H. B. 4084
(By Delegates Michael, Mezzatesta, Leach, Warner,
Foster, Varner and Stalnaker)
Originating in the Committee on
[January 20, 2004]
A BILL to amend the code of West Virginia, 1931, as amended, by
adding thereto a new article, designated §5A-3C-1, §5A-3C-2,
§5A-3C-3, §5A-3C-4, §5A-3C-5, §5A-3C-6, §5A-3C-7, §5A-3C-8,
§5A-3C-9, §5A-3C-10, §5A-3C-11, §5A-3C-12 and §5A-3C-13, all
relating to the creation of a pharmaceutical program for the
state, creation of a West Virginia pharmaceutical commission;
establishing members, responsibilities, pricing parameters for
pharmaceuticals, waiver procedures, state responsibilities,
pharmaceutical reporting requirements, civil and criminal
penalties, savings uses, rule making authority and sunset
Be it enacted by the Legislature of West Virginia:
That the code of West Virginia, 1931, as amended, be amended
by adding thereto a new article, designated §5A-3C-1, §5A-3C-2,
§5A-3C-3, §5A-3C-4, §5A-3C-5, §5A-3C-6, §5A-3C-7, §5A-3C-8,
§5A-3C-9, §5A-3C-10, §5A-3C-11, §5A-3C-12 and §5A-3C-13, all to read as follows:
ARTICLE 3C. PHARMACEUTICAL AVAILABILITY AND AFFORDABILITY ACT OF
The provisions of this article shall be known as and referred
to as the "West Virginia Pharmaceutical Availability and
(a) The Legislature finds:
(1) That the rising cost of prescription drugs has imposed a
significant hardship on individuals who have limited budgets, are
uninsured or who have prescription coverage that is unable to
control costs successfully due to cost shifting and disparate
(2) That the average cost per prescription for seniors rose by
forty-eight percent between nineteen hundred ninety-two and two
thousand, and is expected to continue increasing another seventy-
two percent by two thousand ten;
(3) That residents of West Virginia did not fill their
prescriptions or skipped doses of medicine in order to make their
prescriptions last longer causing them to suffer costly medical
consequences all due to their inability to pay; and
(4) That the current national and state free market system for
pharmaceuticals has failed and prevents all citizens of West Virginia from having affordable access to prescription drugs.
(b) In an effort to promote healthy communities and to protect
the public health and welfare of West Virginia residents, the
Legislature has determined that it is the responsibility of the
Legislature to make every effort to provide affordable prescription
drugs for all residents of West Virginia.
In this article:
(1) "Advertising or marketing" means any means of communication
of information either directly or indirectly that is paid for and
usually persuasive in nature about products, services or ideas
related to pharmaceuticals by identified sponsors through various
media, persons or other forms as further defined by legislative
(2) "AWP" or "average wholesale price" means the amount
determined from the latest publication of the Blue Book, a
universally subscribed pharmacist reference guide annually published
by the Hearst Corporation. "AWP" or "average wholesale price" may
also be derived electronically from the drug pricing database
synonymous with the latest publication of the Blue Book and
furnished in the National Drug Data File(NDDF) by First Data Bank
(FDB), a service of the Hearst Corporation.
(3) "Dispensing fee" is the fee charged by a pharmacy to
(4) "Drug manufacturer" means any entity (A) that is located
within or outside of West Virginia that is engaged in (i) the
production, preparation, promulgation, compounding, conversion, or
processing of prescription drug products either directly or
indirectly by extraction from substances of natural origin,
independently by means of chemical synthesis or (ii)the packaging,
repackaging, leveling, labeling, or distribution of prescription
drug products and (B) that elects to provide prescription drugs
either directly or indirectly in West Virginia. "Drug manufacturer"
does not include wholesale distributors or retail pharmacies
licensed in West Virginia.
(5) "Federal supply schedule" or "FSS" means the price
available to all federal agencies for the purchase of
pharmaceuticals authorized in the Veterans Health Care Act of 1992,
PL 102-585. FSS prices are intended to equal or better the prices
manufacturers charge their "most-favored" non-federal customers
under comparable terms and conditions.
(6) "Labeler" means an entity or person that receives
prescription drugs from a manufacturer or wholesaler and repackages
those drugs for later retail sale and that has a labeler code from
the federal food and drug administration pursuant to 21 C.F.R.
