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        PRIOR PRINTER'S NO. 1899                      PRINTER'S NO. 1905

THE GENERAL ASSEMBLY OF PENNSYLVANIA


SENATE BILL

No. 1400 Session of 2002


        INTRODUCED BY MURPHY, TOMLINSON, MOWERY, ERICKSON, BELL,
           ROBBINS, HOLL, HELFRICK, GERLACH, EARLL, DENT, C. WILLIAMS,
           ORIE, PICCOLA, PUNT, RHOADES, M. WHITE, MADIGAN, BOSCOLA AND
           LEMMOND, APRIL 15, 2002

        SENATOR MURPHY, AGING AND YOUTH, AS AMENDED, APRIL 16, 2002

                                     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 drug utilization
     8     review system, for program generally and for supply;
     9     providing for a mail order program for maintenance drugs;
    10     further providing for reimbursement and for Pharmaceutical
    11     Assistance Contract for the Elderly Needs Enhancement Tier;
    12     providing for Pharmaceutical Assistance Contract for the
    13     Elderly Needs Enhancement Tier Plus, for senior wellness
    14     program, for prescription drug clearinghouse, for provider
    15     assistance, for priority of prescription drug assistance;
    16     defining "best price," "average wholesale cost" and "average
    17     wholesale price"; further providing for terms of rebate
    18     agreement, for amount of rebate, for excessive pharmaceutical
    19     price inflation discount and for disposition of funds; and
    20     providing for interstate bulk purchasing program AND FOR FAIR  <--
    21     PRESCRIPTION DRUG PROVISIONS.

    22     The General Assembly of the Commonwealth of Pennsylvania
    23  hereby enacts as follows:
    24     Section 1.  The definition of "program" in section 502 of the
    25  act of August 26, 1971 (P.L.351, No.91), known as the State
    26  Lottery Law, added November 21, 1996 (P.L.741, No.134), is


     1  amended and the section is amended by adding definitions to
     2  read:
     3  Section 502.  Definitions.
     4     The following words and phrases when used in this chapter
     5  shall have the meanings given to them in this section unless the
     6  context clearly indicates otherwise:
     7     * * *
     8     "Mail order program."  A program to dispense prescription
     9  drugs by postal delivery service designated and administered by
    10  the Department of Aging, and any entity with which it contracts,
    11  upon an enrollee's submission of a prescription and the
    12  applicable copayment.
    13     "Maintenance drug."  A prescription drug prescribed to an
    14  individual for a chronic condition, the use of which is
    15  medically necessary for a consecutive period of 16 days or
    16  longer.
    17     * * *
    18     "PACENET Plus."  The Pharmaceutical Assistance Contract for
    19  the Elderly Needs Enhancement Tier Plus provided for in this
    20  chapter.
    21     * * *
    22     "Program."  The Pharmaceutical Assistance Contract for the
    23  Elderly (PACE) [and], the Pharmaceutical Assistance Contract for
    24  the Elderly Needs Enhancement Tier (PACENET) as established by
    25  this chapter and the Pharmaceutical Assistance Contract for the
    26  Elderly Needs Enhancement Tier Plus (PACENET Plus) as
    27  established by this chapter, unless otherwise specified.
    28     * * *
    29     "Unreimbursed prescription drug expenses."  This term does
    30  not include enrollment fees paid under the program.
    20020S1400B1905                  - 2 -

     1     Section 2.  Section 505 of the act, added November 21, 1996
     2  (P.L.741, No.134), is amended to read:
     3  Section 505.  Drug utilization review system.
     4     (a)  General rule.--The department shall ensure that a state-
     5  of-the-art therapeutic drug utilization review system is
     6  established to monitor and correct misutilization of drug
     7  therapies.
     8     (b)  Technical advisory committee.--The department shall
     9  establish a technical advisory committee comprised of a
    10  sufficient number of practicing pharmacists, physicians,
    11  academic pharmacologists and at least one pharmacoeconomist to
    12  recommend a list of preferred single-source drugs and preferred
    13  innovator multiple-source drugs, based on medical efficacy and
    14  cost and provide the department with technical assistance
    15  related to drugs dispensed under the program.
    16     (c)  Preferred drug list.--From the list recommended by the
    17  technical advisory committee, the secretary shall establish a
    18  list of drugs to be reimbursed by the program.
    19     Section 3.  Section 509(6) of the act, added November 21,
    20  1996 (P.L.741, No.134), is amended and the section is amended by
    21  adding paragraphs to read:
    22  Section 509.  Program generally.
    23     The program shall include the following:
    24         * * *
    25         (6)  [The] (i)  Except as provided in subparagraph (ii),
    26     the program shall consist of payments to pharmacies on behalf
    27     of eligible claimants for 90% of the average wholesale costs
    28     of prescription drugs which exceed the copayment, plus a
    29     dispensing fee of at least $3.50 or the dispensing fee
    30     established by the department by regulation, whichever is
    20020S1400B1905                  - 3 -

