Pharmaceutical Reforms in 2018-19 New York State Budget
April 05, 2018
Notwithstanding the enactment of a first-in-the-nation drug spending cap last year, in light of the $4.4 billion deficit and ongoing concerns about the opioid crisis it was inevitable that this year New York State would once again seek to enact substantial reforms impacting the pharmaceutical industry. The recently adopted 2018-19 New York State (“NYS”) Budget included several provisions that relate to access to pharmaceutical treatments, insurance coverage, cost sharing, and reimbursement. Below please find an overview of these key provisions.
Medicaid Drug Spending Cap. The final budget extends the Medicaid drug cap enacted last year through the 2019-20 fiscal year, at the same amount as the 2018-19 fiscal year (CPI + 4%, less an $85 million savings target). The provisions clarify that the Medicaid drug expenditure growth target shall be calculated and projected on a cash basis and requires the Department of Health (DOH) and Division of Budget to report quarterly to the Drug Utilization Review Board (DURB) the projected (state funds) Medicaid drug expenditures. These reports shall include the aggregate amounts attributable to the net cost of changes in utilization, changes in the number of Medicaid recipients, and changes in the cost of brand and generic drugs. This information cannot be publically released in a manner that will allow for identification of individual drugs or manufacturers. DOH will also be required to provide an annual report (by February 1) to the DURB which details how savings were achieved, calculated and implemented in the last year. Additionally, language was included to clarify the authority the DOH has to require prior approval of drugs and to remove such drugs from managed care formularies when they have not reached a supplemental agreement with a manufacturer.
Opioid Stewardship Act. The final budget establishes an “Opioid Stewardship Fund” which imposes a “stewardship payment” (essentially a tax) on manufacturers and distributors that sell or distribute opioids in New York. The total opioid stewardship payment is $100 million annually, and each manufacturer and distributor that sells or distributes opioids in New York will pay a portion of the total opioid payment amount based on that manufacturer’s or distributor’s ratable share. The ratable share will be calculated based on the total milligram of morphine equivalents (MMEs) sold or distributed during the preceding year, as reported by the manufacturer and distributor, and shall be divided by the total amount of MMEs sold in New York by all manufacturers and distributors. The payment percentage will be multiplied by the total opioid stewardship payment to determine the ratable share. The calculation of total MME’s shall not include opioids sold or distributed to entities certified to operate as hospices and chemical dependence services. Opioid stewardship funds will be used to support programs operated by OASAS for opioid treatment, recovery, prevention, education and the I-STOP program, pursuant to approval of NYS Budget Director.
Opioid Treatment Plans. The final budget includes language which prohibits prescribing opioids beyond three months, unless the patient’s medical record contains a written treatment plan that follows generally accepted national professional or governmental guidelines. Exceptions are provided for patients being treated for cancer or palliative care.
Direct Negotiations for Supplemental Rebates in Medicaid Managed Care. The enacted budget extends authority through March 31, 2020 to allow DOH to negotiate directly with drug manufacturers to obtain supplemental rebates for pharmaceutical utilization of anti-retrovirals and Hepatitis C treatments for Medicaid managed care recipients. The manufacturer is not required to pay supplemental rebates to a managed care provider, or any of a managed care provider’s agents when NYS is collecting such supplemental rebates. This statute was originally enacted in 2015.
Rebates for Generics. The final budget agreement extends DOH authority through March 31, 2020 to require additional rebates/penalties for drugs that have a state maximum acquisition cost (SMAC) of more than 75% over a one year period under the Medicaid program. This statute was first enacted in 2016.
Pharmacy Benefit Manager Clawbacks and Pharmacy Gag Prohibition. The final budget includes language to prohibit pharmacy benefit managers (PBMs) and their contracting agents from penalizing a pharmacist or a pharmacy from disclosing pricing information, the availability of therapeutic equivalents, and alternative payment methods that may be less expensive for patients. PBMs are further prohibited from imposing a co-payment that exceeds the total cost of the drug. Moreover, if an individual pays a co-payment, the pharmacy is entitled to retain the adjudicated costs and the PBM is prohibited from recouping the additional funds.
Pharmacy Dispensing Fees. The final budget increases the professional pharmacy dispensing fee from $10.00 to $10.08 per prescription.
Prescriber Prevails. The final budget agreement continues prescriber prevails consumer protections in both Medicaid fee-for-service and Medicaid managed care. Under current law, a prescriber’s determination can prevail over prior authorization limitations for any drug in fee-for-services, and for eight protected classes of drugs in managed care.
If you have any questions or would like additional information on any of the above referenced issues, please do not hesitate to contact Farrell Fritz’s Regulatory & Government Relations Practice Group at 518.313.1450 or NYSRGR@FarrellFritz.com.