Fiscal Note & Local Impact Statement
126 th General Assembly of Ohio
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LOCAL IMPACT
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Note: The state
fiscal year is July 1 through June 30.
For example, FY 2007 is July 1, 2006 – June 30, 2007.
*Assumes that program changes will take effect April 2007.
·
The
bill expands eligibility for the Program by including: (1) persons with family income between 250%
and 300% of the federal poverty guidelines (FPG), (2) persons discharged from
employment due to a business reorganization, (3) persons with drug coverage
under Workers' Compensation, and (4) persons with drug coverage under a
Medicare prescription drug plan, if responsible for the full cost of the drug
being purchased. According to a
spokesperson for the Ohio Department of Job and Family Services (ODJFS), it is
estimated that approximately 105,000 more people will be eligible for the
Program under the expansion. It is
projected that 35% of the additional participants in the Program are likely to
fill one or more prescriptions per year.
Thus, assuming all the 105,000 eligibles will enroll in the Program, the
expansion could generate approximately $36,750 revenue in the Ohio’s Best Rx
Program Fund through the collection of the $1 administrative fee, if each
enrollee fills one prescription per year.
The expansion could also generate additional revenue in the Ohio’s Best
Rx Program Fund through the 5% of the manufacturer rebate payments. However, the amount of the rebate payments
that will be received as a result of the expansion is unknown.
·
The bill permits applications
for participation in the Program to be submitted on paper forms or under any
other application method ODJFS makes available, including applications by
telephone or through the Internet. This
provision of the bill simplifies the application process. Thus, there will be a potential gain to the
Ohio's Best Rx Program Fund through the increase of the rebate and
administrative fee revenue.
·
The
bill does not require a card to be presented at the terminal distributor each
time a drug is purchased under the Program.
This provision of the bill makes
the use of the Program more convenient.
Thus, it could result in a gain in revenue to the Ohio's Best Rx Program
Fund.
·
The
bill permits ODJFS to accept donations, which are to be included in ODJFS
determination of whether it is necessary to charge fees to cover the Program's
administrative costs. This provision of
the bill provides additional funding sources for the Program, thus it could
result in a gain in revenue to the Ohio's Best Rx Program Fund.
·
No
direct fiscal effect on political subdivisions.
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Ohio's Best Rx Program
Ohio’s Best Rx is a
discount prescription drug card program established by
Am. Sub. H.B.
311 of the 125th General Assembly. The Ohio Department of Job and Family
Services (ODJFS) administers the Program and contracts with Envision
Pharmaceutical Services, Inc. of Twinsburg, Ohio for claims processing,
outreach activities, and other duties.
The Ohio's Best Rx Program is to provide assistance for Ohio residents
who lack prescription drug coverage.
Under the Program, eligible individuals who enroll may purchase drugs at
discounted prices.
In order to be eligible to
participate in the Program, an individual must meet the following requirements:
·
be
a resident of the state;
·
family
income does not exceed 250% of the federal poverty guidelines (FPG), or is 60
years of age or older;
·
does
not have outpatient prescription drug coverage paid for in whole or in part by
a third-party payer, the Medicaid Program, the Children’s Health Insurance
Program, the Disability Medical Assistance Program, or another health plan or
pharmacy assistance program that uses state or federal funds to pay part or all
of the cost of the individual’s outpatient prescription drugs, other than the
Golden Buckeye Prescription Drug Savings Program.
Individuals who wish to apply for the Program must complete a simple,
one page application, which includes an attestation that all information is
correct; the signed application is then sent to Envision via U.S. mail or
facsimile. There is no application or
membership fee and no additional paperwork is required; those who are approved
for the Program receive a new participant packet within a few days of
submitting their applications. This
packet includes a handbook, participant card(s), the Program’s Value Drug List,
an Ohio Medicaid fact sheet for those who might qualify, and information on
generic drugs. Those who are not
approved for the Program also receive timely
notification of their status and the Medicaid fact sheet.[1]
The Ohio's Best Rx Program was launched on January 11, 2005. As of September 2006, the Program has
enrolled 77,568 participants who have filled 413,317 prescriptions.[2] In addition, according to a spokesperson for ODJFS, as of the end
of June 2006, the total manufacturer rebates received are approximately
$430,000.
H.B. 311 required ODJFS to
issue program enrollment cards to or on behalf of individuals who are
determined eligible to participate. One
enrollment card may cover each member of a family determined eligible to
participate. The card is valid only
during the period each individual covered by the card is eligible to
participate. The card is to be
presented at the terminal distributor each time a drug is purchased under the
Program.
H.B. 311
allowed ODJFS to determine an administrative fee that participating
terminal distributors and the Ohio’s Best Rx Program Administrator are to
charge Ohio’s Best Rx Program participants.
