PRINTER'S NO. 2953
No. 2244 Session of 2000
INTRODUCED BY GRUCELA, COY, DeWEESE, HARHAI, FREEMAN, LESCOVITZ,
M. COHEN, STURLA, DeLUCA, GEORGE, TANGRETTI, LaGROTTA,
PISTELLA, YOUNGBLOOD, CASORIO, BATTISTO, YUDICHAK, JOSEPHS,
BEBKO-JONES, SHANER, STABACK, MANN, SOLOBAY, TIGUE, WALKO,
SANTONI, BELARDI, VEON, VAN HORNE, ROBINSON, WASHINGTON,
MUNDY, MELIO, SCRIMENTI, TRAVAGLIO AND GORDNER,
FEBRUARY 9, 2000
REFERRED TO COMMITTEE ON FINANCE, FEBRUARY 9, 2000
AN ACT
1 Amending the act of August 26, 1971 (P.L.351, No.91), entitled
2 "An act providing for a State Lottery and administration
3 thereof; authorizing the creation of a State Lottery
4 Commission; prescribing its powers and duties; disposition of
5 funds; violations and penalties therefor; exemption of prizes
6 from State and local taxation and making an appropriation,"
7 further providing for definitions of "maximum annual income,"
8 "PACENET" and "program" and for the program generally;
9 providing for claimant financial responsibility; eliminating
10 the PACENET program; further providing for the board, for
11 penalties and for the definitions of "covered prescription
12 drug" and "provider"; adding a definition of "best price";
13 further providing for rebate agreement, for terms of rebate
14 agreement, for amount of rebate, for excessive pharmaceutical
15 price inflation discount and for disposition of funds;
16 providing for supplemental funding from the proceeds of the
17 master settlement agreement; and further providing for annual
18 report to General Assembly.
19 The General Assembly of the Commonwealth of Pennsylvania
20 hereby enacts as follows:
21 Section 1. The definitions of "maximum annual income,"
22 "PACENET" and "program" in section 502 of the act of August 26,
23 1971 (P.L.351, No.91), known as the State Lottery Law, added
1 November 21, 1996 (P.L.741, No.134), are amended to read:
2 Section 502. Definitions.
3 The following words and phrases when used in this chapter
4 shall have the meanings given to them in this section unless the
5 context clearly indicates otherwise:
6 * * *
7 "Maximum annual income." For PACE eligibility, the term
8 shall mean annual income which shall not exceed [$14,000 in the
9 case of single persons nor $17,200 in the case of the combined
10 annual income of persons married to each other] 225% of the
11 Federal poverty level. Persons may, in reporting income to the
12 Department of Aging, round the amount of each source of income
13 and the income total to the nearest whole dollar, whereby any
14 amount which is less than 50¢ is eliminated.
15 * * *
16 ["PACENET." The Pharmaceutical Assistance Contract for the
17 Elderly Needs Enhancement Tier provided for in this chapter.]
18 * * *
19 "Program." The Pharmaceutical Assistance Contract for the
20 Elderly (PACE) [and the Pharmaceutical Assistance Contract for
21 the Elderly Needs Enhancement Tier (PACENET)] as established by
22 this chapter, unless otherwise specified.
23 * * *
24 Section 2. Section 509(5) of the act, added November 21,
25 1996 (P.L.741, No.134), is amended to read:
26 Section 509. Program generally.
27 The program shall include the following:
28 * * *
29 [(5) PACE shall include a participant copayment schedule
30 for each prescription. The copayment may increase or decrease
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1 on an annual basis by the average percent change of
2 ingredient costs for all prescription drugs, plus a
3 differential to raise the copayment to the next highest 25¢
4 increment. In addition, the department may approve a request
5 for increase or decrease in the level of copayment based upon
6 the financial experience and projections of PACE and after
7 consultation with the board. The department is prohibited
8 from approving adjustments to the copayment on more than an
9 annual basis.]
10 * * *
11 Section 3. The act is amended by adding a section to read:
12 Section 509.1. Claimant financial responsibility.
13 (a) Subscription fee.--Upon enrollment in PACE, eligible
14 claimants shall be required to pay an annual subscription fee of
15 $40. Upon appeal by an affected claimant, the department may
16 waive a subscription fee or any portion of the fee if in the
17 opinion of the department the fee or portion of the fee will
18 cause undue hardship to the claimant.
