LEGISLATIVE SERVICES AGENCY
OFFICE OF FISCAL AND MANAGEMENT ANALYSIS
FISCAL IMPACT STATEMENT
LS 7353 NOTE PREPARED: Feb 6, 2025
BILL NUMBER: SB 503 BILL AMENDED: Feb 6, 2025
SUBJECT: Pharmacy Benefit Administration.
FIRST AUTHOR: Sen. Zay BILL STATUS: CR Adopted - 1
st
House
FIRST SPONSOR:
FUNDS AFFECTED:XGENERAL IMPACT: State
XDEDICATED
XFEDERAL
Summary of Legislation: (Amended) Pharmacy Benefit Compliance Officer and Fund: This bill requires
the Attorney General to designate or appoint a Pharmacy Benefit Compliance Officer if certain prescription
drug benefit public-private partnership contracts are entered into by the state. It establishes the Pharmacy
Benefit Compliance Fund.
State Contracts: This bill authorizes: (1) the State Personnel Department (SPD), for purposes of the state
employee health plan (SEHP); and (2) the Office of the Secretary of Family and Social Services (FSSA), for
purposes of the Medicaid program; to issue a request for proposal to enter into a public-private partnership
to administer prescription drug benefits. It sets forth certain requirements for a request for proposal and
establishes the competitive proposal procedure.
Committees and Task Forces: This bill allows the Budget Committee to review a contract before the SPD
or the FSSA awards a final contract for the public-private partnership.
Audits: This bill requires that, if the SPD or the FSSA enter into a contract for the public-private partnership,
the Attorney General conduct a SEHP audit or a Medicaid audit at least three years after the implementation
of the contract. It also makes an appropriation.
Effective Date: July 1, 2025.
Explanation of State Expenditures: (Revised) Pharmacy Benefit Compliance Officer and Fund: The bill
establishes the nonreverting Pharmacy Benefit Compliance Fund to be administered by the Attorney General.
Expenses for administering the Fund and for the salary of the Pharmacy Benefit Compliance Officer (Officer)
shall be paid from the Fund. The Fund consists of fees and civil penalties collected by the Officer, as well
as appropriations from the General Assembly. Money in the Fund is continuously appropriated.
The bill requires the Attorney General to designate or appoint a Deputy or Assistant Attorney General as the
Officer. The bill allows the Officer to engage the services of consultants, as needed, including an economist,
a technologist, and other appropriate subject matter experts. Costs for such consultant services are
SB 503 1 indeterminable and shall be paid from the Pharmacy Benefit Compliance Fund established by the bill.
(Revised) State Contracts: The bill allows, but does not require, SPD and FSSA to enter into a public-private
partnership contract with a private entity (defined in the bill as a pharmacy benefit partner) to administer
prescription drug benefits on behalf of the SEHP and the state Medicaid program. Increases in state
expenditures for such contracts, if entered, will depend on the negotiated contract rates but are expected to
be significant. However, such expenditures may be mitigated by the fee revenue collected from a pharmacy
benefit partner. [See Explanation of State Revenues.]
The bill may increase workload for SPD and FSSA if either agency decides to issue a request for proposal,
as the agency will also then be required to provide oversight of PBM operations and submit reports, as
prescribed in the bill. These requirements should be able to be implemented by each agency using existing
staffing and resources.
(Revised) Committees and Task Forces: If the state enters into a public-private partnership contract, the bill
will add an additional requirement for the Health Care Cost Oversight Task Force which should be able to
be accomplished within the Task Force’s typical interim meeting schedule. If the Task Force were to hold
an additional meeting to address this topic, there would be additional expenditures for legislator per diem
and travel reimbursement for the members. Any additional expenditures must be within the Task Force’s
budget, which is established by the Legislative Council.
(Revised) Audits: The Attorney General may incur future workload increases to conduct audits of the
pharmacy benefit partner for the SEHP and the state Medicaid program if either agency enters into a public-
private partnership contract as prescribed in the bill. These audits are not required until three or more years
after the state enters into the contract(s).
Explanation of State Revenues: (Revised) Fees: If a contract is entered into for the SEHP or the state
Medicaid program, the bill requires a pharmacy benefit partner to pay a flat fee fo $5 per covered individual.
This is estimated to total approximately $9.6 M in fee revenue ($287,000 and $9.3 M per year based on
enrollment of the SEHP and state Medicaid program, respectively). Fee revenue is to be deposited into the
Pharmacy Benefit Compliance Fund established in the bill.
Civil Penalties: A PBM or pharmacy benefit partner that violates the terms of their contract with the state
or any applicable state or federal law is subject to a civil penalty of $1,000 per noncompliant claim. Revenue
from civil penalties is to be deposited into the state General Fund.
Additional Information: SEHP membership in CY 2024 totaled 57,347 individuals. The FY 2025 average
monthly Medicaid enrollment forecast totaled approximately 1,861,000 individuals.
Explanation of Local Expenditures:
Explanation of Local Revenues:
State Agencies Affected: Attorney General; State Personnel Department; Family and Social Services
Administration; Health Care Cost Oversight Task Force.
Local Agencies Affected:
SB 503 2 Information Sources: Indiana Transparency Portal; Susan Barnhart, SPD; FSSA Medicaid Financial
Reports, September 2024.
Fiscal Analyst: Jason Barrett, 317-232-9809.
SB 503 3