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

SPONSOR Taylor

ORIGINAL DATE

LAST UPDATED

1/29/2008

HB

SHORT TITLE Financial Incentives For Clinical Decisions

SM 29

ANALYST Moser

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

NM Medical Board (NMMB)

Health Policy Commission (HPC)

SUMMARY

Synopsis of Bill

Senate Memorial 29 requests the New Mexico Medical Board create rules to govern

physicians’ use of brand-name or generic drugs, including the disclosure to patients or about

financial incentives that physicians receive for switching from brand name to generic drugs.

This memorial requests:

•

The NMMB to promulgate rules to ensure the utmost transparency when physicians

receive financial incentives for clinical decisions regarding the use of brand-name or

generic drugs.

•

The NMMB enjoin physicians receiving financial compensation for clinical decisions

from interchanging a patient’s medication, whether it be brand-name or generic,

without prior notification of the change to the patient or the patient’s parent, legal

guardian or spouse.

Senate Memorial 29 – Page

2

SIGNIFICANT ISSUES

SM29 identifies the following issues regarding the use of generic drugs:

•

Many insurance companies are taking steps to encourage physicians and patients to

switch medications based increasingly on cost considerations.

•

Generic prescriptions approved by the U.S. Food and Drug Administration are safe and

effective and often represent an opportunity for greatly needed health care cost savings.

•

The physician-patient relationship relies upon the confidential, honest and transparent

exchange of information especially as relates to the use of prescribed medications.

•

Physicians receiving financial incentives to prescribe certain medications and these

actions may violate the integrity of the physician-patient relationship when the physician

fails to inform their patients of the financial incentives they receive for prescribing

medications pursuant to these incentives.

The Medical Board indicates that the concerns addressed in SM29 are covered in the American

Medical Association (AMA) Code of Medical Ethics, adopted by the NM Medical Board

pursuant to Section 9 of 16.10.8 NMAC. Section 8.03 of the AMA Code of Medical Ethics

addresses conflicts of interest guidelines and states, “For a physician to unnecessarily hospitalize

a patient, prescribe a drug, or conduct diagnostic tests for the physician’s financial benefit is

unethical." Section 8.054 addresses financial incentives and the practice of medicine. Paragraph

(4) states “Patients must be informed of financial incentives that could impact the level or type of

care they receive." Section 8.135 addresses cost containment involving drugs in health care

plans.

If a physician fails to comply with the requirements of the Medical Practice Act, the NM

Medical Board may take necessary disciplinary action; however, the NM Medical Board will

research the issues addressed in SM29 further and adopt appropriate safeguards to prevent

conflicts of interest.

GM/bb