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

SPONSOR Feldman

ORIGINAL DATE

LAST UPDATED

1/26/06

HB

SHORT TITLE Continue Pharmacy Benefit Manager Research

SB SJM 22

ANALYST Lewis

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates HJM 25.

SOURCES OF INFORMATION

LFC Files

Responses Received From

Health Policy Commission (HPC)

Department of Health (DOH)

Public Regulation Commission (PRC)

SUMMARY

Synopsis of Bill

Senate Joint Memorial 22 requests that that the New Mexico Health Policy Commission continue

research and analysis of pharmacy benefit manager activities and laws that regulate pharmacy

benefit managers.

The joint memorial further requests that:

a report of the findings and recommendations be presented to the Legislative Health

and Human Services Committee at its October 2006 meeting; and

a copy of this memorial be sent to the director of the New Mexico Health Policy

Commission.

FISCAL IMPLICATIONS

No funds are appropriated to the Health Policy Commission (HPC) to finance the continuing re-

search and analysis.

Senate Joint Memorial 22 – Page

2

SIGNIFICANT ISSUES

According to the Health Policy Commission (HPC), The HPC convened the HJM98 task force in

2005 to study the need to regulate pharmacy benefit managers (PBMs) in New Mexico. The 16-

member task force included state agencies, health plans, pharmacists, consumers, and PBMs. Af-

ter months of discussion, and based on the information gathered through the process, the task

force could not reach a consensus on the need to regulate PBMs, and recommended that further

research continue led by the HPC.

The HPC commissioners supported the task force recommendations, adding their own recom-

mendation that all PBMs should be registered in New Mexico through an application process

which would include: 1) a description of how PBMs will educate the public about their role and

the prescriptions that are covered; and 2) disclosure of administrative costs and profits.

The HPC reports that a major concern of the HJM98 task force was financial transparency. Rap-

idly rising prescription drug prices have stimulated questions and suspicion among consumer ad-

vocates, legislators, pharmacists, and others as to how much of the increases might be related to

PBMs and their relationship with pharmaceutical manufacturers.

The National Community Pharmacists Association states that transparency would identify poten-

tial conflicts of interest and provide a clear roadmap on any savings earned through rebates and

discounts. However, PBM representatives argue that the imposition of fiduciary and disclosure

requirements on PBMs (is) unworkable, invalid, and unconstitutional.” The Pharmaceutical Care

Management Association has said that disclosing contract deals between PBMs and pharmaceu-

tical manufacturers “violates PBMs’ trade secret rights.”

According to the Public Regulation Commission (PRC), pharmacy benefit managers (PBMs) are

utilized by insurers, HMOs, government agencies and large, self-insured employers to lower and

control the cost of prescription drugs in health care programs. PBMs negotiate with pharmacies

to fill prescriptions on behalf of those plans. It is perceived by some that the large PBMs have

negotiating advantage over many pharmacies in setting the terms of these contracts. This is simi-

lar to the belief that many providers expressed when HMOs first began to dominate health care

coverage in New Mexico (i.e. the HMOs have negotiating advantage over the providers).

The PRC poses the question, “How do we protect the pharmacist (particularly the locally owned

and operated) without giving up the cost savings achieved by use of PBMs.”

ADMINISTRATIVE IMPLICATIONS

HPC notes that, as the lead agency, it will be responsible for providing intensive staff support to

facilitate meetings, follow up on task assignments, and conduct research, as well as writing and

distributing the final report.

OTHER SUBSTANTIVE ISSUES

The HPC suggests that it may be necessary to conduct a survey of pharmacists, pharmacies and

consumers to determine levels of satisfaction feedback and to address other PBM issues, and that

such a survey might require contractual services.

Senate Joint Memorial 22 – Page

3

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

According to the HPC, there will continue to be many unanswered questions about the activities

of PBMs in New Mexico, and what laws may already be in place to oversee those activities.

And, without additional, substantiated data it will be impossible to determine the need to regulate

or not regulate PBMs.

AMENDMENT

HPC proposes that an appropriation be added to

fund a statewide survey by the HPC of pharma-

cies, pharmacists and consumers.

ML/mt