LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 81ST LEGISLATIVE REGULAR SESSION May 14, 2009 TO: Honorable Joe Straus, Speaker of the House, House of Representatives FROM: John S. O'Brien, Director, Legislative Budget Board IN RE:HB2030 by Zerwas (Relating to the Medicaid Drug Utilization Review Program and prescription drug use under the Medicaid program. ), As Passed 2nd House Estimated Two-year Net Impact to General Revenue Related Funds for HB2030, As Passed 2nd House: a negative impact of ($94,238,008) through the biennium ending August 31, 2011. The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 81ST LEGISLATIVE REGULAR SESSION
May 14, 2009
TO: Honorable Joe Straus, Speaker of the House, House of Representatives FROM: John S. O'Brien, Director, Legislative Budget Board IN RE:HB2030 by Zerwas (Relating to the Medicaid Drug Utilization Review Program and prescription drug use under the Medicaid program. ), As Passed 2nd House
TO: Honorable Joe Straus, Speaker of the House, House of Representatives
FROM: John S. O'Brien, Director, Legislative Budget Board
IN RE: HB2030 by Zerwas (Relating to the Medicaid Drug Utilization Review Program and prescription drug use under the Medicaid program. ), As Passed 2nd House
Honorable Joe Straus, Speaker of the House, House of Representatives
Honorable Joe Straus, Speaker of the House, House of Representatives
John S. O'Brien, Director, Legislative Budget Board
John S. O'Brien, Director, Legislative Budget Board
HB2030 by Zerwas (Relating to the Medicaid Drug Utilization Review Program and prescription drug use under the Medicaid program. ), As Passed 2nd House
HB2030 by Zerwas (Relating to the Medicaid Drug Utilization Review Program and prescription drug use under the Medicaid program. ), As Passed 2nd House
Estimated Two-year Net Impact to General Revenue Related Funds for HB2030, As Passed 2nd House: a negative impact of ($94,238,008) through the biennium ending August 31, 2011. The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
Estimated Two-year Net Impact to General Revenue Related Funds for HB2030, As Passed 2nd House: a negative impact of ($94,238,008) through the biennium ending August 31, 2011.
The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
General Revenue-Related Funds, Five-Year Impact: Fiscal Year Probable Net Positive/(Negative) Impact to General Revenue Related Funds 2010 ($44,284,435) 2011 ($49,953,573) 2012 ($58,044,484) 2013 ($66,191,420) 2014 ($75,481,944)
2010 ($44,284,435)
2011 ($49,953,573)
2012 ($58,044,484)
2013 ($66,191,420)
2014 ($75,481,944)
All Funds, Five-Year Impact: Fiscal Year Probable (Cost) fromGeneral Revenue Fund1 Probable (Cost) fromFederal Funds555 Probable Revenue (Loss) fromVendor Drug Rebates Sup Rebates8081 Probable Revenue (Loss) fromFederal Funds - Vendor Drug Rebates Sup Rebates555 2010 ($34,427,544) ($49,114,178) ($20,620,112) ($29,416,560) 2011 ($38,914,787) ($55,860,632) ($23,307,814) ($33,457,443) 2012 ($44,404,262) ($63,793,258) ($26,531,321) ($38,116,146) 2013 ($50,692,798) ($72,827,664) ($30,215,360) ($43,408,812) 2014 ($57,871,915) ($83,141,524) ($34,410,952) ($49,436,397) Fiscal Year Probable Revenue Gain fromVendor Drug Rebates Medicaid706 Probable Revenue Gain fromFederal Funds - Vendor Drug Rebates Medicaid555 2010 $10,763,221 $15,354,762 2011 $12,269,028 $17,611,703 2012 $12,891,099 $18,519,962 2013 $14,716,738 $21,142,759 2014 $16,800,923 $24,136,999
Fiscal Year Probable (Cost) fromGeneral Revenue Fund1 Probable (Cost) fromFederal Funds555 Probable Revenue (Loss) fromVendor Drug Rebates Sup Rebates8081 Probable Revenue (Loss) fromFederal Funds - Vendor Drug Rebates Sup Rebates555 2010 ($34,427,544) ($49,114,178) ($20,620,112) ($29,416,560) 2011 ($38,914,787) ($55,860,632) ($23,307,814) ($33,457,443) 2012 ($44,404,262) ($63,793,258) ($26,531,321) ($38,116,146) 2013 ($50,692,798) ($72,827,664) ($30,215,360) ($43,408,812) 2014 ($57,871,915) ($83,141,524) ($34,410,952) ($49,436,397)
2010 ($34,427,544) ($49,114,178) ($20,620,112) ($29,416,560)
2011 ($38,914,787) ($55,860,632) ($23,307,814) ($33,457,443)
2012 ($44,404,262) ($63,793,258) ($26,531,321) ($38,116,146)
2013 ($50,692,798) ($72,827,664) ($30,215,360) ($43,408,812)
2014 ($57,871,915) ($83,141,524) ($34,410,952) ($49,436,397)
Fiscal Year Probable Revenue Gain fromVendor Drug Rebates Medicaid706 Probable Revenue Gain fromFederal Funds - Vendor Drug Rebates Medicaid555 2010 $10,763,221 $15,354,762 2011 $12,269,028 $17,611,703 2012 $12,891,099 $18,519,962 2013 $14,716,738 $21,142,759 2014 $16,800,923 $24,136,999
2010 $10,763,221 $15,354,762
2011 $12,269,028 $17,611,703
2012 $12,891,099 $18,519,962
2013 $14,716,738 $21,142,759
2014 $16,800,923 $24,136,999
Fiscal Analysis
