The second meeting of the interim Prescription Drug Issues Committee was called to order by Chair Representative Phyllis Heineman at 9:00 a.m., August 7, 2001, in LCR 1 & 2 of the State Capitol, Pierre, South Dakota.

A quorum was determined with the following members answering the roll call: Senators Kenneth Albers and Ed Olson; and Representatives Julie Bartling, Jarvis Brown, Larry Frost, Tom Hansen, Jim Hundstad, Frank Kloucek, Claire Konold, Casey Murschel, David Sigdestad, Dale Slaughter, and Phyllis Heineman. Representatives Jean Hunhoff and Donald Van Etten were unable to attend.

Staff members present included Jacque Storm, Principal Staff Attorney, and Phyllis Petersen, Senior Legislative Secretary.

A list of guests present during all or part of the meeting is on file with the master minutes.

(NOTE: For sake of continuity, the following minutes are not necessarily in chronological order. Also, all referenced documents are on file with the Master Minutes.)

A document containing graphs from Kelly Marshall's presentation from the June meeting was distributed to committee members (Document 1).

Ms. Jill Wellhouse, Administrator of Catastrophic County Poor Relief, Department of Social Services, testified that the county's responsibility for paying an individual's medical expenses is limited by statute to the payment of emergency hospital bills. All other medical expense payments, including prescription drugs, are optional for each county. Because a lack of needed prescription drugs may result in costly hospital stays, the counties often pay for prescription drugs. In order for a county to pay medical expenses on behalf of an individual, the individual must be eligible for county poor relief and must have limited ability or no ability to pay for the cost of care. In a survey done by the South Dakota Association of County Commissioners, thirty-three counties reported spending a total of $434,000 for prescription drugs in 2000. The counties with the highest expenditures were: Pennington - $197,000, Minnehaha - $89,000, Codington - $36,000, Roberts - $28,000, and Yankton - $18,000. The people who received help were the elderly, the disabled, and the working poor. The county typically authorizes the pharmacy to fill the prescription for individuals eligible for county assistance. The county may also work with the client and the prescribing physician to obtain medication through the drug manufacturers' indigent drug program.

In response to committee questions, Ms. Wellhouse said there are no age limits under the indigent drug program and that pharmacy costs are paid at the Medicaid rate. She informed the committee of a website entitled needymeds.com which has a list of companies that assist people who cannot afford to buy the drugs they need (Document 2).

Mr. Harvey C. Jewett, Chair of Jewett Drug Company, testified that there is no nice clean chart of drug pricing. Average wholesale price (AWP) is the manufacturer's suggested price, but it is not the actual wholesale price. The highest price that his company charges is actual cost plus one percent. If they sell to a retail pharmacy, they receive a two-percent rebate from the drug manufacturers. All pricing is done by rebate. Price increases do not come from retail druggists but from drug manufacturers. He urged the committee to look at a formulary for everyone in the state of South Dakota. Formulary rebates reduce the price of drugs to what is charged in the rest of the world or to the price obtained by hospitals and mail order pharmacies. He pointed out that the computer network is in place now, making it possible to communicate with manufacturers. He also stated that drug manufacturers are spending 300 percent more on advertising than on research and development.

Mr. Bill Ladwig, R.Ph., Pharmacy Director, Lewis Drug Stores, said that education is key. People need to become better educated about the prescriptions they take, the side effects of the medication, as well as the cost. With co-pays, people often do not know the cost of their prescriptions. A tiered system helps people understand costs because there are different co-payments for generics, preferred drugs, non-preferred drugs, and convenience medications. He also noted that proper management and utilization are important.

Ms. Ruth Krystopolski, Executive Director, Sioux Valley Health Plan, testified that they are the only Medicare + Choice provider in the state. Significant changes in Medicare occurred with the passage of the Balanced Budget Act of 1997; there was more managed care and fewer dollars for providers. In 1999 the Balanced Budget Relief Act was enacted, which provided additional payments to providers and increased the floor for AAPCC payments. AAPCC is the Average Adjusted Per Capita Cost for providing Medicare services to a beneficiary. This cost is set on a county basis by looking at the historical cost of providing services in that county. Average cost is determined by the number of units of services used multiplied by the cost of providing the service. Areas where the historical costs of services are low, where the number of units of service used are low, and where services are not readily accessible have lower AAPCC payments. It is more difficult to provide supplemental benefits in these areas. Where payment rates are higher, supplemental benefits, like prescription drugs, are added. In response to committee questions, she said Medicare + Choice is available in twenty counties in South Dakota, Minnesota, and Iowa; thirteen of these counties are in southeastern South Dakota (Document 3).

