This chapter shall be called the Alabama Prescription Cost Initiative.

As used in this chapter, the following words and phrases shall have the following meanings:

(1) BOARD. The Alabama Prescription Cost Initiative Board created by Section 36-35-4 to administer the program.

(2) COOPERATIVE. A business entity functioning on a cooperative basis that distributes its income to a particular member in proportion with that member*s use of the cooperative on a patronage basis.

(3) DEPARTMENT. Any department, agency, office, or program administered by the state for which the board or director has negotiated, or entered an agreement with a pharmacy benefits manager or cooperative to negotiate, a prescription drug rebate, or discount.

(4) EXECUTIVE DIRECTOR. An executive director employed by the board to administer this chapter and the program.

(5) GOVERNMENTAL ENTITY. Any department of the State of Alabama; any county government or municipal government; any school system, college, or university; or any public authority.

(6) MANUFACTURER. A manufacturer of prescription drugs as defined in 42 U.S.C. Section 1396r-S(k)(5), including a subsidiary or affiliate of a manufacturer.

(7) PARTICIPATING RETAIL PHARMACY. A retail pharmacy or other business licensed to dispense prescription drugs in this state that participates in state employee health insurance plans.

(8) PRESCRIPTION DRUG BUYING GROUP. Entities formed to enable retail pharmacies to aggregate their buying power in negotiating discounts and/or rebates on the purchase of pharmaceutical products from the manufacturers of pharmaceutical products, including, but not limited to, cooperatives and pharmacy benefits managers. The term pharmacy benefits manager includes any entity that procures prescription drugs at a negotiated rate for dispensing within this state to a department or governmental entity.

(9) PROGRAM. The Alabama Prescription Cost Initiative Program established by this chapter relating to supplemental drug rebates, and negotiated pricing of drugs.

(10) WHOLESALER. A business licensed pursuant to state law to distribute prescription drugs in this state.

(a) The Alabama Prescription Cost Initiative Board is created.

(b) The board shall consist of the following voting members: The executive director or chief staff person of the State Employees Insurance Board (SEIB) and the Public Education Employees Health Insurance Plan (PEEHIP), the Chair of the Board of Directors of SEIB, the Chair of the Board of Directors of PEEHIP, and the State Health Officer. The Director of the Medicaid Agency may serve in a nonvoting capacity.

(c) The board shall promulgate policies to implement this chapter and may hire an executive director and necessary staff to implement and administer this chapter with or without regard to the state Merit System.

(d) The board through its executive director may enter into agreements with a prescription drug buying group or manufacturer to negotiate price discounts or rebates on behalf of the board or any participating department or governmental entity.

(e) The board through its executive director may enter into agreements with, or affiliate with, a prescription drug buying group for centralized purchase and distribution of prescription drugs to retail pharmacies. Notwithstanding any provision of this subsection to the contrary, nothing herein shall require, nor be construed to require, any retail pharmacy to purchase prescription drugs from a central warehouse or central facility.

(f) The board shall make recommendations to public employee insurance programs, departments, and governmental entities for prescription formulary design.

(g) In conformity with the official policy of the U.S. Food and Drug Administration and its regulations, the reimportation of prescription drugs is expressly prohibited pursuant to this chapter.

Savings achieved through drug discounts received by departments and governmental entities shall be calculated on a quarterly basis by the board. A prorated share of the savings of each department or governmental entity, based on the percentage of the department or entity patronage as it bears to the total quarterly patronage, shall first be distributed to the board to reimburse the board for the administrative costs of the program. After administrative costs are fully reimbursed, any remaining savings shall be returned to the respective departments and governmental entities based on the prorated basis.

The board through its executive director shall oversee the negotiation of discount prices or rebates for prescription drugs from drug manufacturers.

The board shall report the savings from rebates and discounts to the Legislature by February 1 of each year, beginning in 2005.

If the board through its executive director finds that it is beneficial to another state program to combine drug pricing negotiations to maximize drug rebates, the board through its executive director shall do so.

Any state department or other governmental entity may elect to participate in the Alabama Prescription Cost Initiative by providing written notice to the board. Notwithstanding the foregoing, the Alabama Medicaid Agency may participate only if the agency*s participation is approved by the Federal Centers for Medicare and Medicaid Services.

The board and each department and governmental entity shall promulgate and adopt rules to implement this chapter. Rules promulgated by the board, department, or governmental entity pursuant to this chapter are exempt from the Alabama Administrative Procedure Act.

A department or governmental entity may seek any waivers of federal law, rule, or regulation necessary to implement this chapter.