     1     greater.
     2             (ii)  For A-rated generic therapeutically equivalent
     3         drugs, the program shall consist of payments to
     4         pharmacies on behalf of eligible claimants for the upper
     5         limits established under 42 CFR § 447.332 (relating to
     6         upper limits for multiple source drugs), plus a
     7         dispensing fee of $3.50, or the dispensing fee
     8         established by the department by regulation, whichever is
     9         greater.
    10     This paragraph shall not apply to prescription drugs
    11     dispensed under paragraph (9).
    12         * * *
    13         (8)  The department shall establish a medical exception
    14     process whereby a prescribing physician may provide, online
    15     or otherwise, clinical justification for an eligible claimant
    16     to receive a prescription drug that is not on the preferred
    17     provider list established under section 505(c).
    18         (9)  (i)  Except as provided in subparagraph (ii), in no
    19         case shall an eligible claimant who is enrolled in
    20         PACENET or PACENET Plus but who has not yet satisfied the
    21         deductibles required by this chapter be charged more than
    22         90% of the average wholesale costs of prescription drugs
    23         which exceed the copayment, plus a dispensing fee of at
    24         least $3.50 or the dispensing fee established by the
    25         department by regulation, whichever is greater.
    26             (ii)  For A-rated generic therapeutically equivalent
    27         drugs, such eligible claimant shall not be charged more
    28         than the upper limits established under 42 C.F.R. §
    29         447.332, plus a dispensing fee of at least $3.50 or the
    30         dispensing fee established by the department by
    20020S1400B1905                  - 4 -

     1         regulation, whichever is greater.
     2         (10)  The Commonwealth shall make payments to pharmacies
     3     for prescription drugs dispensed to eligible claimants under
     4     paragraph (9) in an amount equal to the difference between
     5     the total amount paid by the eligible claimant under
     6     paragraph (9) and the price of the drug at the particular
     7     pharmacy on the date of the sale.
     8     Section 4.  Section 511 of the act, added November 21, 1996
     9  (P.L.741, No.134), is amended to read:
    10  Section 511.  Supply.
    11     [Prescription] Except as may be provided in section 513.1 for
    12  maintenance drugs, prescription benefits for any single
    13  prescription shall be limited to a 30-day supply of the
    14  prescription drug or 100 units, whichever is less, except that,
    15  in the case of diagnosis for acute conditions, the limitation
    16  shall be a 15-day supply. This limitation shall not apply to
    17  topical ointments or gels that are not available in containers
    18  which meet the size and supply restrictions set forth in this
    19  section.
    20     Section 5.  The act is amended by adding a section to read:
    21  Section 513.1.  Mail order program for maintenance drugs.
    22     (a)  General rule.--The department may offer a mail order
    23  program for the delivery of maintenance drugs under the program.
    24     (b)  Pharmacy participation.--A pharmacy enrolled as a
    25  provider may participate in any mail order program offered by
    26  the department. Participating pharmacies must offer mail order
    27  program participants or the participant's designated
    28  representative the opportunity for face-to-face consultation at
    29  least once every 30 days. The department shall pay a
    30  consultation fee of $35 per hour on a prorated basis for
    20020S1400B1905                  - 5 -

     1  consultation services provided for selected prescription drugs
     2  as determined by the technical advisory committee.
     3     Section 6.  Sections 515 and 519 of the act, amended or added
     4  November 21, 1996 (P.L.741, No.134), are amended to read:
     5  Section 515.  Reimbursement.
     6     For-profit third-party insurers, health maintenance
     7  organizations and not-for-profit prescription plans shall be
     8  responsible for any payments made by the program to a [providing
     9  pharmacy] provider on behalf of a claimant covered by such a
    10  third party.
    11  Section 519.  The Pharmaceutical Assistance Contract for the
    12                 Elderly Needs Enhancement Tier.
    13     (a)  Establishment.--There is hereby established within the
    14  department a program to be known as the Pharmaceutical
    15  Assistance Contract for the Elderly Needs Enhancement Tier
    16  (PACENET).
    17     (b)  PACENET eligibility.--
    18         (1)  A claimant with an annual income of not less than
    19     $14,000 and not more than [$16,000] $17,000 in the case of a
    20     single person and of not less than $17,200 and not more than
    21     [$19,200] $20,200 in the case of the combined income of
    22     persons married to each other shall be eligible for enhanced
    23     pharmaceutical assistance under this section.
    24         (2)  A person may, in reporting income to the department,
    25     round the amount of each source of income and the income
    26     total to the nearest whole dollar, whereby any amount which
    27     is less than 50¢ is eliminated.
    28     (b.1)  Enrollment fee.--
    29         (1)  An enrollment fee of $50 shall be paid by an
    30     eligible claimant to an enrolled pharmacy of choice at the
    20020S1400B1905                  - 6 -

