[atlas:bill]

AN ACT Relating to prescription drug prices; and adding a new chapter to Title 70 RCW.

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

NEW SECTION. Sec. 1. (1) The legislature finds that:

(a) Approximately one in four residents of Washington state have no or wholly inadequate prescription drug insurance coverage.

(b) These uninsured residents pay excessive prices for prescription drugs, far higher prices than are paid by managed care organizations, insurance companies, and the federal government for the same medicines and dosages. In many cases, these excessive drug prices have the effect of denying residents access to medically necessary care, and thereby threatening their health and safety.

(c) Many residents require repeated doctor or medical clinic appointments, having gotten sicker because they cannot afford to take the prescriptions prescribed for them. Many residents are admitted to or treated at hospitals each year because they cannot afford the drugs prescribed for them that could have prevented the need for hospitalization. Many others enter expensive institutional care settings because they cannot afford their necessary prescription drugs that could have supported them outside of an institution. In each of these circumstances, state medical assistance programs, including the medicaid program, literally pay the price.

(d) One major reason uninsured residents pay so much for prescription drugs is that, unlike insured residents, they have no prescription benefits manager negotiating a fair price with the drug companies on their behalf.

(e) The state government is the only agent that, as a practical matter, can play an effective role as a market participant on behalf of all residents who are uninsured or underinsured. The state can and should act as a prescription benefits manager, negotiating voluntary drug rebates and using these funds to reimburse retail pharmacies for offering lower drug prices.

(f) The state is a major purchaser of prescription drugs and should use its position to assist all residents to purchase drugs at a reasonable price.

(2) This chapter is enacted by the legislature to create a program whereby the state acts as a participant in the prescription drug marketplace, negotiating voluntary rebates from drug companies and using the funds to make prescription drugs more affordable to Washington residents. Such a program will improve public health and welfare, promote the economic strength of our society, and substantially benefit state health assistance programs, including the medicaid program.

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

(1) "Department" means the department of social and health services.

(2) "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 under 21 C.F.R. Sec. 207.20 (1999).

(3) "Manufacturer" means a manufacturer of prescription drugs and includes a subsidiary or affiliate of a manufacturer.

(4) "Program" means the prescription drug price program created in section 3 of this act.

(5) "Retail pharmacy" means a retail pharmacy or other business licensed to dispense prescription drugs in this state.

(6) "Secretary" means the secretary of social and health services, or the secretary's designee.

NEW SECTION. Sec. 3. (1) The prescription drug price program is established within the department to lower prescription drug prices for uninsured and underinsured residents of the state.

(2) A drug manufacturer or labeler that sells prescription drugs in the state may voluntarily elect to enter into a rebate agreement with the department.

(3) The secretary shall negotiate the terms of the rebate from a manufacturer or labeler, taking into consideration the rebate calculated under the medicaid rebate program pursuant to 42 U.S.C. Sec. 1396r-8, the average wholesale price of prescription drugs, and any other available information on prescription drug prices and price discounts.

(4) If a drug manufacturer or labeler elects not to agree to a rebate, the secretary shall review those manufacturer's products for prior authorization for the state medicaid program pursuant to chapter 74.09 RCW, and take similar actions involving prior authorization or formularies for any other state-funded prescription drug program. The secretary shall adopt rules creating clear procedures for the implementation of this subsection. The names of manufacturers and labelers that do not enter into rebate agreements are public information and the department shall release this information to the public. The secretary shall also publicize to doctors, pharmacists, and other health professionals information about the relative cost of drugs produced by manufacturers and labelers that enter into rebate agreements compared to those who do not enter into rebate agreements.

NEW SECTION. Sec. 4. A retail pharmacy shall discount the price of prescription drugs sold to program participants.

(1) The department shall establish discounted prices for drugs covered by a rebate agreement and shall promote the use of efficacious and reduced-cost drugs, taking into consideration reduced prices for state and federally capped drug programs, differential dispensing fees, administrative overhead, and incentive payments.

