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Executive Summary

Pennsylvania's rebate revision bill for the state's Pharmaceutical Assistance Contract for the Elderly program has hit a snag: a drug utilization review provision that would require that DUR criteria be established through formal rulemaking. The state Senate adopted legislation in early July containing state Administration-accepted revisions to PACE's drug rebate program. However, the package also includes a provision that medical criteria used in drug utilization review cannot be used after July 1993 unless they have been subject to notice-and- comment rulemaking. Pennsylvania Gov. Casey (R) is said to have threatened to veto the bill due to the DUR provision. One state official contended that the notice-and-comment procedures were developed in preceding Administrations to impede the issuing of a surfeit of rules; thus, the procedure is time- consuming and cumbersome. He added that PACE already uses an outside advisory board to examine the DUR criteria and that the highly technical criteria probably do not lend themselves to general public comment. The revised bill must be voted on by the Pennsylvania House, which has recessed until Sept. 21 and might not take up the measure until after the November elections. This leaves PACE's rebate program in limbo: statutory authority for the rebate expired on June 30. State officials expect that the pending legislation will be retroactive to July 1. State officials had proposed a rebate revision plan to recoup price increases above the retail Consumer Price Index, with Jan. 1, 1992 as the baseline date for prices ("The Pink Sheet" Feb. 10, p. 4). One compromise accepted by the Casey Administration and included in the Senate-passed plan would use the Producer Price Index for the indexing instead. The state also proposed to raise the minimum rebate from the current 12.5% of average manufacturer's price to 15% beginning this July. The state additionally agreed to a six-month delay in implementing that increase. The state has sought the revisions because it claims that drug price increases are eroding the net savings yielded by the rebates. PACE currently is projecting that it will obtain drug rebates of $35 mil. for the fiscal 1992-93 year that began on July 1. The state's rebates for the previous year totaled $28.5 mil., with drug expenditures reaching $240 mil. PACE's tightly managed prospective DUR program has reduced drug claims for Upjohn's Halcion (triazolam) benzodiazepine product by 95% by generally limiting reimbursement to indications and dosages on the product's label ("The Pink Sheet" April 20, T&G-12). The program will be expanded in mid-August to include all hypnotic/sedatives, H[2]-receptor antagonist ulcer drugs and nonsteroidal anti-inflammatory drugs.

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