Legislative Analysis
Phone: (517) 373-8080
PHARMACY BENEFIT MANAGERS
http://www.house.mi.gov/hfa
House Bill 4276 (H-3) as reported from committee Analysis available at
Sponsor: Rep. Alabas A. Farhat http://www.legislature.mi.gov
Committee: Health Policy
Complete to 10-23-23
(Enacted as Public Act 279 of 2023)
SUMMARY:
House Bill 4276 would require that, if the Department of Health and Human Services (DHHS)
enters into a contract with a Medicaid managed care organization that relies on a pharmacy
benefit manager, the pharmacy benefit manager must do all of the following:
• For Michigan pharmacies with seven or fewer retail outlets, use a pharmacy
reimbursement methodology of the lesser of national average drug acquisition cost plus
a professional dispensing fee that is at least equal to to the applicable professional
dispensing fee provided through section 1620 of Article 6 of 2020 PA 166 (see
Background, below), wholesale acquisition cost plus a professional dispensing fee
provided through that section, or the usual and customary charge by the pharmacy. The
pharmacy benefit manager or the involved pharmacy services administrative
organization could not receive any portion of the professional dispensing fee. DHHS
would have to identify the pharmacies this provision applies to and provide the list of
applicable pharmacies to the Michigan Medicaid managed care organizations.
• Reimburse for a legally valid claim at a rate that is not less than the rate in effect at the
time the original claim adjudication was submitted at the point of sale.
• Agree to move to a transparent pass-through pricing model, in which the pharmacy
benefit manager discloses the administrative fee as a percentage of the professional
dispensing costs to DHHS.
• Agree to not create new pharmacy administration fees and to not increase current fees
more than the rate of inflation. This provision would not apply to any federal rule or
action that creates a new fee.
• Agree to not terminate an existing contract with a Michigan pharmacy with seven or
fewer retail outlets for the sole reason of the additional professional dispensing fee
authorized under the bill.
Reporting
The bill also would require each pharmacy benefit manager that receives reimbursement for
medical services, either directly or through a Medicaid contracted health plan, to submit to
DHHS all of the following information for the previous fiscal year by January 15 of 2024 and
every following year:
• The total number of prescriptions that were dispensed.
• The aggregate wholesale acquisition cost for each drug on its formulary.
• The aggregate amount of rebates, discounts, and price concessions that the pharmacy
benefit manager received for each drug on its formulary. The amount of rebates would
have to include any utilization discounts the pharmacy benefit manager receives from
a manufacturer.
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 • The aggregate amount identified in the above two items that was retained by the
pharmacy benefit manager and did not pass through to DHHS or the Medicaid
contracted health plan.
• The aggregate amount of administrative fees that the pharmacy benefit manager
received from all pharmaceutical manufacturers.
• The aggregate amount of reimbursements the pharmacy benefit manager pays to
contracting pharmacies.
• Any other information considered necessary by DHHS.
By March 1 of 2024 and every following year, DHHS would have to submit the information
provided above to the House and Senate appropriations subcommittees on the DHHS budget,
the House and Senate fiscal agencies, the House and Senate policy offices, and the State Budget
Office.
Any nonaggregated information submitted under the above provisions would be confidential
and could not be disclosed to any person by DHHS, and the information received would not be
a public record of DHHS.
Proposed MCL 333.105i and 333.105j
BACKGROUND:
Section 1620 of Article 6 of 2020 PA 166, cited in the bill, reads as follows:
Sec. 1620. (1) For fee-for-service Medicaid claims, the professional dispensing fee for
drugs indicated as specialty medications on the Michigan pharmaceutical products list
is $20.02 or the pharmacy’s usual or customary cash charge, whichever is less.
(2) For fee-for-service Medicaid claims, for drugs not indicated as specialty drugs on
the Michigan pharmaceutical products list, the professional dispensing fee for
medications is as follows:
(a) For medications indicated as preferred on the department’s [DHHS’s]
preferred drug list, $10.80 or the pharmacy’s usual or customary cash charge,
whichever is less.
(b) For medications not on the department’s preferred drug list, $10.64 or the
pharmacy’s usual or customary cash charge, whichever is less.
(c) For medications indicated as nonpreferred on the department’s preferred
drug list, $9.00 or the pharmacy’s usual or customary cash charge, whichever
is less.
(3) The department shall require a prescription co-payment for Medicaid recipients not
enrolled in the Healthy Michigan plan or with an income less than 100% of the federal
poverty level of $1.00 for a generic drug indicated as preferred on the department’s
preferred drug list and $3.00 for a brand-name drug indicated as nonpreferred on the
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 department’s preferred drug list, except as prohibited by federal or state law or
regulation.
(4) The department shall require a prescription co-payment for Medicaid recipients
enrolled in the Healthy Michigan plan with an income of at least 100% of the federal
poverty level of $4.00 for a generic drug indicated as preferred on the department’s
preferred drug list and $8.00 for a brand-name drug indicated as nonpreferred on the
department’s preferred drug list, except as prohibited by federal or state law or
regulation.
Sections 1625 and 1626 of Article 6 of 2023 PA 119 read as follows:
Sec. 1625. The department [DHHS] shall not enter into any contract with a Medicaid
managed care organization that relies on a pharmacy benefit manager that does not do
all of the following:
(a) For pharmacies with not more than 7 retail outlets, utilizes a pharmacy
reimbursement methodology of the national average drug acquisition cost plus
a professional dispensing fee comparable to the applicable professional
dispensing fee provided under section 1620 of this part. The pharmacy benefit
manager or the involved pharmacy services administrative organization shall
not receive any portion of the additional professional dispensing fee. The
department shall identify the pharmacies this subdivision applies to and
provide the list of applicable pharmacies to the Medicaid managed care
organizations.