     1     time of enrollment.
     2         (2)  The enrolled pharmacy of choice shall deduct an
     3     amount from the fee that the department approves as the
     4     administrative cost to the pharmacy and shall transmit the
     5     balance of the fee to the department.
     6     (c)  Deductible.--
     7         (1)  Upon enrollment in PACENET, eligible claimants in
     8     the income ranges set forth in subsection (b) shall be
     9     required to meet an annual deductible in unreimbursed
    10     prescription drug expenses [of $500 per person.] per person
    11     as follows:
    12     Deductible    Single Person Income   Married Couple Income
    13        $300              $14,000-14,999         $17,200-18,199
    14         350               15,000-15,999          18,200-19,199
    15         400               16,000-17,000          19,200-20,200
    16         (2)  To qualify for the deductible set forth in this
    17     subsection the prescription drug must be purchased for the
    18     use of the eligible claimant from a provider as defined in
    19     this chapter.
    20         (3)  The department, after consultation with the board,
    21     may approve an adjustment in the deductible on an annual
    22     basis.
    23     (d)  Copayment.--For eligible claimants under this section,
    24  the copayment schedule, which may be adjusted by the department
    25  on an annual basis after consultation with the board, shall be:
    26         (i)  eight dollars for noninnovator multiple source drugs
    27     as defined in section 702; [or]
    28         (ii)  fifteen dollars for preferred single-source drugs
    29     and preferred innovator multiple-source drugs as defined in
    30     section 702[.];
    20020S1400B1905                  - 7 -

     1         (iii)  twenty-five dollars for nonpreferred single source
     2     drugs and nonpreferred innovator multiple-source drugs,
     3     except as provided in paragraph (iv); or
     4         (iv)  fifteen dollars for nonpreferred single source
     5     drugs and nonpreferred innovator multiple-source drugs where
     6     a medical exception has been granted by the department.
     7     Section 7.  The act is amended by adding sections to read:
     8  Section 519.1.  Pharmaceutical Assistance Contract for the
     9                     Elderly Needs Enhancement Tier Plus.
    10     (a)  Establishment.--There is hereby established within the
    11  department a program to be known as the Pharmaceutical
    12  Assistance Contract for the Elderly Needs Enhancement Tier Plus
    13  (PACENET Plus).
    14     (b)  PACENET Plus eligibility.--A claimant with an annual
    15  income which is not less than $17,001 and not more than $20,999
    16  in the case of a single person, and not less than $20,201 and
    17  not more than $25,199 in the case of the combined income of
    18  persons married to each other shall be eligible for
    19  participation under this section. A person may, in reporting
    20  income to the department, round the amount of each source of
    21  income and the income total to the nearest whole dollar, whereby
    22  any amount which is less than 50¢ is eliminated.
    23     (c)  Enrollment fee.--
    24         (1)  An enrollment fee of $50 shall be paid by an
    25     eligible claimant to an enrolled pharmacy of choice at the
    26     time of enrollment.
    27         (2)  The enrolled pharmacy of choice shall deduct an
    28     amount from the fee that the department approves as the
    29     administrative cost to the pharmacy and shall transmit the
    30     balance of the fee to the department.
    20020S1400B1905                  - 8 -

