PHARACEUTICAL ASSISTANCE PROGRAMS; DRUGS;

DRUGS- PHARMACEUTICAL ASSISTANCE PROGRAMS;

Other States laws/regulations;

You asked for information on legislation in Illinois creating a prescription drug discount program for senior citizens and disabled persons. (Much of the information that follows derives from Illinois General Assembly documents and the Health Policy Tracking Service of the National Conference of State Legislatures. )

SUMMARY

Illinois recently passed legislation creating the “Senior Citizens and Disable Persons Prescription Drug Discount Program” that attempts to combine the purchasing power of a drug discount club with that of state agencies to make prescription drugs more affordable for the state’s seniors and disabled citizens (PA 93-0018, copy attached). The bill directs the Illinois Department of Central Management Services to establish and administer this program. The department can contract with an outside entity to administer the program.

Under the terms of the legislation, a “state-run club” for seniors and the disabled will allow members to present a membership card at participating pharmacies and receive state-negotiated discounts on their prescription drug purchases. Those eligible to join are Illinois residents 65 years of age or older and disabled individuals submitting proper proof of disability. The fee for participating is $ 25 a year, with the fee used to offset the cost of program administration. It is estimated that over 1. 5 million individuals may be eligible for the program.

ILLINOIS SENIOR CITIZENS AND DISABLED PERSONS PRESCRIPTION DRUG DISCOUNT PROGRAM ACT

Program Purpose (Section 10 of PA 93-0018)

The legislation states that the act’s purpose is to require the Illinois Department of Central Management Services (DCMS) to establish and administer a program enabling senior citizens and disabled persons to purchase prescription drugs at discounted prices.

Program Eligibility and Definitions (Secs. 15,17,35)

The law provides that any person may apply to the department or its program administrator (see below) for participation in the program in the form and manner required by the department. The department or program administrator will determine the eligibility of each applicant within 30 days after the date of application.

An “eligible senior” is a person who is an Illinois resident and aged 65 years or older. A “disabled person” is an individual unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment, which can be expected to result in death or has lasted or can be expected to last for a continuous period of not less than 12 months.

Disabled persons seeking to participate in the program must submit proof of disability in the form and manner prescribed by DCMS. Proof that a claimant is eligible to receive disability benefits under the Federal Social Security Act (SSA) constitutes proof of disability under the act. Also, issuance of an Illinois Disabled Person Identification Card stating that the claimant is under a Class 2 disability (as defined under Illinois law), also constitutes proof that the person is disabled.

A disabled person seeking program participation but not covered under the federal SSA nor presenting the identification card described above will be examined by a department-designated physician. The person’s disability status will be determined using the same standards used by the Social Security Administration. The cost of any required examination is the responsibility of the person claiming a disability.

To participate in the program, an eligible senior citizen or disabled person must pay $ 25 upon enrollment and annually thereafter. The individual will receive a program identification card which can be presented to an authorized pharmacy to assist it in verifying eligibility. DCMS will deposit the enrollment fees collected into the “Senior Citizens and Disabled Persons Prescription Drug Discount Program Fund. ” Proceeds from the enrollment fees will be used by DCMS to offset the administrative cost of the act. The law allows the department to reduce the annual enrollment fee by rule if the revenue from the fees exceeds the cost of the program. If two or more persons are eligible for benefits under the act and are members of the same household, each participating household member must apply and pay the required fee for an identification card.

The act also provides that any person eligible for pharmaceutical assistance under the Senior Citizens and Disabled Persons Property Tax Relief and Pharmaceutical Assistance Act is presumed eligible for the program. The enrollment fee is not required for such persons.

Program Operation and Administration (Sec. 25)

RFP for Program Administration. While the act authorizes DCMS to administer the program, it also allows the department to issue a request for proposals (RFP) for parties interested in administering the program. The act specifies that if DCMS is not the program administrator, it must issue RFP 90 days after the act’s effective date (the effective date is July 1, 2003). Bidders must compete on the basis of the following minimum criteria:

1. 1. the estimated amount of the discount based on the entity’s previous experience and how the discount will be achieved;

2. the extent to which discounts are to be achieved through rebates, administrative fees, or other fees or discounts in prices that the entity negotiates with drug manufacturers;

3. other benefits offered to cardholders;

4. the estimated number and geographic distribution of participating pharmacies in the administrator’s network;

5. the pharmacy compensation plan;

6. the method for determining the prescription drugs covered by the program, including the criteria and process for establishing a preferred drug list, if applicable;

7. how the entity proposes to improve medication management for program participants;

8. how individuals and pharmacies will be informed f the negotiated discount prices;

9. how program complaints will be handled; and

10. the entity’s previous experience with similar programs.

The DCMS director can contract with one or more entities to administer the program on the basis of the submitted proposals, but can require an administrator to modify its conduct of the program according to rules adopted. The act requires the director to adopt rules specifying the contract period and for terminating a contract if an administrator fails to operate the program according to its proposal or with any modifications required by rule.

