§ 280. Medicaid drug cap. 1. The legislature hereby finds and declares
that there is a significant public interest for the Medicaid program to
manage drug costs in a manner that ensures patient access while
providing financial stability for the state and participating providers.
Since two thousand eleven, the state has taken significant steps to
contain costs in the Medicaid program by imposing a statutory limit on
annual growth. Drug expenditures, however, continually outpace other
cost components causing significant pressure on the state, providers,
and patient access operating under the Medicaid global cap. It is
therefore intended that the department establish a supplemental rebate
program as part of a focused and sustained effort to balance the growth
of drug expenditures with the growth of total Medicaid expenditures.

2. The commissioner shall review at least annually the department of
health state funds Medicaid drug expenditures to identify drugs in the
eightieth percentile or higher of total spend, net of rebate or in the
eightieth percentile or higher based on cost per claim, net of rebate.

3. (a) The commissioner may identify and refer drugs in the eightieth
percentile or higher of total spend, net of rebate or in the eightieth
percentile or higher based on cost per claim, net of rebate, to the drug
utilization review board established by section three hundred
sixty-nine-bb of the social services law for a recommendation as to
whether a target supplemental Medicaid rebate should be paid by the
manufacturer of the drug to the department and the target amount of the
rebate.

(b) If the department intends to refer a drug to the drug utilization
review board pursuant to paragraph (a) of this subdivision, the
department shall notify the manufacturer of such drug and shall attempt
to reach agreement with the manufacturer on a rebate for the drug prior
to referring the drug to the drug utilization review board for review.
Such rebate may be based on evidence-based research, including, but not
limited to, such research operated or conducted by or for other state
governments, the federal government, the governments of other nations,
and third party payers or multi-state coalitions, provided however that
the department shall account for the effectiveness of the drug in
treating the conditions for which it is prescribed or in improving a
patient's health, quality of life, or overall health outcomes, and the
likelihood that use of the drug will reduce the need for other medical
care, including hospitalization.

(c) In the event that the commissioner and the manufacturer have
previously agreed to a supplemental rebate for a drug pursuant to
paragraph (b) of this subdivision or paragraph (e) of subdivision seven
of section three hundred sixty-seven-a of the social services law, the
drug shall not be referred to the drug utilization review board for any
further supplemental rebate for the duration of the previous rebate
agreement, provided however, the commissioner may refer a drug to the
drug utilization review board if the commissioner determines there are
significant and substantiated utilization or market changes, new
evidence-based research, or statutory or federal regulatory changes that
warrant additional rebates. In such cases, the department shall notify
the manufacturer and provide evidence of the changes or research that
would warrant additional rebates, and shall attempt to reach agreement
with the manufacturer on a rebate for the drug prior to referring the
drug to the drug utilization review board for review.

(d) The department shall consider a drug's actual cost to the state,
including current rebate amounts, prior to seeking an additional rebate
pursuant to paragraph (b) or (c) of this subdivision.

(e) If the commissioner is unsuccessful in entering into a rebate
arrangement with the manufacturer of the drug satisfactory to the
department, the drug manufacturer shall, in that event be required to
provide to the department, on a standard reporting form developed by the
department, the following information:

(i) the actual cost of developing, manufacturing, producing (including
the cost per dose of production), and distributing the drug;

(ii) research and development costs of the drug, including payments to
predecessor entities conducting research and development, such as
biotechnology companies, universities and medical schools, and private
research institutions;

(iii) administrative, marketing, and advertising costs for the drug,
apportioned by marketing activities that are directed to consumers,
marketing activities that are directed to prescribers, and the total
cost of all marketing and advertising that is directed primarily to
consumers and prescribers in New York, including but not limited to
prescriber detailing, copayment discount programs, and
direct-to-consumer marketing;

(iv) the extent of utilization of the drug;

(v) prices for the drug that are charged to purchasers outside the
United States;

(vi) prices charged to typical purchasers in the state, including but
not limited to pharmacies, pharmacy chains, pharmacy wholesalers, or
other direct purchasers;

(vii) the average rebates and discounts provided per payer type in the
state; and

(viii) the average profit margin of each drug over the prior five-year
period and the projected profit margin anticipated for such drug.

(f) All information disclosed pursuant to paragraph (e) of this
subdivision shall be considered confidential and shall not be disclosed
by the department in a form that identifies a specific manufacturer or
prices charged for drugs by such manufacturer.

4. In determining whether to recommend a target supplemental rebate
for a drug, the drug utilization review board shall consider the actual
cost of the drug to the Medicaid program, including federal and state
rebates, and may consider, among other things:

(a) the drug's impact on Medicaid drug spending, and the adequacy of
capitation rates of participating Medicaid managed care plans, and the
drug's affordability and value to the Medicaid program; or

(b) significant and unjustified increases in the price of the drug; or

(c) whether the drug may be priced disproportionately to its
therapeutic benefits.

