PRESCRIPTION DRUG AFFORDABILITY S.B. 483 (S-1)-485:
SUMMARY AS PASSED BY THE SENATE
Senate Bill 483 (Substitute S-1 as passed by the Senate)
Senate Bills 484 and 485 (as passed by the Senate)
Sponsor: Senator Darrin Camilleri (S.B. 483)
Senator Veronica Klinefelt (S.B. 484)
Senator Kristen McDonald Rivet (S.B. 485)
Committee: Finance, Insurance, and Consumer Protection
Date Completed: 10-25-23
INTRODUCTION
Senate Bill 483 (S-1) would create the Prescription Drug Affordability Board (Board) and the
Prescription Drug Affordability Stakeholder Council (Council). The Board would have to select
prescription drug products based on specified criteria and costs and determine whether to
conduct cost and affordability reviews for those products based on their average patient cost
share. Upon review, the Board could decide to establish an upper payment limit on a
prescription drug product, which is a cap on the amount that a prescription drug purchaser or
payer could pay for the product. The bill also would allow the Attorney General to pursue civil
actions for a violation of an upper payment limit and subject the bills' provisions to
appropriation. The other two bills would require insurers in the State and the Healthy Michigan
Plan to comply with upper payment limits on prescription drug products.
Senate Bill 484 and Senate Bill 485 are tie-barred to Senate bill 483.
BRIEF RATIONALE
According to testimony before the Senate Committee on Finance, Insurance, and Consumer
Protection, some people believe that the cost of prescription drugs is too high and often
requires individuals to choose between necessary medication and essential goods and
services. To address this concern, it has been suggested that an Affordability Board be formed
to conduct cost affordability reviews and set upper payment limits for certain drugs.
BRIEF FISCAL IMPACT
The bills would have a significant fiscal impact on State government and no fiscal impact on
local units of government. The creation of the Board under the Department of Insurance and
Financial Services (DIFS) would require significant appropriations estimated at about $4.0 to
$5.0 million per year, including approximately 3.0 Full-Time Equivalents (FTEs). The
Department of Attorney General, DIFS, and the Department of Treasury each would incur
minor ongoing costs due to administrative and regulatory activities required under bill;
however, these activities likely would not require any significant increase in appropriations.
The bills would have an indeterminate fiscal impact on the Department of Health and Human
Services dependent upon the effects of prescription drug prices and reimbursements on
Medicaid expenditures.
Proposed MCL 500.3406z (S.B. 484) Legislative Analyst: Eleni Lionas
Proposed MCL 400.109o (S.B. 485) Fiscal Analyst: John P. Maxwell
Elizabeth Raczkowski
Cory Savino, PhD
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CONTENT
Senate Bill 483 (S-1) would enact the "Prescription Drug Cost and Affordability
Review Act" to do the following:
-- Establish the Board and the Council and prescribe their membership and duties.
-- Require the Board, in consultation with the Council, to select prescription drug
products based on specified criteria and costs and determine whether to conduct
cost and affordability reviews for them based on average patient cost share.
-- Specify the information that the Board could, and would have to, consider when
conducting a cost and affordability review for a prescription drug product.
-- Allow the Board to establish upper payment limits on prescription drug products
if it determined that spending on a prescription drug product had or would lead
to affordability challenges to health care systems or high out-of-pocket costs for
patients in the State.
-- Allow the Attorney General to investigate a violation of an upper payment limit
and commence a civil action accordingly.
-- Establish the Prescription Drug Affordability Fund for support of the Board.
-- Require the Board to conduct a one-time study concerning prescription drugs
and their costs and report its findings to the Legislature.
-- Require the Board to provide an annual report to the Legislature detailing
specified information related to prescription drug costs.
-- Allow the Board to promulgate rules and to enter into contracts with third-
parties to assist the Board in carrying out its required functions.
-- Subject the bill's implementation to appropriation.
Senate Bill 484 would amend the Insurance Code to require an insurer that offered
health insurance policies in the State to comply with upper payment limits
established under Senate Bill 483 (S-1).
Senate Bill 485 would amend the Social Welfare Act to require the Medical
Assistance Program (Medicaid) to comply with upper payment limits established
under Senate Bill 483 (S-1).
Senate Bill 483 (S-1)
"Prescription drug product" would mean a brand-name drug, a generic drug, biologic, or
biosimilar. "Biologic" would mean a drug that is produced or distributed in accordance with a
biologics licenses application approved by the United States Food and Drug Administration
(FDA). "Biosimilar" would mean a drug that is produced and distributed in accordance with a
biologics licenses application approved under 42 USC 262(K), which generally prescribes the
requirements for a person applying for licensure of a biological product and specifies the
requirements of such a product.
