State of Illinois
92nd General Assembly

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HB2236 Engrossed                               LRB9203760SMdv

 1        AN ACT concerning discount prescription drugs for  senior
 2    citizens.

 3        Be  it  enacted  by  the People of the State of Illinois,
 4    represented in the General Assembly:

 5        Section 1.  Short title.  This Act may be  cited  as  the
 6    Senior Citizen Prescription Drug Discount Program Act.

 7        Section 5.  Findings.  The General Assembly finds that:
 8        (a)  Although   senior  citizens  represent  12%  of  the
 9    population, they use on average  37%  of  prescription  drugs
10    that are dispensed.
11        (b)  Senior   citizens   in  the  United  States  without
12    prescription drug insurance coverage pay the  highest  prices
13    in the world for needed medications.
14        (c)  High  prescription  drug  prices force many Illinois
15    seniors to go without proper medication or other necessities,
16    thereby affecting their health and safety.
17        (d)  Prescription drug prices in the  United  States  are
18    the world's highest, averaging 32% higher than in Canada, 40%
19    higher than in Mexico, and 60% higher than in Great Britain.
20        (e)  Prescription  drug  prices  listed  on  the  Federal
21    Supply  Schedule  that serve the Veterans Administration, the
22    Department of Defense, and the Coast Guard average 52%  below
23    the non-federal average manufacturer's price.
24        (f)  Regardless  of  household  income,  seniors  without
25    prescription drug coverage are often just one serious illness
26    away from poverty.
27        (g)  Reducing  the  price  of  prescription  drugs  would
28    benefit  the  health  and  well-being  of all Illinois senior
29    citizens by providing more affordable access to needed drugs.
30        (h)  Drug prices  on  the  Federal  Supply  Schedule  are
31    negotiated  by the Department of Veterans Affairs and are the
HB2236 Engrossed            -2-                LRB9203760SMdv
 1    best publicly available indicator of  the  prices  that  drug
 2    companies charge their favored customers.
 3        (i)  The State of Illinois is involved in the purchase of
 4    prescription  drugs  in  a number of areas: the Department of
 5    Central Management Services is involved in  the  purchase  of
 6    prescription  drugs  for  the State employees group insurance
 7    program, for State-operated mental health  and  developmental
 8    disabilities  facilities,  and  for  Department  of Veterans'
 9    Affairs  facilities;  the  Department  of  Public  Health  is
10    involved in the purchase of prescription drugs for ADAP (Aids
11    Drug  Assistance  Program)  and   for   the   STD   (Sexually
12    Transmitted  Diseases) Program; the Department of Corrections
13    is involved in the purchase of prescription drugs for  prison
14    inmates;  the  Department  of  Revenue  is  involved  in  the
15    purchase  of  prescription  drugs  for  the "Circuit Breaker"
16    Pharmaceutical Assistance Program; the Department of Children
17    and  Family  Services  is  involved  in   the   purchase   of
18    prescription  drugs  for  State  wards; and the Department of
19    Public Aid is involved in the purchase of prescription  drugs
20    for  Medicaid recipients; collectively this affords the State
21    of Illinois  great  bargaining  power  for  the  purchase  of
22    prescription drugs.

23        Section  10.  Purpose.  The purpose of this Program is to
24    require the Department  of  Central  Management  Services  to
25    establish  and administer a program that will enable eligible
26    senior citizens to purchase prescription drugs at  discounted
27    prices.

