N.Y. Public Health Law § 280: Medicaid drug cap

§ 280. Medicaid drug cap. 1. The legislature hereby finds and declares

that there is a significant public interest for the Medicaid program to

manage drug costs in a manner that ensures patient access while

providing financial stability for the state and participating providers.

Since two thousand eleven, the state has taken significant steps to

contain costs in the Medicaid program by imposing a statutory limit on

annual growth. Drug expenditures, however, continually outpace other

cost components causing significant pressure on the state, providers,

and patient access operating under the Medicaid global cap. It is

therefore intended that the department establish a supplemental rebate

program as part of a focused and sustained effort to balance the growth

of drug expenditures with the growth of total Medicaid expenditures.

2. The commissioner shall review at least annually the department of

health state funds Medicaid drug expenditures to identify drugs in the

eightieth percentile or higher of total spend, net of rebate or in the

eightieth percentile or higher based on cost per claim, net of rebate.

3. (a) The commissioner may identify and refer drugs in the eightieth

percentile or higher of total spend, net of rebate or in the eightieth

percentile or higher based on cost per claim, net of rebate, to the drug

utilization review board established by section three hundred

sixty-nine-bb of the social services law for a recommendation as to

whether a target supplemental Medicaid rebate should be paid by the

manufacturer of the drug to the department and the target amount of the

rebate.

(b) If the department intends to refer a drug to the drug utilization

review board pursuant to paragraph (a) of this subdivision, the

department shall notify the manufacturer of such drug and shall attempt

to reach agreement with the manufacturer on a rebate for the drug prior

to referring the drug to the drug utilization review board for review.

Such rebate may be based on evidence-based research, including, but not

limited to, such research operated or conducted by or for other state

governments, the federal government, the governments of other nations,

and third party payers or multi-state coalitions, provided however that

the department shall account for the effectiveness of the drug in

treating the conditions for which it is prescribed or in improving a

patient's health, quality of life, or overall health outcomes, and the

likelihood that use of the drug will reduce the need for other medical

care, including hospitalization.

(c) In the event that the commissioner and the manufacturer have

previously agreed to a supplemental rebate for a drug pursuant to

paragraph (b) of this subdivision or paragraph (e) of subdivision seven

of section three hundred sixty-seven-a of the social services law, the

drug shall not be referred to the drug utilization review board for any

further supplemental rebate for the duration of the previous rebate

agreement, provided however, the commissioner may refer a drug to the

drug utilization review board if the commissioner determines there are

significant and substantiated utilization or market changes, new

evidence-based research, or statutory or federal regulatory changes that

warrant additional rebates. In such cases, the department shall notify

the manufacturer and provide evidence of the changes or research that

would warrant additional rebates, and shall attempt to reach agreement

with the manufacturer on a rebate for the drug prior to referring the

drug to the drug utilization review board for review.

(d) The department shall consider a drug's actual cost to the state,

including current rebate amounts, prior to seeking an additional rebate

pursuant to paragraph (b) or (c) of this subdivision.

(e) If the commissioner is unsuccessful in entering into a rebate

arrangement with the manufacturer of the drug satisfactory to the

department, the drug manufacturer shall, in that event be required to

provide to the department, on a standard reporting form developed by the

department, the following information:

(i) the actual cost of developing, manufacturing, producing (including

the cost per dose of production), and distributing the drug;

(ii) research and development costs of the drug, including payments to

predecessor entities conducting research and development, such as

biotechnology companies, universities and medical schools, and private

research institutions;

(iii) administrative, marketing, and advertising costs for the drug,

apportioned by marketing activities that are directed to consumers,

marketing activities that are directed to prescribers, and the total

cost of all marketing and advertising that is directed primarily to

consumers and prescribers in New York, including but not limited to

prescriber detailing, copayment discount programs, and

direct-to-consumer marketing;

(iv) the extent of utilization of the drug;

(v) prices for the drug that are charged to purchasers outside the

United States;

(vi) prices charged to typical purchasers in the state, including but

not limited to pharmacies, pharmacy chains, pharmacy wholesalers, or

other direct purchasers;

(vii) the average rebates and discounts provided per payer type in the

state; and

(viii) the average profit margin of each drug over the prior five-year

period and the projected profit margin anticipated for such drug.

(f) All information disclosed pursuant to paragraph (e) of this

subdivision shall be considered confidential and shall not be disclosed

by the department in a form that identifies a specific manufacturer or

prices charged for drugs by such manufacturer.

4. In determining whether to recommend a target supplemental rebate

for a drug, the drug utilization review board shall consider the actual

cost of the drug to the Medicaid program, including federal and state

rebates, and may consider, among other things:

(a) the drug's impact on Medicaid drug spending, and the adequacy of

capitation rates of participating Medicaid managed care plans, and the

drug's affordability and value to the Medicaid program; or

(b) significant and unjustified increases in the price of the drug; or

(c) whether the drug may be priced disproportionately to its

therapeutic benefits.

