BILL NUMBER: S1351
SPONSOR: CLEARE
 
TITLE OF BILL:
An act to amend the insurance law, in relation to requiring a referenced
rate for prescription drugs
 
PURPOSE OR GENERAL IDEA OF BILL:
To create a state pilot program that caps the price of the five most
expensive prescription drugs by referencing Canadian prices. This would
allow the state to assess the utility of international reference pricing
as a tool to cap prescription drug prices.
 
SUMMARY OF SPECIFIC PROVISIONS:
The Director of the Employee Benefits Division within the Department of
Civil Service, which currently manages employee health plan costs, will
identify the five most costly prescription drugs to reference based on
the formula of net price multiplied by utilization.
Beginning no later than one year after being signed into law, the Direc-
tor will send the Department of Financial Services (DFS) Superintendent
the list of the five drugs to reference and the prior year's total net
spend on each of them.
No later than one year and five months after the bill is signed into
law, the Superintendent will publish the list of the five referenced
drugs on the DFS's website. The Superintendent will determine the refer-
enced rate by comparing the drug's list price set by the manufacturer-
known as the wholesale acquisition cost (WAC)-to the following sources,
which list the prices in the largest Canadian provinces; all of listed
provinces utilize transparent price setting processes:
*Ontario Ministry of Health and Long Term Care and most recently
published on the Ontario Drug Benefit Formulary;
*Regie de ('Assurance Maladie du Quebec and most recently published on
the Quebec Public Drug Programs List of Medications;
*British Columbia Ministry of Health and most recently published on the
BC Pharmacare Formulary; and
*Alberta Ministry of Health and most recently published on the Alberta
Drug Benefit List.
The referenced rate, at which a state entity or health plan will
purchase the referenced drugs, will be calculated as the lowest among
the WAC and the prices listed in the referenced resources. In the case a
specific drug is not included in those resources, the Superintendent
will use the ceiling price reported by the Government of Canada Patented
Medicine Prices Review Board.
The Superintendent will calculate the expected savings, and generally
consult with the Director of the State Employee Health Insurance Plan
and the Chair of the State Board of Pharmacy.
During this pilot study, it will be a violation for a state entity or
health plan to purchase, or for a pharmacy to purchase or distribute,
the referenced drugs subject to this pilot program at a cost higher than
the referenced rate.
Any savings generated must be used to reduce costs to consumers.
No later than sixty days after the conclusion of the pilot program, the
state entity and/or health plans subject to this pilot program will
submit to the DFS Superintendent a report describing the savings and how
those savings were used to benefit consumers. No later than one hundred
eighty days following the conclusion of the plan year, the DFS Super-
intendent will issue a report on the savings, if any, of the program,
along with recommendations on the feasibility of expanding this program
to other prescription drugs, improvements to the program, and anything
else the Superintendent deems necessary to understand its broader
effects.
Manufacturers will not be able to withdraw a referenced drug from sale
or distribution to avoid the program. If they wish to withdraw a refer-
enced drug, they will need to provide notice to DFS and the AG 180 days
prior to the withdrawal. The DFS Superintendent will assess a penalty on
an entity that it determines has withdrawn a referenced drug in
violation of the program. It will also be a violation for a manufacturer
to refuse to negotiate in good faith with any payor or seller of the
referenced drugs at a price that is within the referenced rate. The
penalty for both will be $500,000 or the amount of annual savings deter-
mined by the DFS Superintendent, whichever is greater.
 
JUSTIFICATION:
Americans pay 3 times more for brand drugs than people in similar coun-
tries do. For example, the price of Xeljanz, a drug for rheumatoid
arthritis, is 450% higher in the United States than in Canada. An effec-
tive tool to address the cost of living crisis, especially for seniors,
is to utilize international reference pricing in capping the price of a
medication by comparing it to the price in a group of other reference
countries. This bill creates a pilot program to cap prescription drug
prices based on the prices that Canadians pay.
 
PRIOR LEGISLATIVE HISTORY:
A9086 of 2024: Referred to Insurance
 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
None.
 
EFFECTIVE DATE:
This act shall take effect on the thirtieth day after it shall have
become a law.