January 24, 2007, Introduced by Reps. Donigan, Polidori, Gonzales, Spade, Miller, Vagnozzi, Meisner, Tobocman, Accavitti, Constan, Bieda and Leland and referred to the Committee on Health Policy.
A bill to allow certain prescription drug manufacturers and
labelers to enter into rebate agreements with the department of
community health; to establish a discount prescription drug program
for certain individuals; to allow certain retail pharmacies to
offer certain discounts; to create certain funds; to prescribe
certain powers and duties of certain state agencies and
departments; and to provide for the promulgation of rules.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1. This act shall be known and may be cited as the
"Michigan prescription drug fair pricing act".
Sec. 2. As used in this act:
(a) "Department" means the department of community health.
(b) "Director" means the director of the department of
community health or his or her designee.
(c) "Fund" means the Rx dedicated fund established in section
(d) "Labeler" means an entity or person that receives
prescription drugs from a manufacturer or wholesaler and repackages
those drugs for later retail sale and that has a labeler code from
the federal food and drug administration under 21 CFR 207.20.
(e) "Manufacturer" means a manufacturer of prescription drugs
and includes a subsidiary or affiliate of a manufacturer.
(f) "Medicaid" or "state medicaid program" means the program
for medical assistance administered by the department under the
social welfare act, 1939 PA 280, MCL 400.1 to 400.119b.
(g) "Participating retail pharmacy" means a pharmacy or other
business that dispenses prescription drugs at retail and is
licensed under article 15 of the public health code, 1978 PA 368,
MCL 333.16101 to 333.18838, that participates in the state medicaid
program or voluntarily agrees to dispense prescription drugs
covered by a rebate agreement under the Rx program created in
(h) "Rx program participant" means an individual who is
eligible to participate in the Rx program under section 4.
(i) "Underinsured" means an individual who is covered by an
insurance policy that pays 80% or less of prescription drug costs.
Sec. 3. (1) The Rx program is established within the
department to provide discounted prescription drug prices to
uninsured and underinsured residents of this state and to residents
of this state who are recipients of benefits under the state
(2) A manufacturer or labeler that sells prescription drugs in
this state that are ultimately dispensed to patients through any
state funded or state operated program may voluntarily elect to
enter into a rebate agreement with the department for the Rx
program. The rebate agreement shall require the manufacturer or
labeler to make rebate payments to the state each calendar quarter
according to a schedule established by the department under
(3) The director shall negotiate the amount of the rebate
required under a rebate agreement entered into pursuant to
subsection (2) from a manufacturer or labeler in accordance with
(a) The director shall take into consideration the rebate
calculated under the medicaid rebate program pursuant to section
1927 of title XIX of the social security act, 42 USC 1396r-8, the
average wholesale price of prescription drugs, and any other
information on prescription drug prices and price discounts
considered relevant by the director.
(b) The director shall attempt to obtain an initial rebate
amount equal to or greater than the rebate calculated under the
medicaid rebate program pursuant to section 1927 of title XIX of
the social security act, 42 USC 1396r-8.
(c) The director shall attempt to obtain a rebate in an amount
equal to or greater than the amount of any discount, rebate, or
price reduction for prescription drugs provided to the federal
government by manufacturers and labelers.
(d) The director shall begin collecting rebates under this
section on July 1, 2007.
(4) The name of a manufacturer or labeler that does not enter
into a rebate agreement with the department under this section is
public information, and the department shall release the
information to the public. If the director and a drug manufacturer
or labeler fail to reach agreement on the terms of a rebate, the
director shall impose the prior authorization requirements allowed
under the state medicaid program, as permitted by law, for the
dispensing of prescription drugs provided by a manufacturer or
labeler described in this section. In determining which
prescription drugs are placed on the prior authorization list, the
director shall only allow prior authorization of a prescription
drug if safety, efficacy, and disease management considerations are
not compromised by substitution with an equivalent prescription
(5) A participating retail pharmacy shall discount the price
of a prescription covered by the Rx program and sold to an Rx
program participant. In addition, the department and a
participating retail pharmacy shall meet all of the following
(a) The department shall establish discounted prices for drugs
covered by a rebate agreement entered into under this section and
shall promote the use of efficacious and reduced-cost prescription
drugs, taking into consideration reduced prices for state and
federally capped drug programs, differential dispensing fees,
administrative overhead, and incentive payments.