     1     (d)  Deductible.--
     2         (1)  Upon enrollment in PACENET Plus, eligible claimants
     3     in the income ranges set forth in subsection (b) shall be
     4     required to meet an annual deductible in unreimbursed
     5     prescription drug expenses per person as follows:
     6     Deductible    Single Person Income   Married Couple Income
     7        $450              $17,001-17,999         $20,201-21,199
     8         500               18,000-18,999          21,200-22,199
     9         550               19,000-19,999          22,200-23,199
    10         600               20,000-20,999          23,200-24,199
    11         650                                      24,200-25,199
    12         (2)  To qualify for the deductible set forth in this
    13     subsection the prescription drug must be purchased for the
    14     use of the eligible claimant from a provider as defined in
    15     this chapter.
    16         (3)  The department, after consultation with the board,
    17     may approve an adjustment in the deductible on an annual
    18     basis.
    19     (e)  Copayment.--For eligible claimants under this section,
    20  the copayment schedule shall be the same as provided under
    21  section 519(d).
    22  Section 523.  Senior wellness program.
    23     The department shall provide eligible claimants with
    24  educational materials to maintain physical and mental health.
    25  Section 524.  Prescription drug clearinghouse.
    26     The department shall directly or by contract, establish,
    27  implement and administer a prescription drug clearinghouse which
    28  is easily accessible to senior citizens by means of a toll-free
    29  telephone number and electronic and other mechanisms that:
    30         (1)  Facilitates access by senior citizens to
    20020S1400B1905                  - 9 -

     1     prescription drugs.
     2         (2)  Identifies alternatives for securing or purchasing
     3     prescription drugs through public or private programs.
     4         (3)  Provides information resources relating to the
     5     costs, coverage, policy and access to the programs under
     6     paragraph (2).
     7         (4)  Provides such additional information which will
     8     enable senior citizens to make informed reasonable choices
     9     related to the purchase of prescription drugs.
    10  Section 525.  Provider assistance.
    11     (a)  General rule.--The department shall:
    12         (1)  Encourage and facilitate physician use of online
    13     technology.
    14         (2)  Provide secure online and other technical assistance
    15     to physicians related to prescription drugs dispensed to
    16     claimants through the program, including contraindications,
    17     therapeutic interchange, cost and medical exception
    18     processing.
    19     (b)  Administration.--The department in carrying out its
    20  duties under this section may enter into a contract with a
    21  private contractor.
    22  Section 526.  Priority of prescription drug assistance.
    23     If the Federal Government provides for a prescription drug
    24  assistance program and participants utilizing the programs
    25  offered by the Commonwealth are also qualified for coverage
    26  under the Federal program, then each participant shall first
    27  utilize the Federal program and may not seek Commonwealth
    28  assistance until Federal eligibility is exhausted.
    29     Section 8.  The definitions of "covered prescription drug"
    30  and "provider" in section 702 of the act, added November 21,
    20020S1400B1905                 - 10 -

     1  1996 (P.L.741, No.134), are amended and the section is amended
     2  by adding definitions to read:
     3  Section 702.  Definitions.
     4     The following words and phrases when used in this chapter
     5  shall have the meanings given to them in this section unless the
     6  context clearly indicates otherwise:
     7     * * *
     8     "Average wholesale cost."  The cost of a dispensed drug based
     9  upon the price published in a national drug pricing system in
    10  current use by the Department of Aging as the average wholesale
    11  price of a prescription drug in the most common package size.
    12     "Average wholesale price."  Average wholesale cost.
    13     "Best price."  As defined under section 1927 of the Social
    14  Security Act (49 Stat. 620, 42 U.S.C. § 301 et seq.).
    15     * * *
    16     "Covered prescription drug."  A legend drug, insulin, an
    17  insulin syringe or an insulin needle eligible for payment by the
    18  Commonwealth under PACE, PACENET, PACENET Plus or designated
    19  pharmaceutical programs.
    20     * * *
    21     "PACENET Plus."  The program established under section 519.1.
    22     * * *
    23     "Provider."  A licensed pharmacy or dispensing physician
    24  enrolled as a provider in PACE, PACENET, PACENET Plus or
    25  designated pharmaceutical programs.
    26     * * *
    27     Section 9.  Sections 703 and 704(a) and (b) of the act, added
    28  November 21, 1996 (P.L.741, No.134), are amended to read:
    29  Section 703.  Rebate agreement.
    30     (a)  Requirement.--PACE, PACENET, PACENET Plus and designated
    20020S1400B1905                 - 11 -

