HOUSE BILL No. 1437
DIGEST OF INTRODUCED BILL
Citations Affected: IC 12-15.
Synopsis: Prior authorization of bronchial drugs. Prohibits a managed
care organization or the office of Medicaid policy and planning from
requiring prior authorization for a prescription drug that is: (1) used in
an outpatient setting; and (2) used to treat a life threatening acute
bronchial spasm condition.
Effective: July 1, 2005.
January 18, 2005, read first time and referred to Committee on Public Health.
First Regular Session 114th General Assembly (2005)
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HOUSE BILL No. 1437
A BILL FOR AN ACT to amend the Indiana Code concerning
Be it enacted by the General Assembly of the State of Indiana:
SOURCE: IC 12-15-35-28; (05)IN1437.1.1. -->
SECTION 1. IC 12-15-35-28, AS AMENDED BY P.L.28-2004,
SECTION 104, AND AS AMENDED BY P.L.97-2004, SECTION 51,
IS CORRECTED AND AMENDED TO READ AS FOLLOWS
[EFFECTIVE JULY 1, 2005]: Sec. 28. (a) The board has the following
(1) The adoption of rules to carry out this chapter, in accordance
with the provisions of IC 4-22-2 and subject to any office
approval that is required by the federal Omnibus Budget
Reconciliation Act of 1990 under Public Law 101-508 and its
(2) The implementation of a Medicaid retrospective and
prospective DUR program as outlined in this chapter, including
the approval of software programs to be used by the pharmacist
for prospective DUR and recommendations concerning the
provisions of the contractual agreement between the state and any
other entity that will be processing and reviewing Medicaid drug
claims and profiles for the DUR program under this chapter.
(3) The development and application of the predetermined criteria
and standards for appropriate prescribing to be used in
retrospective and prospective DUR to ensure that such criteria
and standards for appropriate prescribing are based on the
compendia and developed with professional input with provisions
for timely revisions and assessments as necessary.
(4) The development, selection, application, and assessment of
interventions for physicians, pharmacists, and patients that are
educational and not punitive in nature.
(5) The publication of an annual report that must be subject to
public comment before issuance to the federal Department of
Health and Human Services and to the Indiana legislative council
by December 1 of each year. The report issued
to the legislative
council must be in an electronic format under IC 5-14-6.
(6) The development of a working agreement for the board to
clarify the areas of responsibility with related boards or agencies,
including the following:
(A) The Indiana board of pharmacy.
(B) The medical licensing board of Indiana.
(C) The SURS staff.
(7) The establishment of a grievance and appeals process for
physicians or pharmacists under this chapter.
(8) The publication and dissemination of educational information
to physicians and pharmacists regarding the board and the DUR
program, including information on the following:
(A) Identifying and reducing the frequency of patterns of
fraud, abuse, gross overuse, or inappropriate or medically
unnecessary care among physicians, pharmacists, and
(B) Potential or actual severe or adverse reactions to drugs.
(C) Therapeutic appropriateness.
(D) Overutilization or underutilization.
(E) Appropriate use of generic drugs.
(F) Therapeutic duplication.
(G) Drug-disease contraindications.
(H) Drug-drug interactions.
(I) Incorrect drug dosage and duration of drug treatment.
(J) Drug allergy interactions.
(K) Clinical abuse and misuse.
(9) The adoption and implementation of procedures designed to
ensure the confidentiality of any information collected, stored,
retrieved, assessed, or analyzed by the board, staff to the board, or
contractors to the DUR program that identifies individual
physicians, pharmacists, or recipients.
(10) The implementation of additional drug utilization review
with respect to drugs dispensed to residents of nursing facilities
shall not be required if the nursing facility is in compliance with
the drug regimen procedures under 410 IAC 16.2-3-8 and 42 CFR
(11) The research, development, and approval of a preferred drug
(A) Medicaid's fee for service program;
(B) Medicaid's primary care case management program; and
(C) the primary care case management component of the
children's health insurance program under IC 12-17.6;
in consultation with the therapeutics committee.
(12) The approval of the review and maintenance of the preferred
drug list at least two (2) times per year.
