Section 39. (a) For the purposes of this section and section 40, the following words shall, unless the context clearly requires otherwise, have the following meanings:—

''Department,'' the department of elder affairs.

''Eligible person,'' a resident of the commonwealth who:

(1) is 65 years of age or older; or

(2) has a gross annual household income less than or equal to 188 per cent of the federal poverty level, does not work more than 40 hours per month and meets: (i) the disability requirements of the CommonHealth program, so-called, under clause (h) of subsection (2) of section 9A of chapter 118E, notwithstanding the income eligibility requirements under said clause (h); or (ii) the disability requirements of the CommonHealth program, so-called, under section 16 of said chapter 118E, notwithstanding the income eligibility requirements under said clause (h); or (iii) the disability requirements of the CommonHealth program, so-called, under section 16A of said chapter 118E; or

(3) was enrolled in the Pharmacy Program, so-called, or the Pharmacy Program Plus, so-called, as of March 31, 2001; and

(4) is not eligible for pharmacy benefits or coverage under said chapter 118E other than under said clause (h) of said subsection (2) of said section 9A, said section 16, or said section 16A of said chapter 118E.

''Enrollee,'' an eligible person who has applied and enrolled in the program established by this section.

''Enrollment,'' the process during which the program accepts and receives applications for the purpose of review, determination of eligibility and approval of applicants for entry into the program.

''Mail service program,'' a program to dispense prescription drugs by postal delivery service designated and administered by the department, and any entity with which it contracts, upon an enrollee's submission of a prescription and the applicable co-payment.

''Maintenance drug,'' a prescription drug prescribed to an individual for a chronic condition, the use of which is medically necessary for a consecutive period of 90 days or longer.

''Open Enrollment,'' a period of time as determined by the secretary during which the program accepts enrollment forms from eligible applicants age 66 or over who did not enroll during the period in which they were initially eligible.

''Out-of-Pocket Expenditures,'' the total amount paid by an enrollee to satisfy the applicable annual deductible and co-payments, not including monthly premiums.

''Pharmacy benefit manager,'' an entity under contract with the department, whether organized on a for-profit or a not-for-profit basis, contracted to manage the program established by this section.

''Program,'' the subsidized catastrophic prescription drug insurance program.

''Review commission,'' the prescription drug review commission.

''Secretary,'' the secretary of the department of elder affairs.

(b) The department shall administer a subsidized catastrophic prescription drug insurance program designed to provide eligible persons with prescription drug coverage. Said program shall be the payer of last resort for the provision of such outpatient prescription drug coverage. The program shall be actuarially sound. Enrollment in the program shall be voluntary and shall be funded each fiscal year, subject to appropriation, from the Tobacco Settlement Fund established by section 2XX of chapter 29. The program may apply on behalf of enrollees to obtain Transitional Assistance Program Medicare drug benefits pursuant to 42 U.S.C. sections 1395 et seq., but the program shall permit enrollees to decline before enrollment with a discount drug card sponsor; and the program shall not reduce a person's prescription drug benefit under this section.

(c) The secretary shall enter into a competitively procured contract with 1 or more entities including, but not limited to, a pharmacy benefit manager, to administer benefits under the program. The secretary shall take all necessary steps to ensure that the program is structured in a way that maximizes savings, efficiencies, affordability, benefits and coverage. The procurement shall explicitly be made a part of, or said contract shall be performed in conjunction with, the aggregate purchasing program established by section 271 of chapter 127 of the acts of 1999, or any successor statute. The department shall contract with entities to perform marketing, enrollment, billing, claims processing, claims management or any other function it deems necessary.

(d) No outpatient prescription drug shall be excluded from any formulary established for the program unless another outpatient prescription drug is available on said formulary that is therapeutically equivalent to the excluded outpatient prescription drug; but the secretary may establish a formulary that excludes certain outpatient prescription drugs or classes of outpatient prescription drugs upon said secretary's written determination, pursuant to subsection (r), that the exclusion is necessary to maintain the fiscal viability of the program. The review commission shall review and comment on the formulary and any changes thereto.

(e) Notwithstanding any general or special law to the contrary, the department shall, subject to appropriation, engage in outreach marketing efforts to maximize enrollment in the program for the purpose of spreading the risk, so-called, of the program established herein.

(f) Not later than 30 days prior to enrolling eligible persons in said program, and annually thereafter, the department shall establish a schedule of monthly premiums and annual deductibles based on a sliding income scale payable by enrollees whose gross annual household income is greater than 188 per cent of the federal poverty level. The department shall establish a separate schedule of monthly premiums and deductibles based on a sliding income scale payable by married applicants whose gross annual household income is greater than 188 per cent of the federal poverty level. The commonwealth shall be liable for the cost of the monthly premium and annual deductible established by the schedules for any and all enrollees whose gross annual household income is less than or equal to 188 per cent of the federal poverty level, unless the secretary determines in writing, pursuant to subsection (r), that requiring such enrollees to pay premiums or deductibles is necessary to maintain the fiscal viability of the program. Each enrollee shall separately pay the applicable monthly premium and annual deductible according to the applicable monthly premium and deductible schedule established by the secretary.

(g) The determination of eligibility for the program shall be based on an enrollee's gross annual household income. The department or its designee shall verify income for the program based on the submission of the most recently required federal income tax return for the household or, if an applicant is not required to file a return, the submission of copies of 1099 forms or other easily obtainable means of income verification. Residency shall be verified by the submission of such documentation as the department deems reasonable.