19 (b) Copayment.--For eligible claimants, the copayment, which
20 may be adjusted by the department on an annual basis after
21 consultation with the board, shall be $4 for noninnovator
22 multiple-source drugs and innovator multiple-source drugs as
23 defined in section 702.
24 (c) Dispensing fee.--Eligible claimants shall pay a
25 dispensing fee of $3.50 for each prescription.
26 Section 4. Sections 519, 520(c) and 521(b) and (d) of the
27 act, added November 21, 1996 (P.L.741, No.134), are amended to
28 read:
29 [Section 519. The Pharmaceutical Assistance Contract for the
30 Elderly Needs Enhancement Tier.
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1 (a) Establishment.--There is hereby established within the
2 department a program to be known as the Pharmaceutical
3 Assistance Contract for the Elderly Needs Enhancement Tier
4 (PACENET).
5 (b) PACENET eligibility.--A claimant with an annual income
6 of not less than $14,000 and not more than $16,000 in the case
7 of a single person and of not less than $17,200 and not more
8 than $19,200 in the case of the combined income of persons
9 married to each other shall be eligible for enhanced
10 pharmaceutical assistance under this section. A person may, in
11 reporting income to the department, round the amount of each
12 source of income and the income total to the nearest whole
13 dollar, whereby any amount which is less than 50¢ is eliminated.
14 (c) Deductible.--Upon enrollment in PACENET, eligible
15 claimants in the income ranges set forth in subsection (b) shall
16 be required to meet an annual deductible in unreimbursed
17 prescription drug expenses of $500 per person. To qualify for
18 the deductible set forth in this subsection the prescription
19 drug must be purchased for the use of the eligible claimant from
20 a provider as defined in this chapter. The department, after
21 consultation with the board, may approve an adjustment in the
22 deductible on an annual basis.
23 (d) Copayment.--For eligible claimants under this section,
24 the copayment schedule, which may be adjusted by the department
25 on an annual basis after consultation with the board, shall be:
26 (i) eight dollars for noninnovator multiple source
27 drugs as defined in section 702; or
28 (ii) fifteen dollars for single-source drugs and
29 innovator multiple-source drugs as defined in section
30 702.]
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1 Section 520. Board.
2 * * *
3 (c) Review.--Using the annual report submitted by the
4 department pursuant to section 2102 and other appropriate data
5 sources, the board shall conduct an annual review. The board
6 shall develop recommendations concerning any changes in the
7 level of copayment[, deductible] or in the level of fees paid to
8 participating pharmacists. The board shall review the
9 department's therapeutic drug utilization review program on an
10 ongoing basis. The board may also recommend other changes in the
11 structure of the program and direct the department to enter into
12 discussions with the private contractor concerning amendments to
13 the contract, or the department may enter into such discussion
14 if it deems necessary. The copayment [or deductible] schedule
15 shall only be adjusted on an annual basis.
16 * * *
17 Section 521. Penalties.
18 * * *
19 (b) Civil penalty.--In addition to any appropriate criminal
20 penalty for prohibited acts under this chapter whether or not
21 that act constitutes a crime under 18 Pa.C.S. (relating to
22 crimes and offenses), a provider who violates this section may
23 be liable for a civil penalty in an amount not less than $500
24 and not more than $10,000 for each violation of this act which
25 shall be collected by the department. Each violation constitutes
26 a separate offense. If the department collects three or more
27 civil penalties against the same provider, the provider shall be
28 ineligible to participate in [either] PACE [or PACENET] for a
29 period of one year. If more than three civil penalties are
30 collected from any provider, the department may determine that
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1 the provider is permanently ineligible to participate in PACE
2 [or PACENET].
3 * * *
4 (d) Repayment of gain.--Any provider, recipient or other
5 person who is found guilty of a crime for violating this chapter
6 shall repay three times the value of the material gain received.
7 In addition to the civil penalty authorized pursuant to
8 subsection (b), the department may require the provider,
9 recipient or other person to repay up to three times the value
10 of any material gain to PACE [or PACENET].
11 Section 5. The definitions of "covered prescription drug,"
12 "PACENET" and "provider" in section 702 of the act, added
13 November 21, 1996 (P.L.741, No.134), are amended and the section
14 is amended by adding a definition to read:
15 Section 702. Definitions.
16 The following words and phrases when used in this chapter
17 shall have the meanings given to them in this section unless the
18 context clearly indicates otherwise:
19 * * *
20 "Best price."