(13) The preparation and submission of a report concerning the
preferred drug list at least two (2) times per year to the select joint
commission on Medicaid oversight established by IC 2-5-26-3.
(14) The collection of data reflecting prescribing patterns related
to treatment of children diagnosed with attention deficit disorder
or attention deficit hyperactivity disorder.
(15) Advising the Indiana comprehensive health insurance
association established by IC 27-8-10-2.1 concerning
implementation of chronic disease management and
pharmaceutical management programs under IC 27-8-10-3.5.
(b) The board shall use the clinical expertise of the therapeutics
committee in developing a preferred drug list. The board shall also
consider expert testimony in the development of a preferred drug list.
(c) In researching and developing a preferred drug list under
subsection (a)(11), the board shall do the following:
(1) Use literature abstracting technology.
(2) Use commonly accepted guidance principles of disease
(3) Develop therapeutic classifications for the preferred drug list.
(4) Give primary consideration to the clinical efficacy or
appropriateness of a particular drug in treating a specific medical
(5) Include in any cost effectiveness considerations the cost
implications of other components of the state's Medicaid program
and other state funded programs.
(d) Prior authorization is required for coverage under a program
described in subsection (a)(11) of a drug that is not included on the
preferred drug list.
(e) The board shall determine whether to include a single source
covered outpatient drug that is newly approved by the federal Food and
Drug Administration on the preferred drug list not later than sixty (60)
days after the date on which the manufacturer notifies the board in
writing of the drug's approval. However, if the board determines that
there is inadequate information about the drug available to the board
to make a determination, the board may have an additional sixty (60)
days to make a determination from the date that the board receives
adequate information to perform the board's review. Prior authorization
may not be automatically required for a single source drug that is newly
approved by the federal Food and Drug Administration, and that is:
(1) in a therapeutic classification:
(A) that has not been reviewed by the board; and
(B) for which prior authorization is not required; or
(2) the sole drug in a new therapeutic classification that has not
been reviewed by the board.
(f) The board may not exclude a drug from the preferred drug list
based solely on price.
(g) The following requirements apply to a preferred drug list
developed under subsection (a)(11):
(1) Except as provided by IC 12-15-35.5-3(b)
IC 12-15-35.5-3(c), through IC 12-15-35.5-3(d), the office or the
board may require prior authorization for a drug that is included
on the preferred drug list under the following circumstances:
(A) To override a prospective drug utilization review alert.
(B) To permit reimbursement for a medically necessary brand
name drug that is subject to generic substitution under
(C) To prevent fraud, abuse, waste, overutilization, or
(D) To permit implementation of a disease management
(E) To implement other initiatives permitted by state or federal
(2) All drugs described in IC 12-15-35.5-3(b) and
IC 12-15-35.5-3(c) must be included on the preferred drug list.
(3) The office may add a drug that has been approved by the
federal Food and Drug Administration to the preferred drug list
without prior approval from the board.
(4) The board may add a drug that has been approved by the
federal Food and Drug Administration to the preferred drug list.
(h) At least two (2) times each year, the board shall provide a report
to the select joint commission on Medicaid oversight established by
IC 2-5-26-3. The report must contain the following information:
(1) The cost of administering the preferred drug list.
(2) Any increase in Medicaid physician, laboratory, or hospital
costs or in other state funded programs as a result of the preferred
(3) The impact of the preferred drug list on the ability of a
Medicaid recipient to obtain prescription drugs.
(4) The number of times prior authorization was requested, and
the number of times prior authorization was:
(A) approved; and
(i) The board shall provide the first report required under subsection
(h) not later than six (6) months after the board submits an initial
preferred drug list to the office.
SOURCE: IC 12-15-35-46; (05)IN1437.1.2. -->
SECTION 2. IC 12-15-35-46 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2005]: Sec. 46. (a) This section
applies to a managed care organization that enters into an initial
contract with the office to be a Medicaid managed care organization
after May 13, 1999.
(b) Before a Medicaid managed care organization described in
subsection (a) implements a formulary, the managed care organization
shall submit the formulary to the office at least thirty-five (35) days
before the date that the managed care organization implements the
formulary for Medicaid recipients.
(c) The office shall forward the formulary to the board for the
board's review and recommendation.
(d) The office shall provide at least thirty (30) days notification to
the public that the board will review a Medicaid managed care
organization's proposed formulary at a particular board meeting. The
notification shall contain the following information:
(1) A statement of the date, time, and place at which the board
meeting will be convened.
(2) A general description of the subject matter of the board
(3) An explanation of how a copy of the formulary to be discussed
may be obtained.
The board shall meet to review the formulary at least thirty (30) days
but not more than sixty (60) days after the notification.
(e) In reviewing the formulary, the board shall do the following:
(1) Make a determination, after considering evidence and credible
information provided to the board by the office and the public,
that the use of the formulary will not:
(A) impede the quality of patient care in the Medicaid
(B) increase costs in other parts of the Medicaid program,
including hospital costs and physician costs.
(2) Make a determination that:
(A) there is access to at least two (2) alternative drugs within
each therapeutic classification, if available, on the formulary;
(B) a process is in place through which a Medicaid member
has access to medically necessary drugs; and
(C) the managed care organization otherwise meets the
requirements of IC 27-13-38.
(f) The board shall consider:
(1) health economic data;
(2) cost data; and
(3) the use of formularies in the non-Medicaid markets;
in developing its recommendation to the office.
(g) Within thirty (30) days after the board meeting, the board shall
make a recommendation to the office regarding whether the proposed
formulary should be approved, disapproved, or modified.
(h) The office shall rely significantly on the clinical expertise of the
board. If the office does not agree with the recommendations of the
board, the office shall, at a public meeting, discuss the disagreement
with the board and present any additional information to the board for
the board's consideration. The board's consideration of additional
information must be conducted at a public meeting.
(i) Based on the final recommendations of the board, the office shall
approve, disapprove, or require modifications to the Medicaid managed
care organization's proposed formulary. The office shall notify the
managed care organization of the office's decision within fifteen (15)
days of receiving the board's final recommendation.
(j) The managed care organization must comply with the office's
decision within sixty (60) days after receiving notice of the office's
(k) Notwithstanding the other provisions of this section, the office
may temporarily approve a Medicaid managed care organization's
proposed formulary pending a final recommendation from the board.
(l) A Medicaid managed care organization may not require
prior authorization for a prescription drug that is used:
(1) in an outpatient setting; and
(2) for the treatment of a life threatening acute bronchial
SOURCE: IC 12-15-35.5-3; (05)IN1437.1.3. -->
SECTION 3. IC 12-15-35.5-3 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2005]: Sec. 3. (a) Except as
provided in subsection (b) or (c),
the office may establish prior
authorization requirements for drugs covered under a program
described in section 1(a) of this chapter.
(b) The office may not require prior authorization for the following
single source or brand name multisource drugs:
(1) A drug that is classified as an antianxiety, antidepressant, or
antipsychotic central nervous system drug in the most recent
publication of Drug Facts and Comparisons (published by the
Facts and Comparisons Division of J.B. Lippincott Company).
(2) A drug that, according to:
(A) the American Psychiatric Press Textbook of
(B) Current Clinical Strategies for Psychiatry;
(C) Drug Facts and Comparisons; or
(D) a publication with a focus and content similar to the
publications described in clauses (A) through (C);
is a cross-indicated drug for a central nervous system drug
classification described in subdivision (1).
(3) A drug that is:
(A) classified in a central nervous system drug category or
classification (according to Drug Facts and Comparisons) that
is created after the effective date of this chapter; and
(B) prescribed for the treatment of a mental illness (as defined
in the most recent publication of the American Psychiatric
Association's Diagnostic and Statistical Manual of Mental
(c) The office may not require prior authorization for a
prescription drug that is used by a Medicaid recipient:
(1) in an outpatient setting; and
(2) for the treatment of a life threatening acute bronchial
Except as provided under section 7 of this chapter, a
recipient enrolled in a program described in section 1(a) of this chapter
shall have unrestricted access to a drug described in subsection (b).