Bill Caption

Relating to the use of maximum allowable cost lists under a Medicaid managed care pharmacy benefit plan.

Fiscal Notes

The fiscal implications of the bill cannot be determined at this time; potential cost implications range from insignificant to significant negative impact to General Revenue Funds depending on changes to reimbursement rates. HHSC does not have access to the information necessary to estimate potential increased cost to Medicaid managed care under the provisions of the bill.

Bill Analysis

Summary: Pharmacy benefit managers operating in Texas’ Medicaid managed care program use a formula based on the maximum allowable price for a drug to determine reimbursement rates for pharmacies providing drugs to Medicaid recipients under the program. SB 1106 would require a managed care organization (MCO) or pharmacy benefit manager to ensure numerous things throughout the process of placing a drug on a maximum allowable cost list. SB 1106 stipulates:

• Drugs must meet certain standards set by the United States Food and Drug Administration (FDA) and be generally available for pharmacies in Texas to purchase from wholesalers.
• Drugs on these lists must not be obsolete.
• Prior to contracting with a network pharmacy provider,  the sources used to determine the maximum allowable cost pricing for a particular provider's list must be disclosed to the provider.
• Maximum allowable prices must be updated every seven days based on prices set by the FDA. Eliminate products and set prices in a timely manner to reflect product availability.
• Network pharmacy providers must be able to challenge maximum allowable drug prices. Prices must be changed if a network pharmacy provider successfully challenges a price, and the prices must be changed for all similarly situated providers.
• If a price challenge fails, the reasons for the failure must be given to the provider who made the challenge. Network pharmacy providers must be allowed access to their applicable maximum allowable cost list.

Analysis: SB 1106 would provide greater transparency for pharmacy benefit managers (PBM) to use in determining which drugs will be reimbursed, what their prices will be, and when their prices will change, according to the Maximum Allowable Cost (MAC) formula. This formula sets prices for generic prescription drugs. By giving PBMs access to this information, they can more quickly determine prices and act accordingly. While SB 1106 does provide some additional transparency it also adds new regulations. We are neutral on this legislation.