(2) Beginning no later than January 1, 2002, a retail pharmacy shall offer prescription drugs at or below the average wholesale price, minus six percent, plus a dispensing fee designated by the secretary. These initial price levels shall be calculated by the secretary and the dispensing fee shall not be less than that provided under the state medicaid program. The average wholesale price is the wholesale price charged on a specific commodity that is assigned by the drug manufacturer and is listed in a nationally recognized drug pricing file.

(3) No later than October 1, 2002, a retail pharmacy shall offer prescription drugs at or below the initial price levels specified in subsection (2) of this section minus the amount of any rebate paid by the state to the retail pharmacy. These discounted price levels shall be calculated by the secretary. In determining the discounted price levels, the secretary shall consider an average of all rebates weighted by sales of drugs subject to these rebates over the most recent twelve-month period for which the information is available.

NEW SECTION. Sec. 5. All residents of the state are eligible to participate in the program. The department shall establish simplified procedures for issuing program enrollment cards to eligible residents. The department shall undertake outreach efforts to build public awareness of the program and maximize enrollment by eligible residents.

NEW SECTION. Sec. 6. (1) The board of pharmacy, created under RCW 18.64.001, shall adopt rules requiring disclosure by retail pharmacies to program participants of the amount of savings provided as a result of the program. The rules must protect information that is proprietary in nature.

(2) The department may not impose transaction charges on retail pharmacies that submit claims or receive payments under the program.

(3) A retail pharmacy shall submit claims to the department to verify the amount charged to program participants.

(4) On a weekly or biweekly basis, the department shall reimburse a retail pharmacy for discounted prices provided to program participants and dispensing fees set by the secretary.

(5) The department shall collect from the retail pharmacies utilization data necessary to calculate the amount of the rebate from the manufacturer or labeler. The department shall protect the confidentiality of all information subject to confidentiality protection under state or federal law, rule, or regulation.

NEW SECTION. Sec. 7. Discrepancies in rebate amounts must be resolved using the process established in this section.

(1) If there is a discrepancy in the manufacturer's or labeler's favor between the amount claimed by a pharmacy and the amount rebated by the manufacturer or labeler, the department, at the department's expense, may hire a mutually agreed-upon independent auditor. If a discrepancy still exists following the audit, the manufacturer or labeler shall justify the reason for the discrepancy or make payment to the department for any additional amount due.

(2) If there is a discrepancy against the interest of the manufacturer or labeler in the information provided by the department to the manufacturer or labeler regarding the manufacturer's or labeler's rebate, the manufacturer or labeler, at the manufacturer's or labeler's expense, may hire a mutually agreed-upon independent auditor to verify the accuracy of the data supplied to the department. If a discrepancy still exists following the audit, the department shall justify the reason for the discrepancy or refund to the manufacturer any excess payment made by the manufacturer or labeler.

(3) Following the procedures established in subsection (1) or (2) of this section, either the department or the manufacturer or labeler may request a hearing. Supporting documentation must accompany the request for a hearing.

NEW SECTION. Sec. 8. The prescription drug price account is created in the custody of the state treasurer. All receipts from revenues paid by manufacturers or labelers who pay rebates and any appropriations made to the account must be deposited into the account. Expenditures from the account may be used only to reimburse retail pharmacies for discounted prices provided to program participants and to reimburse the department for the costs of administering the program. Only the secretary or the secretary's designee may authorize expenditures from the account. The account is subject to allotment procedures under chapter 43.88 RCW, but an appropriation is not required for expenditures.

NEW SECTION. Sec. 9. The department shall report the enrollment and financial status of the program to the legislature by the second week in January each year.

NEW SECTION. Sec. 10. In implementing this chapter, the department shall coordinate with other governmental programs to increase efficiency and, where it is beneficial to another state program, combine drug pricing negotiations to maximize drug rebates for this and other programs, including but not limited to the state medicaid program, the health care authority, the department of health, and other participating public and private entities.

NEW SECTION. Sec. 11. The department may adopt rules to implement the provisions of this chapter.

NEW SECTION. Sec. 12. The department may seek any waivers of federal law, rule, or regulation necessary to implement the provisions of this chapter.

NEW SECTION. Sec. 13. This act may be known and cited as the "prescription drug fair pricing act."

NEW SECTION. Sec. 14. 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. 15. Sections 1 through 14 of this act constitute a new chapter in Title 70 RCW.