H. B. 3164

(By Mr. Speaker, Mr. Thompson, and Delegate Armstead)

[By Request of the Executive]

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[Introduced February 21, 2007;

referred to the Committee on Finance.]

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A BILL to repeal §5-16-7b of the Code of West Virginia, 1931, as amended; to repeal §5-16C-1, §5-16C-2, §5-16C-3, §5-16C-4, §5-16C-5, §5-16C-6, §5-16C-7, §5-16C-8, §5-16C-9, and §5-16C-10 of said code; to repeal §5A-3-1a of said code; to repeal §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, §5A-3C-13, §5A-3C-14, §5A-3C-15, §5A-3C-16 and §5A-3C-17 of said code; and to amend said code by adding thereto a new article, designated §16-43-1, §16-43-2, §16-43- 3, §16-43-4, §16-43-5, §16-43-6, §16-43-7, §16-43-8, §16-43-9, §16-43-10, §16-43-11, §16-43-12, §16-43-13, §16-43-14, §16-43- 15, §16-43-16, and §16-43-17, all relating generally to pharmaceutical availability and affordability; legislative findings; defining certain terms; creating the position of the Pharmaceutical Advocate ; continuing the West Virginia Pharmaceutical Cost Management Council; establishing powers and duties; exempting the Pharmaceutical Advocate from state purchasing requirements; authorizing the Pharmaceutical Advocate to take advantage of acts of Congress, accept gifts, grants and matching funds; continuing interim agency management ability; requiring manufacturers and labelers to report certain marketing, advertising, and promotional costs to the Pharmaceutical Advocate; requiring participation by all state agencies who are payors for prescription drugs; providing authority for the secretary of each department to cooperate with the Pharmaceutical Advocate in the purchase of prescription drugs; authorizing the Pharmaceutical Advocate to establish programs permitting participation in a preferred drug list by private individuals, commercial insurance carriers and self-insured companies; and providing for rule- making authority.

Be it enacted by the Legislature of West Virginia:
That §5-16-7b of the Code of West Virginia, 1931, as amended, be repealed; that §5-16C-1, §5-16C-2, §5-16C-3, §5-16C-4, §5-16C-5, §5-16C-6, §5-16C-7, §5-16C-8, §5-16C-9, and §5-16C-10 of said code be repealed; that §5A-3-1a of said code be repealed; that §5A-3C-1, §5A-3C-2, §5A-3C-3, §5A-3C-4, §5A-3C-5, §5A-3C-6, §5A-3C-7, §5A-3C-8, §5A-3C-9, §5A-3C-10, §5A-3C-11, §5A-3C-12, §5A-3C-13, §5A-3C-14, §5A-3C-15, §5A-3C-16 and §5A-3C-17 of said code be repealed; and that said code be amended by adding thereto a new article, designated §16-43-1, §16-43-2, §16-43-3, §16-43-4, §16-43-5, §16-43-6, §16-43-7, §16-43-8, §16-43-9, §16-43-10, §16- 43-11, §16-43-12, §16-43-13, §16-43-14, §16-43-15, §16-43-16, and §16-43-17, all to read as follows:

ARTICLE 3C. PHARMACEUTICAL AVAILABILITY AND AFFORDABILITY ACT OF

2007.
§16-43-1. Title.
The provisions of this article shall be known as and referred to as the "Pharmaceutical Availability and Affordability Act of 2007."
§16-43-2. Legislative findings and declarations.
The Legislature hereby finds and declares: (1) That the rising cost of prescription drugs is one of the most critical issues facing the current health care system in the State of West Virginia;
(2) That these rising costs have imposed a significant hardship on those individuals who have limited budgets, are uninsured, or who have prescription coverage that is unable to effectively control costs;
(3) That the average cost per prescription for seniors rose significantly between one thousand nine hundred ninety-two and two thousand seven, and is expected to continue to increase significantly at least through two thousand ten;
(4) That State government agencies could achieve significant savings through the coordinated purchase of prescription drugs;
(5) That there is an increasing need for the citizens of West Virginia to have affordable access to prescription drugs;
(6) That in two thousand four, the Legislature established the Pharmaceutical Cost Management Council and directed the Council to recommend measures to decrease the rising costs of prescription drugs;
(7) That the Pharmaceutical Cost Management Council subsequently recommended that the position of Pharmaceutical Advocate be created to coordinate all Executive Branch entities' activities, practices, and policies relating to prescription drugs;
(8) That pursuant to Executive Order No. 18-04, the position of Pharmaceutical Advocate was created within the Office of the Governor;
(9) That a number of recent federal and state initiatives also have attempted to address the rising costs of pharmaceutical drugs and increase the accessibility of citizens to such vital drugs, including:
(A) the expansion of primary care clinics offering pharmaceuticals under a 340b Drug Pricing Program pursuant to the Veterans Health Care Act of 1992, Pub. L. No. 102-585, 106 Stat. 4943 (1992);
(B) the creation of the Medicaid Preferred Drug List pursuant to section fifteen, article five, chapter nine of this code;
(C) the enactment of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173, 117 Stat. 2066 (2003);
(D) the consolidation of certain prescription drug purchasing agreements between state agencies; and
(E) the Public Employees Insurance Agency's development of a 340b Drug Pricing Program pilot project; and
(9) That in addition to any savings that may be realized by such recent initiatives, the Legislature's attempt to lower the cost of prescription drugs would be furthered by codifying the position of Pharmaceutical Advocate and investing said position with certain statutory powers originally granted the Pharmaceutical Cost Management Council and the Public Employees Insurance Agency, thereby creating a single, identifiable leader in the State's effort to bring affordable prescription drugs to her people.
§16-43-3. Definitions.
In this article:
(1) "Drug manufacturer" or "pharmaceutical manufacturer" means an entity engaged in: (A) The production, preparation, propagation, compounding, conversion or processing of prescription drug products by extraction from substances of natural origin, or independently by means of chemical synthesis or by a combination of extraction and chemical synthesis; or (B) in the packaging, repackaging, labeling, relabeling or distribution of prescription drug products. "Drug manufacturer" or "pharmaceutical manufacturer" does not include a wholesale distributor of drugs or a retail pharmacy licensed under state law.
(2) "Labeler" means an entity or person that has a labeler code from the Food and Drug Administration pursuant to 21 C.F.R. §207.20 (1999) and receives prescription drugs from a manufacturer or wholesaler and repackages those drugs for retail sale.
(3) "Marketing, advertising, and promotional costs" means those costs subject to the reporting requirements of section fifteen of this article;
(4)"Office of the Pharmaceutical Advocate" or "office" means the office created pursuant to section four of this article.
(5) "Person" means any natural person or persons or any corporation, partnership, company, trust or association of persons.
(6) "Pharmaceutical Advocate" or "advocate" means the position created pursuant to section four of this article.
(7) "Pharmacy benefit management contract" means a contract entered into with an entity that procures prescription drugs at a negotiated rate under a contract and which may serve as a third party prescription drug benefit administrator.
(8) "Prescription drug purchasing agreement" means a written agreement to pool all parties' prescription drug buying power in order to negotiate the best possible prices.
(9) "Prescription drugs" mean substances recognized as drugs in the official "United States Pharmacopoeia, Official Homeopathic Pharmacopoeia of the United States or National Formulary," or any supplement thereto, dispensed pursuant to a prescription issued by an authorized health care practitioner, for use in the diagnosis, cure, mitigation, treatment or prevention of disease in a human, as well as prescription drug delivery systems, testing kits and related supplies.
(10) "Sole source" means a pharmaceutical that provides a unique and powerful advantage available in the market to a broad group of patients established under federal law.
(11) "State payors" means the Public Employees Insurance Agency, the Children's Health Insurance Program, the Division of Corrections, the Division of Juvenile Services, the Regional Jail and Correctional Facility Authority, state colleges and universities, public hospitals, state or local institutions such as nursing homes, veterans' homes, the Division of Rehabilitation, public health departments, the Bureau of Medical Services, the State Police, or any other state program which is a payor for prescription drugs.
(12) "West Virginia Pharmaceutical Cost Management Council" or "council" means the council continued pursuant to section ten of this article.
§16-43-4. Creation of Office of Pharmaceutical Advocate; appointment of Advocate; term of office, reports; qualifications; oath.