The administrative fee, if any, would only be applied if needed to cover
the administrative costs of the Ohio’s Best Rx Program not covered by the
application of the rebate administration percentage plus the investment
earnings of the Ohio’s Best Rx Program Fund.
The current administrative fee is $1 per prescription filled.
H.B. 311 allowed ODJFS to determine a rebate administration percentage. The rebate administration percentage, if any, would only be applied if needed to cover the administrative costs of the Ohio’s Best Rx Program not covered by the administrative fee plus the investment earnings of the Ohio’s Best Rx Program Fund. The current rebate administration percentage is 5%.
H.B. 311 required Department
of Administrative Services (DAS) and each state retirement system to submit to
ODJFS the formula used to determine the per unit price for each drug covered by
its health plan and dispensed through means other than a mail order system, the
per unit price for those drugs, or, if the formula and the per unit price are
available for submission, both the formula and the per unit price.[3]
In addition, DAS and each
state retirement system must submit to ODJFS the per unit rebates for each drug
covered by a state health benefit plan and dispensed through a mail order
system or means other than a mail order system.
ODJFS is to do all of the
following for each drug included in the Ohio’s Best Rx Program. ODJFS is to compute the weighted average of
the per unit price. In addition, ODJFS,
once each year, is to compute the weighted average of the per unit rebate,
adjusting for a rebate administration percentage if applicable. ODJFS is then to subtract the adjusted
weighted average of the per unit rebate from the weighted average of the per
unit price to determine the Ohio’s Best Rx Program price.
In other
words, the Ohio’s Best Rx Program price is calculated by applying the following
to a drug’s base price:
Participating terminal distributors charge the Ohio's Best Rx Program
participants for each drug the lesser of (1) the sum of the Ohio’s Best Rx
Program price, the $3 professional fee, and the $1 administrative fee or (2)
the terminal distributor’s usual and customary price. Currently, approximately 2,300 retail pharmacies are members of
the statewide Ohio’s Best Rx pharmacy network.[4]
Although the Program was authorized to calculate weighted averages for
rebates using data from the employee and retiree health plans, it has been
unable to obtain the data needed for those calculations. However, state laws allow the Program, in
the absence of weighted average rebates, to accept rebates in amounts
determined by the manufacturers.
Currently, 26 manufacturers are providing rebates on more than 202 of
their products.[5]
H.B. 311 created the Ohio’s Best Rx Program Fund in the custody of the Treasurer of State, but not part of the state treasury. The fund consists of the following: (1) rebate payments made by participating manufacturers, (2) administrative fees, and (3) the fund's investment earnings. ODJFS is to use moneys in the fund to make payments to participating terminal distributors and the Ohio’s Best Rx Program Administrator.
H.B. 311 created the Ohio’s Best Rx Administration Fund in the state treasury. The Treasurer of State is to transfer from the Ohio’s Best Rx Program Fund to the Ohio’s Best Rx Administration Fund amounts equal to the following: (1) amounts resulting from application of the rebate administration percentage, (2) the amount of administrative fees charged Ohio’s Best Rx participants, if any, and (3) the amount of investment earnings credited to the Ohio’s Best Rx Program Fund. The Treasurer of State is to make the transfers in accordance with a schedule developed by the Director of Job and Family Services. ODJFS is to use money in the Ohio’s Best Rx Administration Fund to pay the administrative costs of the Ohio’s Best Rx Program, including, but not limited to, costs associated with contracted services, staff, outreach activities, computers and network services, and the Ohio’s Best Rx Program Council.
H.B. 311 appropriated $10 million in FY 2004 in GRF appropriation item 600-440, Ohio’s Best Rx Start-Up Costs, to be used by ODJFS to pay for the administrative and operational expenses for the creation and operation of the Ohio’s Best Rx Program, including costs associated with the duties assigned by the Department to the Ohio’s Best Rx Program Administrator and making payments to participating terminal distributors until sufficient cash exists to make payments from the Ohio’s Best Rx Program Fund and the Ohio’s Best Rx Administration Fund. The unspent appropriations from FY 2004 were carried over to FY 2005.
Am. Sub. H.B. 66 of the 126th General Assembly (the enacted budget) authorized ODJFS to use the unencumbered funds in GRF appropriation item 600-440 for the administration of the Ohio’s Best Rx Program in FY 2006 and FY 2007. According to a spokesperson for ODJFS, the current balance in GRF appropriation item 600-440 is approximately $8 million.
H.B. 311 also appropriated $5 million in both FY 2004 and FY 2005 in state special revenue fund appropriation item 600-673, Ohio’s Best Rx Administration, to be used on an ongoing basis to cover expenses associated with the Ohio’s Best Rx Program.
The enacted budget also appropriated $5 million in both FY 2006 and FY 2007 in appropriation item 600-673 to be used on an ongoing basis to cover expenses associated with the Ohio’s Best Rx Program.