28        Section 15.  Definitions.  As used in this Act:
29        "Authorized  pharmacy"  means  any pharmacy registered in
30    this State under  the  Pharmacy  Practice  Act  of  1987  and
31    approved by the Department.
32        "AWP"  or  "Average  wholesale  price"  means  the amount
HB2236 Engrossed            -3-                LRB9203760SMdv
 1    determined from the latest publication of the  Blue  Book,  a
 2    universally  subscribed  pharmacist  reference guide annually
 3    published by  the  Hearst  Corporation.   "AWP"  or  "Average
 4    wholesale  price" may also be derived electronically from the
 5    drug  pricing database synonymous with the latest publication
 6    of the Blue Book and furnished in the National Drug Data File
 7    (NDDF) by First Data Bank (FDB),  a  service  of  the  Hearst
 8    Corporation.
 9        "Department" means the Department of  Central  Management
10    Services.
11        "Director"  means  the  Director  of  Central  Management
12    Services.
13        "Drug  manufacturer" means any entity (1) that is located
14    within or  outside  Illinois  that  is  engaged  in  (i)  the
15    production,     preparation,     propagation,    compounding,
16    conversion,  or  processing  of  prescription  drug  products
17    covered under the Program, either directly or  indirectly  by
18    extraction  from  substances of natural origin, independently
19    by means of  chemical  synthesis,  or  by  a  combination  of
20    extraction  and  chemical  synthesis  or  (ii) the packaging,
21    repackaging,   leveling,   labeling,   or   distribution   of
22    prescription drug products covered under the Program and  (2)
23    that  elects to provide prescription drugs either directly or
24    under contract with any entity  providing  prescription  drug
25    services   on   behalf  of  the  State  of  Illinois.   "Drug
26    manufacturer",  however,  does  not   include   a   wholesale
27    distributor  of  drugs  or  a  retail pharmacy licensed under
28    Illinois law.
29        "Eligible senior" means a person who is (i) a resident of
30    Illinois and (ii) 65 years of age or older.
31        "Federal  Supply  Schedule"  or  "FSS"  means   a   price
32    catalogue  containing goods available for purchase by federal
33    agencies.  Drug prices on  the  FSS  are  negotiated  by  the
34    (U.S.)  Department  of  Veterans'  Affairs  and  are the best
HB2236 Engrossed            -4-                LRB9203760SMdv
 1    publicly available indicator of prices drug companies  charge
 2    favored customers.
 3        "Prescription drug" means any prescribed drug that may be
 4    legally dispensed by an authorized pharmacy.
 5        "Program"  means  the  Senior  Citizen  Prescription Drug
 6    Discount Program created under this Act.
 7        "Rules" includes rules adopted and  forms  prescribed  by
 8    the Department.

 9        Section 20. The Senior Citizen Prescription Drug Discount
10    Program.   The  Senior  Citizen  Prescription  Drug  Discount
11    Program is established to protect the health  and  safety  of
12    senior  citizens.   The  Program shall be administered by the
13    Department.  The Department shall (i) enroll eligible seniors
14    into the Program to  qualify  them  for  a  discount  on  the
15    purchase  of  prescription  drugs  at an authorized pharmacy,
16    (ii) enter into rebate agreements  with  drug  manufacturers,
17    and  (iii)  reimburse  pharmacies  for  the cost of providing
18    discounts using the proceeds  from  the  manufacturer  rebate
19    agreements.

20        Section 25.  Prescription drug prices.
21        (a)  Beginning  on  January  1,  2002, the amount paid by
22    eligible  seniors  enrolled  in  the  Program  to  authorized
23    pharmacies for  prescription  drugs  may  not  exceed  prices
24    listed  on  the Federal Supply Schedule plus a dispensing fee
25    calculated as provided in Section 3.16 of the Senior Citizens
26    and Disabled Persons Property Tax Relief  and  Pharmaceutical
27    Assistance  Act. Nothing in this Act precludes any authorized
28    pharmacy from charging less than  the  listed  price  on  the
29    Federal  Supply  Schedule.  The  Department  must provide the
30    applicable Federal Supply Schedule to authorized  pharmacies.
31    For  prescription  drugs  that  are not listed on the Federal
32    Supply Schedule, the amount paid by eligible seniors enrolled
HB2236 Engrossed            -5-                LRB9203760SMdv
 1    in the Program to authorized pharmacies may  not  exceed  the
 2    AWP minus 35% plus a dispensing fee calculated as provided in
 3    Section  3.16  of  the  Senior  Citizens and Disabled Persons
 4    Property Tax Relief and Pharmaceutical Assistance Act.
 5        (b)  Subject to the  requirements  of  the  State  Prompt
 6    Payment  Act,  the  Department  shall  compensate  authorized
 7    pharmacies from the Senior Citizen Prescription Drug Discount
 8    Program  Fund  for  the difference between the amount paid by
 9    eligible seniors for prescription drugs dispensed  under  the
10    Program and the AWP minus 10%.

