[1] NOTE: As provided in LFC policy, this report is intended only for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used in any other situation.

Only the most recent FIR version (in HTML & Adobe PDF formats) is available on the Legislative Website. The Adobe PDF version includes all attachments, whereas the HTML version does not. Previously issued FIRs and attachments may be obtained from the LFC’s office in Suite 101 of the State Capitol Building North.

F I S C A L I M P A C T R E P O R T

SPONSOR:	Kidd		DATE TYPED:	02/01/02		HB
SHORT TITLE:		Prescription Drug Fair Pricing Act				SB	226
					ANALYST:		Sandoval

APPROPRIATION

Appropriation Contained		Estimated Additional Impact		Recurring or Non-Rec	Fund Affected
FY02	FY03	FY02	FY03
	$50.0			Recurring	General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates HB264

Relates to HB149, HB200, HJM 21, HJM41, SB91, SB118, SB253, SB263, SJM22, SJM23 and

SJM35

SOURCES OF INFORMATION

LFC files

Responses Received

Health Policy Commission (HPC)

Department of Health (DOH)

No Response

Regulation and Licensing Department (RLD)

Attorney General (AG)

SUMMARY

Senate Bill 226 establishes the “Prescription Drug Fair Pricing Act” which prohibits prescription drug price discrimination. A seller offering drugs in a covered transaction must offer the same price during the same period of time to any other purchaser. A “covered transaction” is defined as any sale of a drug to a purchaser doing business in the State, in which a manufacturer, in an arrangement with a wholesaler, negotiates, establishes, determines or otherwise controls terms of conditions of sale. Certain defined entities would be exempt from the statute, most notably federal, state, or local government programs that purchase drugs directly. Violations of this Act will result in a $1.0 to $50.0 fine for each violation.

Synopsis of Bill

Senate Bill 226 appropriates $50.0 from the general fund to the Attorney General for the purpose of enforcing the Prescription Drug Fair Pricing Act.

FISCAL IMPLICATIONS

The appropriation of $50.0 contained in this bill is a recurring expense to the general fund. Any unexpended or unencumbered balance remaining at the end of fiscal year 2003 shall revert to the general fund.

CONFLICT/DUPLICATION/COMPANIONSHIP/RELATIONSHIP

Duplicates SB226.

Relates to:

• HB200 & SB091– Provides prescription drug benefit to New Mexico seniors.
• HJM41 – Requests a study of tax credits to offset prescription drug spending.
• SB253 – Provides for negotiated drug discounts in the Medicaid program.
• SJM23 – Requests the State Agency on Aging to develop a “brown bag assessment” of individuals’ prescription drug bundles.
• HB149 – An appropriation to study a means to use of Native American prescription prerogatives to develop a bulk-purchasing program.
• SB263 – Requires reporting of certain manufacturer drug prices to the Human Services Department.
• HJM21 – Requests the U. S. Congress to enact legislation establishing a single uniform federal “best price” for prescription drugs.
• SJM35 – Requests the Medical Assistance Division to identify all avenues to maximize prescription drug discounts using the Federal 340B program.
• SJM22 – Requests the State Agency on Aging to work with drug manufacturers to simplify the application for manufacturer drug assistance programs, and to conduct a pilot study.
• SB118 - An appropriation to expand prescription drug outreach programs by the State Agency on Aging

OTHER SUBSTANTIVE ISSUES

· According to the Health Policy commission, “small retail pharmacies are unable to obtain the same pricing advantage as other large volume drug purchasers in the State of New Mexico. Small retail pharmacies believe this situation puts them at a disadvantage to compete in the retail arena.”

· According to the Health Policy commission, 92% of prescription sales flow through full-line wholesalers or warehouses owned by chain drug stores, buying groups, or other distributors, so very few sales are made between a manufacturer and an end retailer or hospital. This means that price negotiations between the retail pharmacy and the manufacturer must go through a third party.

· This bill gives smaller pharmacies the opportunity to purchase drugs at the same price manufacturers and wholesalers sell to customers who purchase large volumes of drugs.

Overall retail pharmacy prescription prices, particularly in rural areas, smaller cities and at neighborhood pharmacies might be lowered, saving customers extra costs.

· There is a possibility that this legislation could have an opposite impact by increasing the lower price level afforded to high volume pharmacies. This could result in higher total costs for pharmaceutical purchases and would not benefit small pharmacies or the consumer as the legislation is likely intended to do.

POSSIBLE QUESTIONS

1. What is the possibility that this legislation could increase the lower price level afforded to high volume pharmacies?

2. What is the current discrepancy between prices offered to small pharmacies and high volume pharmacies?

3. What options are available for rural communities to purchase affordable medication?

4. What options are available for low-income people to purchase affordable medication?

JFS/ar

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