(a) There is hereby created the Office of Pharmaceutical Advocate.
(b) The office shall be under the supervision of the Pharmaceutical Advocate. The advocate shall be appointed by the Governor, with the advice and consent of the Senate, and shall hold office subject to the will and pleasure of the Governor. The advocate shall be selected with consideration to training and experience in issues relating to health care and prescription drug costs.
(c) The advocate shall devote his or her entire time to the duties of his or her office and may not be a candidate for, nor hold, any other public office or trust nor be a member of a political committee.
(d) The advocate, before entering upon the duties of office, shall take and subscribe to the oath prescribed in section five, article IV of the Constitution of West Virginia. The executed oath shall be filed with the Secretary of State.
(e) The advocate shall report directly to the Governor or the Governor's designee.
(f) All employees of the office shall be covered by the policy and procedures of the classified-exempt service protection policies of the Division of Personnel.
§16-43-5. Participation by state payors.
( a) Notwithstanding any provision of this code to the contrary, the advocate shall be the sole source for the management, negotiation, and purchase of all prescription drugs for all state payors: Provided, That the Bureau for Medical Services and the Children's Health Insurance Program may be temporarily exempt from the requirements of this section, pending any necessary approval by the United State Department of Health and Human Services' Center for Medicare and Medicaid Services: Provided further, That any contract or agreement negotiated and executed by the advocate on behalf of the Bureau of Medical Services shall contain all terms and conditions necessary to comply with the provisions of Title XIX of the Social Security Act, 42 U.S.C. §1396 et seq., dealing with pharmacy services offered to recipients under the medical assistance plan of West Virginia.
(b) All state payors shall cooperate with the advocate to meet the requirements of this article: Provided, That no action of the advocate shall encumber greater than five percent of the state share of the annual funds appropriated to any one department, agency, division, or board without prior approval of the secretary, executive director, commissioner, or other chief officer with authority over that department, agency, division, or board. Intergovernmental agreements shall be developed to establish the responsibilities of each entity in dealing with the provision of pharmaceuticals.
(c) For the purpose of implementing this article, the advocate shall have the authority to negotiate pharmaceutical prices to be paid by all state payors, which shall have the authority to participate in any program developed by the advocate, including but not limited to, a uniform preferred drug list.
 §16-43-6. Powers and duties, annual report.
(a)The office shall have the following powers and duties:
(1) To purchase or enter into contracts or agreements pursuant to the provisions of section seven of this article;
(2) To sue and be sued, to plead and be impleaded;
(3) To evaluate, renegotiate, and amend existing contracts relating to state purchase of prescription drugs to achieve cost savings, including but not limited to pharmacy benefit management contracts : Provided, That in renegotiating existing contracts involving a department, agency, division, or board, the advocate shall include the secretary of the department or the executive director, commissioner or other chief officer of the agency, division, commission or board which is the party to the contract in all negotiations;
(4) To negotiate and execute pharmacy benefit management contracts for the purpose of managing rising costs for this state and all parties which have executed prescription drug purchasing agreements with the state or any state payor;
(5) To ensure disclosure by drug manufacturers and labelers of expenditures for marketing, advertising and promotional costs in accordance with the provisions of section fifteen of this article;
(6) To make recommendations to the Governor and the Legislature regarding strategies that could more effectively control the costs of prescription drugs in West Virginia;
(7) To issue grants to achieve the goals of this article, including the initiation, evaluation and promotion of strategies that may result in reduced costs of prescription drugs; and
(8)To evaluate, develop, and implement other programs, projects and initiatives to achieve the purposes of this article, including, but not limited to:
(A) A streamlined prior authorization process for state insurers; and
(B) Patient assistance programs in their current forms, as well as new programs, such as central fill pharmacy/bulk replenishment models;
(b) On or before the first day of January of each year, the advocate shall submit an annual report to the Governor and the Legislature Oversight Commission on Health and Human Resources Accountability on the condition, operation, and functioning of the office.
§16-43-7. Authorization to execute prescription drug purchasing
agreements.
(a) The advocate may execute, subject to the review and advice of the West Virginia Pharmaceutical Cost Management Council in accordance with the provisions of subsection (b) of this section and as permitted by applicable federal law, prescription drug purchasing agreements on behalf of the state and all state payors with:
(1) The governments of other states and jurisdictions and their individual departments, agencies, authorities, institutions, programs, quasi-public corporations and political subdivisions; (2) Cooperative purchasing agreements, alliances or consortia in accordance with the provisions of section twelve of this article ; and
(3) Entities in the private sector, including, commercial insurance carriers, self-funded benefit plans and not-for-profit health care organizations: Provided, That the advocate may also execute agreements with private entities which are designed to permit the combined purchasing of health care services, health care management services, pharmacy benefits management services or pharmaceutical products: Provided however, That no private entity may be compelled to participate in any prescription drug purchasing pool established under this article.
(b) The council shall review any proposed contract authorized by this article before it is executed by the advocate and advise the advocate as to whether the contract furthers the purposes of this article and effectively manages the costs for the state payors involved: Provided, That the council shall complete its review of any proposed contract within fifteen days of receipt of the contract for review: Provided further, That if any information relied on by the council during the course of deliberations on any proposed contract involves matters of commercial competition, the council may conduct such deliberations in executive session in accordance with the provisions of section four, article nine-a, chapter six of this code until the commercial competition has been finalized and completed .
(c) The advocate may not execute any agreement that grants the state's credit for the purchase of prescription drugs by any entity other than this state.
§16-43-8. Audit required; reports.

