The Legislature of Alabama finds that the high cost of pharmaceuticals is a matter of much concern to this state, especially as the cost and utilization of drug therapy continue to rise. Insofar as this rise represents a trend towards drug therapy in lieu of more invasive and expensive procedures, it represents a positive change. At the same time, increasing drug costs can effectively prevent large numbers of patients from accessing vital medication. The solution to this problem should be market-based. This legislation attempts such a solution by (1) consolidating the state's buying power in the pharmaceutical market, and (2) authorizing the State Health Officer to negotiate rebates and discounts from pharmaceutical manufacturers. The result should be better prices for agencies and departments of the State of Alabama and better access to life-saving drugs for clients, by law, they are mandated to serve.

As used in this chapter the following terms shall have the following meanings:

(1) MULTI-STATE POOLING INITIATIVE. A group of two or more states working together to reduce the cost of pharmaceuticals purchased or paid for by those states.

(2) PHARMACEUTICAL or DRUG. Any medicinal substance, preparation, or device recognized by the United States Pharmacopoeia and National Formulary, or any revision thereof, and any substance and preparation intended for external and internal use in the cure, diagnosis, mitigation, treatment, or prevention of disease in humans, and any substance and preparation other than food intended to affect the structure or any function of the human body.

(3) PHARMACEUTICAL PROGRAM. A program administered by the Department of Mental Health and Mental Retardation, Department of Corrections, Department of Public Health, Department of Youth Services, or the Department of Rehabilitation Services, pursuant to which pharmaceuticals are purchased for use by clients.

(4) STATE AGENCY. The Department of Mental Health and Mental Retardation, Department of Corrections, Department of Public Health, Department of Youth Services, and the Department of Rehabilitation Services.

(5) SUPPLIER. A wholesaler or manufacturer of pharmaceuticals.

(a) The State Health Officer may develop, maintain, and implement a program and procedures to do the following: (1) Aggregate or negotiate the purchase of pharmaceuticals for pharmaceutical programs for state agencies, as defined herein, or joining a multi-state pooling initiative, or both, and (2) maximize savings, rebates, and discounts from suppliers on pharmaceutical purchases under any pharmaceutical program enumerated in this chapter. The State Board of Health shall promulgate rules and regulations for the purpose of implementing this chapter with the approval of the chief executive officers of the departments and agencies administering a pharmaceutical program.

(b) Subdivision (1) of subsection (a) shall not apply to state insurance plans that provide reimbursement for the purchase of pharmaceuticals to public employees.

(c) All purchase contracts for pharmaceuticals for pharmaceutical programs for state agencies shall be subject to the applicable state competitive bid requirements and procedures.

Notwithstanding any other provision of law to the contrary, pharmaceutical programs as defined herein shall obtain drugs through the program established pursuant to this chapter, unless a particular pharmaceutical program can purchase its pharmaceuticals at a special rate, which is lower than the savings and rebates that could be realized under this chapter, through an agreement or federal or state government public health program or a contract currently in place for the purchasing of pharmaceuticals by a pharmaceutical program in this state. In the event a contract is currently in place for the purchasing of pharmaceuticals by a pharmaceutical program in this state, the contract shall not be abrogated and shall remain in place until the occurrence of the earlier of the expiration date or the earliest termination date, as applicable.

Negotiations pursuant to subdivision (1) of subsection (a) of Section 22-2A-3 shall not restrict access to medications required by clients served by the Department of Mental Health and Mental Retardation.

The Medicaid Agency shall be exempt from this chapter.

All rebates and savings specifically realized shall be deposited in the General Fund of the state.