Massachusetts Budget Update: Commonwealth Now Waiting on Governor Baker

July 30, 2019 Alerts and Newsletters

On July 22, 2019, the Massachusetts House of Representatives ("House") and Senate Conference Committee ("Conference Committee") released the Commonwealth's $43.1 billion fiscal year 2020 budget bill ("H. 4000"). It passed the House unanimously and the Senate by 39-1. H. 4000 now heads to Governor Charlie Baker. Most important for pharmaceutical companies is the proposed initiative allowing MassHealth, the Commonwealth's Medicaid program, greater authority to negotiate supplemental rebates directly with pharmaceutical companies, in an effort to reduce prescription drug prices for MassHealth. However, Baker's proposed budget incorporated stronger prescription drug price controls than agreed to by the Conference Committee. For more detailed information on Baker's proposed budget, please read our previous alert.

Conference Committee Budget

The budget now before Baker is the product of a compromise between the House and Senate versions. The Conference Committee consists of six appointed members, three from the House and three from the Senate, who met over the course of three weeks to come to an agreed upon version. Much like the previous budget proposals, H. 4000 would allow MassHealth to directly negotiate with pharmaceutical companies for supplemental rebates on the prices of the most expensive prescription drugs used by the program based on the value, efficacy, or outcomes of the prescription drug, taking into account whether or not the pharmaceutical company currently offers discounts to MassHealth. If supplemental rebate negotiations between MassHealth and the pharmaceutical company fail and both sides cannot agree on a price for the prescription drug after rebates that is less than $25,000 per individual per year or that results in more than $10 million cumulatively for MassHealth per year, MassHealth may hold a public rate-setting process to create a target value for the prescription drug. MassHealth would refer the pharmaceutical company to the Health Policy Commission ("HPC") for further oversight if negotiations following the public rate-setting process are ineffective. Diverging from both Baker's and the Senate's respective proposed budgets, the HPC's review would occur in private and it would not refer the pharmaceutical company to the Office of the Attorney General for potential fines or prosecution under the Commonwealth's consumer protection laws.

Next Steps

Baker has 10 days to review and take action on H. 4000. Baker may approve or veto H. 4000 in its entirety, make line-item vetos, veto outside sections, or submit modifications as an amendment to H. 4000 for further consideration by the House and Senate. The final budget should be enacted soon—the Commonwealth has been operating without a fiscal year 2020 budget since the new fiscal year started on July 1, 2019.

Verrill Dana will analyze Baker's actions and the Commonwealth's final budget in more detail once it is released. For assistance with questions regarding the impact of the prescription drug provisions on pharmaceutical companies or if your organization would like to become directly involved in this conversation, please reach out to James Roosevelt, Andrew Rusczek, or your regular Verrill Dana attorney.

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