On an annual basis, the advocate shall cause to be conducted an audit by an independent certified public accountant of all books, accounts, and records relating to all expenditures made pursuant to any prescription drug purchasing agreement or pharmacy benefit management contract executed under the provisions of this article. The advocate shall submit the audit to the Joint Committee on Government and Finance and the Legislative Oversight Commission on Health and Human Resources Accountability on or before the thirty-first day of December of each year.
§16-43-9. Exemption from Purchasing Division requirements.

The provisions of article three, chapter five-a of this code shall not apply to any agreement or contract executed under the provisions of this article: Provided, That any contract or agreement executed under the provisions of this article shall be approved as to form by the Attorney General.
§16-43-10. Continuation of the West Virginia Pharmaceutical

Cost Management Council; appointment of members; chairperson; reimbursement for expenses.

(a) The West Virginia Pharmaceutical Cost Management Council is hereby continued.
(b) The council shall be comprised of the advocate, who shall act as chairperson, the Secretary of the Department of Administration, the Director of the Public Employees Insurance Agency, the Commissioner of the Bureau of Medical Services of the Department of Health and Human Resources, the Secretary of the Department of Health and Human Resources, the Commissioner of the Bureau of Senior Services, the Secretary of the Department of Military Affairs and Public Safety, or their designees, and nine members from the public who shall be appointed by the Governor with the advice and consent of the Senate. One public member shall represent low income citizens, one public member shall have experience in the financing, development or management of a health insurance company which provides pharmaceutical coverage, one public member shall represent an organization of senior citizens with at least ten thousand members within the state, two public members shall be licensed pharmacists employed by a community retail pharmacy, one public member shall be a representative of a pharmaceutical manufacturer with substantial operations located in West Virginia that has at least seven hundred fifty employees, one public member shall be a primary care physician, and one public member shall represent those who will benefit from the establishment of the Office of the Pharmaceutical Advocate.
(c) Nine members of the council constitute a quorum.
(d) The members shall elect a vice chairperson and secretary annually, and other officers as the members determine necessary.
(e) Meetings of the council shall be held at least once per calendar quarter or at such other times as designated by the chairperson or when a majority of the members so request.
(f) The members of the council shall not receive compensation by reason of their membership on the council but shall be reimbursed for reasonable expenses incurred in the performance of their official duties.
(g) Members serving on the effective date of this article may continue on the council until their terms expire. Appointed members shall serve for a term of two years. Any member whose term has expired shall serve until his or her successor is appointed and has qualified. Any person appointed to fill a vacancy shall serve only for the unexpired term.
(h) A majority vote of the members present is required for any final determination by the council.
(i) The office shall furnish to the council such secretarial, clerical, technical, research, and other services as are necessary to the conduct of the business of the council.
(j) Members of the council appointed by the Governor may pursue and engage in any business, occupation or gainful employment that is not in conflict with the duties of the council.
§16-43-11. General duties of the West Virginia Pharmaceutical

Cost Management Council.

