Assembly Bill A1118

                                BILL NUMBER:A1118A

TITLE OF BILL:  An act to amend the elder law and the social services
law, in relation to dispensing fees paid to pharmacies in EPIC and Medi-
caid

PURPOSE OR GENERAL IDEA OF BILL: This bill provides for the dispensing
fee paid per prescription.

SUMMARY OF SPECIFIC PROVISIONS: Section One of the bill amends para-
graphs (c) of subdivision 1 of section 250 of elder law related to the
dispensing fee paid to pharmacies for every prescription filled under
the EPIC program. This bill adds a new provision related to the dispens-
ing fee paid to pharmacies required to dispense medications in unit-of-
use packaging.

Section Two of the bill amends subparagraphs (i) and (ii) of paragraph
(d) of subdivision 9 of section 367-a of the social services law, as
amended by chapter 19 of the laws of 1998, related to the dispensing fee
paid to pharmacies for every prescription filled for persons eligible to
participate in the Medicaid program. The bill adds a new subparagraph
(iii) related to the dispensing fee paid to pharmacies required to
dispense medications in unit-of-use packaging.

JUSTIFICATION:  The enacted 2008-2009 state budget reduces the amount
allowed under Medicaid and EPIC to cover the cost of prescription medi-
              

cation without a counterbalancing increase in the dispensing fee paid to
participating pharmacies. Other state Medicaid programs such as Califor-
nia pay higher dispensing fees in order to meet the "reasonableness"
standard in federal statutes governing Medicaid programs. Unless the
dispensing fee is adjusted prior to the enactment of the new product
cost allowance on July 1, 2008, it is possible that New York will not
meet this test. Moreover, given the high costs of doing business in this
state, publicly-financed prescription benefit programs such as Medicaid
and EPIC should not reimburse pharmacies at a rate lower than every
other state that has enacted deeply discounted product reimbursement
policies.

The actual cost of dispensing a prescription to a beneficiary in the New
York Medicaid program ranges between $8.79 and $14.04 according to the
survey conducted by Grant Thorton released in January, 2007.  We apply
the same survey results to dispensing fees paid under EPIC.  Although
the dispensing fees in this legislation are below these amounts, they
are consistent with reimbursement policies that are in place in other
state Medicaid programs that discount the product allowance as substan-
tially as in the adopted NYS FY 2008-2009 budget.  With the high costs
of living and doing business, New York's Medicaid and EPIC programs
should not reimburse pharmacies at the very lowest level in the country.
Doing so may reduce the pharmacy provider network to unacceptable
levels. Should that occur, both programs will fail in their primary
objective, to deliver medically necessary healthcare of acceptable qual-
ity cost-containment parameters.

Although the legislature has restored millions to the cuts proposed by
the executive over the course of the past fourteen years, every state
budget has nevertheless left pharmacy providers with less reimbursement
than in the previous year. Virtually every health care provider in the
Medicaid program has faced regular decreases in reimbursement, but no
other provider category has been subject to the cumulative percentage
reductions as have the state's pharmacies. This year's reduction of two
and a half percentage points off average wholesale price actually
represents a 30% reduction in gross margins, with a 60% decrease in net
amounts, for example. Some pharmacy providers have calculated the loss
at $3 per prescription across all prescriptions filled in both programs.

Pharmacies that provide prescription services for residents in long-term
care facilities and other forms of residential care incur additional
expense associated with preparing "blister packs" and other forms of
unit-of-use packaging that are required by regulation.  This special
packaging provides additional security again9t misuse or overuse and
enhances patient compliance that in turn reduces unnecessary Medicaid
spending associated with medication errors or inappropriate use. The
differential in the legislation is also based on policies adopted by
other states.

PRIOR LEGISLATIVE HISTORY: 2008: A.11144 - Referred to the Assembly
Health Cmte.

FISCAL IMPLICATIONS: None. The changes proposed in this legislation are
possible in the context of the funds appropriated for spending on the
pharmacy benefit. First of all, national trends suggest that the rate of
growth in spending for prescription drugs has slowed. The proposed 6%
increase in the cost of the benefit is likely to be much lower. Second,
the proposed spending on prescription drugs does not take into account
the additional supplemental rebates generated by preferred drug
programs. In 2006 when the PDP was first implemented, the program gener-
ated $80.5 million. Although the 2007 supplemental rebate amounts not
yet available, they will be significantly higher than in the previous
year when the Preferred Drug Program had just begun and the number of
therapeutic categories was considerably less than it was in 2007. Third,
although the dispensing fees in this bill appear to be the same for
brands and generics, differences in co-payments actually provide pharma-
cy with a slight higher fee for dispensing generic drugs. In the past,
the state Medicaid program realized $21 million in savings per year when
generic utilization improved by one percent. Savings in FY 2008-2009
will be very significant as a large number of brand medications are
scheduled to lose patent protection without a comparable number of new
branded drugs coming into the market. The state is poised to realize the
savings by virtue of two policies now in place, namely the generic
mandate and the Preferred Drug Program.

LOCAL FISCAL IMPLICATIONS: None.

EFFECTIVE DATE: April 1, 2010, to coincide with the new reimbursement
rate for pharmaceutical products dispensed under the Medicaid program.