(h) After an enrollee satisfies his or her applicable out-of-pocket annual deductible amount, the program shall pay the costs of any outpatient prescription drug in excess of an enrollee's applicable co-payment amount. Subject to this section, the program shall pay the costs of all outpatient prescription drugs after an enrollee's out-of-pocket expenditures for outpatient prescription drugs exceed the lesser of (a) 10 per cent of such enrollee's gross annual household income; or (b) $2,000 in out-of-pocket expenditures made by an enrollee for co-payments and deductibles in a fiscal year. The plan shall pay the cost of all outpatient prescription drugs for married enrollee's who are both enrolled and residing in the same household after such enrollee's combined out-of-pocket expenditures for outpatient prescription drugs exceed the lesser of (a) 10 per cent of such married enrollee's combined gross annual household income; or (b) $3,000 in combined out-of-pocket expenditures made by such married enrollee's for co-payments and deductibles in a fiscal year. For purposes of this paragraph, out-of-pocket expenditures shall not include any amounts paid by an enrollee as a condition to receiving outpatient prescription drugs from any other source.

(i) Program enrollees shall be responsible for retail and mail service co-payments for each outpatient prescription as established by the secretary.

(j) Subject to this section, the department shall offer a mail service program and may require the use of a mail service program for maintenance drugs.

(k) In order to maintain the fiscal viability of the program, after the first 12 months of said program, cost sharing required of enrollees whose gross household income is greater than 188% FPL in the form of co-payments, premiums and deductibles, or any combination thereof, shall be adjusted annually by the department to reflect price trends for outpatient prescription drugs, as determined by the secretary. The review commission shall review the actuarial assumptions of such adjustments. Not later than 30 days prior to making any such adjustments, the secretary shall submit to the chairman of the senate and house committees on ways and means the reasons therefor and all actuarial assumptions and other supporting materials upon which such adjustments are based.

(l) During the initial 12–month period the program is in effect, an eligible person may enroll at any time, after which, application to the program shall be made during an open enrollment period established by the department, but a person shall be eligible to enroll in the program at any time within the year of reaching age 65. The department shall establish a surcharge for any eligible person whose gross annual household income is greater than 188 per cent of the federal poverty level and who fails to enroll within their first year of eligibility.

(m) Coverage shall be effective as of the date an application for enrollment is approved by the department. The secretary shall close enrollment or an established open enrollment period or modify premium and eligibility income levels upon a written determination by the secretary that program expenditures are projected to exceed the amount appropriated for the program or, based on not less than 9 months of claims and enrollment data for the current fiscal year, expenditures in the subsequent fiscal year are clearly projected to annualize beyond the expenditures projected by the department in the subsequent fiscal year.

(n) The department, and any entity with which it contracts, shall inform enrollees in writing of the program's scope, coverage, cost sharing requirements and any limitations on access to outpatient prescription drugs. The department shall create a process that provides for a clear and timely process by which enrollees can seek review of a decision by the department or any contracted entity to deny or limit coverage or benefits under this section.

(o) The appeal process shall, at a minimum, provide enrollees with the opportunity to (1) obtain a nonpreferred drug at the co-payment level of a preferred drug, or to obtain any prescription drug excluded by the program, upon the separate written certification by the enrollee's physician, satisfactory to the department, that the nonpreferred or excluded drug is medically necessary and there is no therapeutically equivalent preferred drug available to the enrollee on the formulary established for the program, and documentation, satisfactory to the department from the enrollee exhibiting that payment for such drug would create a financial hardship to said enrollee; (2) appeal the exclusion of any prescription drug from any formulary established for said program, upon the separate written certification by the enrollee's physician, satisfactory to the department, that the nonpreferred or excluded drug is medically necessary, that there is no therapeutically equivalent preferred drug available to the enrollee on the formulary established for the program, and documentation, satisfactory to the department, from the enrollee exhibiting that payment for such drug will create a financial hardship to said enrollee. An enrollee may apply to be exempt from any mail service requirement of the program upon a separate written certification by the enrollee's physician, satisfactory to the department, that due to a disability or other significant limiting factor, the use of such a mail service program would be medically inappropriate for the enrollee.

(p) A retail pharmacy shall not be required to dispense an outpatient prescription upon the failure of an enrollee to make the required co-payment.

(q) The secretary shall promulgate such rules and regulations as may be necessary to implement and administer the program.

(r) In the event that the secretary determines that the program is unsustainable and that modifications to the terms of the program are necessary to sustain the long term viability and cost effectiveness of the program, said secretary shall submit a report to the clerks of the house and senate and the prescription drug review commission certifying said determination and detailing necessary program modifications; provided, that not less than 30 days prior to implementing any such program modifications, said secretary shall issue public notification and convene a public hearing on any such findings and proposed changes. Notwithstanding this section, the secretary shall make necessary adjustments or rescind any modifications to the terms of the program, including to the program formulary or to the cost sharing required of low income enrollees, to the extent necessary to obtain federal financial participation or federal reimbursement for program expenditures.

(s) The secretary may negotiate with pharmaceutical companies in order to reduce the pricing or cost of prescription medications made available through the program. The secretary may adopt any tools or programs available to achieve reduced pricing or cost of prescription medications. Nothing included in this section shall preclude the secretary from negotiating with manufacturers on other initiatives that may benefit the program.