The council has general responsibility to review and provide advice to the advocate regarding:
(1) The hiring of professional, clerical, technical and administrative personnel as may be necessary to carry out the provisions of this article;
(2) The execution of any proposed contract authorized by this article in accordance with the provisions of subsection (b), section seven of this article; and
(3) The review, analysis, and assessment of any issue, project, or program requested by the advocate.
§16-43-12. Multistate alliances or consortia; discussion groups; agreements.

(a) The advocate may participate in a cooperative purchasing agreement, alliance, or consortium for the purchase of prescription drugs with agencies of other states, other public bodies, or other state agencies, if available and financially advantageous. Nothing in this article shall prohibit the payment of any administrative fee necessary to participate in such a cooperative purchasing agreement, alliance, or consortium.
(b) If the advocate participates in any cooperative purchasing agreement, alliance, or consortium which is comprised of at least eight other jurisdictions, including but not limited to the other states, U.S. territories, and the District of Columbia, the cooperative purchasing agreement, alliance, or consortium may employ an agreed-upon pricing schedule that, in the judgment of the advocate and the member jurisdictions, will maximize savings to the broadest percentage of the population of this state: Provided, That any pharmaceutical manufacturer that deals with such cooperative purchasing agreements, alliances, or consortia may request a waiver from such pricing schedule in West Virginia for a particular drug that should be granted if the advocate finds that the development, production, distribution costs, other reasonable costs and reasonable profits is more than the schedule price of the pharmaceutical or in those cases in which the pharmaceutical in question has a sole source .
§16-43-13. Authorization to take advantage of Acts of Congress, accept gifts, grants and matching funds.

The Office of the Pharmaceutical Advocate is authorized to take full advantage of the benefits and provisions of any Acts of Congress and to accept any and all gifts, grants and matching funds whether in the form of money or services.
§16-43-14. State payors' interim authority.
Nothing contained in this article limits the authority of state payors to enter into contracts or arrangements or to otherwise manage their pharmacy programs until such time as the programs created or authorized pursuant to this article are implemented.
§16-43-15. Advertising, marketing, and promotional costs;
reporting of same.
(a) To assist the state in its role as a purchaser of prescription drugs and an administrator of prescription drug programs, and to enable the state to determine the scope of prescription drug advertising, marketing, and promotional costs and their effect on the cost, utilization and delivery of health care services, all drug manufacturers and/or labelers of prescription drugs dispensed in this state shall report advertising, marketing, and promotional costs for prescription drugs as provided in this section.
(b) On the first day of July of each calendar year, a drug manufacturer or labeler of prescription drugs dispensed in this state shall file a report with the office, in a form and manner as proscribed by the advocate, setting forth its advertising, marketing, and promotional activities conducted within this State during the preceding twelve months.
(c) The annual report filed under subsection (b) of this section shall include the following information in a form that provides the value, nature, purpose and recipient of the expense:
(1) All expenses associated with the advertising, marketing and direct promotion of prescription drugs through radio, television, magazines, newspapers, direct mail, telephone communications, and the Internet, as they pertain to residents of this state;
(2) With regard to all persons and entities licensed to provide health care in this state, including health care professionals and persons employed by them in this state, carriers licensed pursuant to chapter thirty-three of this code, health plans and benefits managers, pharmacies, hospitals, nursing facilities, clinics, and other entities licensed to provide health care in this state, the following information:
(A) Except for expenses associated with educational or informational programs, materials, or seminars approved as satisfactory continuing medical education pursuant to section twelve, article three, chapter thirty of this code, 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;
(B) All expenses associated with food, entertainment, gifts and anything provided to a health care professional for less than market value;
(C) All expenses associated with trips and travel; and
(D) All expenses associated with product samples, except for samples that will be distributed free of charge to patients; and
(3) The aggregate cost of all employees or contractors of the drug manufacturer or labeler who directly or indirectly engage in activities listed in subdivisions (1) and (2) of this subsection, including all forms of payment to such employees or contractors. All costs reported under this subdivision shall reflect only that portion of payment to employees or contractors that pertains to activities within the state or to recipients of the advertising, marketing, or promotional activities who are residents of or are employed in the state. (d) The following are exempt from disclosure requirements: (1) All free samples of prescription drugs intended to be distributed free of charge to patients;
(2) All payments of reasonable compensation and reimbursement of expenses in connection with a bona fide clinical trial. As used in this subdivision, "clinical trial" means a clinical trial approved by an institutional review board in compliance with Title 21 of the United States Code and 21 C.F.R. §56.101 et seq. and 45 C.F.R. §46.101 et seq. and conducted in connection with a research study where the principal purpose is scientific research; and
(3) All scholarship or other support for medical students, residents and fellows to attend significant educational, scientific or policy-making conference of a national, regional or specialty medical or other professional association if the recipient of the scholarship or other support is selected by the association; and
(e) The advocate is authorized to establish the documentation, form and manner of reporting required as he or she, with the advice of the council, determines necessary to effectuate the purpose of this section. The advocate shall include in the annual report required pursuant to subsection (b), section six of this article, in an aggregate form, the information provided in the required reporting.