(b) For pharmacies with not more than 7 retail outlets, utilizes a pharmacy
reimbursement methodology, when a national average drug acquisition cost
price is not available, for brand drugs of the lesser of the wholesale acquisition
cost, the average wholesale price less 16.7% plus a professional dispensing fee
comparable to the applicable professional dispensing fee provided under
section 1620 of this part, or the usual and customary charge by the pharmacy.
The department shall identify the pharmacies this subdivision applies to and
provide the list of applicable pharmacies to the Medicaid managed care
organizations.
(c) For pharmacies with not more than 7 retail outlets, utilizes a pharmacy
reimbursement methodology, when a national average drug acquisition cost
price is not available, for generic drugs of the lesser of wholesale acquisition
cost plus a professional dispensing fee comparable to the applicable
professional dispensing fee provided under section 1620, average wholesale
price less 30.0% plus a professional dispensing fee comparable to the
applicable professional dispensing fee provided under section 1620 of this part,
or the usual and customary charge by the pharmacy. The department shall
identify the pharmacies this subdivision applies to and provide the list of
applicable pharmacies to the Medicaid managed care organizations.
(d) Reimburses for a legally valid claim at a rate not less than the rate in effect
at the time the original claim adjudication as submitted at the point of sale.
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 (e) Agrees to move to a transparent “pass-through” pricing model, in which the
pharmacy benefit manager discloses the administrative fee as a percentage of
the professional dispensing costs to the department.
(f) Agrees to not create new pharmacy administration fees and to not increase
current fees more than the rate of inflation. This subdivision does not apply to
any federal rule or action that creates a new fee.
(g) Agrees to not terminate an existing contract with a pharmacy with not more
than 7 retail outlets for the sole reason of the additional professional dispensing
fee authorized under this section.
Sec. 1626. (1) By January 15 of the current fiscal year, each pharmacy benefit manager
that receives reimbursements, either directly or through a Medicaid health plan, from
the funds appropriated in part 1 for medical services must submit all of the following
information to the department [DHHS] for the previous fiscal year:
(a) The total number of prescriptions that were dispensed.
(b) The aggregate fiscal year paid pharmacy claims repriced using the
wholesale acquisition cost for each drug on its formulary.
(c) The aggregate amount of rebates, discounts, and price concessions that the
pharmacy benefit manager received for each drug on its formulary. The amount
of rebates shall include any utilization discounts the pharmacy benefit manager
receives from a manufacturer.
(d) The aggregate amount of administrative fees that the pharmacy benefit
manager received from all pharmaceutical manufacturers.
(e) The aggregate amount identified in subdivisions (b) and (c) that were
retained by the pharmacy benefit manager and did not pass through to the
department or to the Medicaid health plan.
(f) The aggregate amount of reimbursements the pharmacy benefit manager
pays to contracting pharmacies.
(g) Any other information considered necessary by the department.
(2) By March 1 of the current fiscal year, the department shall submit a report including
the information provided under subsection (1) to the report recipients required in
section 246 of this part.
(3) Any nonaggregated information submitted under this section shall be confidential
and shall not be disclosed to any person by the department. Such information is not
considered a public record of the department.
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FISCAL IMPACT:
House Bill 4276 would reduce state costs, from lower reimbursements for pharmacy ingredient
costs, by a range of $5.0 million Gross ($1.25 million GF/GP) to $12.0 million Gross ($3.0
million GF/GP) and would have no fiscal impact on local units of government. The non-state
portion of the Gross represents federal Medicaid reimbursements, for which the federal
reimbursement rate is 64.94% for fiscal year 2023-24. The primary fiscal driver would be that
the reimbursement of pharmacies for the ingredient cost would no longer be solely based on
the national average drug acquisition cost (NADAC), if the drug has a NADAC price, as
currently required in DHHS boilerplate section 1625, but instead the NADAC pricing would
be one of three indices used by Medicaid managed care organizations to determine the
reimbursement amount for ingredient costs (the other two being the wholesale acquisition cost
and the usual and customary charge), with the determination being the lesser of the three cost
indices.
POSITIONS:
Representatives of the following entities testified in support of the bill (10-12-23):
• Independent Pharmacy Cooperative
• National Community Pharmacists Association
The following entities indicated support for the bill (10-12-23):
• Michigan Pharmacists Association (10-12-23)
• Michigan Nurses Association (10-12-23)
• American Arab Pharmacist Association (10-12-23)
• Michigan Health and Hospital Association (10-19-23)
The Department of Health and Human Services indicated a neutral position on the bill.
(10-12-23)
Legislative Analyst: Rick Yuille
Fiscal Analyst: Kevin Koorstra
■ This analysis was prepared by nonpartisan House Fiscal Agency staff for use by House members in their
deliberations and does not constitute an official statement of legislative intent.
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Statutes affected:
Substitute (H-3): 400.1, 400.119
House Introduced Bill: 400.1, 400.119
As Passed by the House: 400.1, 400.119
As Passed by the Senate: 400.1, 400.119
House Concurred Bill: 400.1, 400.119
Public Act: 400.1, 400.119
House Enrolled Bill: 400.1, 400.119