21 (1) For current covered prescription drugs, the lesser
22 of:
23 (i) the lowest price available for the drug in this
24 Commonwealth from the manufacturer to any wholesaler,
25 retailer, provider, private entity or governmental entity
26 doing business in this Commonwealth during the quarter;
27 or
28 (ii) the lowest price available for the drug, as of
29 July 1, 2000, in this Commonwealth from the manufacturer
30 to any wholesaler, retailer, provider, private entity or
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1 governmental entity doing business in this Commonwealth
2 increased by the Consumer Price Index-Urban from July
3 2000 to the month before the beginning of the calendar
4 quarter involved.
5 (2) For new drugs approved for marketing after July 1,
6 2000, the lesser of:
7 (i) the lowest price available for the drug in this
8 Commonwealth from the manufacturer to any wholesaler,
9 retailer, provider, private entity or governmental entity
10 doing business in this Commonwealth during the quarter;
11 or
12 (ii) the lowest price available for the drug, during
13 the first month in which the drug was marketed, in this
14 Commonwealth from the manufacturer to any wholesaler,
15 retailer, provider, private entity or governmental entity
16 doing business in this Commonwealth, increased by the
17 percentage increase in the Consumer Price Index-Urban
18 from the first day of the first month of marketing to the
19 beginning of the calendar quarter involved.
20 (3) The term excludes any price less than 8% of the
21 average manufacturer price in the same quarter for which the
22 average manufacturer price is computed.
23 (4) The term includes Federal supply schedule prices.
24 (5) Best price shall be determined on a unit basis and
25 shall be adjusted by the manufacturer if cumulative
26 discounts, rebates or other arrangements subsequently adjust
27 the prices actually realized. For capitated sales, the
28 allocation of the discount shall be made proportionally to
29 the dollar value of the units of each drug sold under the
30 capitated arrangement.
20000H2244B2953 - 7 -
1 * * *
2 "Covered prescription drug." A legend drug, insulin, an
3 insulin syringe or an insulin needle eligible for payment by the
4 Commonwealth under PACE[, PACENET] or designated pharmaceutical
5 programs.
6 * * *
7 ["PACENET." The program established under section 519.]
8 * * *
9 "Provider." A licensed pharmacy or dispensing physician
10 enrolled as a provider in PACE[, PACENET] or designated
11 pharmaceutical programs.
12 * * *
13 Section 6. Sections 703, 704(b)(1) and (c)(1), 705, 706(b)
14 and 709 of the act, added November 21, 1996 (P.L.741, No.134),
15 are amended to read:
16 Section 703. Rebate agreement.
17 (a) Requirement.--PACE[, PACENET] and designated
18 pharmaceutical programs shall not reimburse for any covered
19 prescription drug without a rebate agreement between the
20 department and the manufacturer of the covered prescription
21 drug.
22 (b) Exception.--Subsection (a) shall not apply if the
23 availability of the drug is essential to the health of eligible
24 claimants as determined by the department.
25 (c) Agreements.--Manufacturers of prescription drugs
26 reimbursed under PACE[, PACENET] and designated pharmaceutical
27 programs must enter into a rebate agreement with the department
28 under this chapter to obtain such reimbursement. Nothing in this
29 chapter shall be deemed to affect or impair any agreement made
30 under the former provisions of Chapter 6 of the act of August
20000H2244B2953 - 8 -
1 14, 1991 (P.L.342, No.36), known as the Lottery Fund
2 Preservation Act.
3 (d) Notice.--The department shall notify enrolled providers
4 of PACE[, PACENET] and designated pharmaceutical programs on an
5 annual basis and, as appropriate, of all manufacturers who have
6 entered into a rebate agreement.
7 (e) Drug formulary.--Except as provided in section 512,
8 there shall be no drug formulary, prior or retroactive approval
9 system or any similar restriction imposed on the coverage of
10 outpatient drugs made by manufacturers who have agreements in
11 effect with the Commonwealth to pay rebates for drugs utilized
12 in PACE [and PACENET], provided that such outpatient drugs were
13 approved for marketing by the Food and Drug Administration. This
14 subsection shall not apply to any act taken by the department
15 pursuant to its therapeutic drug utilization review program
16 under section 505.
17 Section 704. Terms of rebate agreement.
18 * * *
19 (b) Information.--
20 (1) The department shall report to each manufacturer,
21 not later than 60 days after the end of each calendar
22 quarter, information by zip code of provider on the total
23 number of dosage units of each covered prescription drug
24 reimbursed under PACE[, PACENET] and designated
25 pharmaceutical programs during the quarter.