5. (a) If the drug utilization review board recommends a target rebate

amount on a drug referred by the commissioner, the department shall

negotiate with the drug's manufacturer for a supplemental rebate to be

paid by the manufacturer in an amount not to exceed such target rebate

amount.

(b) The supplemental rebate required by paragraph (a) of this

subdivision shall apply to drugs dispensed to enrollees of managed care

providers pursuant to section three hundred sixty-four-j of the social

services law and to drugs dispensed to Medicaid recipients who are not

enrollees of such providers.

(c) Where the department and a manufacturer enter into a rebate

agreement pursuant to this section, which may be in addition to existing

rebate agreements entered into by the manufacturer with respect to the

same drug, no additional rebates shall be required to be paid by the

manufacturer to a managed care provider or any of a managed care

provider's agents, including but not limited to any pharmacy benefit

manager, while the department is collecting the rebate pursuant to this

section.

(d) In formulating a recommendation concerning a target rebate amount

for a drug, the drug utilization review board may consider:

(i) publicly available information relevant to the pricing of the

drug;

(ii) information supplied by the department relevant to the pricing of

the drug;

(iii) information relating to value-based pricing provided, however,

if the department directly invites any third party to provide

cost-effectiveness analysis or research related to value-based pricing,

and the department receives and considers such analysis or research for

use by the board, such third party shall disclose any funding sources.

The department shall, if reasonably possible, make publicly available

the following documents in its possession that it relies upon to provide

cost effectiveness analyses or research related to value-based pricing:

(A) descriptions of underlying methodologies; (B) assumptions and

limitations of research findings; and (C) if available, data that

presents results in a way that reflects different outcomes for affected

subpopulations;

(iv) the seriousness and prevalence of the disease or condition that

is treated by the drug;

(v) the extent of utilization of the drug;

(vi) the effectiveness of the drug in treating the conditions for

which it is prescribed, or in improving a patient's health, quality of

life, or overall health outcomes;

(vii) the likelihood that use of the drug will reduce the need for

other medical care, including hospitalization;

(viii) the average wholesale price, wholesale acquisition cost, retail

price of the drug, and the cost of the drug to the Medicaid program

minus rebates received by the state;

(ix) in the case of generic drugs, the number of pharmaceutical

manufacturers that produce the drug;

(x) whether there are pharmaceutical equivalents to the drug; and

(xi) information supplied by the manufacturer, if any, explaining the

relationship between the pricing of the drug and the cost of development

of the drug and/or the therapeutic benefit of the drug, or that is

otherwise pertinent to the manufacturer's pricing decision; any such

information, including the information on the standard reporting form

requirement in paragraph (e) of subdivision three of this section,

provided shall be considered confidential and shall not be disclosed by

the drug utilization review board in a form that identifies a specific

manufacturer or prices charged for drugs by such manufacturer.

6. (a) After taking into account all rebates and supplemental rebates

received by the department, including rebates received to date pursuant

to this section, the commissioner may: subject any drug of a

manufacturer referred to the drug utilization review board under this

section to prior approval in accordance with existing processes and

procedures when such manufacturer has not entered into a supplemental

rebate arrangement as required by this section; direct a managed care

plan to limit or reduce reimbursement for a drug provided by a medical

practitioner if the drug utilization review board recommends a target

rebate amount for such drug and the manufacturer has failed to enter

into a rebate arrangement required by this section; direct managed care

plans to remove from their Medicaid formularies any drugs of a

manufacturer who has a drug that the drug utilization review board

recommends a target rebate amount for and the manufacturer has failed to

enter into a rebate arrangement required by this section; promote the

use of cost effective and clinically appropriate drugs other than those

of a manufacturer who has a drug that the drug utilization review board

recommends a target rebate amount and the manufacturer has failed to

enter into a rebate arrangement required by this section; allow

manufacturers to accelerate rebate payments under existing rebate

contracts; and such other actions as authorized by law. The commissioner

shall provide written notice to the legislature at least thirty days

prior to taking action pursuant to this paragraph.

(b) The commissioner shall be authorized to take the actions described

in paragraph (a) of this subdivision. In addition, no such actions shall

be deemed to supersede the provisions of paragraph (b) of subdivision

three of section two hundred seventy-three of this article or the

provisions of subdivisions twenty-five and twenty-five-a of section

three hundred sixty-four-j of the social services law; provided further

that nothing in this section shall prevent access by a Medicaid

recipient to a drug which is the only treatment for a particular disease

or condition.

7. The commissioner shall provide a report by July first annually to

the drug utilization review board, the governor, the speaker of the

assembly, and the temporary president of the senate on savings achieved

through the supplemental rebate programs in the last fiscal year. Such

report shall provide data on what savings were achieved through actions

pursuant to subdivisions three, five and six of this section,

respectively, and what savings were achieved through other means and how

such savings were calculated and implemented.