(f) Notwithstanding any provision of law to the contrary, the reports submitted to the advocate pursuant to this section are confidential and exempt from disclosure under the provisions of article one, chapter twenty-nine-b of this code. Data compiled in aggregate form by the advocate for the purposes of preparing and submitting the annual report required by subsection (b), section six of this article, is a public record as defined in section two, article one, chapter twenty-nine-b of this code: Provided, That any trade secrets, as defined in section four, article one, chapter twenty-nine-b of this code, or any other trade information protected from disclosure under state or federal law, shall be exempt from disclosure.
§16-43-16. Participation by private individuals, commercial insurance carriers, self-insured companies and others in negotiated drug pricing program.

The advocate shall have the authority to establish programs and procedures necessary to allow private individuals, commercial insurance carriers, self-insured companies and private and not-for-profit health care providers to participate in prescription drug purchasing agreements executed under this article.
§16-43-17. Rulemaking.
The advocate, in consultation with the council, shall propose rules for legislative approval in accordance with article three, chapter twenty-nine-a of this code to implement the provisions of this article. This authority shall include emergency rule-making authority pursuant to the provisions of section fifteen, article three, chapter twenty-nine-a of this code. These rules may include, but are not limited to:
(1) The development of criteria to establish a purchasing consortium. These criteria shall include, but are not limited to: membership eligibility, which shall include state entities that are payors for prescription drugs and may include private individuals and commercial insurance carriers, self-funded benefit plans, and private and not-for-profit health care providers; consortium operation and functionality; and the manner and procedure for the consortium to either bid or negotiate pricing with pharmaceutical manufacturers for obtaining lower priced pharmaceuticals;
(2) The reporting requirements of information by labelers and manufacturers required pursuant to section fifteen of this article;
(3) The development of virtual wholesale program to allow the state to act as a pharmaceutical drug wholesaler and ensure that prices obtained by a buying consortium operated by the advocate would be made available for purchase by local pharmacies if the pharmaceutical advocate finds it necessary;
(4) The extension of practices and procedures necessary to allow the participation of private individuals, commercial insurance carriers, self-insured companies and private and not-for-profit health care providers in prescription drug purchasing agreements executed under this article; and
(5) Other legislative rules considered necessary by the advocate to carry out the duties and responsibilities prescribed to the advocate or the office in this article.

Note: The purpose of this bill is to create the Office of the Pharmaceutical Advocate; to establish the powers and duties of the Pharmaceutical Advocate; to continue the West Virginia Pharmaceutical Cost Management Council; authorizing the Pharmaceutical Advocate to negotiate and execute agreements related to the purchase of prescription drugs on behalf of state payors; to transfer certain powers currently vested in other state entities related to the purchase of prescription drugs to the Pharmaceutical Advocate; and to require manufacturers and labelers to report certain marketing, advertising, and promotional costs to the Pharmaceutical Advocate.
Strike-throughs indicate language that is to be stricken from the present law and underscoring indicates new language that would be added.
§§16-43-1 through -17 are new; therefore, strike-throughs and underscoring have been omitted.