It was expected the Program would become self-funding over time as the result of retaining a small portion (5%) of the voluntary rebates from drug manufacturers and the assessment of a nominal ($1) administrative fee on each filled prescription. According to a spokesperson for ODJFS, the Ohio's Best Rx Program Fund is accumulating the rebates, administrative fees, and interest earnings. As of November 13, 2006, $866,874.64 has accumulated in the Ohio’s Best Rx Program Fund. ODJFS plans to start using the funds accumulated in the Ohio's Best Rx Program Fund once the $10 million GRF appropriation for the start-up costs is used up. In addition, ODJFS has not made the transfer from the Ohio’s Best Rx Program Fund to the Ohio’s Best Rx Administration Fund, because that fund is not an interest-bearing account.
Provisions of the Bill and Fiscal Impact
The bill modifies the Ohio’s
Best Rx Program. Provisions that may
have fiscal implication are discussed below.
The bill expands eligibility
for the Program by including: (1)
persons with family income between 250% and 300% of the FPG, (2) persons discharged
from employment due to a business reorganization, (3) persons with drug
coverage under Workers' Compensation, and (4) persons with drug coverage under
a Medicare prescription drug plan, if responsible for the full cost of the drug
being purchased.
According to a spokesperson
for ODJFS, it is estimated that approximately 105,000 more people will be
eligible for the Program under the expansion.
It is projected that 35% of the additional participants in the Program
are likely to fill one or more prescriptions per year. Thus, assuming all the 105,000 eligibles
will enroll in the Program, the expansion could generate approximately $36,750
revenue in the Ohio’s Best Rx Program Fund through the collection of the $1
administrative fee, if each enrollee fills one prescription per year. The expansion could also generate additional
revenue in the Ohio’s Best Rx Program Fund through the 5% of the manufacturer
rebate payments. However, the amount of
the rebate payments that will be received as a result of the expansion is
unknown.
There could be
additional administrative costs for the Program associated with the
expansion. For examples, costs for
outreach, eligibility determination, card issuance, and administrative cost per
claim. Currently, Envision Pharmaceutical
Services, Inc. performs these duties under contract. According
to a spokesperson for ODJFS, the current contract with Envision Pharmaceutical Services will not expire until
2009, and the potential administrative cost associated with the expansion is
included in the current contracts.
Envision Pharmaceutical Services is not going to charge the Program for
the additional administrative cost as a result of the expansion.
The bill permits
applications for participation in the Program to be submitted on paper forms or
under any other application method ODJFS makes available, including
applications by telephone or through the Internet.
This provision of the
bill simplifies the application process.
Presumably qualified people will be more likely to apply for the Program
due to the simplification. Thus, this
could result in a gain in revenue to the Ohio's Best Rx Program Fund through
the increase of the rebate and administrative fee revenue.
The bill does not require a
card to be presented at the terminal distributor each time a drug is purchased
under the Program. However, it requires
that a person's eligibility be confirmed each time a drug is purchased under
the Program.
This provision of the
bill makes the use of the Program more convenient. If more prescriptions are filled, more rebate and administrative
fee revenue will be collected. Thus, it
could increase the revenue in the Ohio's Best Rx Program Fund.
The bill
permits the submission of a formula, in lieu of individual information for each
drug, with regard to the drug pricing and rebate information that must be
submitted to the Program by DAS and the state retirement systems.
The bill
requires a drug manufacturer participating in the Program to make payments that
are based on its best estimate of the average rebates that apply under the
health benefit plans offered to state employees and retirees, when information
is not available to make the computation of the plan's average rebates.
The bill
requires a manufacturer to make aggregate payments to reconcile any difference
between its best estimate payments and the plans' average rebates, if the
applicable computations can be made within 12 months.
These
provisions of the bill will affect the Ohio's Best Rx Program price in terms of
"per unit." However, it may
not affect the Ohio's Best Rx price in terms of "aggregate." Thus, the fiscal impact of these provisions
is unknown.
The bill
permits ODJFS to accept donations, which are to be included in ODJFS
determination of whether it is necessary to charge fees to cover the Program's
administrative costs.
This provision of the bill
provides additional funding sources for the Program, thus it could result in a
gain in revenue to the Ohio's Best Rx Program Fund.
LSC fiscal staff: Ivy Chen, Senior Economist
[1] Source: Ohio's Best Rx 2005 Annual Report, http://www.ohiobestrx.org/.
[2] Source: Ohio's Best Rx Monthly Report, September 2006, http://www.ohiobestrx.org/.
[3] The state retirement system includes Public Employees Retirement System, State Teachers Retirement System, School Employees Retirement System, Ohio Police and Fire Pension Fund, and State Highway Patrol Retirement System.
[4] Source: Ohio's Best Rx 2005 Annual Report, http://www.ohiobestrx.org/.
[5] Id.