H. B. 4084

(By Delegates Michael, Mezzatesta, Leach, Warner,

Foster, Varner and Stalnaker)

( Originating in the Committee on Finance)

[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 provisions.

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:

§5A-3C-1. Title
The provisions of this article shall be known as and referred to as the "West Virginia Pharmaceutical Availability and Affordability Act".
§5A-3C-2. Purpose.
(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 pricing policies;
(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.
§5A-3C-3. Definitions.
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 rule.
(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 dispense pharmaceuticals.
(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. §207.20 (1999).
(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 article.
(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 article.
§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 this article.
§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 administrative functions;
(6) Determine the most effective mechanism to implement this program through wholesalers either directly or through a rebate program;
(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 Virginia citizens. 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 implemented.
(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 waiver request.
(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 commission.
(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 persons:
(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 pharmaceuticals; or
(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 pharmaceutical prices.
(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 both.
(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 clinical trial.
(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 participation.
§5A-3C-11. Rulemaking.
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 article.
§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.