AN ACT IMPLEMENTING THE GOVERNOR'S BUDGET RECOMMENDATIONS CONCERNING MAXIMIZATION OF PHARMACY REBATES.

AN ACT IMPLEMENTING THE GOVERNOR'S BUDGET RECOMMENDATIONS CONCERNING MAXIMIZATION OF PHARMACY REBATES.

Federal Medicaid law establishes two different formulas for calculating drug rebates for drugs dispensed to Medicaid recipients—one for single source innovator (brand-name) drugs and another for noninnovator multiple source drugs (generics). Retroactive to February 1, 2008, this bill requires the rebates the Department of Social Services (DSS) collects from drug manufacturers whose products are provided to Connecticut Pharmaceutical Contract to the Elderly and Disabled (ConnPACE) and State-Administered General Assistance (SAGA), and Connecticut AIDS Drug Assistance Program (CADAP) recipients to equal the rebates it collects for Medicaid recipients. For the other DSS pharmacy assistance programs, the bill establishes a lower rebate for innovator and single source drugs.

1. prohibits DSS from paying for any prescription drugs of manufacturers that do not provide rebates unless DSS has determined that a particular manufacturer's drug is medically necessary for one of DSS' clients;

2. specifies that drug manufacturers must provide rebates only after their drug has been on the market for a certain period of time;

3. requires participating manufacturers to notify DSS when they are providing rebates, on a form DSS prescribes, and requires DSS to provide notice to them when it establishes a new pharmacy assistance program;

4. removes a requirement that DSS have an application form and issue certificates for every manufacturer providing rebates; and

5. permits DSS to enter into additional contracts for supplemental rebates for drugs on its preferred drug list.

*House Amendment “A” makes drugs dispensed to CADAP recipients eligible for the Medicaid-level rebate.

The bill provides that retroactive to February 1, 2008, any manufacturer of a drug covered by DSS medical assistance programs that are “federally qualified” state pharmacy assistance programs (SPAP) must provide rebates to DSS. These rebates must be the same as those DSS receives for Medicaid-covered drugs.

Under federal law, for noninnovator multiple source drugs, the Medicaid rebate the state receives equals the average manufacturer's price (AMP) times 11%. For single source or innovator drugs, the rebate is the greater of the AMP times 15. 1% or the AMP minus best price (BP). In addition, the state receives an additional rebate when the price of the drug increases faster than inflation (see BACKGROUND).

For non-federally qualified programs, and also retroactive to February 1, 2008, the bill establishes a separate formula for single source or innovator drugs. (For both federally and non-federally qualified programs, the rebates for noninnovator multiple source drugs remain the same. ) It is the Medicaid formula without the additional rebate for inflation. But if the rebate would establish a new Medicaid BP, the unit amount is capped at the AMP minus BP.

Current law requires drug manufacturers to provide rebates for drugs covered by any DSS medical assistance program, and the amount and administration of the rebates are calculated in accordance with the rebates negotiated under the ConnPACE program.

The bill specifies that a manufacturer is not required to provide a rebate for a drug that is new to the market until the quarter in which the manufacturer has established a Medicaid BP for it.

The bill does not define what a federally qualified program is (see BACKGROUND).

The bill requires the unit rebate amount for drugs dispensed under the ConnPACE program to be the same as it is under the Medicaid program.

The bill eliminates a requirement that the DSS commissioner establish an application form for manufacturers who want to participate in the ConnPACE program, as well as a requirement that DSS issue a certificate of participation for manufacturers whose drugs are purchased under that program.

In general, the state does not collect rebates for individuals eligible for both Medicare and Medicaid since the Medicare Part D program pays for their drugs and that program negotiates directly with the drug companies. But for drugs that the Part D plans do not cover, the state has used a special fund (Supplemental Needs Fund) to pay for them. Under the bill, for noninnovator multiple source drugs, the rebate for these drugs equals the average manufacturer's price (AMP) times 11%. For single source or innovator drugs, the rebate is the greater of the AMP times 15. 1% or the AMP minus BP.

The bill provides that if the calculated rebate establishes a new Medicaid BP, the unit rebate amount will be capped at the AMP minus BP.

The bill specifies that a manufacturer is not required to provide a rebate for a drug that is new to the market until the quarter in which the manufacturer has established a Medicaid BP for it.

The bill requires manufacturers to submit written confirmation of participation on a form that DSS prescribes stating the terms of participation, including the process for discontinuing participation.

If DSS establishes a new pharmacy assistance program, the bill requires it to provide (1) advance notice to already participating manufacturers and (2) opportunity for them to stop participating.

The bill likewise requires DSS to promptly notify participating manufacturers if they become disqualified. If disqualification occurs and a manufacturer has paid rebates at the rate for a qualified program, DSS must reimburse the manufacturer the amount it overpaid as a result of the disqualification.

The bill permits DSS to enter into contracts for supplemental rebates for drugs that are on its PDL or a formulary that it establishes. By law, DSS can negotiate supplemental rebates for Medicaid-covered drugs on its PDL.

Since 1990, federal law has required drug manufacturers to enter into rebate agreements with state Medicaid programs and requires these programs to cover any of those manufacturer's drugs. States share any rebates collected with the federal government, since it pays a share of the states' drug expenditures (50% in Connecticut).

The federal law defines “best price” with respect to a single source or innovator multiple source drug as the lowest price available from the manufacturer during the rebate period to any wholesaler, retailer, provider, HMO, nonprofit entity, or government entity within the United States. Best price (1) includes cash discounts, free goods contingent on any purchase requirement, volume discounts, and rebates; (2) must be determined without regard to special packaging, labeling, or identifiers on the dosage form or product or package; and (3) may not take into account merely nominal prices.

The law also provides that for any covered outpatient drug that the Food and Drug Administration approves, the rebate must be provided during the first full calendar quarter after the day on which the drug is first marketed (42 USC § 1986r-8).

DSS presently collects rebates on all drugs covered under the Medicaid program, which includes HUSKY A. It also receives supplemental rebates for Medicaid-covered drugs on its preferred drug list.

DSS also collects regular rebates from manufacturers that participate in ConnPACE, as well as the Connecticut AIDS Drug Assistance Program. (The latter rebates go to the Department of Public Health. )

For the state-funded SAGA medical assistance program, DSS collects minimal rebates, in part because until recently, SAGA care was managed and the health centers were expected to negotiate the rebates directly.

Although it has the legal authority, DSS does not collect rebates under either the HUSKY B or Charter Oak Health Plan. Likewise, DSS is not collecting drug rebates for drugs (1) provided to Medicaid recipients who are also eligible for Medicare and (2) for which DSS pays because they are not covered by the recipient's Medicare Part D plan. Apparently, the manufacturers are requesting individual contracts to do so, based on their interpretation of the state ConnPACE law (that the bill repeals).

According to the federal Centers for Medicare and Medicaid Services (CMS), a SPAP is a pharmacy assistance program developed specifically for the aged, indigent, low-income elderly, or other financially vulnerable people. In Connecticut, besides Medicaid, this would include ConnPACE, but not the Connecticut AIDS Drug Assistance Program, HUSKY B, the Charter Oak Health Plan, or the Supplemental Needs-funded program that provides drug coverage to dually eligible individuals whose Medicare Part D plan formulary does not include particular prescribed drugs.

CMS has told the state that it cannot collect the Medicaid rebate for programs that are not federally qualified SPAPs, because to do so would set a new best price and force manufacturers to set a lower Medicaid rebate.

Although not a federally qualified program, CADAP drugs can also receive the Medicaid-level rebate.

Yea

Nay

(03/12/2009)

Yea

Nay

(03/27/2009)