5. (a) If the drug utilization review board recommends a target rebate
amount on a drug referred by the commissioner, the department shall
negotiate with the drug's manufacturer for a supplemental rebate to be
paid by the manufacturer in an amount not to exceed such target rebate
amount.

(b) The supplemental rebate required by paragraph (a) of this
subdivision shall apply to drugs dispensed to enrollees of managed care
providers pursuant to section three hundred sixty-four-j of the social
services law and to drugs dispensed to Medicaid recipients who are not
enrollees of such providers.

(c) Where the department and a manufacturer enter into a rebate
agreement pursuant to this section, which may be in addition to existing
rebate agreements entered into by the manufacturer with respect to the
same drug, no additional rebates shall be required to be paid by the
manufacturer to a managed care provider or any of a managed care
provider's agents, including but not limited to any pharmacy benefit
manager, while the department is collecting the rebate pursuant to this
section.

(d) In formulating a recommendation concerning a target rebate amount
for a drug, the drug utilization review board may consider:

(i) publicly available information relevant to the pricing of the
drug;

(ii) information supplied by the department relevant to the pricing of
the drug;

(iii) information relating to value-based pricing provided, however,
if the department directly invites any third party to provide
cost-effectiveness analysis or research related to value-based pricing,
and the department receives and considers such analysis or research for
use by the board, such third party shall disclose any funding sources.
The department shall, if reasonably possible, make publicly available
the following documents in its possession that it relies upon to provide
cost effectiveness analyses or research related to value-based pricing:
(A) descriptions of underlying methodologies; (B) assumptions and
limitations of research findings; and (C) if available, data that
presents results in a way that reflects different outcomes for affected
subpopulations;

(iv) the seriousness and prevalence of the disease or condition that
is treated by the drug;

(v) the extent of utilization of the drug;

(vi) the effectiveness of the drug in treating the conditions for
which it is prescribed, or in improving a patient's health, quality of
life, or overall health outcomes;

(vii) the likelihood that use of the drug will reduce the need for
other medical care, including hospitalization;

(viii) the average wholesale price, wholesale acquisition cost, retail
price of the drug, and the cost of the drug to the Medicaid program
minus rebates received by the state;

(ix) in the case of generic drugs, the number of pharmaceutical
manufacturers that produce the drug;

(x) whether there are pharmaceutical equivalents to the drug; and

(xi) information supplied by the manufacturer, if any, explaining the
relationship between the pricing of the drug and the cost of development
of the drug and/or the therapeutic benefit of the drug, or that is
otherwise pertinent to the manufacturer's pricing decision; any such
information, including the information on the standard reporting form
requirement in paragraph (e) of subdivision three of this section,
provided shall be considered confidential and shall not be disclosed by
the drug utilization review board in a form that identifies a specific
manufacturer or prices charged for drugs by such manufacturer.

6. (a) After taking into account all rebates and supplemental rebates
received by the department, including rebates received to date pursuant
to this section, the commissioner may: subject any drug of a
manufacturer referred to the drug utilization review board under this
section to prior approval in accordance with existing processes and
procedures when such manufacturer has not entered into a supplemental
rebate arrangement as required by this section; direct a managed care
plan to limit or reduce reimbursement for a drug provided by a medical
practitioner if the drug utilization review board recommends a target
rebate amount for such drug and the manufacturer has failed to enter
into a rebate arrangement required by this section; direct managed care
plans to remove from their Medicaid formularies any drugs of a
manufacturer who has a drug that the drug utilization review board
recommends a target rebate amount for and the manufacturer has failed to
enter into a rebate arrangement required by this section; promote the
use of cost effective and clinically appropriate drugs other than those
of a manufacturer who has a drug that the drug utilization review board
recommends a target rebate amount and the manufacturer has failed to
enter into a rebate arrangement required by this section; allow
manufacturers to accelerate rebate payments under existing rebate
contracts; and such other actions as authorized by law. The commissioner
shall provide written notice to the legislature at least thirty days
prior to taking action pursuant to this paragraph.

(b) The commissioner shall be authorized to take the actions described
in paragraph (a) of this subdivision. In addition, no such actions shall
be deemed to supersede the provisions of paragraph (b) of subdivision
three of section two hundred seventy-three of this article or the
provisions of subdivisions twenty-five and twenty-five-a of section
three hundred sixty-four-j of the social services law; provided further
that nothing in this section shall prevent access by a Medicaid
recipient to a drug which is the only treatment for a particular disease
or condition.

7. The commissioner shall provide a report by July first annually to
the drug utilization review board, the governor, the speaker of the
assembly, and the temporary president of the senate on savings achieved
through the supplemental rebate programs in the last fiscal year. Such
report shall provide data on what savings were achieved through actions
pursuant to subdivisions three, five and six of this section,
respectively, and what savings were achieved through other means and how
such savings were calculated and implemented.