                                BILL NUMBER:A1118B

TITLE OF BILL:
An act
to amend the elder law and the social services law, in relation to
dispensing fees paid to pharmacies in EPIC and Medicaid

PURPOSE OR GENERAL IDEA OF BILL: This bill provides
for the dispensing
fee paid per prescription.

SUMMARY OF SPECIFIC PROVISIONS: Section One of the
bill amends
paragraphs (c) of subdivision 1 of section 250 of elder law related
to the dispensing fee paid to pharmacies for every prescription
filled under the EPIC program. This bill adds a new provision related
to the dispensing fee paid to pharmacies required to dispense
medications in unit-of-use packaging.

Section Two of the bill amends subparagraphs (i) and (ii) of paragraph
(d) of subdivision 9 of section 367-a of the social services law, as
amended by chapter 19 of the laws of 1998, related to the dispensing
fee paid to pharmacies for every prescription filled for persons
eligible to participate in the Medicaid program. The bill adds a new
subparagraph (iii) related to the dispensing fee paid to pharmacies
required to dispense medications in unit-of-use packaging.
              

JUSTIFICATION: The enacted 2008-2009 state budget
reduces the amount
allowed under Medicaid and EPIC to cover the cost of prescription
medication without a counterbalancing increase in the dispensing fee
paid to participating pharmacies. Other state Medicaid programs such
as California pay higher dispensing fees in order to meet the
"reasonableness" standard in federal statutes governing Medicaid
programs. Unless the dispensing fee is adjusted prior to the
enactment of the new product cost allowance on July 1, 2008, it is
possible that New York will not meet this test. Moreover, given the
high costs of doing business in this state, publicly-financed
prescription benefit programs such as Medicaid and EPIC should not
reimburse pharmacies at a rate lower than every other state that has
enacted deeply discounted product reimbursement policies.

The actual cost of dispensing a prescription to a beneficiary in the
New York Medicaid program ranges between $8.79 and $14.04 according
to the survey conducted by Grant Thorton released in January, 2007.
We apply the same survey results to dispensing fees paid under EPIC.
Although the dispensing fees in this legislation are below these
amounts, they are consistent with reimbursement policies that are in
place in other state Medicaid programs that discount the product
allowance as substantially as in the adopted NYS FY 2008-2009 budget.
With the high costs of living and doing business, New York's Medicaid
and EPIC programs should not reimburse pharmacies at the very lowest

level in the country. Doing so may reduce the pharmacy provider
network to unacceptable levels. Should that occur, both programs will
fail in their primary objective, to deliver medically necessary
healthcare of acceptable quality cost-containment parameters.

Although the legislature has restored millions to the cuts proposed by
the executive over the course of the past fourteen years, every state
budget has nevertheless left pharmacy providers with less
reimbursement than in the previous year. Virtually every health care
provider in the Medicaid program has faced regular decreases in
reimbursement, but no other provider category has been subject to the
cumulative percentage reductions as have the state's pharmacies. This
year's reduction of two and a half percentage points off average
wholesale price actually represents a 30% reduction in gross margins,
with a 60% decrease in net amounts, for example. Some pharmacy
providers have calculated the loss at $3 per prescription across all
prescriptions filled in both programs.

Pharmacies that provide prescription services for residents in
long-term care facilities and other forms of residential care incur
additional expense associated with preparing "blister packs" and
other forms of unit-of-use packaging that are required by regulation.
This special packaging provides additional security against
misuse or overuse and enhances patient compliance that in turn reduces
unnecessary Medicaid spending associated with medication errors or
inappropriate use. The differential in the legislation is also based
on policies adopted by other states.

PRIOR LEGISLATIVE HISTORY:
2008: A.11144 - Referred to the Assembly Health Committee
2009: A.1118-A - Referred to the Assembly Health Committee

FISCAL IMPLICATIONS: None. The changes proposed in
this legislation
are possible in the context of the funds appropriated for spending on
the pharmacy benefit. First of all, national trends suggest that the
rate of growth in spending for prescription drugs has slowed. The
proposed 6% increase in the cost of the benefit is likely to be much
lower. Second, the proposed spending on prescription drugs does not
take into account the additional supplemental rebates generated by
preferred drug programs. In 2006 when the PDP was first implemented,
the program generated $80.5 million. Although the 2007 supplemental
rebate amounts not yet available, they will be significantly higher
than in the previous year when the Preferred Drug Program had just
begun and the number of therapeutic categories was considerably less
than it was in 2007. Third, although the dispensing fees in this bill
appear to be the same for brands and generics, differences in
co-payments actually provide pharmacy with a slight higher fee for
dispensing generic drugs. In the past, the state Medicaid program
realized $21 million in savings per year when generic utilization
improved by one percent. Savings in FY 2008-2009 will be very
significant as a large number of brand

medications are scheduled to lose patent protection without a
comparable number of new branded drugs coming into the market. The
state is poised to realize the savings by virtue of two policies now
in place, namely the generic mandate and the Preferred Drug Program.

LOCAL FISCAL IMPLICATIONS: None,

EFFECTIVE DATE: April 1, 2011, to coincide with the
new reimbursement
rate for pharmaceutical products dispensed under the Medicaid program.