     1  pharmaceutical programs shall not reimburse for any covered
     2  prescription drug without a rebate agreement between the
     3  department and the manufacturer of the covered prescription
     4  drug.
     5     (b)  Exception.--Subsection (a) shall not apply if the
     6  availability of the drug is essential to the health of eligible
     7  claimants as determined by the department.
     8     (c)  Agreements.--Manufacturers of prescription drugs
     9  reimbursed under PACE, PACENET, PACENET Plus and designated
    10  pharmaceutical programs must enter into a rebate agreement with
    11  the department under this chapter to obtain such reimbursement.
    12  Nothing in this chapter shall be deemed to affect or impair any
    13  agreement made under the former provisions of Chapter 6 of the
    14  act of August 14, 1991 (P.L.342, No.36), known as the Lottery
    15  Fund Preservation Act.
    16     (d)  Notice.--The department shall notify enrolled providers
    17  of PACE, PACENET, PACENET Plus and designated pharmaceutical
    18  programs on an annual basis and, as appropriate, of all
    19  manufacturers who have entered into a rebate agreement.
    20     (e)  Drug formulary.--Except as provided in section 512,
    21  there shall be no drug formulary, prior or retroactive approval
    22  system or any similar restriction imposed on the coverage of
    23  outpatient drugs made by manufacturers who have agreements in
    24  effect with the Commonwealth to pay rebates for drugs utilized
    25  in PACE [and], PACENET and PACENET Plus, provided that such
    26  outpatient drugs were approved for marketing by the Food and
    27  Drug Administration. This subsection shall not apply to any act
    28  taken by the department pursuant to its therapeutic drug
    29  utilization review program under section 505.
    30  Section 704.  Terms of rebate agreement.
    20020S1400B1905                 - 12 -

     1     (a)  Quarterly basis.--A rebate agreement shall require any
     2  manufacturer of covered prescription drugs to provide to the
     3  department a rebate each calendar quarter [in an amount
     4  specified in section 705] in an amount which shall give the
     5  department the best price for the drugs provided under PACE,
     6  PACENET and PACENET Plus, for covered prescription drugs of the
     7  manufacturer reimbursed during the quarter. The rebate shall be
     8  paid by the manufacturer not later than 30 days after the date
     9  of receipt of the information described in subsection (b) for
    10  the period involved.
    11     (b)  Information.--
    12         (1)  The department shall report to each manufacturer,
    13     not later than 60 days after the end of each calendar
    14     quarter, information by zip code of provider on the total
    15     number of dosage units of each covered prescription drug
    16     reimbursed under PACE, PACENET, PACENET Plus and designated
    17     pharmaceutical programs during the quarter.
    18         (2)  A manufacturer may review the information provided
    19     under paragraph (1) and verify information. Adjustments to
    20     rebates shall be made to the extent that information
    21     indicates that utilization was greater or less than the
    22     amount previously specified.
    23         (3)  In the event that in any quarter a material
    24     discrepancy in the department's information is certified by
    25     the manufacturer prior to the due date of the rebate, the
    26     department and the manufacturer shall, in good faith, attempt
    27     to resolve the discrepancy. If resolution is not reached
    28     within 30 days of receipt of the manufacturer's certification
    29     by the department, the manufacturer may appeal the
    30     department's decision under the department's formal fair
    20020S1400B1905                 - 13 -

     1     hearings and appeals process. The manufacturer shall pay the
     2     department that portion of the rebate amount which is not
     3     disputed within the required time frame under this chapter.
     4     Any balance due, plus statutory interest, shall be paid or
     5     credited by the manufacturer or the department by the due
     6     date of the next quarterly payment after resolution of the
     7     dispute.
     8     * * *
     9     Section 10.  Section 705 (a) and (c) of the act, added
    10  November 21, 1996 (P.L.741, No.134), are amended and the section
    11  is amended by adding a subsection to read:
    12  Section 705.  Amount of rebate.
    13     (a)  Single-source drugs and innovator multiple-source
    14  drugs.--With respect to single-source drugs and innovator
    15  multiple-source drugs, each manufacturer shall remit a rebate to
    16  the Commonwealth. Except as otherwise provided in this section,
    17  the amount of the rebate to the Commonwealth per calendar
    18  quarter with respect to each dosage form and strength of single-
    19  source drugs and innovator multiple-source drugs shall be as
    20  follows:
    21         (1)  For quarters beginning after September 30, 1992, and
    22     ending before January 1, 1997, the product of the total
    23     number of units of each dosage form and strength reimbursed
    24     by PACE and General Assistance in the quarter and the
    25     difference between the average manufacturer price and 85% of
    26     that price, after deducting customary prompt payment
    27     discounts, for the quarter.
    28         (2)  For quarters beginning after December 31, 1996
    29     through December 31, 2002, the product of the total number of
    30     units of each dosage form and strength reimbursed by PACE,
    20020S1400B1905                 - 14 -