11        Section 30.  Manufacturer rebate agreements.
12        (a)  Taking  into  consideration  the extent to which the
13    State  pays  for  prescription  drugs  under  various   State
14    programs,  the  Department  or  its agent shall negotiate and
15    enter into rebate  agreements  with  drug  manufacturers,  as
16    defined  in  this  Act,  to  effect  prescription  drug price
17    discounts.  Persons eligible for benefits under this  Program
18    shall  be  entitled  to  purchase  prescription  drugs at the
19    negotiated discount price.  The  rebate  agreement  shall  be
20    equal   to   the  cost  to  the  Department  for  reimbursing
21    authorized pharmacies under this Act pursuant  to  subsection
22    (b)  of  Section  25.   The  rebate  agreement  shall  become
23    effective  the  first day of the calendar quarter that begins
24    60 days after the date the agreement is entered into.
25        (b)  The  Department  shall  develop   a   model   rebate
26    agreement  for  prescription drugs dispensed on and after the
27    effective date of this Act.
28        (c)  Rebate payment procedures.  All  rebates  negotiated
29    under  agreements  described in this Section shall be paid to
30    the Department in accordance with  procedures  prescribed  by
31    the   Department.   All  rebates  must  be  remitted  to  the
32    Department not later than 30 days after receipt of a  request
33    for payment by the Department.
HB2236 Engrossed            -6-                LRB9203760SMdv
 1        (d)  The receipts from the rebates and moneys transferred
 2    under  Section  33 shall be deposited into the Senior Citizen
 3    Prescription Drug  Discount  Program  Fund,  a  special  fund
 4    hereby  created  in  the  State  treasury, and shall be used,
 5    subject to appropriation, to cover the  cost  of  reimbursing
 6    authorized  pharmacies  under this Act pursuant to subsection
 7    (b) of Section 25.

 8        Section 33.  Transfer to Senior Citizen Prescription Drug
 9    Discount Program Fund.
10        (a)  Within 30 days after  the  effective  date  of  this
11    amendatory  Act  of  the  92nd  General  Assembly,  the State
12    Comptroller  shall  direct  and  the  State  Treasurer  shall
13    transfer $27,000,000 from the General  Revenue  Fund  to  the
14    Senior  Citizen  Prescription  Drug  Discount Program Fund to
15    facilitate  the  payment  of  reimbursements  to   authorized
16    pharmacies.  Repayment  of  principal  and  interest  to  the
17    General Revenue Fund shall be made so that the balance in the
18    General  Revenue  Fund will be restored as if the transfer to
19    the Senior Citizen Prescription Drug  Discount  Program  Fund
20    had  not been made. Upon a certification by the Department of
21    Revenue that the obligations under subsection (b) of  Section
22    25  are  being met, beginning on July 1, 2002, and on the 1st
23    of  each  month  thereafter  until   the   principal   amount
24    transferred  from  the General Revenue Fund plus interest has
25    been repaid, the State Comptroller shall direct and the State
26    Treasurer shall transfer 1/12th of $27,000,000, or so much of
27    that  amount  as  is  necessary,  from  the  Senior   Citizen
28    Prescription  Drug  Discount  Program  Fund  to  the  General
29    Revenue  Fund  plus  accrued  interest.    The balance of the
30    amount transferred from the General Revenue Fund  shall  bear
31    interest  at  the  rate  of 7.5% per annum until the required
32    transfers back  into  the  General  Revenue  Fund  have  been
33    completed.
HB2236 Engrossed            -7-                LRB9203760SMdv
 1        Section 35.  Program eligibility.
 2        (a)  Any   person   may   apply  to  the  Department  for
 3    participation in the Program in the form and manner  required
 4    by  the  Department.   The  Department  shall  determine  the
 5    eligibility  of each applicant for the Program within 30 days
 6    after the date of application.  To participate in the Program
 7    an eligible senior whose application has been approved by the
 8    Department  must  pay  $25  upon  enrollment   and   annually
 9    thereafter  and  shall receive a Program identification card.
10    The card may be presented to an authorized pharmacy to assist
11    the pharmacy in verifying eligibility under the Program.  The
12    Department  shall  deposit the enrollment fees collected into
13    the Senior Citizen Prescription Drug Discount  Program  Fund.
14    The  monies  collected  by the Department for enrollment fees
15    and deposited  into  the  Senior  Citizen  Prescription  Drug
16    Discount Program Fund must be separately accounted for by the
17    Department. If 2 or more persons are eligible for any benefit
18    under  this  Act  and are members of the same household, each
19    participating household member shall apply to the  Department
20    and  pay  the  fee  required  for the purpose of obtaining an
21    identification card.
22        (b)  Proceeds from annual  enrollment  fees,  subject  to
23    appropriation,  shall be used by the Department to offset the
24    administrative cost of this Act. The  Department  may  reduce
25    the  annual  enrollment  fee  by rule if the revenue from the
26    enrollment fees is in excess of the costs to  carry  out  the
27    Program.
28        (c)  Any   person  who  is  eligible  for  pharmaceutical
29    assistance under the Senior  Citizens  and  Disabled  Persons
30    Property  Tax  Relief  and  Pharmaceutical  Assistance Act is
31    presumed to be eligible for this Program.   That  person  may
32    purchase  prescription  drugs under this Program that are not
33    covered by the pharmaceutical assistance  program  under  the
34    Senior  Citizens and Disabled Persons Property Tax Relief and
HB2236 Engrossed            -8-                LRB9203760SMdv
 1    Pharmaceutical Assistance Act  by  using  the  identification
 2    card issued under the pharmaceutical assistance program.