(7) "Person" shall mean any natural person or persons, or any
corporation, partnership, company, trust or association of persons.
(8) "Qualified entities" means those persons who have been
approved by the commission pursuant to section seven of this
(9) "Savings" means the difference between the previous price
of a prescription drug including any discounts, rebates or price
reductions and the current price after the effective date of this
article for the public employee insurance agency, children's health
insurance program, medicaid and worker's compensation programs.
(10) "Sole source" means a pharmaceutical that provides a
unique and powerful advantage available in the market to a broad
group of patients.
(11) "West Virginia pharmaceutical commission" or "commission"
means the commission created pursuant to section six of this
§5A-3C-4. Creation of program.
There is hereby created in the state a program to obtain
favorable pharmaceutical prices for state agencies and other
qualified entities pursuant to this article.
§5A-3C-5. Multi-state discussion group.
For the purposes of reviewing or amending this program
establishing the process for making pharmaceuticals more available
and affordable to the citizens of West Virginia, the state may
continue to enter into multi-state discussions and agreements. For
purposes of participating in these discussions, the state shall be represented by members of the commission created in section six of
§5A-3C-6. West Virginia pharmaceutical commission.
(a) There is hereby created the West Virginia pharmaceutical
commission which consists of the secretary of the department of
administration or his or her designee, the secretary of the
department of health and human services and his or her designee, the
executive director of the workers' compensation commission or his
or her designee, the commissioner of the bureau of senior services
or his or her designee and three members from the public who have
experience in the financing, development or management of a health
insurance company which provides pharmaceutical coverage. Public
members shall be appointed by the governor with the advice and
consent of the Senate. Each public member shall serve for a term
of four years. Of the members of the commission first appointed,
one shall be appointed for a term ending the thirtieth day of June,
two thousand six, and one each for terms of three and four years.
Each public member shall serve until his or her successor is
appointed and has qualified. Commission members may be removed by
the Governor for cause.
(b) The secretary of the department of administration shall
serve as chairperson of the commission, which shall meet at times
and places specified by the chairperson or upon the request of two
members of the commission.
(c) Commission members shall not be compensated in their
capacity as board members but shall be reimbursed for reasonable
expenses incurred in the performance of their duties.
(d) The commission has the authority to:
(1) Create a program pursuant to the provisions of this article
to obtain favorable rates and dispensing fees for pharmaceuticals
entering the state;
(2) Review, grant or deny waivers;
(3) Gather marketing reports required by this article;
(4) Prepare an analytical report on the effectiveness of the
pharmaceutical program with an analysis of savings, benefits and
problems associated with the program to be submitted biannually to
the joint committee on government and finance;
(5) Enter into cooperative agreements or contracts as are
necessary or proper to carry out the provisions and purposes of this
article, including the authority to enter into contracts with
similar plans in political subdivisions and other entities who
establish a similar program for the joint performance of common
(6) Determine the most effective mechanism to implement this
program through wholesalers either directly or through a rebate
(7) Provide recommendations to the Legislature on needed
legislative action and any other functions established by this article or requested by the joint committee on government and
finance of the Legislature;
(8) Contract with appropriate legal, actuarial and other
services required to accomplish any function within the authority
of the commission.
(9) Investigate the feasibility of purchasing prescription
drugs from sources in Canada, which may include the feasibility of
the state or an instrumentality thereof serving as a wholesale
distributor of prescription drugs in the state.
(A) Upon a determination by the commission that the same is
feasible and in the best interests of the citizens of the state, the
commission is authorized to pursue such waivers from the federal
government, including, but not limited to, from the United States
Food and Drug Administration, as are necessary for the state to
accomplish prescription drug purchasing from sources in Canada
provided however if such waiver is not granted the commission is
authorized to take whatever legal action may be necessary.
(B) Upon a favorable finding by the appropriate federal
agencies or courts notwithstanding any provision of this code to
the contrary the commission may establish and implement a
methodology to provide wholesale drugs to licensed pharmacies
located within West Virginia, provided however, prior to the
implementation, the Legislature must adopt a concurrent resolution
authorizing such action.
