usual and

customary charge"; further providing for program generally,

for generic drugs, for indication of price, for the

Pharmaceutical Assistance Contract for the Elderly Needs

Enhancement Tier and for penalties; providing for the

Medication Therapy Management Program; and further providing

for terms of rebate agreement, for amount of rebate and for

excessive pharmaceutical price inflation discount.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 502 of the act of August 26, 1971

(P.L.351, No.91), known as the State Lottery Law, is amended by

adding definitions to read:

Section 502.  Definitions.

The following words and phrases when used in this chapter

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

* * *

"Acquisition cost."  The actual price paid by a provider for

a prescription drug dispensed to a claimant, without application

of discounts, including prompt payment discounts, stocking or

other distribution allowances, credits, chargebacks or rebates.

* * *

"Federal upper payment limits."  The maximum allowable price

as established in the Medicaid program and published under 42

CFR § 447.514 (relating to upper limits for multiple source

drugs).

* * *

"Usual charge" or "usual and customary charge."  The usual

charge as defined in 6 Pa. Code § 22.2 (relating to

definitions).

Section 2.  Sections 509 and 510 of the act, amended July 7,

2006 (P.L.1061, No.111), are amended to read:

Section 509.  Program generally.

The program shall include the following:

(1)  Participating pharmacies shall be paid within 21

days of the contracting firm receiving the appropriate

substantiation of the transaction. Pharmacies shall be

entitled to interest for payment not made within the 21-day

period at a rate approved by the board.

(2)  Collection of the copayment by pharmacies shall be

mandatory.

(3)  Claimants are not required to maintain records of

each transaction.

(4)  A system of rebates or reimbursements to claimants

for pharmaceutical expenses shall be prohibited.

(5)  PACE shall include participant copayment schedules

for each prescription, including a copayment for generic or

multiple-source drugs that is less than the copayment for

single-source drugs. The department shall annually calculate

the copayment schedules based on the Prescription Drugs and

Medical Supplies Consumer Price Index. When the aggregate

impact of the Prescription Drugs and Medical Supplies

Consumer Price Index equals or exceeds $1, the department

shall adjust the copayment schedules. Each copayment schedule

shall not be increased by more than $1 in a calendar year.

[(6)  The program payment shall be the lower of the

following amounts determined as follows:

(i)  88% of the average wholesale cost of the

prescription drug dispensed:

(A)  with the addition of a dispensing fee of the

greater of:

(I)  $4 per prescription; or

(II)  the amount set by the department by

regulation;

(B)  the subtraction of the copayment; and

(C)  if required, the subtraction of the generic

differential; or

(ii)  the pharmacy's usual charge for the drug

dispensed with the subtraction of the copayment and, if

required, the subtraction of the generic differential; or

(iii)  if a generic drug, the most current Federal

upper payment limits established in the Medicaid Program

under 42 CFR § 447.332 (relating to upper limits for

multiple source drugs), plus a dispensing fee of $4 or

the amount set by the department by regulation, whichever

is greater minus the copayment. The department shall

update the average wholesale costs and the Federal upper

payment limits at least every 30 days.]

(6)  (i)  The program payment shall be the lower of the

following:

(A)  (I)  82% of the average wholesale cost of

the prescription drug dispensed for brand name

drugs; or

(II)  20% of the average wholesale cost of

the prescription drug dispensed for generic

drugs.

(B)  The pharmacy's usual charge for the drug

dispensed.

(C)  If a generic drug, the most current Federal

upper payment limits.

(D)  The acquisition cost of the prescription

drug dispensed.

(ii)  Except when payment is made under subparagraph

(i)(B), the program shall pay a dispensing fee of the

greater of:

(A)  $12 per prescription for generic drugs or $7

per prescription for brand name drugs.

(B)  The amount set by department regulation.

(iii)  The copayment shall be paid by the claimant at

the point of sale and the generic differential, if

required, shall be subtracted at the point of sale.

(iv)  Neither the Commonwealth nor any claimant shall

be charged more than the price of the drug at the

particular pharmacy on the date of the sale.

(v)  An exception process for selected therapeutic

classes, medications and individual providers shall be

established by the department, which shall be published

as a notice in the Pennsylvania Bulletin and distributed

to providers.