26 * * *
27 (c) Manufacturer provision of price information.--
28 (1) Each manufacturer with an agreement in effect under
29 this chapter shall report [the average manufacturer price for
30 all covered prescription drugs produced by that manufacturer]
20000H2244B2953 - 9 -
1 to the department not later than 30 days after the last day
2 of each quarter[.] all of the following:
3 (i) The average manufacturer price.
4 (ii) For single-source drugs and innovator multiple-
5 source drugs:
6 (A) the manufacturer's best price for covered
7 prescription drugs for the quarter; and
8 (B) the best price in effect on July 1, 2000.
9 (iii) For new drugs, the best price in effect during
10 the first month of marketing the new drug.
11 * * *
12 Section 705. Amount of rebate.
13 (a) Single-source drugs and innovator multiple-source
14 drugs.--With respect to single-source drugs and innovator
15 multiple-source drugs, each manufacturer shall remit a rebate to
16 the Commonwealth. Except as otherwise provided in this section,
17 the amount of the rebate to the Commonwealth per calendar
18 quarter with respect to each dosage form and strength of single-
19 source drugs and innovator multiple-source drugs shall be [as
20 follows:] equal to the product of the total number of units of
21 each dosage form and strength reimbursed by PACE and General
22 Assistance in the quarter and the following:
23 (1) For quarters beginning after [September 30, 1992,
24 and ending before January 1, 1997, the product of the total
25 number of units of each dosage form and strength reimbursed
26 by PACE and General Assistance in the quarter and the
27 difference between the average manufacturer price and 85% of
28 that price, after deducting customary prompt payment
29 discounts, for the quarter.] April 2000 the greater of the
30 following:
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1 (i) The difference between the average manufacturer
2 price and 85% of that price after deducting customary
3 prompt payment discounts for the quarter.
4 (ii) The difference between the average manufacturer
5 price for a drug and the best price. For calendar quarter
6 beginning after April 1, 2000, and ending before January
7 1, 2001, the rebate under this subparagraph shall not
8 exceed 25% of the average manufacturer price. For
9 calendar quarters beginning after December 31, 2000, and
10 ending before January 1, 2002, the rebate under this
11 subparagraph shall not exceed 50% of the average
12 manufacturer price.
13 (2) For quarters beginning after December 31, 1996, the
14 product of the total number of units of each dosage form and
15 strength reimbursed by PACE[, PACENET] and designated
16 pharmaceutical programs in the quarter and the difference
17 between the average manufacturer price and 83% of that price,
18 after deducting customary prompt payment discounts.
19 (b) Rebate for other drugs.--
20 (1) The amount of the rebate to the Commonwealth for a
21 calendar quarter with respect to covered prescription drugs
22 which are noninnovator multiple-source drugs shall be equal
23 to the product of:
24 (i) the applicable percentage of the average
25 manufacturer price, after deducting customary prompt
26 payment discounts, for each dosage form and strength of
27 such drugs for the quarter; and
28 (ii) the number of units of such form and dosage
29 reimbursed by PACE and General Assistance in the quarter.
30 (2) For the purposes of paragraph (1), the applicable
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1 percentage for calendar quarters beginning after September
2 30, 1992, and ending before January 1, 1997, is 11%.
3 (c) Revised rebate for other drugs.--Beginning after
4 December 31, 1996:
5 (1) The amount of the rebate to the Commonwealth for a
6 calendar quarter with respect to covered prescription drugs
7 which are noninnovator multiple-source drugs shall be the
8 greater of the product of:
9 (i) the applicable percentage of the average
10 manufacturer price, after deducting customary prompt
11 payment discounts, for each dosage form and strength of
12 such drugs for the quarter; and
13 (ii) the number of units of such form and dosage
14 reimbursed by PACE[, PACENET] and designated
15 pharmaceutical programs in the quarter.
16 (2) For purposes of paragraph (1), the applicable
17 percentage is 17%.
18 (d) Drugs approved after act takes effect.--In the case of a
19 covered outpatient drug approved for marketing after the
20 effective date of the act of August 14, 1991 (P.L.342, No.36),
21 known as the Lottery Fund Preservation Act, any reference to
22 January 1, 1991, shall be a reference to the first day of the
23 first month during which the drug was marketed.