(10) Develop other strategies, as permitted under state and
federal law, aimed at managing escalating prescription drug prices
and increasing affordable access to prescription drugs for all West
Nothing contained herein shall be construed to limit the
ability of the various state agencies to enter into contracts or
arrangements for the purpose of managing pharmacy programs until
such time as the program created pursuant to this article is
(e) There is hereby created in the state treasury a special
revenue account which shall be designated and known as "the
pharmaceutical fund". The fund consists of all fees established
in this article and civil penalties exacted pursuant to this
article. Expenditures from the fund shall include reimbursement of
attorney fees and costs of legal actions initiated or entered into
on behalf of the commission excluding civil and criminal actions,
reasonable expenses of the commission, and all appropriations made
by the Legislature in accordance with the provisions of article
three, chapter twelve of this code and upon fulfillment of the
provisions of article two, chapter five-a of this code: Provided,
That for the fiscal year beginning the first day of July, two
thousand four, expenditures are authorized from deposits rather than
pursuant to appropriations by the Legislature.
(f) Administrative staff support for the commission shall be provided by the departments represented on the commission.
§5A-3C-7. Agreement requirements.
(a)(1) The amount paid for pharmaceuticals made available to
residents of West Virginia participating in state-run insurance
programs including the public employee insurance agency, the
medicaid program, the children's health insurance program and the
workers compensation program may not exceed prices listed on the
federal supply schedule plus a dispensing fee except in those cases
in which the commission has established different rates pursuant to
the provisions of this article. In order to participate in this
program, a pharmacy must maintain a policy of not excluding patients
whose health care coverage is provided pursuant to the West Virginia
public employees insurance act, the West Virginia children's health
insurance program, West Virginia medicaid program, or the West
Virginia workers' compensation program solely based on the fact that
the person's health care coverage is provided by any of the
aforementioned. Nothing in this article precludes the commission
from negotiating prices that are less than the FSS listed price.
For prescription drugs not listed on the FSS, the amount charged for
pharmaceuticals in West Virginia may not exceed the AWP less thirty
percent plus a dispensing fee. The commission may adjust this
percentage based on current market conditions.
(2) Qualified entities, including but not limited to, licensed
private insurers, self insured employers, free clinics and other entities who provide pharmaceuticals either directly or through some
form of coverage to the citizens of West Virginia shall have an
option to apply for participation in the program established by this
article in the form and manner established by the commission. The
commission, in its sole discretion, shall approve or deny
participation through review of documentation determined to be
necessary for full consideration and as established by rule. The
commission shall consider, but not be limited to, the fiscal
stability and the size of each applicant.
(3) Pharmaceutical manufacturers may request a waiver from the
FSS rates to be granted by the commission for a particular drug in
which the development, production, distribution costs, other
reasonable costs and reasonable profits, but exclusive of all
marketing and advertising costs as determined by the commission,
is more than the FSS rate of the pharmaceutical or in those cases
in which the pharmaceutical in question has a sole source. The
determination of reasonable costs and reasonable profits may
fluctuate between different pharmaceuticals under consideration by
the commission. The commission shall determine by legislative rule
fees to be paid by the applicant at the time a waiver request is
made and documentation required to be submitted at the time of the
(4) Pharmaceutical manufacturers of generic pharmaceuticals may
request a waiver from the FSS rates to be granted by the commission for a particular drug in which the development, production,
distribution costs, other reasonable costs and reasonable profits,
but exclusive of all marketing and advertising costs as determined
by the commission is more than the FSS rate of the pharmaceutical
or in those cases in which it is determined that there is an
incentive to provide a preferential price to a generic manufacturer
to increase utilization of generic pharmaceuticals by program
participants in an effort to further reduce overall costs.
(5) The Medicaid program and the West Virginia children's
health insurance program may be exempt from participation in this
program until approval by the Center for Medicare and Medicaid
Services has been granted if it is determined to be required by the
(6) The commission, in its sole discretion, may defer
implementation of the program established by this article based on
the extent of in-state and intra-state program participation and the
completion of negotiations required by this article.
§5A-3C-8. Civil and Criminal Violations Defined.
(a) The following are deemed to restrain trade or commerce
unreasonably and shall be unlawful:
(1) A contract, combination or conspiracy between two or more
(A) For the purpose or with the intent to fix, control, or
maintain the market price, rate or fee of pharmaceuticals; or
(B) Fix, control, maintain, limit or discontinue the
production, manufacture, sale or supply of pharmaceuticals, or the
sale or supply of pharmaceuticals, for the purpose of or with the
intent to fix, control or maintain the market price, rate or fee of
(C) Allocate or divide customers or markets, functional or
geographic, for any pharmaceutical.
