SENATE Amended 3rd Reading April 26, 2006 SENATE Amended 2nd Reading April 19, 2006 Second Regular Session Sixty-fifth General Assembly STATE OF COLORADO REENGROSSED This Version Includes All Amendments Adopted in the House of Introduction LLS NO. 06-0034.01 Michele Hanigsberg SENATE BILL 06-001 SENATE SPONSORSHIP Hagedorn, HOUSE SPONSORSHIP Madden, Senate Committees House Committees Health and Human Services Appropriations A BILL FOR AN ACT Concerning a reduction in the cost of prescription drugs, and making an appropriation therefor. Bill Summary (Note: This summary applies to this bill as introduced and does not necessarily reflect any amendments that may be subsequently adopted.) Requires the department of health care policy and financing ("department") to apply for federal authorization, as necessary, to enter into a multi-state drug purchasing pool ("purchasing pool") for the benefit of the state's medicaid recipients. Requires the department to contract, through a competitive bidding process, with one or more for-profit or nonprofit entities for purposes of the purchasing pool. Requires the executive director of the department to promulgate any rules necessary for the state to receive the federal authorization necessary to implement the purchasing pool and for the state to generate the maximum amount of savings to the state medicaid program. Contains a reporting requirement. Establishes the Colorado cares Rx program ("program") in the department to allow an eligible person, any political subdivision of the state, and any business to purchase prescription drugs at the discounted rate negotiated by the entity administering the program. Defines the eligibility criteria for the program. Requires the department's contract with one or more entities to implement and administer the program. Requires a pharmaceutical manufacturing company to annually disclose to the medical services board ("board") specific expenditure information, including but not limited to expenditures on direct marketing to consumers and lobbying. Describes the reporting requirements and the disclosure exemptions. Requires the board to make the disclosure information and other specified information regarding prescription drugs available to the public through an internet website. Refers the question of whether the state of Colorado shall enact these measures to reduce the cost of prescription drugs to the electors of Colorado at the next general election. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. Legislative declaration. (1) (a) The general assembly finds that: (I) The state of Colorado pays a substantial amount for prescription drugs under the state's medicaid program. This expenditure is one of the fastest-growing obligations in the state's medicaid program. (II) Every year, there has been an increase in the state's medicaid enrollment, and this increase is even more significant in times of economic decline; (III) The ever-increasing costs of providing prescription drugs to medicaid recipients coupled with the state's revenue restrictions demand that the state attempt to decrease expenditures through available discounts wherever possible. (b) The general assembly, therefore, declares that it is in the best interest of the state to join a multi-state prescription drug purchasing pool to obtain prescription drugs for medicaid recipients at the lowest possible cost. (2) (a) The general assembly finds that: (I) As the population of Colorado ages, there is an increasing demand on Colorado's long-term care system; (II) It is healthier for an individual, and less expensive, to enable a person to stay in their home as long as possible; (III) Funding for mental health services for one of the state's most vulnerable populations has been significantly cut in recent years due to the state's budget constraints. (b) It is, therefore, the intent of the general assembly to use the savings generated by the implementation of the multi-state prescription drug purchasing pool to help pay for the increased need in long-term care services and to restore cuts in mental health services. (3) (a) The general assembly finds that: (I) Uninsured and underinsured residents of Colorado pay a disproportionately greater share of their income for prescription drugs. In many cases, current drug prices have the effect of denying residents access to necessary medical care, thereby threatening their health and safety. (II) The new medicare prescription drug benefit prohibits people from insuring themselves in order to fully cover their prescription drug needs. This restriction on an individual's ability to purchase adequate coverage may threaten the individual's health and safety. (III) Prescription drugs are playing an increasingly important role in improving or stabilizing a person's health status and in reducing overall health care costs; (IV) Direct-to-consumer advertising affects both prescription drug use and a consumer's shift to higher-priced prescription drugs; (V) The practices of direct-to-consumer advertising, lobbying, and educating and entertaining medical professionals for the purpose of increasing sales of prescription drugs results in an inordinate and unnecessary escalation of the cost of prescription drugs to consumers; (VI) It is important for a consumer to understand what drives the cost of prescription drugs in order for the consumer to make more educated choices. (b) The general assembly, therefore, declares that: (I) It is necessary to provide a mechanism for individuals to purchase lower-cost prescription drugs through the implementation of the Colorado Cares Rx program in order to protect the health status of uninsured and underinsured individuals and older Coloradans; and (II) It is necessary for the Colorado Cares Rx program to educate consumers regarding the factors that drive the cost of their prescription drugs. SECTION 2. Part 1 of article 1 of title 25.5, Colorado Revised Statutes, is amended BY THE ADDITION OF A NEW SECTION to read: 25.5-1-114. Multi-state prescription drug purchasing pool - federal authorization - contracting - implementation - rules. (1) The state department shall apply for federal authorization, as necessary, to enter into a multi-state prescription drug purchasing pool for the benefit of the state's medicaid recipients. (2) The state department shall contract, through a competitive bidding process, with one or more for-profit or nonprofit entities capable of administering the necessary components of a multi-state prescription drug purchasing program, including but not limited to a supplemental rebate program, in order to combine the purchasing power of the state's medical assistance program with other states' medicaid programs to obtain prescription drugs at discounted rates. The state department shall have the contract in place on or before February 1, 2007. (3) In addition to the rule-making authority granted in section 25.5-1-108, the executive director shall promulgate any rules necessary for the state to receive the federal authorization specified in subsection (1) of this section and for the state to generate the maximum amount of savings to the medical assistance program through participation in a multi-state prescription drug purchasing pool. (4) The state department may purchase prescription drugs outside of any multi-state purchasing agreement authorized by this section if the state department determines the prescription drugs are medically necessary or if the state department is able to purchase the prescription drugs for a lower price than is available under the multi-state purchasing agreement. (5) On or before July 1, 2007, the state department shall report to the joint budget committee of the general assembly on the implementation of the requirements of this section. SECTION 3. Article 1 of title 25.5, Colorado Revised Statutes, is amended BY THE ADDITION OF A NEW PART to read: PART 6 THE COLORADO CARES RX PROGRAM 25.5-1-601. Short title. This part 6 shall be known and may be cited as "Colorado Cares Rx". 