§ 272. Preferred drug program. 1. There is hereby established a
preferred drug program to promote access to the most effective
prescription drugs while reducing the cost of prescription drugs for
persons in state public health plans.

2. When a prescriber prescribes a non-preferred drug, state public
health plan reimbursement shall be denied unless prior authorization is
obtained, unless no prior authorization is required under this article.

3. The commissioner shall establish performance standards for the
program that, at a minimum, ensure that the preferred drug program and
the clinical drug review program provide sufficient technical support
and timely responses to consumers, prescribers and pharmacists.

4. Notwithstanding any other provision of law to the contrary, no
preferred drug program or prior authorization requirement for
prescription drugs, except as created by this article, paragraph (a-1)
or (a-2) of subdivision four of section three hundred sixty-five-a of
the social services law, paragraph (g) of subdivision two of section
three hundred sixty-five-a of the social services law, subdivision one
of section two hundred forty-one of the elder law and shall apply to the
state public health plans.

5. The drug utilization review board shall consider and make
recommendations to the commissioner for the adoption of a preferred drug
program. (a) In developing the preferred drug program, the board shall,
without limitation: (i) identify therapeutic classes or drugs to be
included in the preferred drug program; (ii) identify preferred drugs in
each of the chosen therapeutic classes; (iii) evaluate the clinical
effectiveness and safety of drugs considering the latest peer-reviewed
research and may consider studies submitted to the federal food and drug
administration in connection with its drug approval system; (iv)
consider the potential impact on patient care and the potential fiscal
impact that may result from making such a therapeutic class subject to
prior authorization; and (v) consider the potential impact of the
preferred drug program on the health of special populations such as
children, the elderly, the chronically ill, persons with HIV/AIDS and
persons with mental health conditions.

(b) In developing the preferred drug program, the board may consider
preferred drug programs or evidence based research operated or conducted
by or for other state governments, the federal government, or
multi-state coalitions. Notwithstanding any inconsistent provision of
section one hundred twelve or article eleven of the state finance law or
section one hundred forty-two of the economic development law or any
other law, the department may enter into contractual agreements with the
Oregon Health and Science University Drug Effectiveness Review Project
to provide technical and clinical support to the board and the
department in researching and recommending drugs to be placed on the
preferred drug list.

(c) The board shall from time to time review all therapeutic classes
included in the preferred drug program, and may recommend that the
commissioner add or delete drugs or classes of drugs to or from the
preferred drug program, subject to this subdivision.

(d) The board shall establish procedures to promptly review
prescription drugs newly approved by the federal food and drug
administration.

6. The board shall recommend a procedure and criteria for the approval
of non-preferred drugs as part of the prior authorization process. In
developing these criteria, the board shall include consideration of the
following:

(a) the preferred drug has been tried by the patient and has failed to
produce the desired health outcomes;

(b) the patient has tried the preferred drug and has experienced
unacceptable side effects;

(c) the patient has been stabilized on a non-preferred drug and
transition to the preferred drug would be medically contraindicated; and

(d) other clinical indications for the use of the non-preferred drug,
which shall include consideration of the medical needs of special
populations, including children, the elderly, the chronically ill,
persons with mental health conditions, and persons affected by HIV/AIDS.

7. The commissioner shall provide thirty days public notice on the
department's website prior to any meeting of the board to develop
recommendations concerning the preferred drug program and any proposed
eliminations to the list of drugs reimbursable under subdivision four of
section three hundred sixty-five-a of the social services law. Such
notice regarding meetings of the board shall include a description of
the proposed therapeutic class to be reviewed, a listing of drug
products in the therapeutic class, and the proposals to be considered by
the board. The board shall allow interested parties a reasonable
opportunity to make an oral presentation to the board related to the
prior authorization of the therapeutic class to be reviewed. The board
shall consider any information provided by any interested party,
including, but not limited to, prescribers, dispensers, patients,
consumers and manufacturers of the drug in developing their
recommendations.

8. The commissioner shall provide notice of any recommendations
developed by the board regarding the preferred drug program or
elimination to the list of drugs reimbursable under subdivision four of
section three hundred sixty-five-a of the social services law, at least
five days before any final determination by the commissioner, by making
such information available on the department's website. Such public
notice may include: a summary of the deliberations of the board; a
summary of the positions of those making public comments at meetings of
the board; the response of the board to those comments, if any; and the
findings and recommendations of the board.