(6.1)  The department shall update the average wholesale

cost and the Federal upper payment limits relating to upper

limits for multiple source drugs on a regular basis at least

every 30 days.

(6.2)  Providers shall provide documentation of their

acquisition costs for each prescription drug dispensed to

claimants to the department within 30 days of a request. The

documentation shall not be discoverable or admissible as

evidence in any civil or administrative action or proceeding,

except that the department may rely on the documentation to

defend against any appeal brought by a provider from an audit

or adverse action regarding program payments. The

documentation shall not be considered to be a public record

or be subject to disclosure under the act of February 14,

2008 (P.L.6, No.3), known as the Right-to-Know Law.

[(7)  In no case shall the Commonwealth or any claimant

be charged more than the price of the drug at the particular

pharmacy on the date of the sale.]

(8)  The Governor may, based upon certified State Lottery

Fund revenue that is provided to both the chairman and

minority chairman of the Appropriations Committee of the

Senate and the chairman and minority chairman of the

Appropriations Committee of the House of Representatives, and

after consultation with the board, decrease the eligibility

limits established in this subchapter.

Section 510.  Generic drugs.

(a)  In general.--Notwithstanding any other statute or

regulation, a brand name product shall be dispensed and not

substituted with an A-rated generic therapeutically equivalent

drug if it is less expensive to the program. If a less expensive

A-rated generic therapeutically equivalent drug is available for

dispensing to a claimant, the provider shall dispense the A-

rated generic therapeutically equivalent drug to the claimant.

The department shall reimburse providers based upon the most

current listing of Federal upper payment limits [established in

the Medicaid Program under 42 CFR § 447.332 (relating to upper

limits for multiple source drugs)], plus a dispensing fee as set

forth in section [509(6)] 509(6)(ii). The department shall

update the average wholesale costs and the Federal upper payment

limits on a regular basis, at least every 30 days. The

department shall not reimburse providers for brand name products

except in the following circumstances:

(1)  There is no A-rated generic therapeutically

equivalent drug available on the market. This paragraph does

not apply to the lack of availability of an A-rated generic

therapeutically equivalent drug in the providing pharmacy

unless it can be shown to the department that the provider

made reasonable attempts to obtain the A-rated generic

therapeutically equivalent drug or that there was an

unforeseeable demand and depletion of the supply of the A-

rated generic therapeutically equivalent drug. In either

case, the department shall reimburse the provider for [88%]

82% of the average wholesale cost plus a dispensing fee based

on the least expensive A-rated generic therapeutically

equivalent drug for the brand drug dispensed.

(2)  An A-rated generic therapeutically equivalent drug

is deemed by the department, in consultation with a

utilization review committee, to have too narrow a

therapeutic index for safe and effective dispensing in the

community setting. The department shall notify providing

pharmacies of A-rated generic therapeutically equivalent

drugs that are identified pursuant to this paragraph on a

regular basis.

(3)  The Department of Health has determined that a drug

shall not be recognized as an A-rated generic therapeutically

equivalent drug for purpose of substitution under section

5(b) of the act of November 24, 1976 (P.L.1163, No.259),

referred to as the Generic Equivalent Drug Law.

(4)  At the time of dispensing, the provider has a

prescription on which the brand name drug dispensed is billed

to the program by the provider at a usual and customary

charge which is equal to or less than the least expensive

usual and customary charge of any A-rated generic

therapeutically equivalent drug reasonably available on the

market to the provider.

(5)  The brand name drug is less expensive to the

program.

(b)  Generic not accepted.--If a claimant chooses not to

accept the A-rated generic therapeutically equivalent drug

required by subsection (a), the claimant shall be liable for the

copayment and 70% of the average wholesale cost of the brand

name drug.

(c)  Generic drugs not deemed incorrect substitution.--The

dispensing of an A-rated generic therapeutically equivalent drug

in accordance with this subchapter shall not be deemed incorrect

substitution under section 6(a) of the Generic Equivalent Drug

Law.

(d)  Medical exception.--A medical exception process shall be

established by the department, which shall be published as a

notice in the Pennsylvania Bulletin and distributed to providers

and [recipients] claimants in the program.

Section 3.  Section 514 of the act, added November 21, 1996

(P.L.741. No.134), is amended to read:

Section 514.  Indication of price.

(a)  Retail price.--The retail price of the prescription

shall be indicated on the label of the prescription container or

furnished by separate receipt.