 3        Section 40.  Eligible pharmacies.
 4        (a)  The   Department  shall  adopt  rules  to  establish
 5    standards and procedures for participation in the Program and
 6    approve those pharmacies that apply to participate  and  meet
 7    the  requirements  for  participation.   The  Department  may
 8    remove the authorization of a pharmacy to participate in this
 9    Program  for failure to meet the standards and procedures for
10    participation established by  the  Department  by  rule.  Any
11    pharmacy  that  has been removed as an authorized pharmacy by
12    the Department may apply for reinstatement as  an  authorized
13    pharmacy   in   accordance   with  standards  and  procedures
14    established by the Department by rule.
15        (b)  The Department shall annually review the eligibility
16    of pharmacies to participate in the Program.
17        (c)  The  Department  shall  establish   procedures   for
18    properly   contracting   for  pharmacy  services,  validating
19    reimbursement claims,  validating  compliance  of  authorized
20    pharmacies  with  the  conditions  for participation required
21    under this Act, and otherwise  providing  for  the  effective
22    administration  of  this  Act.  The Director, in consultation
23    with pharmacists licensed under the Pharmacy Practice Act  of
24    1987,  may enter into a written contract with any other State
25    agency, instrumentality, or political subdivision or  with  a
26    fiscal  intermediary  for  the  purpose of making payments to
27    authorized pharmacies pursuant to subsection (b)  of  Section
28    25  and  coordinating  the  Program  with other programs that
29    provide payments for prescription  drugs  covered  under  the
30    Program.

31        Section  45.   Rules. The Department shall adopt rules to
32    implement and administer the Program, which shall include the
HB2236 Engrossed            -9-                LRB9203760SMdv
 1    following:
 2             (1)  Execution  of  contracts  with  pharmacies   to
 3        participate   in   the   Program.   The  contracts  shall
 4        stipulate terms and conditions for the  participation  of
 5        authorized  pharmacies  and  the  rights  of the State to
 6        terminate participation for breach of the contract or for
 7        violation of this Act or rules adopted by the  Department
 8        under this Act.
 9             (2)  Establishment  of maximum limits on the size of
10        prescriptions that are eligible for a discount under  the
11        Program,  up  to  a  90-day  supply,  except  as  may  be
12        necessary for utilization control reasons.
13             (3)  Establishment  of liens upon any and all causes
14        of action that accrue to a beneficiary  as  a  result  of
15        injuries  for  which prescription drugs covered under the
16        Program are directly or indirectly required and for which
17        the Director made payment or became liable for under this
18        Act.
19             (4)  Inspection of appropriate records and audits of
20        participating authorized pharmacies  to  ensure  contract
21        compliance  and  to determine any fraudulent transactions
22        or practices under this Act.

23        Section 50.  Report on administration  of  Program.   The
24    Department  shall  report  to  the  Governor  and the General
25    Assembly by March 1st of each year on the  administration  of
26    the Program under this Act.

27        Section   905.   The  Department  of  Central  Management
28    Services Law of the Civil Administrative Code of Illinois  is
29    amended by adding Section 405-195 as follows:

30        (20 ILCS 405/405-195 new)
31        Sec.   405-195.    Prescription  Drug  Purchasing  Policy
HB2236 Engrossed            -10-               LRB9203760SMdv
 1    Office.  The Department shall establish a  Prescription  Drug
 2    Purchasing  Policy  Office.   The  Office shall determine and
 3    implement strategies for best price purchasing practices  for
 4    State  agencies  that  pay  for  prescription drugs by direct
 5    purchase  or  by  other  arrangements.   This   may   include
 6    establishing a central State purchasing policy, entering into
 7    cooperative  agreements  with other states or other public or
 8    private entities that may enable  the  State  to  reduce  its
 9    prescription  drug  costs,  and  establishing any other State
10    agency policies and practices that may enable  the  State  to
11    reduce its costs.

12        Section  990.  The State Finance Act is amended by adding
13    Section 5.545 as follows:

14        (30 ILCS 105/5.545 new)
15        Sec.  5.545.   The  Senior  Citizen   Prescription   Drug
16    Discount Program Fund.

17        Section 999.  Effective date.  This Act takes effect July
18    1, 2001.

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