24 Section 706. Excessive pharmaceutical price inflation discount.
25 * * *
26 (b) Revised general rule.--A discount shall be provided to
27 the department for all covered prescription drugs. The discount
28 shall be calculated as follows:
29 (1) For each quarter for which a rebate under section
30 705(a) and (c) is to be paid after December 31, 1996, the
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1 average manufacturer price for each dosage form and strength
2 of a covered prescription drug shall be compared to the
3 average manufacturer price for the same form and strength in
4 the previous calendar year and a percentage increase shall be
5 calculated.
6 (2) For each quarter under paragraph (1), the average
7 percentage increase in the Consumer Price Index-Urban over
8 the same quarter in the previous calendar year shall be
9 calculated.
10 (3) If the calculation under paragraph (1) is greater
11 than the calculation under paragraph (2), the discount amount
12 for each quarter shall be equal to the product of:
13 (i) the difference between the calculations under
14 paragraphs (1) and (2); and
15 (ii) the total number of units of each dosage form
16 and strength reimbursed by PACE[, PACENET] and designated
17 pharmaceutical programs and the average manufacturer
18 price reported by the manufacturer under section
19 704(c)(1).
20 * * *
21 Section 709. Disposition of funds.
22 (a) PACE [and PACENET].--Money received under this chapter
23 in connection with PACE [and PACENET] shall be deposited in the
24 Pharmaceutical Assistance Contract for the Elderly Fund.
25 (b) Designated pharmaceutical programs.--Money received
26 under this chapter in connection with designated pharmaceutical
27 programs shall be treated as a refund of expenditures to the
28 appropriation which originally provided the funding for the
29 pharmaceutical purchase.
30 Section 7. The act is amended by adding a section to read:
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1 Section 710. Supplemental funding.
2 (a) Supplemental funding.--The following sums are hereby
3 appropriated to the department for deposit into the
4 Pharmaceutical Assistance Contract for the Elderly Fund from the
5 moneys received by the Commonwealth from the master settlement
6 agreement:
7 (1) $106 million for fiscal year 2000-2001.
8 (2) $112 million for fiscal year 2001-2002.
9 (3) $119 million for fiscal year 2002-2003.
10 (4) $126 million for fiscal year 2003-2004.
11 (5) $134 million for fiscal year 2004-2005.
12 (b) Definition.--As used in this section, the term "master
13 settlement agreement" means the settlement agreement and related
14 documents entered into on November 23, 1998, by the Commonwealth
15 and leading United States tobacco product manufacturers and
16 approved by the court in Commonwealth v. Philip Morris, April
17 Term 1997, No.2443 (C.P.Philadelphia County), on January 13,
18 1999.
19 Section 8. Section 2102 of the act, added November 21, 1996
20 (P.L.741, No.134), is amended to read:
21 Section 2102. Annual report to General Assembly.
22 (a) Submission of report.--The department shall submit a
23 report no later than April 1 of each year to the chairman and
24 minority chairman of the Aging and Youth Committee of the
25 Senate, the chairman and minority chairman of the Aging and
26 Youth Committee of the House of Representatives and the
27 Pharmaceutical Assistance Review Board.
28 (b) Collection of data.--The department shall maintain
29 monthly statistical records on PACE [and PACENET], including the
30 level of participation and any patterns of unusual drug usage
20000H2244B2953 - 14 -
1 for purposes of formulating the annual report.
2 (c) Information for inclusion in annual report.--The annual
3 report shall contain, but not be limited to, all information
4 relating to:
5 (1) The number of persons served by PACE [and PACENET]
6 and their counties of residence.
7 (2) A breakdown of the numbers and kinds of
8 pharmaceuticals used.
9 (3) The cost of prescriptions.
10 (4) An estimate of actual expenses incurred by
11 pharmacists participating in the program.
12 (5) The results obtained by the drug education program
13 under section 522.
14 (6) Information regarding the operation of the
15 therapeutic drug utilization review system for the prior
16 calendar year, which shall include, at a minimum:
17 (i) The scope of physician and pharmacist
18 participation in the system.
19 (ii) A description of claimant response to the
20 system.
21 (iii) Data for each month of the covered period
22 regarding the number of prescription revisions based on
23 utilization review, including drug information, cost
24 savings and the policy used by the department to make
25 utilization review decisions.
26 (7) Information on the existence and scope of fraudulent
27 activity and violations of this act by providers
28 participating in PACE [and PACENET].
29 (8) Information regarding the financial status of PACE
30 [and PACENET], including, but not limited to, the adequacy of
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1 any applicable deductible and copayment levels, based upon
2 the financial experience and projections of PACE [and
3 PACENET].
4 Section 9. This act shall take effect in 60 days.
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