(b)  Invoices.--Providers shall maintain invoices for four

years to document their acquisition costs for prescription drugs

dispensed to claimants.

Section 4.  Sections 519 and 521 of the act, amended July 7,

2006 (P.L.1061, No.111), are amended to read:

Section 519.  The Pharmaceutical Assistance Contract for the

Elderly Needs Enhancement Tier.

(a)  Establishment.--There is hereby established within the

department a program to be known as the Pharmaceutical

Assistance Contract for the Elderly Needs Enhancement Tier

(PACENET).

(b)  PACENET eligibility.--A person with an annual income of

not less than $14,500 and not more than [$23,500] $30,000 in the

case of a single person and of not less than $17,700 and not

more than [$31,500] $40,000 in the case of the combined income

of persons married to each other shall be eligible for enhanced

pharmaceutical assistance under this section. A person may, in

reporting income to the department, round the amount of each

source of income and the income total to the nearest whole

dollar, whereby any amount which is less than 50¢ is eliminated.

(c.1)  Premium.--In those instances in which a PACENET

claimant is not enrolled in Part D pursuant to section 533, the

claimant shall be required to pay a monthly premium equivalent

to the regional benchmark premium.

(d)  Copayment.--

(1)  For claimants under this section, the copayment

schedule shall be:

(i)  eight dollars for noninnovator multiple source

drugs as defined in section 702; or

(ii)  fifteen dollars for single-source drugs and

innovator multiple-source drugs as defined in section

702.

(2)  The department shall annually calculate the

copayment schedules based on the Prescription Drugs and

Medical Supplies Consumer Price Index. When the aggregate

impact of the Prescription Drugs and Medical Supplies

Consumer Price Index equals or exceeds $1, the department

shall adjust the copayment schedules. Each copayment schedule

shall not be increased by more than $1 in a calendar year.

Section 521.  Penalties.

(a)  Prohibited acts.--It shall be unlawful for any person to

submit a false or fraudulent claim or application under this

subchapter, including, but not limited to:

(1)  aiding or abetting another in the submission of a

false or fraudulent claim or application;

(2)  receiving benefits or reimbursement under a private,

Federal or State program for prescription assistance and

claiming or receiving duplicative benefits hereunder;

(3)  soliciting, receiving, offering or paying any

kickback, bribe or rebate, in cash or in kind, from or to any

person in connection with the furnishing of services under

this subchapter;

(4)  engaging in a pattern of submitting claims that

repeatedly uses incorrect National Drug Code numbers; [or]

(4.1)  seeking reimbursement from the program for amounts

other than the provider's acquisition costs; or

(5)  otherwise violating any provision of this

subchapter.

(b)  Civil penalty.--In addition to any appropriate criminal

penalty for prohibited acts under this subchapter whether or not

that act constitutes a crime under 18 Pa.C.S. (relating to

crimes and offenses), a provider who violates this section may

be liable for a civil penalty in an amount not less than $500

and not more than $10,000 for each violation of this act which

shall be collected by the department. Each violation constitutes

a separate offense. If the department collects three or more

civil penalties against the same provider, the provider shall be

ineligible to participate in either PACE or PACENET for a period

of one year. If more than three civil penalties are collected

from any provider, the department may determine that the

provider is permanently ineligible to participate in PACE or

PACENET.

(c)  Suspension of license.--The license of any provider who

has been found guilty under this subchapter shall be suspended

for a period of one year. The license of any provider who has

committed three or more violations of this subchapter may be

suspended for a period of one year.

(d)  Reparation.--Any provider, claimant or other person who

is found guilty of a crime for violating this subchapter shall

repay three times the value of the material gain received. In

addition to the civil penalty authorized pursuant to subsection

(b), the department may require the provider, claimant or other

person to repay up to three times the value of any material gain

to PACE or PACENET.

(e)  Repayment.--Any provider who fails to produce invoices,

when requested, documenting its acquisition costs, shall be

liable for repayment of any reimbursements paid by the program

for prescription drugs dispensed to claimants for which invoices

were not produced.

Section 5.  The act is amended by adding a section to read:

Section 523.  Medication Therapy Management Program.

The department may develop and implement a medication therapy

management program designed to assist and counsel claimants,

with medical conditions identified by the department, who

receive prescription drugs in selected therapeutic classes from

providers with whom the department has entered into medication

management provider agreements. The department shall administer

the program with available funds.