Mr. Richard Cauchi, Program Manager, Pharmaceuticals Project, Health Care Program, National Conference of State Legislatures, testified (via telephone) that the cost of prescription drugs is a very active topic and many states are proposing legislation to address the problem. He said that the Medicaid programs in all fifty states provide pharmaceuticals, most with cost containment programs, and twenty-four states provide subsidies for pharmacy assistance to seniors. He then turned to state experiments with discounts and pricing. These discount-pricing programs are not subsidies but allow Medicare enrollees to buy at the Medicaid discounted price. Many states are proposing measures to lower the cost of prescription drugs to broader segments of residents through discount programs, bulk purchasing programs, expanded manufacturer rebates, price negotiations, or price controls (Documents 4, 5, 6, and 7).

Mr. David Gross, Senior Policy Advisor, AARP Public Policy Institute, Washington D.C., stated that the Public Policy Institute conducts policy research and analysis in the areas of health, economics, long-term care, and consumer protection for mid-life and older persons. Prescription drugs are an important part of medical treatment but Medicare does not pay for outpatient prescription drugs. Lack of drug coverage threatens beneficiaries' access to needed medications and can also affect state budgets. The federal government and many states are looking for ways to increase access to needed prescription drugs. Some of the state approaches designed to help residents pay for prescription drugs include price reduction and buying pool programs, direct benefit programs, pharmacy assistance programs, and income tax credits for Medicare beneficiaries. He gave the committee a list of key issues to consider in designing a state pharmacy assistance program (Documents 8, 9, and 10).

Mr. Jim Stephens, R. Ph., Vilas Pharmacies, explained that the Pierre Pilot Project is a cooperative effort between the retail pharmacies and physicians in Pierre and the South Dakota Bureau of Personnel. The program provides state employees and their families with prescription services using techniques and practices that are cost effective to the state. A pharmacy and therapeutics committee, consisting of local pharmacists and physicians, developed a list of frequently prescribed drugs and a protocol for prescribing drugs. The program was implemented and resulted in significant savings. This program is now being expanded to six more cities in South Dakota and may be expanded to include the Medicaid program as well as other in-state agencies (Document 11).

Ms. Jo Prang, R. Ph., Medicap Pharmacies, Rapid City, told the committee of her experience as a pharmaceutical case manager. Case managers identify, prevent, and resolve adverse events related to medications. It is estimated that these services could save Medicaid $6.3 billion annually (Document 12).

Dr. Michael C. Rost, President, Health Care Medical Technology, Inc., said that the South Dakota state employee health plan has in place a disease management program for high-risk pregnancies and will have a cardiac disease management program starting soon. Last year 3,500 state employees took part in health screenings; this year it is hoped 7,000 employees will participate.

Mr. Dean Krogman, South Dakota Medical Association, provided the committee with information on a quality care management program and how it saves money. He also furnished information on South Dakota's ethical guidelines for physicians and the American Medical Association's ethical guidelines (Documents 13, 14, 15, and 16).

Dr. Jerry Walton, Medical Director of the Sioux Valley Health Plan, said that physicians prescribe a drug because it the best for the patient, not because of any influence from drug companies. Drug companies educate physicians on new drugs but doctors do not know the price of drugs. He said that drug samples are an important part of a practice. Drug company representatives must log in all samples and remove any that become outdated. Doctors record the patient's name and the drug name with the lot number in case of a recall. Most doctors use samples to test a drug's effectiveness for a patient. Some samples are given to indigents for the entire length of the prescription. He stated that disease management is a team approach and doctors need to be the leaders on the team.

Ms. Lynn Thomas, Health Services Director for Sioux Valley Health Plan (SVHP), discussed disease management programs. Clinical physicians, nurses, and pharmacists work together in disease management programs to provide quality care for all patients. SVHP has management programs for diabetes, heart disease, migraines, adolescent health, healthy pregnancy, home health, and hypertension. She distributed a newsletter from the Health Plan Pharmacy and Therapeutics Committee (Document 17).

The committee suggested the following topics for discussion at the next meeting: any disease management programs offered by the Departments of Health and Social Services; utilizing, expanding, or streamlining the Rx Access program; the group or groups in need of assistance; and disparity in international prices of pharmaceutical drugs. In addition, Professor Stephen Schondelmeyer was suggested as a potential speaker at the next meeting.

Chair Heineman said the next meeting will be held in mid-September.

Chair Heineman adjourned the meeting at 4:35 p.m.