Personally Identifiable Information. The act prohibits the program administrator from using any personally identifiable information that it receives concerning a cardholder through the program to promote or sell a program offered by the administrator that is not related to the program’s administration without the cardholder’s written consent. It also prohibits an administrator from selling any information about a cardholder, other than aggregate information that does not identify the cardholder, without the person’s consent.

Use of Rebates, Fees, or Discounts. The bill specifies that if a discount is achieved through rebates, administrative fees, or any other fees or discounts in prices that an administrator negotiates with drug manufacturers, the administrator must use the rebates or discounts to (1) reduce costs to cardholders, (2) achieve discounts for cardholders, and (3) cover any program administrative costs. The act prevents the administrator from using any funds generated from rebates, discounts, administrative fees or other fees to promote its mail order pharmacy operation or the mail order pharmacy of an affiliate. But it does not limit the participation of an Illinois-licensed pharmacy if it provides drugs by mail order.

Prices for Prescription Drugs. Beginning January 1, 2004, the amount paid by enrolled eligible seniors and disabled persons to authorized pharmacies for prescription drugs cannot exceed prices established as a result of the rebate agreements. Eligible participants will pay the price determined plus a dispensing fee of $ 3. 50 per prescription for brand name drugs, single-source drug products, and, for a six-month period, newly released generic drug products. The fee is

$ 4. 25 per prescription for all other generic drugs. But the total amount paid by the eligible participant for each drug cannot exceed the usual and customary charge for such prescription.

Pharmacy Compensation. The act directs DCMS or the program administrator to compensate authorized pharmacies for drugs dispensed under the program for the difference between the amount paid by the eligible senior or disabled person and the (i) average wholesale price (AWP) minus 12% for brand name products, single-source generics, and for a six month period, newly-released generics and (ii) the AWP minus 35% for all other generics. The act provides that DCMS will compensate a pharmacy only if the amount paid by the program participant has been discounted to a price, including dispensing fees, that is less than (i) the AWP minus 12% for brand name, single-source, and newly released generic drugs, and (ii) the AWP minus 35% for all other generics.

The act specifies that beginning January 1, 2004, the department or program administrator will reimburse pharmacies within 30 days after claim adjudication.

Manufacturer Rebate Agreements (Sec. 30)

The act directs DCMS or the program administrator to negotiate and enter into rebate agreements with drug manufacturers to achieve prescription drug price discounts. The department or program administrator must take into account the extent to which the state pays for prescription drugs under other state programs and provides assistance to disabled persons or eligible seniors under patient assistance programs, prescription drug discount programs, or other offers for free or reduced price medicine, clinical research projects, limited supply distribution programs, compassionate use programs, or research programs conducted by or for a drug manufacturer.

The act allows the department or program administrator to establish a preferred drug list as a basis for determining the discounts, administrative fees, or other fees or rebates under the act.

Receipts from rebates must be used to provide discounts for prescription drugs purchased by eligible program participants and to cover program administrative costs. This includes compensation to be paid to participating pharmacies by DCMS or the administrator. Any receipts allocated to the department must be deposited into the Senior Citizens and Disabled Persons Prescription Drug Account Program Fund.

Participating Pharmacies (Sec. 40)

DCMS or the program administrator must adopt rules on standards and procedures for pharmacy participation in the program. Pharmacies must apply for participation in the program, including those in the program administrator’s network. DCMS must establish procedures for properly contracting for pharmacy services, validating reimbursement claims, and validating compliance of approved pharmacies with the conditions of participation. The DCMS director, in consultation with pharmacies licensed under Illinois law, can contract with any other state agency, instrumentality, or political subdivision or with a fiscal intermediary for purposes of making payments to authorized pharmacies and coordinating the program with other programs providing payments for prescription drugs.

Adoption of Rules (Sec. 45)

The act directs DCMS to adopt rules to implement the program including:

1. executing contracts with participating pharmacies;

2. establishing maximum limits on prescription size eligible for a discount, up to a 90 day supply, except as necessary for utilization control reasons;

3. inspecting appropriate records and audits of participating pharmacies;

4. specifying application procedures;

5. specifying circumstances under which DCMS can require an administrator to modify its program conduct;

6. specifying contract duration;

7. requiring an administrator permit any Illinois licensed pharmacy willing to comply with the act’s requirements to participate in any network used by the administrator;

8. permitting an administrator to negotiate with one or more drug manufacturers for discounts or rebates;

9. permitting an administrator to receive any rebate payments from manufacturers; and

10. permitting an administrator to develop, administer, and promote a program of disease management according to written agreements between the administrator and participating pharmacies.

Program Report (Sec. 50)

The act requires DCMS to report to the Governor and the General Assembly by March 1 annually. The report must address:

1. the number of disable persons and seniors enrolled;

2. the number of state activities to inform people about the program;

3. the number of prescriptions filed under the program and estimated savings for enrollees;

4. a listing of the participating manufacturers and pharmacies;

5. the amount of enrollment fees and rebates collected and any additional funds or resources made available to cover program costs;

6. the itemized annual cost of program administration; and

7. findings and recommendations regarding program problems and solutions.

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