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.