9. Within ten days of a final determination regarding the preferred
drug program or elimination to the list of drugs reimbursable under
subdivision four of section three hundred sixty-five-a of the social
services law, the commissioner shall provide public notice on the
department's website of such determinations, including: the nature of
the determination; and analysis of the impact of the commissioner's
determination on state public health plan populations and providers; and
the projected fiscal impact to the state public health plan programs of
the commissioner's determination.

10. The commissioner shall adopt a preferred drug program and
amendments after considering the recommendations from the board and any
comments received from prescribers, dispensers, patients, consumers and
manufacturers of the drug.

(a) The preferred drug list in any therapeutic class included in the
preferred drug program shall be developed based initially on an
evaluation of the clinical effectiveness, safety and patient outcomes,
followed by consideration of the cost-effectiveness of the drugs.

(b) In each therapeutic class included in the preferred drug program,
the board shall determine whether there is one drug which is
significantly more clinically effective and safe, and that drug shall be
included on the preferred drug list without consideration of cost. If,
among two or more drugs in a therapeutic class, the difference in
clinical effectiveness and safety is not clinically significant, then
cost effectiveness (including price and supplemental rebates) may also
be considered in determining which drug or drugs shall be included on
the preferred drug list.

(c) In addition to drugs selected under paragraph (b) of this
subdivision, any prescription drug in the therapeutic class, whose cost
to the state public health plans (including net price and supplemental
rebates) is equal to or less than the cost of another drug in the
therapeutic class that is on the preferred drug list under paragraph (b)
of this subdivision, may be selected to be on the preferred drug list,
based on clinical effectiveness, safety and cost-effectiveness.

(d) Notwithstanding any provision of this section to the contrary, the
commissioner may designate therapeutic classes of drugs, including
classes with only one drug, as all preferred prior to any review that
may be conducted by the board pursuant to this section.

11. (a) The commissioner shall provide an opportunity for
pharmaceutical manufacturers to provide supplemental rebates to the
state public health plans for drugs within a therapeutic class; such
supplemental rebates shall be taken into consideration by the board and
the commissioner in determining the cost-effectiveness of drugs within a
therapeutic class under the state public health plans.

(b) The commissioner may designate a pharmaceutical manufacturer as
one with whom the commissioner is negotiating or has negotiated a
manufacturer agreement, and all of the drugs it manufactures or markets
shall be included in the preferred drug program. The commissioner may
negotiate directly with a pharmaceutical manufacturer for rebates
relating to any or all of the drugs it manufactures or markets. A
manufacturer agreement shall designate any or all of the drugs
manufactured or marketed by the pharmaceutical manufacturer as being
preferred or non preferred drugs. When a pharmaceutical manufacturer has
been designated by the commissioner under this paragraph but the
commissioner has not reached a manufacturer agreement with the
pharmaceutical manufacturer, then the commissioner may designate some or
all of the drugs manufactured or marketed by the pharmaceutical
manufacturer as non preferred drugs. However, notwithstanding this
paragraph, any drug that is selected to be on the preferred drug list
under paragraph (b) of subdivision ten of this section on grounds that
it is significantly more clinically effective and safer than other drugs
in its therapeutic class shall be a preferred drug.

(c) Supplemental rebates under this subdivision shall be in addition
to those required by applicable federal law and subdivision seven of
section three hundred sixty-seven-a of the social services law. In order
to be considered in connection with the preferred drug program, such
supplemental rebates shall apply to the drug products dispensed under
the Medicaid program and the EPIC program. The commissioner is
prohibited from approving alternative rebate demonstrations, value added
programs or guaranteed savings from other program benefits as a
substitution for supplemental rebates.

13. The commissioner may implement all or a portion of the preferred
drug program through contracts with administrators with expertise in
management of pharmacy services, subject to applicable laws.

14. For a period of eighteen months, commencing with the date of
enactment of this article, and without regard to the preferred drug
program or the clinical drug review program requirements of this
article, the commissioner is authorized to implement, or continue, a
prior authorization requirement for a drug which may not be dispensed
without a prescription as required by section sixty-eight hundred ten of
the education law, for which there is a non-prescription version within
the same drug class, or for which there is a comparable non-prescription
version of the same drug. Any such prior authorization requirement shall
be implemented in a manner that is consistent with the process employed
by the commissioner for such authorizations as of one day prior to the
date of enactment of this article. At the conclusion of the eighteen
month period, any such drug or drug class shall be subject to the
preferred drug program requirements of this article; provided, however,
that the commissioner is authorized to immediately subject any such drug
to prior authorization without regard to the provisions of subdivisions
five through eleven of this section.