"Generic drug" would mean any of the following:
-- A retail drug that is marketed or distributed in accordance with an abbreviated new drug
application under 21 USC 355.
-- Any drug sold, licensed, or marketed under the new drug application approved by the FDA
of the Federal Food, Drug, and Cosmetic Act that is marketed, sold, or distributed under
a different labeler code, product code, trade name, trademark, or packaging than the
brand name drug.
-- A drug that entered the market before 1962 that was not originally marketed under a new
drug application.
"Person" would mean an individual and would include a body politic and corporate.
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"Prescription drug product purchaser" would mean an entity that purchases and takes
ownership of a prescription drug product for resale or providing to patients.
"Third party payer" would mean a health insurer, a State department or agency administering
a plan of Medical Assistance under the Social Welfare Act, a person administering a self-
funded plan, or a pharmacy benefit manager.
"Health insurer" would mean an insurer authorized under the Insurance Code to deliver, issue,
for delivery, or renew in the State a health insurance policy or a health maintenance
organization under the Insurance Code. (Generally, a health maintenance organization means
a person that, among other things, delivers health insurance services that are medically
necessary to enrollees under the terms of its health maintenance contract and is responsible
for the availability, accessibility, and quality of the health services provided.)
"Health equity" would mean attaining the highest level of health for all individuals, in which
an individual has fair and just opportunity to attain the individual's optimal health regardless
of race, ethnicity, disability, sexual orientation, gender identity, socioeconomic status,
geography, preferred language, or other factor that affects access to health care and health
outcomes.
"Manufacturer" would mean an entity that meets any of the following:
-- Owns the patent to a prescription drug product or enters into a lease with another
manufacturer to market and distribute a prescription drug product under the entity's own
name.
-- Is the labeled entity, of a generic drug at the point of manufacture and the entity sets or
changes the wholesale accusation cost of a brand-name drug that it manufactures or has
leased the right to market or the entity sets or changes the wholesale acquisition cost of
a generic drug that it manufactures.
"Wholesale acquisition cost" would mean, with respect to a drug or biological, the
manufacturer’s list price for the drug or biological to wholesalers or direct purchasers in the
United States, not including prompt pay or other discounts, rebates or reductions in price, for
the most recent month for which the information is available, as reported in wholesale price
guides or other publications of drug or biological pricing data.
"Consumer Price Index" (CPI) would mean the United States Consumer Price for all urban
consumers as defined and reported by the United States Department of Labor, Bureau of
Labor Statistics.
"340B Program entity" would mean an entity authorized to participate in the Federal 340B
Program under the Public Health Service Act. (Generally, the 340B Program requires
pharmaceutical manufacturers participating in Medicaid to sell outpatient drugs at discounted
prices to healthcare organizations that care for low income or uninsured patients, among
other things. (See BACKGROUND))
Prescription Drug Affordability Board
The bill would create the Board as an autonomous entity within DIFS.
The Board would consist of five members appointed by the Governor with advice and consent
of the Senate. The members would have to include individuals who had expertise in health
care economics, health policy, health equity, and clinical medicine. The Governor could not
appoint an individual if the individual was affiliated with a manufacturer or a trade association
for a manufacturer or otherwise had a personal or financial interest that had the potential to
bias or have the appearance of biasing the individual's decisions on the Board.
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The Governor would have to appoint two of the first members to one-year terms and three of
the fist members to two-year terms. After the first appointments, members would be
appointed for four-year terms or until a successor was appointed, whichever was later. If a
vacancy occurred on the Board, the Governor would have to appoint an individual to fill the
vacancy to the balance of the term. The Governor could remove a member of the Board for
incompetence, dereliction of duty, malfeasance, misfeasance, or nonfeasance in office, or any
other good cause.
The Governor would have to call the first meeting of the Board. At the first meeting, the Board
members would have to elect a member as chairperson and other officers as it considered
necessary or appropriate. After the first meeting, the Board would have to meet at least
quarterly, or more frequently at the call of the chairperson or if requested by at least three
members. A majority of the members would constitute a quorum. A majority of the members
present and serving would be required for official action unless one or more members recused
themselves, in that case two thirds of the members present and serving would be required
official action of the Board.
The Board would have to comply with the provisions of the Open Meetings Act and the
Freedom of Information Act (FOIA). The salaries and other expenses of the Board would be
subject to an annual appropriation. Members of the Board would be subject to Public Act 317
of 1968, which governs the conduct of public servants regarding governmental decisions and
contracts.
Prescription Drug Affordability Stakeholder Council
The bill would create the Council within DIFS. The Council would consist of 21 members.
