HBA-MPM H.B. 1116 77(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 1116
By: Maxey
Public Health
3/20/2001
Introduced



BACKGROUND AND PURPOSE 

According to a 1991 report prepared by the United States Senate's Special
Committee on Aging, prescription drug prices rose by 152 percent during the
1980's, when the general inflation rate rose by 58 percent. The report also
found that, in 1991, the drug industry's annual average 15.5 percent profit
margin was three times more than the 4.6 percent profit margin of the
average Fortune 500 company.  Texas purchases prescription drugs through
the Medicaid vendor drug program using a formula that sets the price of the
drugs at Average Wholesale Price (AWP) less 15 percent and sets the
inventory management expense allowance at two percent of the drug
acquisition cost and the dispensing fee, thereby limiting the cost to the
state. In addition to providing prescription drugs through the Medicaid
Vendor Drug Program, the state of Texas buys hundreds of thousands of
prescription drugs for other programs at the Texas Department of Mental
Health and Mental Retardation and the Texas Department of Criminal Justice.
As seniors and others absorb the rising costs of pharmaceuticals so do
Texas state agencies, and therefore, Texas taxpayers. Applying the Medicaid
formula to the sale of drugs by pharmaceutical companies to all public
entities would make prescription drugs more affordable to the state and
taxpayers.  House Bill 1116 amends the Texas Food, Drug, and Cosmetic Act
to prohibit the sale of prescription drugs to a public entity for more than
the drug would be sold under the Medicaid vendor drug program. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

ANALYSIS

House Bill 1116 amends the Health and Safety Code to prohibit a person from
selling a drug to a public entity for more than the reimbursement rate for
the drug under the Medicaid vendor drug program. 

EFFECTIVE DATE

September 1, 2001.