(2) The establishment, maintenance or use of a monopoly or an
attempt to establish a monopoly of trade or commerce, any part of
which is within this state, by any persons for the purpose of or
with the intent to exclude competition or control, fix or maintain
(b) Any person violating the provisions of this section is
guilty of a felony, and, upon conviction thereof, shall be confined
in a state correctional facility for not less than one nor more than
ten years, or fined not less than one hundred million dollars, or
(c) Any person violating the provisions of this section is
liable for a civil penalty of not less than one hundred million
dollars for each violation.
(d) The county prosecutor shall investigate suspected
violations of, and institute criminal proceedings pursuant to the
provisions of this section.
(e) The attorney general or special counsel appointed by the governor, in his or her discretion, shall represent the state in all
civil proceedings brought on behalf of the state to enforce the
provisions of this section. After payment of all attorney fees and
costs, no less than fifty percent of all judgments or settlements
shall be placed in the pharmaceutical fund created in this article.
§5A-3C-9. Marketing costs.
(1) Advertising and marketing costs for prescription drugs in
this state must be reported to the commission by all manufacturers
and labelers of prescription drugs dispensed in this state that
employs, directs or utilizes marketing representatives. The
reporting shall assist this state in its role as a purchaser of
prescription drugs and an administrator of prescription drug
programs, enabling this state to determine the scope of
prescription drug marketing costs and their effect on the cost,
utilization and delivery of health care services and furthering the
role of this state as guardian of the public interest.
(2) The commission shall establish by legislative rule the
reporting requirements of information by labelers and manufacturers
which shall include, but not be limited to, the following:
(A) All expenses associated with advertising, marketing and
direct promotion of prescription drugs through radio, television,
magazines, newspapers, direct mail and telephone communications as
they pertain to residents of this state;
(B) All expenses associated with educational or informational programs, materials and seminars and remuneration for promoting or
participating in educational or informational sessions, regardless
of whether the manufacturer or labeler provides the educational or
informational sessions or materials;
(C) All remuneration provided to health care providers for
providing or prescribing a specific drug that is not in a bona fide
(3) The commission is further authorized to establish time
lines, the documentation, form and manner of reporting required and
exemptions from advertising and marketing requirements as the
commission determines necessary to effectuate the purpose of this
article. The commission shall report to the joint committee on
government and finance in an aggregate form the information provided
in the required reporting.
(4) Notwithstanding any provision of law to the contrary,
information submitted to the commission and governor pursuant to
this section is confidential and is not a public record and is not
available for release pursuant to the West Virginia freedom of
information act. Data compiled in aggregate form by the commission
for the purposes of reporting required by this section is a public
record as defined in the West Virginia freedom of information act,
as long as it does not reveal trade information that is protected
by state or federal law.
(5) This section may be enforced in a civil action brought by the governor. A manufacturer or labeler that fails to provide a
report as required by this section commits a civil violation for
which a fine of ten thousand dollars per violation plus costs and
attorney's fees may be adjudged.
§5A-3C-10. State role.
(a) For purpose of implementing this article, the state
represented by the commission shall have authority to negotiate
pharmaceutical prices to be paid by program participants. These
negotiated prices shall be available to all program participants.
(b) Each pharmacy participating in the program may be eligible
for a rebate in an amount to be determined by the commission for the
purpose of preventing any loss of income by pharmacies for program
The commission may promulgate emergency rules pursuant to the
provisions of section fifteen, article three, chapter twenty-nine-a
of this code to implement any section of this article.
§5A-3C-12. Sunset provision.
The commission shall continue to exist, pursuant to the
provisions of article ten, chapter four of this code, until the
first day of July, two thousand eight, unless sooner terminated,
continued or reestablished pursuant to the provisions of that
§5A-3C-13. Potential use of savings.
Savings identified by all program participants shall be
quantified and certified to the commission and to the Legislature.
Savings, or any part thereof, created by the implementation of this
program may, in the sole discretion of the Legislature, be directed
towards the maintenance of existing state health programs and the
expansion of insurance programs for the uninsured and underinsured.