     1     PACENET, PACENET Plus and designated pharmaceutical programs
     2     in the quarter and the difference between the average
     3     manufacturer price and 83% of that price, after deducting
     4     customary prompt payment discounts.
     5         (3)  For quarters beginning after December 31, 2002, the
     6     product of the total number of units of each dosage form and
     7     strength reimbursed by designated pharmaceutical programs in
     8     the quarter and the difference between the average
     9     manufacturer price and 83% of that price, after deducting
    10     customary prompt payment discounts.
    11         (4)  For quarters beginning after December 31, 2002, the
    12     product of the total number of units of each dosage form and
    13     strength reimbursed by PACE, PACENET and PACENET Plus in the
    14     quarter and the difference between the average wholesale
    15     price and 83% of that price, after deducting customary prompt
    16     payment discounts.
    17     * * *
    18     (c)  Revised rebate for other drugs.--Beginning after
    19  December 31, 1996 through December 31, 2002:
    20         (1)  The amount of the rebate to the Commonwealth for a
    21     calendar quarter with respect to covered prescription drugs
    22     which are noninnovator multiple-source drugs shall be [the
    23     greater of] equal to the best price or the product of:
    24             (i)  the applicable percentage of the average
    25         manufacturer price, after deducting customary prompt
    26         payment discounts, for each dosage form and strength of
    27         such drugs for the quarter; and
    28             (ii)  the number of units of such form and dosage
    29         reimbursed by PACE, PACENET, PACENET Plus and designated
    30         pharmaceutical programs in the quarter[.], whichever is
    20020S1400B1905                 - 15 -

     1         greater.
     2         (2)  For purposes of paragraph (1), the applicable
     3     percentage is 17%.
     4     (c.1)  Revised rebate for other drugs in 2003.--Beginning
     5  after December 31, 2002:
     6         (1)  The amount of the rebate to the Commonwealth for a
     7     calendar quarter with respect to covered prescription drugs
     8     which are noninnovator multiple-source drugs shall be the
     9     greater of the product of:
    10             (i)  the applicable percentage of the average
    11         manufacturer price, after deducting customary prompt
    12         payment discounts, for each dosage form and strength of
    13         such drugs for the quarter; and
    14             (ii)  the number of units of such form and dosage
    15         reimbursed by designated pharmaceutical programs in the
    16         quarter.
    17         (2)  The amount of the rebate to the Commonwealth for a
    18     calendar quarter with respect to covered prescription drugs
    19     which are noninnovator multiple-source drugs shall be the
    20     greater of the product of:
    21             (i)  the applicable percentage of the average
    22         wholesale price, after deducting customary prompt payment
    23         discounts, for each dosage form and strength of such
    24         drugs for the quarter; and
    25             (ii)  the number of units of such form and dosage
    26         reimbursed by PACE, PACENET and PACENET Plus in the
    27         quarter.
    28         (3)  For purposes of paragraphs (1) and (2), the
    29     applicable percentage is 17%.
    30     * * *
    20020S1400B1905                 - 16 -

     1     Section 11.  Section 706(b) of the act, added November 21,
     2  1996 (P.L.741, No.134), is amended to read:
     3  Section 706.  Excessive pharmaceutical price inflation discount
     4                 for designated pharmaceutical programs.
     5     * * *
     6     (b)  Revised general rule.--A discount shall be provided to
     7  the department for all covered prescription drugs under
     8  designated pharmaceutical programs. The discount shall be
     9  calculated as follows:
    10         (1)  For each quarter for which a rebate under section
    11     705(a) and (c) is to be paid after December 31, 1996, the
    12     average manufacturer price for each dosage form and strength
    13     of a covered prescription drug shall be compared to the
    14     average manufacturer price for the same form and strength in
    15     the previous calendar year and a percentage increase shall be
    16     calculated.
    17         (2)  For each quarter under paragraph (1), the average
    18     percentage increase in the Consumer Price Index-Urban over
    19     the same quarter in the previous calendar year shall be
    20     calculated.
    21         (3)  If the calculation under paragraph (1) is greater
    22     than the calculation under paragraph (2), the discount amount
    23     for each quarter shall be equal to the product of:
    24             (i)  the difference between the calculations under
    25         paragraphs (1) and (2); and
    26             (ii)  the total number of units of each dosage form
    27         and strength reimbursed by [PACE, PACENET and] designated
    28         pharmaceutical programs and the average manufacturer
    29         price reported by the manufacturer under section
    30         704(c)(1).
    20020S1400B1905                 - 17 -