Seven of the members would be appointed by the Governor as follows:
-- One individual representing manufacturers of brand-name drugs.
-- One individual representing manufacturers of generic drugs.
-- One individual representing employers.
-- One individual representing pharmacy benefit managers
-- One individual representing pharmacists.
-- One individual representing a mutual insurance company.
-- One member of the public.
"Brand-name drug" would mean a drug other than an authorized generic that is produced or
distributed in accordance with an original new drug application approved under 21 USC 355,
which generally specifies the application process and requirements for a person to introduce
an original new drug.
The mutual insurance company could not be an entity that directly, or indirectly, through one
or more intermediaries controlled, or was controlled by, or was under common control with a
managed care organization described below.
The Council also would have to consist of seven members appointed by the Governor from a
list of nominees submitted by the Speaker of the House of Representatives. The list of
nominees would have to include individuals who represented the following:
-- A statewide organization that advocated for senior citizens.
-- A statewide organization that advocated for health care.
-- A statewide organization that advocated for diversity within communities.
-- A labor union.
-- Researchers who specialized in prescription drug products.
-- The public.
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The final seven members would have to be appointed by the Governor from a list of nominees
submitted by the Senate Majority Leader. The list of nominees would have to include
individuals who represented the following:
-- Physicians.
-- Nurses.
-- Hospitals.
-- Managed care organizations.
-- The Department of Technology, Management and Budget.
-- Clinical Researchers.
-- The public.
The managed care organization could not be an entity that directly or indirectly, through one
or more intermediaries, controlled, was controlled by, or was under common control with the
mutual insurance company described above.
The Governor would have to ensure that the members appointed to the Council had knowledge
in at least one of the following areas:
-- The pharmaceutical business model.
-- Supply chain business model.
-- The practice of medicine or clinical training.
-- Consumer or patient perspectives.
-- Healthcare cost trends.
-- Clinical and health services research.
The Governor would have to appoint seven of the first members to one-year terms, seven of
the first members to two-year terms, and seven of the first members to three-year terms.
After the first appointment, members would be appointed for three-year terms or until a
successor was appointed, whichever were later. If a vacancy occurred, the Governor would
have to appoint an individual to fill the vacancy for the balance of the term. The Governor
could remove a member of the Board for incompetence, dereliction of duty, malfeasance,
misfeasance, or nonfeasance in office, or any other good cause.
At the first meeting, the Council would elect a chairperson and other officers as it considered
necessary or appropriate. After the first meeting, the Council would have to meet at least
quarterly. The Council could meet more frequently at the call of the chairperson or if requested
by at least seven members. A majority of the members would constitute a quorum and a
majority of the members present and serving would be required for official action of the
Council.
The Council would have to comply with the provisions of the Open Meetings Act and FOIA.
Council members would not be entitled to compensation for service on the Council but could
be reimbursed for actual and necessary expenses incurred in serving.
Cost and Affordability Review
Within 18 months of bills effective date, the Board, in consultation with the Council, would
have to select at least one prescription drug product based on any of the following criteria:
-- The prescription drug product was a brand-name drug or biologic that, as adjusted
annually for inflation in accordance with the CPI, had a wholesale acquisition cost of at
least $60,000 per year or course of treatment had a wholesale acquisition cost increase
of at least $3,000 in any 12-month period.
-- The prescription drug product was a biosimilar that had a wholesale acquisition cost that
was less than 15% lower than the referenced brand biologic.
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-- The prescription drug product was a prescription drug product that could create
affordability challenges for health systems in the State and patients, including a
prescription drug product needed to address a public health emergency.
Additionally, the Board, in consultation with the Council would choose a prescription drug
product based on if the prescription drug product were a generic drug that, adjusted annually
for inflation in accordance with the CPI, had a wholesale acquisition cost that was increased
by 200% or more during the immediately preceding 12-month period, as determined by the
difference between the resulting wholesale acquisition cost and the average wholesale
question cost reported over the immediately preceding 12-months and was at least $100 or
more for any of the following:
-- A 30 day-supply that lasted a patient a period of 30 consecutive days based on the
recommended dosage approved for labeling by the FDA.
-- A supply that lasted a patient fewer than 30 consecutive days based on the recommended
dosage for labeling by the FDA.
-- One unit of the drug if the labeling approved by the FDA did not recommend a finite
dosage.
The Board would not be required to identify each prescription drug product that met the
criteria listed above. The Board would have to determine whether to conduct a cost and
affordability review for each prescription drug product that was selected. The Board would
have to consider input from the Council and the average patient cost chare for each
prescription drug product.
If the Board conducted a cost affordability review of a prescription drug product, the Board
could consider any document or research related to the manuf