Section 6.  Section 704(e) of the act, added November 21,

1996 (P.L.741, No.134), is amended to read:

Section 704.  Terms of rebate agreement.

* * *

(e)  Confidentiality of information.--Information disclosed

by manufacturers, wholesalers or direct sellers under this

chapter is confidential and shall not be [disclosed] considered

to be a public record under the act of February 14, 2008 (P.L.6,

No.3), known as the Right-to-Know Law, nor shall it be subject

to disclosure by the department in a form which discloses the

identity of a specific manufacturer, wholesaler or direct seller

or the prices charged for drugs by the manufacturer or

wholesaler, except as the department determines to be necessary

to carry out this chapter and to permit the Department of the

Auditor General and the Office of State Inspector General to

review the information provided.

* * *

Section 7.  Section 705(a) of the act, amended November 26,

2003 (P.L.212, No.37), is amended to read:

Section 705.  Amount of rebate.

(a)  Single-source drugs and innovator multiple-source

drugs.--With respect to single-source drugs and innovator

multiple-source drugs, each manufacturer shall remit a rebate to

the Commonwealth. Except as otherwise provided in this section,

the amount of the rebate to the Commonwealth per calendar

quarter with respect to each dosage form and strength of single-

source drugs and innovator multiple-source drugs shall be as

follows:

(1)  For quarters beginning after September 30, 1992, and

ending before January 1, 1997, the product of the total

number of units of each dosage form and strength reimbursed

by PACE and General Assistance in the quarter and the

difference between the average manufacturer price and 85% of

that price, after deducting customary prompt payment

discounts, for the quarter.

(2)  For quarters beginning after December 31, 1996, and

ending before January 1, 2003, the product of the total

number of units of each dosage form and strength reimbursed

by PACE, PACENET and designated pharmaceutical programs in

the quarter and the difference between the average

manufacturer price and 83% of that price, after deducting

customary prompt payment discounts.

(3)  For quarters beginning after December 31, 2002, and

ending before January 1, 2009, each manufacturer shall remit

a rebate to the Commonwealth for the total number of units of

each dosage form and strength reimbursed by PACE, PACENET and

designated pharmaceutical programs in the quarter pursuant to

the determination established by section 1927(c)(1) of the

Social Security Act (49 Stat. 620, 42 U.S.C. § 1396r-8(c)

(1)).

(4)  For quarters beginning after December 31, 2008, each

manufacturer shall remit a rebate to the Commonwealth for the

total number of units of each dosage form and strength

reimbursed by PACE, PACENET and designated pharmaceutical

programs in the quarter pursuant to the determination

established under section 1927 (c)(1) and (2) of the Social

Security Act (49 Stat. 620, 42 U.S.C. § 1396r-8(c)(1) and

(2)).

* * *

Section 8.  Section 706(b) of the act, amended July 7, 2006

(P.L.1061, No.111), is amended to read:

Section 706.  Excessive pharmaceutical price inflation discount.

* * *

(b)  Revised general rule.--A discount shall be provided to

the department for all covered prescription drugs except those

excluded under subsection (d). The discount shall be calculated

as follows:

(1)  For each quarter for which a rebate under section

705(a) and (c) is to be paid after December 31, 1996, and

before January 1, 2009, the average manufacturer price for

each dosage form and strength of a covered prescription drug

shall be compared to the average manufacturer price for the

same form and strength in the previous calendar year and a

percentage increase shall be calculated.

(2)  For each quarter under paragraph (1), the average

percentage increase in the Consumer Price Index-Urban over

the same quarter in the previous calendar year shall be

calculated.

(3)  If the calculation under paragraph (1) is greater

than the calculation under paragraph (2), the discount amount

for each quarter shall be equal to the product of:

(i)  the difference between the calculations under

paragraphs (1) and (2); and

(ii)  the total number of units of each dosage form

and strength reimbursed by PACE, PACENET and designated

pharmaceutical programs and the average manufacturer

price reported by the manufacturer under section 704(c)

(1).

* * *

Section 9.  The amendment of sections 705(a) and 706(b) of

the act shall apply retroactively to January 1, 2009.

Section 10.  This act shall take effect July 1, 2009, or

immediately, whichever is later.