Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance
committees of the Legislature. LFC does not assume responsibility for the accuracy of these reports if they
are used for other purposes.
F I S C A L I M P A C T R E P O R T
SPONSOR Armstrong
LAST UPDATED
ORIGINAL DATE 2/7/2025
SHORT TITLE Pharmacy Reimbursement for Certain Plans
BILL
NUMBER House Bill 174
ANALYST Esquibel
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT*
(dollars in thousands)
Agency/Program
FY25 FY26 FY27
3 Year
Total Cost
Recurring or
Nonrecurring
Fund
Affected
HCA State Health
Benefits Plan
No fiscal
impact
$325.7 $651.3 $977.0 Recurring
General Fund
(employer
share through
state health
benefits fund)
HCA State Health
Benefits Plan
No fiscal
impact
$175.4 $350.7 $526.1 Recurring
Cost to
Employees
(premiums)
HCA State Health
Benefits Plan
No fiscal
impact
$105.0 $210.0 $315.0 Recurring
Cost to
Employees
(cost-sharing)
NMPSIA
No fiscal
impact
Up to $400.0 Up to $765.0 Up to $1,165.0 Recurring
NMPSIA
Benefits Fund
Total
No fiscal
impact
Up to $1,006.1 Up to $1,977.0 Up to $2,983.1 Recurring
Parentheses ( ) indicate expenditure decreases.
*Amounts reflect most recent analysis of this legislation.
Sources of Information
LFC Files
Agency Analysis Received From
Health Care Authority (HCA New Mexico Public Schools Insurance Authority (NMPSIA)
Regulation and Licensing Department (RLD)
Office of Superintendent of Insurance (OSI)
University of New Mexico Health Sciences Center (UNMHSC)
Agency Analysis was Solicited but Not Received From
Albuquerque Public Schools (APS) Retiree Health Care Authority (RHCA) House Bill 174 – Page 2
SUMMARY
Synopsis of House Bill 174
House Bill 174 (HB174) would require group health coverage and self-insurance offered, issued,
or renewed under the Health Care Purchasing Act that offer a prescription drug benefit to pay
community pharmacies a professional dispensing fee that is no lower than the professional
dispensing fee Medicaid pays to community pharmacies. The current Medicaid professional
dispensing fee for community pharmacies is $10.30.
The bill defines community pharmacies as:
A. Open to the public for prescriptions to be filled, regardless of the facility or practice
where the prescription was written;
B. Located in the state or near the state border, if the border town is a primary source of
prescription drugs for Medicaid recipients residing in the border area; and
C. Not: 1) government-owned; 2) hospital-owned; 3) owned by a corporation that owns
hospitals; 4) an extension of a medical practice or special facility; 5) owned by a
corporate chain of pharmacies with stores outside of defined as the state; or 6) a mail-
order pharmacy.
The effective date of this bill is January 1, 2026.
FISCAL IMPLICATIONS
The Health Care Authority (HCA) reports changing to the national average drug acquisition cost
for community pharmacies would have the following cost implications for the state health
benefits plan. The cost would split between the state as the employer who pays approximately 65
percent of the cost and employees who pay approximately 35 percent of the cost. There would
also be impacts to member out-of-pocket cost-sharing.
HCA provides the following impact:
1. Total premium impact: $1,002,000 per calendar year
a. Member premium impact: $350,700 per calendar year
b. State premium impact: $651,300
2. Member out-of-pocket cost impact: $210,000
3. Total member impact (premium + out-of-pocket): $560,700
4. Total general fund plan impact: $651,300
The New Mexico Public Schools Insurance Authority (NMPSIA) reports implementing the
national average drug acquisition cost pricing platform for independent retail pharmacies in New
Mexico would require an increased administration fee of $1.00 per member per month which
equates to $300 thousand annually and a 3-year projected impact of $1.17 million. The proposed
national average drug acquisition cost pricing adjustments will apply to approximately 80
independent retail pharmacies in the state. Pharmacy claims are expected to grow at an annual
trend rate of 14 percent, while dispensing fees are projected to increase by 6 percent per year.