As recommended in the Legislative Budget Board's 2009 Government Effectiveness and Efficiency Report entitled "Strengthen the Texas Medicaid Drug Utilization Review Program to Promote Safety and Contain Spending," the bill would amend Chapter 531 of the Government Code to require the Health and Human Services Commission (HHSC) to increase the number and type of retrospective drug use reviews performed each year under the Medicaid Drug Utilization Review (DUR) program. HHSC would be required to include a detailed description of Medicaid DUR program activities and cost savings estimates for retrospective and prospective reviews in the program's federally required annual report and to post the annual report on its website. The bill would require HHSC to monitor and analyze Medicaid prescription drug use and expenditure patterns and post certain data on its website. The bill prohibits Medicaid DUR board members from having a contractual relationship, ownership interest, or other conflict of interest with a pharmaceutical manufacturer or labeler or with an entity engaged by HHSC to assist with administering the Medicaid DUR program. HHSC would be allowed to adopt rules that identify prohibited relationships or require the Medicaid DUR board to develop a conflict of interest policy. The bill would also require HHSC to ensure that prescriptions written under the Medicaid Program are valid for no more than one year. The bill would amend Chapter 531 of the Government Code regarding information that is confidentialwith respect to the Medicaid Vendor Drug program's preferred drug list (PDL). The bill would allowthe PDL to contain drugs for which no supplemental rebate agreement was reached if it would nothave a negative cost impact to the state. It would require HHSC to consider including all strengths and dosages of a drug on the PDL, and to consider including multiple methods of delivery within each drug class, including liquid, tablet, capsule, and orally disintegrating tablet. The bill would require the commission to ensure that prior authorization requests may be submitted by telephone, facsimile, or electronic communications via the Internet. HHSC would provide an automated process to determine whether a drug may be dispensed without an additional prior authorization request. The bill would require HHSC to publish on the Internet specific non-confidential information regarding HHSC decisions concerning preferred drug list placement of individual drug products. The bill requires HHSC to allow a physician to write a total of 24 prescriptions each year without obtaining prior authorization for drugs that would otherwise require prior authorization and requires that HHSC provide reimbursement for those drugs under the Medicaid Vendor Drug Program. This bill would take effect September 1, 2009.
As recommended in the Legislative Budget Board's 2009 Government Effectiveness and Efficiency Report entitled "Strengthen the Texas Medicaid Drug Utilization Review Program to Promote Safety and Contain Spending," the bill would amend Chapter 531 of the Government Code to require the Health and Human Services Commission (HHSC) to increase the number and type of retrospective drug use reviews performed each year under the Medicaid Drug Utilization Review (DUR) program. HHSC would be required to include a detailed description of Medicaid DUR program activities and cost savings estimates for retrospective and prospective reviews in the program's federally required annual report and to post the annual report on its website. The bill would require HHSC to monitor and analyze Medicaid prescription drug use and expenditure patterns and post certain data on its website. The bill prohibits Medicaid DUR board members from having a contractual relationship, ownership interest, or other conflict of interest with a pharmaceutical manufacturer or labeler or with an entity engaged by HHSC to assist with administering the Medicaid DUR program. HHSC would be allowed to adopt rules that identify prohibited relationships or require the Medicaid DUR board to develop a conflict of interest policy.
The bill would also require HHSC to ensure that prescriptions written under the Medicaid Program are valid for no more than one year.
The bill would amend Chapter 531 of the Government Code regarding information that is confidentialwith respect to the Medicaid Vendor Drug program's preferred drug list (PDL). The bill would allowthe PDL to contain drugs for which no supplemental rebate agreement was reached if it would nothave a negative cost impact to the state. It would require HHSC to consider including all strengths and dosages of a drug on the PDL, and to consider including multiple methods of delivery within each drug class, including liquid, tablet, capsule, and orally disintegrating tablet. The bill would require the commission to ensure that prior authorization requests may be submitted by telephone, facsimile, or electronic communications via the Internet. HHSC would provide an automated process to determine whether a drug may be dispensed without an additional prior authorization request. The bill would require HHSC to publish on the Internet specific non-confidential information regarding HHSC decisions concerning preferred drug list placement of individual drug products.