(b) Beginning July 1, 2007, a participating retail pharmacy
shall offer a prescription drug to an Rx program participant at or
below the average wholesale price, minus 6%, plus the dispensing
fee provided under the state medicaid program. The initial price
level required under this subdivision shall be specified by the
director by rule. The average wholesale price, for purposes of this
subdivision, is the wholesale price charged on a specific
prescription drug that is assigned by the manufacturer and is
listed in a nationally recognized drug pricing file approved by the
(c) Not later than October 1, 2007, a participating retail
pharmacy shall offer a prescription drug to an Rx program
participant at or below the initial price level specified in
subdivision (b) minus the amount of any rebate paid by the state to
the retail pharmacy. The discounted price level required by this
subdivision shall be specified by the director by rule. In
determining the discounted price level, the director shall consider
an average of all rebates weighted by sales of prescription drugs
subject to rebates under this act over the most recent 12-month
period for which the information is available and the cost of
administering the Rx program, not to exceed 1% of the total rebates
Sec. 4. A resident of this state is eligible to participate in
the Rx program if he or she does not have prescription drug
coverage under a public or private health care payment or benefits
plan, is underinsured, or is a recipient of benefits under the
state medicaid program. The department shall promulgate rules to
establish simplified procedures for determining eligibility and
issuing Rx program enrollment cards to eligible residents. The
department shall undertake outreach efforts to build public
awareness of the Rx program and maximize enrollment by eligible
residents. The department may promulgate rules to adjust the
requirements and terms of the Rx program to accommodate any new
federally funded prescription drug programs.
Sec. 5. (1) The Michigan board of pharmacy created in section
17721 of the public health code, 1978 PA 368, MCL 333.17721, shall
promulgate rules requiring disclosure by a participating retail
pharmacy to an Rx program participant of the amount of savings
provided as a result of the Rx program. In promulgating the rules,
the Michigan board of pharmacy shall consider and protect
information that is proprietary in nature.
(2) The department shall not impose a transaction charge on a
participating retail pharmacy that submits a claim or receives a
payment under the Rx program.
(3) A participating retail pharmacy shall submit a claim to
the department to verify the amount charged to an Rx program
(4) On a weekly or biweekly basis, the department shall
reimburse a participating retail pharmacy for all of the discounted
prices provided to Rx program participants and dispensing fees set
by the director.
(5) The department shall collect from each participating
retail pharmacy utilization data necessary to calculate the amount
of the rebate from the manufacturer or labeler. The department
shall protect the confidentiality of all information subject to
confidentiality protection under state and federal law, rule, and
Sec. 6. A discrepancy in a rebate amount paid under a rebate
agreement entered into under section 3 shall be resolved using the
(a) If there is a discrepancy in the manufacturer's or
labeler's favor between the amount claimed by a participating
retail pharmacy and the amount rebated by the manufacturer or
labeler, the department, at the department's expense, may hire a
mutually agreed-upon independent auditor. If a discrepancy still
exists following the audit, the manufacturer or labeler shall
justify the reason for the discrepancy or make payment to the
department for any additional rebate amount due.
(b) If there is a discrepancy against the interest of the
manufacturer or labeler in the information provided by the
department to the manufacturer or labeler regarding the negotiation
under section 3 of the rebate to be paid by the manufacturer or
labeler, the manufacturer or labeler, at the manufacturer's or
labeler's expense, may hire a mutually agreed-upon independent
auditor to verify the accuracy of the information supplied by the
department. If a discrepancy still exists following the audit, the
department shall justify the reason for the discrepancy or refund
to the manufacturer or labeler any excess paid to the department by
the manufacturer or labeler pursuant to a rebate agreement entered
into under section 3.
(c) After completion of the procedures established in
subdivision (a) or (b), either the department or the manufacturer
or labeler may request a hearing. Supporting documentation must
accompany the request for a hearing. The hearing shall be conducted
as a contested case hearing under the administrative procedures act
of 1969, 1969 PA 306, MCL 24.201 to 24.328.
Sec. 7. (1) The Rx dedicated fund is established in the state
treasury to receive revenue from manufacturers and labelers who pay
rebates to the department under this act and any appropriations or
allocations designated for the fund.
(2) The department shall use the fund to reimburse
participating retail pharmacies for discounted prices provided to
Rx program participants and to reimburse the department for the
costs of administering the Rx program, including, but not limited
to, contracted services, computer costs, professional fees paid to
participating retail pharmacies, and other reasonable Rx program
(3) The state treasurer shall oversee the investment of the
fund, and interest earned on fund balances accrues to the fund.
(4) The unexpended balance remaining in the fund at the end of
the fiscal year remains in the fund and does not lapse to the
Sec. 8. Beginning with the year after the year in which this
act takes effect, the department shall report the enrollment and
financial status of the Rx program to the legislature by the second
week in January each year.
Sec. 9. In implementing this act, the department may
coordinate with other governmental programs and may take actions to
enhance efficiency, reduce the cost of prescription drugs, and
maximize the benefits of this and other governmental programs,
including providing the benefits of the Rx program to the
beneficiaries of other programs.
Sec. 10. The department and board shall promulgate rules to
implement this act under the administrative procedures act of 1969,
1969 PA 306, MCL 24.201 to 24.328.
Sec. 11. The department may seek any waivers of federal law,
rule, or regulation necessary to implement this act.
Sec. 12. If a portion of this act or the application of this
act to any person or circumstances is found by a court to be
invalid, the invalidity does not affect the remaining portions or
applications of the act that can be given effect without the
invalid portion or application, if the remaining portions of the
act are not determined by the court to be inoperable, and to this
end this act is declared to be severable.