     1     * * *
     2     Section 12.  The act is amended by adding a section to read:
     3  Section 706.1.  Excessive pharmaceutical price inflation
     4                     discount for PACE, PACENET and PACENET Plus.
     5     (a)  General rule.--A discount shall be provided to the
     6  department for all covered prescription drugs under PACE,
     7  PACENET and PACENET Plus. The discount shall be calculated as
     8  follows:
     9         (1)  For each quarter for which a rebate under section
    10     705(a) and (c) is to be paid after December 31, 1996, through
    11     December 31, 2002, the average manufacturer price for each
    12     dosage form and strength of a covered prescription drug shall
    13     be compared to the average manufacturer price for the same
    14     form and strength in the previous calendar year and a
    15     percentage increase shall be calculated.
    16         (2)  For each quarter under paragraph (1), the average
    17     percentage increase in the Consumer Price Index-Urban over
    18     the same quarter in the previous calendar year shall be
    19     calculated.
    20         (3)  If the calculation under paragraph (1) is greater
    21     than the calculation under paragraph (2), the discount amount
    22     for each quarter shall be equal to the product of:
    23             (i)  the difference between the calculations under
    24         paragraphs (1) and (2); and
    25             (ii)  the total number of units of each dosage form
    26         and strength reimbursed by PACE, PACENET and PACENET Plus
    27         and the average manufacturer price reported by the
    28         manufacturer under section 704(c)(1).
    29     (b)  Discounts after December 31, 2002.--A discount shall be
    30  provided to the department for all covered prescription drugs
    20020S1400B1905                 - 18 -

     1  under PACE, PACENET and PACENET Plus. The discount shall be
     2  calculated as follows:
     3         (1)  For each quarter for which a rebate under section
     4     705(a) and (c) is to be paid after December 31, 2002, the
     5     average wholesale price for each dosage form and strength of
     6     a covered prescription drug shall be compared to the average
     7     wholesale price for the same form and strength in the
     8     previous calendar year and a percentage increase shall be
     9     calculated.
    10         (2)  For each quarter under paragraph (1), the average
    11     percentage increase in the Producer Price Index for
    12     Pharmaceuticals over the same quarter in the previous
    13     calendar year shall be calculated.
    14         (3)  If the calculation under paragraph (1) is greater
    15     than the calculation under paragraph (2), the discount amount
    16     for each quarter shall be equal to the product of:
    17             (i)  the difference between the calculations under
    18         paragraphs (1) and (2); and
    19             (ii)  the total number of units of each dosage form
    20         and strength reimbursed by PACE, PACENET and PACENET Plus
    21         and the average wholesale price reported by the
    22         manufacturer under section 704(c)(1).
    23     Section 13.  Section 709 of the act, added November 21, 1996
    24  (P.L.741, No.134), is amended to read:
    25  Section 709.  Disposition of funds.
    26     (a)  PACE [and], PACENET and PACENET Plus.--Money received
    27  under this chapter in connection with PACE [and], PACENET and
    28  PACENET Plus shall be deposited in the Pharmaceutical Assistance
    29  Contract for the Elderly Fund.
    30     (b)  Designated pharmaceutical programs.--Money received
    20020S1400B1905                 - 19 -

     1  under this chapter in connection with designated pharmaceutical
     2  programs shall be treated as a refund of expenditures to the
     3  appropriation which originally provided the funding for the
     4  pharmaceutical purchase.
     5     Section 14.  The act is amended by adding a section to read:
     6  Section 710.  Interstate agreement.
     7     The secretary may enter into a multistate agreement to obtain
     8  additional discounts.
     9     SECTION 15.  THE ACT IS AMENDED BY ADDING A CHAPTER TO READ:   <--
    10                             CHAPTER 11
    11                 FAIR PRESCRIPTION DRUG PROVISIONS
    12  SECTION 1101.  SHORT TITLE OF CHAPTER.
    13     THIS CHAPTER SHALL BE KNOWN AND MAY BE CITED AS THE FAIR
    14  PRESCRIPTION DRUG ACT.
    15  SECTION 1102.  DEFINITIONS.
    16     THE FOLLOWING WORDS AND PHRASES WHEN USED IN THIS CHAPTER
    17  SHALL HAVE THE MEANINGS GIVEN TO THEM IN THIS SECTION UNLESS THE
    18  CONTEXT CLEARLY INDICATES OTHERWISE:
    19     "MEDICAL ASSISTANCE PROGRAM."  THE PROGRAM ESTABLISHED
    20  PURSUANT TO ARTICLE IV, SUBARTICLE (F) OF THE ACT OF JUNE 13,
    21  1967 (P.L.31, NO.21), KNOWN AS THE PUBLIC WELFARE CODE.
    22     "MEDICARE CARD."  THE IDENTIFICATION CARD ISSUED BY THE
    23  FEDERAL GOVERNMENT TO ALL MEDICARE RECIPIENTS.
    24     "MEDICARE RECIPIENT."  AN INDIVIDUAL RESIDING IN THIS
    25  COMMONWEALTH WHO RECEIVES BENEFITS UNDER PART A OF SUBCHAPTER
    26  XVIII OF CHAPTER 7 OF THE SOCIAL SECURITY ACT (49 STAT. 620, 42
    27  U.S.C. § 301 ET SEQ.) OR WHO IS ENROLLED UNDER PART B OF SUCH
    28  SUBCHAPTER.
    29     "PACE."  AS DEFINED UNDER SECTION 502.
    30     "PHARMACY."  A PHARMACY LICENSED BY THE COMMONWEALTH.
    20020S1400B1905                 - 20 -