25.5-1-602. Definitions. As used in this part 6, unless the context otherwise requires: (1) "Clinical trial" means an approved clinical trial conducted in connection with the United States food and drug administration's approval process, a research study designed to answer specific questions about vaccines, new therapies, or new ways of using known treatments, any research performed concerning the efficacy or side effects of a prescription drug or therapy, or any other research performed regarding any prescription drug or therapy prior or subsequent to the drug's approval by the United States food and drug administration. (2) "Eligible entity" means a city, county, city and county, or political subdivision of the state of Colorado, or a business entity that is authorized to conduct and is conducting business in the state of Colorado. (3) "Eligible person" means a person who: (a) Is a resident of the state of Colorado; (b) Is not eligible for medical assistance pursuant to article 4 of title 26, C.R.S., or the children's basic health plan pursuant to article 19 of title 26, C.R.S.; and (c) Does not have employer provided health insurance coverage, unless the only coverage offered is a high deductible health insurance plan. (4) "Pharmaceutical manufacturing company" means any entity that is engaged in the production, preparation, propagation, compounding, conversion, or processing of prescription drugs, either directly or indirectly, by extraction from substances of natural origin, or independently by means of chemical synthesis, or by a combination of extraction and chemical synthesis. "Pharmaceutical manufacturing company" also includes any entity engaged in the packaging, repackaging, labeling, relabeling, or distribution of prescription drugs; except that "pharmaceutical manufacturing company" does not include a wholesaler as defined in section 12-22-102 (34), C.R.S., or a pharmacist licensed pursuant to article 22 of title 12, C.R.S. (5) "Pharmaceutical marketer" means a person who, while employed by or under contract to represent a pharmaceutical manufacturing company, engages in pharmaceutical detailing, promotional activities, or other marketing of prescription drugs in this state to any physician, hospital, nursing home, pharmacist, health benefit plan administrator, or any other person authorized to prescribe, dispense, or purchase prescription drugs. "Pharmaceutical marketer" does not include a wholesaler, as defined in section 12-22-102 (34), C.R.S., or a wholesaler's representative who promotes or otherwise markets the services of the wholesale drug distributor in connection with a prescription drug. (6) "Program" means Colorado cares Rx. 25.5-1-603. Program. (1) (a) There is hereby established the program in the state department. The state department shall contract with one or more entities capable of implementing and administering the prescription drug benefits under the program. A contracted entity may utilize one or more of the following: (I) A multi-state drug purchasing agreement; (II) Negotiation of prescription drug prices with prescription drug manufacturers, wholesalers, and retailers; (III) Any other method for receiving lower cost prescription drugs for eligible persons. (b) The program shall allow an eligible person or an eligible entity to purchase prescription drugs at a discounted rate negotiated by a contracted entity. Any rebates negotiated by a contracted entity shall be used to lower the rates of the prescription drugs available to an eligible person or an eligible entity under the program. A contracted entity is authorized to charge an annual fee to eligible persons, not to exceed twenty-five dollars, and eligible entities for the administration of the program and to determine the amount of any dispensing fees under the program. The dispensing fees and drug reimbursement rates to pharmacies for prescription drugs under the program shall be no less than the medicaid reimbursement rate to pharmacies for dispensing medications to medicaid recipients. Any program contract between a contracting entity and a pharmacy shall comply with all statutes under the "Colorado Medical Assistance Act" relating to providers of pharmaceutical services and the corresponding rules adopted by the state board. 25.5-1-604. Report. On or before July 1, 2007, the state department shall report to the joint budget committee of the general assembly on the implementation of the requirements of the program. SECTION 4. Appropriation - adjustments to 2006 long bill. (1) For the implementation of this act, appropriations made in the annual general appropriation act to the department of health care policy and financing, executive director's office, for the fiscal year beginning July 1, 2006, shall be adjusted as follows: (a) The appropriation for personal services is increased by sixty-five thousand four dollars ($65,004) and 1.7 FTE. Said sum shall be from the general fund and subject to the "(M)" notation as defined in the general appropriation act. In addition to said appropriation, the general assembly anticipates that, for the fiscal year beginning July 1, 2006, the department of health care policy and financing will receive the sum of twenty-seven thousand eighty-five dollars ($27,085) in federal funds for the implementation of this act. Although these federal funds are not appropriated in this act, they are noted for the purpose of indicating the assumptions used relative to these funds. (b) The appropriation for operating expenses is increased by five thousand eight hundred thirteen dollars ($5,813). Said sum shall be from the general fund and subject to the "(M)" notation as defined in the general appropriation act. In addition to said appropriation, the general assembly anticipates that, for the fiscal year beginning July 1, 2006, the department of health care policy and financing will receive the sum of one thousand nine hundred thirty-eight dollars ($1,938) in federal funds for the implementation of this act. Although these federal funds are not appropriated in this act, they are noted for the purpose of indicating the assumptions used relative to these funds. SECTION 5. Effective date. This act shall take effect July 1, 2006. SECTION 6. Safety clause. The general assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety.