Under current state law, pharmacies and pharmacists that are certified
providers of medical assistance services are reimbursed for the provision of certain
prescription drugs to medical assistance (MA) recipients at a rate established by the
department of health and family services (DHFS). Under current federal law,
persons entitled to coverage under part B of medicare do not receive coverage for

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prescription drugs for outpatient care as a benefit. Also under current law, as
enacted in 1999 Wisconsin Act 9 (the biennial budget act), DHFS may not discount
the average wholesale price of pharmaceutical drugs provided to MA recipients if
DHFS reimburses for those drugs under a formula that takes into account the
average wholesale price, nor may DHFS reduce pharmacy dispensing fees.

Under current law, an individual who is 65 years of age or older is eligible to
receive MA if he or she meets certain income and asset requirements. Currently, to
satisfy the income requirements for MA eligibility, an individual who is 65 years of
age or older must have an income that does not exceed 133.33% of the maximum
payment amount under the former aid to families with dependent children (AFDC)
program.

Beginning January 1, 2001, this bill increases the maximum income level for
individuals 65 years of age or older to 100% of the federal poverty level.

The bill specifies that, beginning July 1, 2001, as a condition of participation
by a pharmacy or pharmacist in the MA program, the pharmacy or pharmacist may
not charge eligible persons an amount for certain prescription drugs for outpatient
care that exceeds the average wholesale price minus 5% or the maximum allowable
cost, as determined by DHFS, whichever is lower, for providing that drug, plus a
dispensing fee. Persons who are eligible for reduced charges are those who are at
least 65 years of age and ineligible for MA and who have incomes that do not exceed
185% of the federal poverty line. In order to purchase the drugs, eligible persons
must provide to pharmacies or pharmacists a card, issued by DHFS after a
determination of eligibility and payment of an annual enrollment fee of $25, and
must pay the pharmacy or pharmacist an annual deductible of $840 for drugs at the
reduced charge and a copayment of $10 for each generic drug and $20 for each drug
that is not a generic drug. Prescription drugs for which the reduced charges must
be made are those that are available as an MA benefit. DHFS must calculate and
transmit to pharmacies and pharmacists that participate in the MA program the
amounts that may be charged for providing the specified prescription drugs and
must periodically update this information and transmit the updated information to
pharmacies and pharmacists. DHFS must monitor compliance by pharmacies and
pharmacists with the requirement to charge low-income persons for the specified
prescription drugs at the reduced amounts and annually report to the legislature
concerning the compliance.

DHFS is authorized, under the bill, to enter with drug manufacturers into
rebate agreements, which are modeled on federal medicaid rebate agreements,
under which the manufacturer must make payments to the state treasurer for
deposit in the general fund for each of the manufacturer's drugs that is prescribed
under the program. The amount of the rebate payment under the agreement is
required to be determined by the method that is specified under the federal medicaid
rebate agreements. The amounts of the rebate payments must, in turn, together
with general purpose revenues, be paid by DHFS to pharmacies or pharmacists that
have reduced charges for prescription drugs for the eligible persons. In addition,
DHFS may not, after June 30, 2001, and before July 1, 2003, subject the prescription
drugs manufactured by manufacturers that enter into the rebate agreements to prior

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authorization requirements for prescription drugs for the eligible persons or to any
expansion of prior authorization requirements under MA.

DHFS is authorized to enter into a contract with an entity to perform DHFS'
duties and exercise its powers under the prescription drug assistance program.

DHFS must report to the legislature if federal law is changed to provide
coverage for outpatient prescription drugs as a benefit under medicare. The bill
appropriates $2,000,000 in general purpose revenues in fiscal year 2000-01 to DHFS
for administration of the program.