The bill requires HHSC to allow a physician to write a total of 24 prescriptions each year without obtaining prior authorization for drugs that would otherwise require prior authorization and requires that HHSC provide reimbursement for those drugs under the Medicaid Vendor Drug Program.
This bill would take effect September 1, 2009.
Methodology
Implementing strategies to strengthen the Medicaid DUR program has the potential to improve thequality of pharmaceutical care and contain Medicaid prescription drug spending. HHSC currentlycontracts with an entity to perform retrospective drug use reviews. Per HHSC's contract with thisentity, HHSC is guaranteed cost savings equal to twice the amount paid to the contracted entity foreach retrospective drug use review performed. As a result, the implementation of additionalretrospective drug use reviews would be cost neutral. It is assumed that any cost to implement theprovisions of the bill related to the annual report, analysis of prescription drug data, and the conflict ofinterest provision for the Medicaid DUR board would be minimal and can be absorbed withinavailable resources. Based on HHSC's analysis, any cost to implement provisions of the bill related to the period of validity for prescription drugs written under the Medicaid Program can be absorbed within available resources. The requirement for the agency to consider including multiple dosages and methods of delivery isassumed to have no fiscal impact; it is assumed that the agency would not implement unless there wasno signficant fiscal impact to do so. It is assumed that the automated process for certain drugdispensing without prior authorization would require system programming expenditures. Therequirement to publish HHSC PDL decisions on the Internet would result in an increased amount ofstaff time and resources needed to post the detailed information requested. It is assumed that thesecosts could be absorbed within current resources. The provisions of the bill related to allowing physicians to write 24 prescriptions per year without obtaining prior authorization would result in a negative net All Funds fiscal impact of $107,460,411 in fiscal year 2010, $121,659,945 in fiscal year 2011, $141,433,926 in fiscal year 2012, $161,285,137 in fiscal year 2013, and $183,922,866 in fiscal year 2014. These amounts are based on HHSC's assumption that the bill would result in a 30 percent reduction in savings from the operation of the Medicaid PDL. The assumed reduction in PDL savings is due to an increase in client service expenditures from a shift to prescribing more expensive prescription drugs and a concomitant reduction in Medicaid supplemental rebates. The net All Funds fiscal impact includes a projected increase in federal contract Medicaid Program drug rebates due to increased client service expenditures for more expensive prescription drugs.
Implementing strategies to strengthen the Medicaid DUR program has the potential to improve thequality of pharmaceutical care and contain Medicaid prescription drug spending. HHSC currentlycontracts with an entity to perform retrospective drug use reviews. Per HHSC's contract with thisentity, HHSC is guaranteed cost savings equal to twice the amount paid to the contracted entity foreach retrospective drug use review performed. As a result, the implementation of additionalretrospective drug use reviews would be cost neutral. It is assumed that any cost to implement theprovisions of the bill related to the annual report, analysis of prescription drug data, and the conflict ofinterest provision for the Medicaid DUR board would be minimal and can be absorbed withinavailable resources.
Based on HHSC's analysis, any cost to implement provisions of the bill related to the period of validity for prescription drugs written under the Medicaid Program can be absorbed within available resources.
The requirement for the agency to consider including multiple dosages and methods of delivery isassumed to have no fiscal impact; it is assumed that the agency would not implement unless there wasno signficant fiscal impact to do so. It is assumed that the automated process for certain drugdispensing without prior authorization would require system programming expenditures. Therequirement to publish HHSC PDL decisions on the Internet would result in an increased amount ofstaff time and resources needed to post the detailed information requested. It is assumed that thesecosts could be absorbed within current resources.
The provisions of the bill related to allowing physicians to write 24 prescriptions per year without obtaining prior authorization would result in a negative net All Funds fiscal impact of $107,460,411 in fiscal year 2010, $121,659,945 in fiscal year 2011, $141,433,926 in fiscal year 2012, $161,285,137 in fiscal year 2013, and $183,922,866 in fiscal year 2014.
These amounts are based on HHSC's assumption that the bill would result in a 30 percent reduction in savings from the operation of the Medicaid PDL. The assumed reduction in PDL savings is due to an increase in client service expenditures from a shift to prescribing more expensive prescription drugs and a concomitant reduction in Medicaid supplemental rebates. The net All Funds fiscal impact includes a projected increase in federal contract Medicaid Program drug rebates due to increased client service expenditures for more expensive prescription drugs.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies: 529 Health and Human Services Commission
529 Health and Human Services Commission
LBB Staff: JOB, CL, JI, DM
JOB, CL, JI, DM