BIOLOGICAL DRUG PRODUCTS                                                              H.B. 4812 (S-1):

                                                                                                    SUMMARY OF BILL

                                                                                      REPORTED FROM COMMITTEE

House Bill 4812 (Substitute S-1 as reported)

Sponsor:  Representative John Bizon, MD

House Committee:  Health Policy

Senate Committee:  Health Policy

CONTENT

The bill would amend the Public Health Code to authorize a pharmacist to dispense an interchangeable biological drug product in lieu of a prescribed biological drug product, and require the pharmacist to retain an electronic record of the interchangeable product dispensed for two years.

Under the Code, when a pharmacist receives a prescription for a brand name drug product, the pharmacist may dispense a lower cost but not higher cost generically equivalent drug product if available at the pharmacy. The pharmacist must dispense a lower cost generic product, if available, upon a purchaser's request. In the case of such a substitution, the purchaser must be notified and the prescription label must indicate both the name of the brand prescribed and the name of the brand dispensed. If the dispensed drug does not have a brand name, the prescription label must indicate the generic name of the drug dispensed. Under the bill, a pharmacist also could substitute an interchangeable biological drug product for a prescribed biological drug product, subject to the same conditions.

The Code requires a pharmacist who dispenses a generically equivalent drug product to pass on the cost savings to the purchaser or, if applicable, to the third-party payment source. The Code also describes certain circumstances under which the pharmacist may not dispense a generically equivalent drug product. Under the bill, these provisions also would apply to a substitution involving an interchangeable biological drug product.

The bill would take effect 90 days after it was enacted.

MCL 333.17702 et al.                                                     Legislative Analyst:  Julie Cassidy

FISCAL IMPACT

Implementation of the legislation would result in reduced costs for the State and local governments as employers and for the State's Medicaid program.

State and Local Government:  According to a June 2015 white paper by Milliman, Inc. (a firm that provides actuarial services and products), as of 2013, insurance companies spent about $22 per member per month on biologics (biological drugs). Experience from Europe indicates that the price differential between biologics and biosimilar medications ranges from 10% to 30%; that is, the price of biosimilar drugs is 10% to 30% below the price of biologics. For the sake of this analysis, a 20% differential is assumed. The key question is how much substitution of biosimilars for biologics would occur. The evidence from Europe in the Milliman, Inc. report indicates that a 25% penetration rate is a reasonable estimate. Savings thus would be 20% on 25% of the costs or about 5% of total spending. Five percent of $22 per month is $1.10 per month or about $13 per individual per year, using 2013 data. Based on current

employment data, this would mean savings of $650,000 for State government (roughly half GF/GP), $800,000 for institutions of higher education, $1.3 million for local units of government, and $1.9 million for schools.

The bill would have no fiscal impact on the Department of Licensing and Regulatory Affairs, which houses the Michigan Board of Pharmacy.

Medicaid: There are no specific data on biologics in Medicaid. Based on the share of pharmaceutical costs in the general population, it appears that biologics represent about $200.0 million Gross of combined fee-for-service and managed care pharmaceutical costs. Savings of 5% of total spending (25% substitution times 20% cost savings) would be about $10.0 million Gross, $3.5 million GF/GP.

Long-Term Trends: The above figures are static estimates based on recent health care spending. There is a clear trend toward greater use of biologics and, if the legislation were enacted, there would be greater use of biosimilars in Michigan. In future years, whether or not the legislation is enacted, it is likely that use of biologics will increase significantly. Such an increase would increase the level of potential savings tied to the legislation.

Date Completed:  2-16-16                                                 Fiscal Analyst:  Steve Angelotti

Josh Sefton

This analysis was prepared by nonpartisan Senate staff for use by the Senate in its deliberations and does not constitute an official statement of legislative intent.