a) The DEPARTMENT shall enter into partnerships, consistent with section (c), in consultation with other departments as necessary, to increase competition, lower prices, and address shortages in the market for generic prescription drugs, to reduce the cost of prescription drugs for public and private purchasers, taxpayers, and consumers, and to increase patient access to affordable drugs for state residents.

b) The DEPARTMENT shall have the ability to hire staff to oversee and project-manage the partnerships for manufacturing or distribution of generic prescription drugs, contingent upon an appropriation by the Legislature for this purpose.

c) PARTNERSHIPS FOR THE PRODUCTION AND DISTRIBUTION OF GENERIC DRUGS

i) The DEPARTMENT shall enter into partnerships resulting in the production or distribution of generic prescription drugs, with the intent that these drugs be made widely available to public and private purchasers, providers and suppliers, and pharmacies, as appropriate. The generic prescription drugs shall be produced or distributed by a drug company or generic drug manufacturer that is registered with the United States Food and Drug Administration.

ii) The DEPARTMENT shall have the ability to enter into partnerships with and/or consult with state governmental agencies, other state governments, group purchasing organizations, nonprofit organizations, or other entities, in order to produce or distribute generic prescription drugs.  

iii) The DEPARTMENT shall only enter into partnerships pursuant to subdivision (c)(i) and (c)(ii) to produce a generic prescription drug at a price that results in consumer savings, targets failures in the market for generic drugs, and improves patient access to affordable medications.

1) The DEPARTMENT and the partnering entity that produces or distributes generic prescription drugs are prohibited from distributing drugs for use or consumption if they have reasonable grounds to believe the distribution would exacerbate or cause a drug shortage and/or prevent the achievement of goals set forth in section a)

2) The DEPARTMENT and/or the partnering entity that distributes drugs for consumption or use must keep records of the assessment to show that there were reasonable grounds for such a determination.

iv) For top drugs identified pursuant to the criteria listed in section (d), the DEPARTMENT shall determine if viable pathways exist for partnerships to manufacture or distribute generic prescription drugs by examining the relevant legal, market, policy, and regulatory factors.

v) The DEPARTMENT shall consider the following, if applicable, when setting the price of the generic prescription drug:

1) United States Food and Drug Administration user fees.

2) Abbreviated new drug application acquisition costs amortized over a five-year period.

3) Mandatory rebates.

4) Total contracting and production costs for the drug, including a reasonable amount for administrative, operating, and rate-of-return expenses of the drug company or generic drug manufacturer.

5) Research and development costs attributed to the drug over a five-year period.

6) Other initial start-up costs amortized over a five-year period.

vi) Each drug shall be made available to providers, patients, and purchasers at a transparent price and without rebates, other than federally required rebates with priority for in-state providers, patients, and purchasers, should supply levels necessitate.

vii) Before effectuating a partnership pursuant to this chapter, the DEPARTMENT shall determine minimum thresholds for procurement of an entity’s expected volume of a targeted drug from the company or manufacturer over a multiyear period. In making advance commitments, the DEPARTMENT shall consult with appropriate entities. 

d) IDENTIFYING GENERIC DRUGS

i) Within [6-12 MONTHS] after passage of this Act, the DEPARTMENT shall prioritize the selection of generic prescription drugs that have the greatest impact on lowering drug costs to patients, increasing competition and addressing shortages in the prescription drug market, improving public health, or reducing the cost of prescription drugs to public and private purchasers.

ii) The DEPARTMENT shall prioritize drugs for chronic and high-cost conditions, and shall consider prioritizing those that can be delivered through mail order.

iii) The DEPARTMENT shall consult with all of the following public and private purchasers to assist in developing a list of generic prescription drugs to be manufactured or distributed through partnerships and to determine the volume of each generic prescription drug that can be procured over a multiyear period to support a market for a lower cost generic prescription drug:

1) The [DEPARTMENTS – INCLUDING SUCH DEPARTMENTS RESPONSIBLE FOR STATE OR LOCAL PUBLIC EMPLOYEES’ RETIREMENT SYSTEMs, HEALTH CARE SERVICES, HEALTH BENEFIT EXCHANGE, PUBLIC HEALTH, GENERAL SERVICES, AND CORRECTIONS AND REHABILITATION], or the entities acting on behalf of each of those state purchasers;

2) Licensed healthcare service plans;

3) Health insurers holding a valid STATE license/certificate;

4) Hospitals;

5) Pharmacy benefit managers.

iv) The DEPARTMENT shall not be required to consult with every entity listed in section (2) to (5), inclusive, of subdivision (iii), so long as purchaser engagement includes representation from these groups.

e) REPORTING REQUIREMENTS: 

i) On or before [DATE, within 6-12 MONTHS of enactment], and annually thereafter, the DEPARTMENT shall report to the Governor and the Legislature on both of the following:

1) A description of the status of all drugs targeted under this chapter;

2) An analysis of how the activities of the DEPARTMENT are impacting competition, availability of targeted drugs, the costs of those drugs, and the costs of generic prescription drugs to public and private purchasers and an assessment of recommended next steps in the program and purposes described in this Act.

ii) In the first report required under i) of this section, the DEPARTMENT shall detail the DEPARTMENT’s plan to manufacture and sell generic prescription drugs as required by this Act, including an assessment of the best paths to feasibly achieve the manufacturing and sale of the generic drugs identified through Section d) of this Act. This first report shall include an analysis of governance structure options for manufacturing functions, including chartering a private organization, a public-private partnership, or a public board of directors.

1) If additional drugs are later identified through the process identified in Section d) of this Act, the next report submitted under the requirements of this Section shall include the information listed in ii) above.

f) Licensed health care service plans and pharmacy benefits managers shall not be required to purchase prescription drugs from the DEPARTMENT or entities that contract or partner with the DEPARTMENT pursuant to this chapter.

g) In order to protect proprietary, confidential information regarding manufacturer or distribution costs and drug pricing, utilization, and rebates, it is necessary that this Act limit the public’s right of access to that information. Notwithstanding any other provision of law, all nonpublic information and documents obtained under this Act shall not be required to be disclosed pursuant to the [STATE Public Record Laws].

h) The provisions of this Act are severable. If any provision of this Act or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.

i) DEFINITIONS

i) “Generic drug” means a drug that is approved pursuant to subdivision (j) of Section 355 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. Sec. 301 et seq.), or a biosimilar, as defined under the federal Public Health Service Act (42 U.S.C. Sec. 262).

ii) “Partnerships” include, but are not limited to, agreements for the procurement of generic prescription drugs by way of contracts or purchasing by a payer, state governmental agency, group purchasing organization, nonprofit organization, or other entity.