Senate Bill S6146

                                 BILL NUMBER:  S6146               REVISED 09/02/09

 TITLE OF BILL :

An act to amend the social services law and the elder law, in relation
to prescription drug pricing for pharmacy reimbursement


 PURPOSE OF THE BILL :

This bill would amend the social services and elder laws to change the
benchmark used to determined pharmacy reimbursement for brand-name
drugs under public health care programs from Average Wholesale Price
to its equivalent using Wholesale Acquisition Cost.

 SUMMARY OF PROVISIONS :

Section 1 of the bill would amend the social services law to change
the reimbursement methodology used to reimburse pharmacies for
brand-name drugs under the State Medicaid program from Average
Wholesale Price (AWP) minus 16.25% to its equivalent, Wholesale
Acquisition Cost (WAC) plus 5%. This change will also be applicable to
Family Health Plus, Child Health Plus and the AIDS Drug Assistance
Program (ADAP) because the pharmacy reimbursement rates under these
programs utilize the Medicaid rates. In addition, Section 1 of the
bill also changes the reimbursement methodology used to reimburse
              

pharmacies for brand-name drugs by a specialized HIV pharmacy from AWP
minus 12% to its equivalent, WAC plus 8%.

Sections 2 and 3 of the bill would amend the elder law to change the
reimbursement methodology used to reimburse pharmacies for brand-name
drugs under the Elderly Pharmaceutical Insurance Coverage Program
(EPIC) from AWP-16.25% to its equivalent, WAC plus 5%.

Section 4 of the bill establishes the effective date of the bill as
September 26, 2009.

 EXISTING LAW :

Under current law, pharmacies are reimbursed for brand-name drugs
under Medicaid, EPIC, Family Health Plus, Child Health Plus, ADAP, a
specialized HIV pharmacy and workers compensation using the benchmark
Average Wholesale Price.

 PRIOR LEGISLATIVE HISTORY :

None.

 STATEMENT IN SUPPORT :

On September 26, 2009, First Data Bank and Medi-Span will adjust the
values of Average Wholesale Price (AWP) to decrease AWP by
approximately four percentage points. First Data Bank and Medi-Span
are the national publishers of Average Wholesale Prices, which
currently form the basis of reimbursement policies in both public and
private health care programs. The four-percentage point across the
board reduction in the value of AWP on September 26, 2009 is part of a
Settlement accepted by Federal District Court in Massachusetts in an
action that began in 2001 charging that the values of AWP were
inflated for approximately 1400 drugs. Pharmacies were not parties in
this case and there was no alleged wrongdoing on the part of
pharmacies in this case.

As a result of this Settlement and the resulting four-percentage point
reduction in the value of AWP, pharmacies will experience the largest
and most significant cut in pharmacy reimbursement for brand-name
drugs in history if programs continue to use AWP as their benchmark
for determining such reimbursement. It is important to understand,
that while reimbursement would be decreased substantially for over
8,000 brand-name drugs as a result of the Settlement, inventory costs
and the cost to acquire prescription drugs incurred by pharmacies
would remain unchanged. The potential impact on the State's pharmacies
and in turn, patient access to pharmacy services could be severe.

In New York, pharmacies have already experienced serious cuts over the
last decade. In 2001, pharmacies were reimbursed under Medicaid at a
rate of AWP-10%. Today, pharmacies are reimbursed at AWP-16.25% -- a
six and one quarter percentage decrease in reimbursement in the last
eight years alone.

Further, as a result of this case, First Data Bank and Medi-Span have
stated that the publication of Average Wholesale Prices will be
discontinued at some point within the next two years. For this reason,
it is inevitable that public and private health care programs that
currently use AWP to determine their pharmacy reimbursement will need
to move to a new reimbursement methodology at some point within two
years.

The private prescription benefit market has already responded
positively to the change coming on September 26, 2009. Citing the need
to ensure provider network stability, many have notified pharmacies
that their current reimbursement levels will not change on this date.

This legislation would make this needed adjustment for the drug
benefits provided in New York's public health care programs including
Medicaid, Family Health Plus, Child Health Plus, ADAP, a specialized
HIV pharmacy and EPIC. Specifically, this legislation would make the
necessary statutory changes to move away from Average Wholesale Price
as the benchmark for pharmacy reimbursement for brand-name drugs to
its equivalent, Wholesale Acquisition Cost. The equivalent rate of the
current AWP minus 16.25% is WAC plus 5% under Medicaid, Family Health
Plus, Child Health Plus, ADAP and EPIC.

Wholesale Acquisition Cost (WAC) is a readily available and regularly
updated published price for prescription drugs. Many see it is a more
transparent and reliable methodology for determining pharmacy-pricing.

A number of state Medicaid programs base pharmacy reimbursement on
WAC.  For example: Massachusetts (WAC + 5%), Maryland (WAC + 8%),
Missouri (WAC + 10%), Mississippi (WAC + 9%), North Dakota (WAC +
12.5%), Ohio (WAC + 7%), Pennsylvania (WAC + 7%), Texas (WAC + 12%),
and Virginia (WAC + 10%). Many public and private programs across the
country are also in the process of moving from AWP to WAC.

This legislation and its enactment prior to September 26, 2009 is
critical to prevent the steepest and most precipitous pharmacy payment
reduction in history which has the real potential to destabilize the
provider networks in Medicaid and other public health programs. If the
State does not act, patient access to pharmacy services could be
compromised. Limited access to pharmacy may result in significantly
increased costs to the State since the products and services routinely
provided by pharmacies are critical to control health care costs and
enable patients to remain in their homes and the community, preventing
far more costly care in hospitals, clinics and emergency rooms.

In the interest of fairness and out of concern for maintaining the
current level of access to pharmacy services for all New Yorkers, New
York should follow the lead of almost a dozen other states and private
insurers and move to a Wholesale Acquisition Cost methodology for
pharmacy reimbursement for its public health care programs through the
enactment of this legislation.

 BUDGET IMPLICATIONS :

Division of Budget has booked $9 million in savings from the impact of
the federal lawsuit for this fiscal year. The bill would not create
new expenditures for the state but would maintain the status quo in
terms of Medicaid reimbursement to pharmacies. In doing so, it would
prevent future savings arising from the revaluing of AWP.

 EFFECTIVE DATE :
This bill would take effect September 26, 2009.