BP BHEAD INT S

AN ACT Relating to pharmaceutical price discrimination; adding a new chapter to Title 69 RCW; and prescribing penalties.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature finds that drug manufacturers and drug wholesalers engage in pricing practices that result in unfair price discrimination among the retail prescription pharmacies in the state of Washington, including the independent and chain pharmacies, paying the highest prices for drugs, regardless of the quantities they purchase. The legislature further finds that as part of this practice, many manufacturers refuse to sell to retail pharmacies directly, but sell through wholesalers at higher prices than charged to other privileged purchasers. This practice adversely affects the retail pharmacies' ability to bid for prescription services in proposed insurance contracts, to form or become part of any health care reform alliances, and to offer consumers a reasonable price in comparison to those charged by the privileged purchasers who receive the deep discounts. The legislature finds that this price discrimination results in subsidization by consumers and pharmacies to further this practice of deep discounts to privileged purchasers.

NEW SECTION. Sec. 2. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Drug" means any substance subject to section 503(b) of the federal food, drug and cosmetic act.

(2) "Manufacturer" means any person who is engaged in manufacturing, preparing, propagating, compounding, processing, packaging, repackaging, or labeling of a drug, provided that a pharmacist compounding drugs to be dispensed from the pharmacy in which the drugs are compounded pursuant to prescriptions for individual patients shall not be considered a manufacturer; a manufacturer generally sells drugs to sellers, purchasers, or both.

(3) "Person" means any individual, partnership or other association, or corporation.

(4) "Purchaser" means any person who sells or dispenses drugs directly to consumers, whether in person, by mail, or other means of delivery, or any co-op or buying group that purchases drugs on behalf of pharmacies; purchasers who resell to other purchasers or sellers shall be deemed to be sellers in such resale transactions.

(5) "Seller" means any person who sells drugs to purchasers.

NEW SECTION. Sec. 3. (1)(a) It is the intent of this section that all Washington consumers pay a fair price for drugs, and that some Washington consumers not subsidize large discounts for others due to formularies and other nonvolume-based pricing mechanisms. To accomplish this, the purpose of this section is to prohibit price discrimination or differentiation based on factors other than volume.

(b) Subsection (2) of this section prohibits nonvolume-based discounts on all drugs delivered to purchasers located in Washington for resale in this state, regardless of where the manufacturer or seller are located.

(c) Subsection (3) of this section prohibits nonvolume-based discounts on all drugs sold by manufacturers to sellers or purchasers, or by sellers to purchasers, for resale to Washington consumers, regardless of where the manufacturers, sellers, or purchasers are located. The legislature does not intend to improperly interfere with commerce, but does intend to exercise its full authority by law to protect the health, safety, and welfare of Washington consumers of drugs. Washington does not intend to regulate the price of any drug that is not going to be resold in Washington state. The legislature intends to regulate out-of-state manufacturers, sellers, and purchasers just as the state licenses these out-of-state manufacturers, sellers, and purchasers when the drugs are resold to Washington consumers. The legislature also does not intend to protect intrastate purchasers, but also does not intend to put them at a disadvantage; therefore, subsection (3) of this section treats out-of-state purchasers and intrastate purchases the same for drugs resold to Washington consumers.

(2)(a) Every manufacturer shall offer drugs to any seller with all rights and privileges offered or accorded by the manufacturer to the most favored seller, including purchase prices for similar volume purchases. Every manufacturer shall offer rebates, free merchandise, and similar trade concessions on proportionally equal terms to every seller. Nothing in this subsection prohibits the giving of a discount for volume purchases, so long as the discount is justified by the economies or efficiencies resulting from those volume purchases and the discount is made available to all sellers on proportionally equal terms.

(b) Every manufacturer or seller shall offer drugs to every purchaser, with all rights and privileges offered or accorded by the manufacturer or seller to the most favored purchaser, including purchase prices for similar volume purchases. A manufacturer or seller shall offer rebates, free merchandise, samples, and similar trade concessions on proportionally equal terms to every purchaser. Nothing in this subsection prohibits the giving of a discount for volume purchases, so long as such discount is justified by the economies or efficiencies resulting from such volume purchases and such discount is made available to all purchasers on proportionally equal terms.

(c) This subsection applies to any purchase of drugs that is delivered to a purchaser or purchaser facility located in this state.

(3)(a) Every manufacturer who offers any drug to any seller shall offer the drug to every seller with all rights and privileges offered or accorded by the manufacturer to the most favored seller, including rebates, free merchandise, samples, and similar trade concessions. Nothing in this subsection prohibits the giving of a discount for volume purchases, so long as such discount is justified by the economies or efficiencies resulting from such volume purchases and such discount is made available to all purchasers on proportionally equal terms.

(b) Every manufacturer or seller who offers any drug to any purchaser shall offer the drug to every purchaser with all rights and privileges offered or accorded by the manufacturer or seller to the most favored purchaser, including rebates, free merchandise, samples, and similar trade concessions. Nothing in this subsection prohibits the giving of a discount for volume purchases, so long as such discount is justified by the economies or efficiencies resulting from such volume purchases and such discount is made available to all purchasers on proportionally equal terms.

(c) This subsection applies to drugs sold by manufacturers or sellers that are resold by purchasers to Washington consumers.

(4) This section shall not apply to the purchase of drugs by a hospital for its own use. "For its own use" refers to drugs that are used by a hospital to care for hospital patients and are not sold directly to the patient through the hospital's pharmacy.

NEW SECTION. Sec. 4. Agencies of state government and political subdivisions of the state may not purchase any drugs from a manufacturer or seller that engages in any price discrimination prohibited by this chapter.

NEW SECTION. Sec. 5. (1) Any person damaged by violation of this chapter may bring an action to recover treble damages sustained by reason of such violation. Proof of price discrimination shall constitute prima facie evidence of damage. The monetary amount of the unlawful discrimination is conclusively presumed to equal the amount of sustained damages. The plaintiff may establish further damages.

(2) Any person who violates this chapter or any rule adopted under this chapter or any order or injunction to cease and desist from such violations shall be required to pay a civil penalty of not less than one thousand dollars nor more than one hundred thousand dollars per violation.

NEW SECTION. Sec. 6. (1) The legislature finds that the practices covered by this chapter are matters vitally affecting the public interest for the purpose of applying the consumer protection act, chapter 19.86 RCW. Violations of this chapter are not reasonable in relation to the development and preservation of business. A violation of this chapter is an unfair or deceptive act in trade or commerce and an unfair method of competition for the purpose of applying the consumer protection act, chapter 19.86 RCW.

(2) A private party shall not recover treble damages under both this section and section 5 of this act.

NEW SECTION. Sec. 7. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 8. Sections 1 through 7 of this act shall constitute a new chapter in Title 69 RCW.