     1     "PHARMACY SERVICES."  MEDICALLY NECESSARY PRESCRIPTION DRUGS
     2  AND OTHER PHARMACY SERVICES FURNISHED DIRECTLY TO ELIGIBLE
     3  RECIPIENTS BY PHARMACIES.
     4     "PRESCRIPTION DRUG."  A DRUG REQUIRING A PRESCRIPTION IN THIS
     5  COMMONWEALTH, INSULIN, INSULIN SYRINGES AND INSULIN NEEDLES. THE
     6  TERM DOES NOT INCLUDE EXPERIMENTAL DRUGS OR DRUGS PRESCRIBED FOR
     7  WRINKLE REMOVAL OR HAIR GROWTH.
     8     "PROVIDER."  A PHARMACY OR LICENSED PRESCRIBER WHO PROVIDES
     9  PHARMACY SERVICES TO A RECIPIENT OF ANY PRESCRIPTION PROGRAM
    10  ESTABLISHED BY THE COMMONWEALTH OR IN WHICH A CONTRIBUTION BY
    11  THE COMMONWEALTH IS REQUIRED.
    12  SECTION 1103.  PHARMACIES AND DISPENSING PHYSICIANS.
    13     (A)  GENERAL RULE.--PHARMACIES AND DISPENSING PHYSICIANS
    14  PARTICIPATING IN THE PACE PROGRAM SHALL, AS A CONDITION OF
    15  PARTICIPATION IN THAT PROGRAM, AGREE TO THE CONDITIONS SET FORTH
    16  IN THIS SECTION.
    17     (B)  MEDICARE RECIPIENTS.--ANY PHARMACY OR DISPENSING
    18  PHYSICIAN PARTICIPATING IN THE PACE PROGRAM SHALL, AS A
    19  CONDITION OF PARTICIPATION IN THAT PROGRAM, AGREE TO SELL
    20  PRESCRIPTION DRUGS TO MEDICARE RECIPIENTS AT THE PACE PROGRAM
    21  PRICE. IN NO CASE SHALL A MEDICARE RECIPIENT BE CHARGED MORE
    22  THAN THE PRICE OF THE DRUG AT THE PARTICULAR PHARMACY ON THE
    23  DATE OF THE SALE.
    24     (C)  LIMITATION ON PARTICIPATION.--ANY PHARMACIST, PHARMACY
    25  OR DISPENSING PHYSICIAN THAT IS PRECLUDED OR EXCLUDED FOR CAUSE
    26  FROM THE MEDICAL ASSISTANCE PROGRAM SHALL BE PRECLUDED OR
    27  EXCLUDED FROM PARTICIPATION UNDER THIS CHAPTER.
    28  SECTION 1104.  MEDICARE RECIPIENTS.
    29     (A)  GENERAL RULE.--MEDICARE RECIPIENTS SHALL BE ELIGIBLE TO
    30  PURCHASE PRESCRIPTION DRUGS AT THE PACE PRICE ESTABLISHED
    20020S1400B1905                 - 21 -

     1  PURSUANT TO CHAPTER 5.
     2     (B)  PROCEDURE.--IN ORDER TO RECEIVE THE PACE PRICE UNDER
     3  SUBSECTION (A), A MEDICARE RECIPIENT SHALL PRESENT THE
     4  RECIPIENT'S MEDICARE CARD TO THE PARTICIPATING PROVIDER AT THE
     5  TIME OF PURCHASE OF THE RECIPIENT'S PRESCRIPTION DRUGS.
     6     (C)  INFORMATION TO BE MADE AVAILABLE.--A PHARMACIST,
     7  PHARMACY OR DISPENSING PHYSICIAN SHALL INFORM THE MEDICARE
     8  RECIPIENT WHETHER USING THE MEDICARE CARD WILL RESULT IN THE
     9  MEDICARE RECIPIENT RECEIVING THE PRESCRIPTION DRUG AT THE LOWEST
    10  PRICE AVAILABLE TO THE MEDICARE RECIPIENT.
    11     Section 15 16.  This act shall take effect in 60 days.         <--













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