BILL NUMBER: SB 1315 CHAPTERED 09/12/02 CHAPTER 483 FILED WITH SECRETARY OF STATE SEPTEMBER 12, 2002 APPROVED BY GOVERNOR SEPTEMBER 11, 2002 PASSED THE SENATE AUGUST 29, 2002 PASSED THE ASSEMBLY AUGUST 25, 2002 AMENDED IN ASSEMBLY AUGUST 23, 2002 AMENDED IN ASSEMBLY JUNE 30, 2002 AMENDED IN SENATE MAY 15, 2002 AMENDED IN SENATE FEBRUARY 25, 2002 INTRODUCED BY Senator Sher JANUARY 24, 2002 An act to add Chapter 12 (commencing with Section 14977) to Division 3 of Title 2 of the Government Code, relating to pharmaceuticals. LEGISLATIVE COUNSEL'S DIGEST SB 1315, Sher. Pharmaceuticals: purchasing. Existing law authorizes certain state entities to purchase drugs for health purposes. This bill would authorize the Department of General Services to enter into contracts on a bid or negotiated basis with manufacturers and suppliers of single source or multisource drugs, and would authorize the department to obtain from them discounts, rebates, or refunds as permissible under federal law. This bill would require the State Department of Mental Health, the Department of Corrections, the Department of the Youth Authority, and the State Department of Developmental Services to participate in the program authorized by this bill. This bill would also authorize other state , local, and public agency governmental entities to elect to participate in the program. This bill would authorize the Department of General Services to contract with a pharmaceutical benefits manager or other entity to negotiate price discounts, rebates, or other options for, and to purchase, prescription drugs and to act as a consultant to the department. This bill would authorize the Department of General Services to explore additional strategies for managing drug costs. It would also require the department, on or before February 1, 2005, to submit a report containing specified information to certain committees of the Legislature regarding the program. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. (a) The Legislature finds and declares all of the following: (1) Many different state, district, city, county, municipal, and public agency governmental entities purchase prescription drugs for individuals served by those entities. (2) Currently, the Department of General Services uses the bid process to develop contracts with drug manufacturers on behalf of some state local, and public agencies. However, many state, district, county, city, municipal, and public agencies are not included in this current purchasing process. (3) The Department of General Services does not have sufficient direction from the Legislature to maximize savings. (4) By better coordinating bulk purchasing contracts and providing purchasing procedures and options, the Department of General Services may be able to negotiate better prices for drugs on behalf of participating governmental entities. (b) It is the intent of the Legislature in enacting this act to coordinate bulk purchasing of prescription drugs, and authorize the Department of General Services to investigate and implement other options and strategies to achieve the greatest savings on prescription drugs with prescription drug manufacturers and wholesalers. SEC. 2. Chapter 12 (commencing with Section 14977) is added to Division 3 of Title 2 of the Government Code, to read: CHAPTER 12. PURCHASE OF PRESCRIPTION DRUGS FOR GOVERNMENT AGENCIES 14977. As used in this chapter, "department" means the Department of General Services. 14977.1. (a) Notwithstanding any other provision of law, the Department of General Services may enter into exclusive or nonexclusive contracts on a bid or negotiated basis with manufacturers and suppliers of single source or multisource drugs. The department may obtain from those manufacturers and suppliers, discounts, rebates, or refunds based on quantities purchased insofar as permissible under federal law. Contracts entered into pursuant to this chapter may include price discounts, rebates, refunds, or other strategies aimed at managing escalating prescription drug prices. (b) Contracts under this chapter shall be exempt from Chapter 2 (commencing with Section 10290) of Part 2 of Division 2 of the Public Contract Code. 14977.5. (a) The following state agencies shall participate in the prescription drug bulk purchasing program authorized under this chapter. (1) State Department of Mental Health. (2) Department of Corrections. (3) Department of the Youth Authority. (4) State Department of Developmental Services. (b) Any state, district, county, city, municipal, or public agency governmental entity, other than a state entity specified in subdivision (a), may elect to participate in the coordinated purchasing program. 14978. The department, in consultation with the agencies listed in subdivision (a) of Section 14977.5, may investigate and implement other options and strategies to achieve the greatest savings on prescription drugs with prescription drug manufacturers and wholesalers. 14979. The department may appoint and contract with a pharmaceutical benefits manager or other entity for purposes of the prescription drugs purchased under this chapter. The pharmaceutical benefits manager or other entity may do all of the following: (a) Negotiate price discounts, rebates, or other options that achieve the greatest savings on prescription drugs with prescription drug manufacturers and wholesalers. (b) Purchase prescription drugs for participating state, district, county, or municipal governmental entities. (c) Act as a consultant to the department. 14980. The department may explore additional strategies for managing the increasing costs of prescription drugs, including: (a) Coordinating programs offered by pharmaceutical manufacturers that provide prescription drugs for free or at reduced prices. (b) Studying the feasibility and appropriateness of including in the bulk purchasing programs entities in the private sector, including employers, providers, and individual consumers. (c) Implementing other strategies, as permitted under state and federal law, aimed at managing escalating prescription drug prices. 14981. On or before than February 1, 2005, the department shall submit a report to the appropriate policy and fiscal committees of the Legislature on activities that have been or will be undertaken pursuant to this chapter. The report shall include, but not be limited to, all of the following: (a) The number and a description of contracts entered into with manufacturers and suppliers of drugs pursuant to Section 14977.1, including any discounts, rebates, or refunds obtained. (b) The number and a description of entities that elect to participate in the coordinated purchasing program pursuant to Section 14977.5. (c) Other options and strategies that have been or will be implemented pursuant to Sections 14978 and 14980. (d) Estimated costs and savings attributable to activities that have been or will be undertaken pursuant to this chapter.