NMPSIA analysis assumes a dispensing fee of $10.30 per prescription, based on the current New
Mexico Medicaid reimbursement model. House Bill 174 – Page 3
NMPSIA Fiscal Impact
(in thousands)
Allowed Cost Plus
Dispensing Fee Administra tive Fee Total Impact
FY2026 $115 $285 $400
FY2027 $195 $570 $765
SIGNIFICANT ISSUES
HCA notes community pharmacies can be vital in rural communities, often serving as the
primary access point for essential healthcare services. These pharmacies play a crucial role in
ensuring residents have convenient access to medications, health supplies, and professional
advice without needing to travel long distances. In many cases, community pharmacists are not
only trusted healthcare providers, but also key community members who understand the unique
health needs and challenges of their rural neighbors. Beyond dispensing medications, they can
offer personalized care, medication management, and health education, which are especially
valuable in areas with limited access to physician care.
HCA reports state health plan member co-pays for generic drugs are $6 and may increase if the
current cost of the prescription drug is less than $6 because the increased ingredient cost or
dispensing fee would exceed the current co-pay amount. For brand-name drugs, member costs
are unlikely to change, as these drugs typically cost more than the co-pay threshold.
The state health benefit plan’s pharmacy benefit manager would need to update its contracts with
community pharmacies to reflect new reimbursement rates.
Prescriptions filled at community pharmacies would likely be excluded from certain guarantees
offered by the pharmacy benefit manager, slightly reducing the value of these guarantees to
HCA.
The state health benefit plan fund currently has a projected shortfall of $85 million due to higher
claim costs than premium collections. The bill could contribute to the projected shortfall if there
were not an adjustment to the premium rate to reflect the new pricing requirements.
ADMINISTRATIVE IMPLICATIONS
Medicaid already provides this same professional dispensing fee to community pharmacies and
would not be required to increase rates under the provisions of the bill. Additionally, oversight of
this bill is not under Medicaid’s purview and would therefore not impact administrative costs.
OTHER SUBSTANT IVE ISSUES
NMPSIA reports while national average drug acquisition cost pricing offers transparency, it
introduces financial risks due to unstable pricing, lack of rebate inclusion, and reduced cost-
control mechanisms which adds difficulty to predict, budget, and manage pharmacy benefits.
House Bill 174 – Page 4
The University of New Mexico (UNM) Health Sciences Center notes the bill excludes
governmental entities like UNM. HB174 could help sustain community pharmacies, which have
difficulty competing with pharmacy benefit manager-owned mail order pharmacies, by requiring
health insurers and their associated pharmacy benefit managers to compensate community
pharmacies at cost plus a prescribing fee.
HCA reports the following regarding the state health benefits plan:
Examples of Medication Costs:
a. If the ingredient cost of New Mexico’s discounted AWP for a generic
medication is $3 but the national average drug acquisition cost price is $10,
the total cost to the state and the member would increase. The maximum
member co-pay for a generic drug is currently $6, meaning that the member’s
cost sharing would increase by $3 and the state’s ingredient cost would
increase by $4.
b. Assuming no change in the ingredient cost…an increase in the dispensing fee
could impact the member co-pay. For example, if the ingredient cost is $1 and
the current dispensing fee is $2, the member’s co-pay would be $3. If the
dispensing fee increased to $10, the member’s co-pay would increase to the
maximum of $6 and the state’s cost would increase to $5.
c. Member cost sharing is unlikely to be impacted for more expensive drugs
because the ingredient cost is likely much higher than the member’s co-pay.
For example, if a brand name drug costs $200 and the member co-pay is $40,
the increased dispensing fee would not impact the member because they have
already reached their co-pay limit. The additional $10 would be borne by the
state.
RAE/SL2/hj