Last session, according to many, the mouse roared. The West Virginia Legislature passed landmark legislation creating a Pharmaceutical Cost Management Council charged with lowering the cost of prescription drugs.

Before leaving office, Gov. Bob Wise established an Office of the Pharmaceutical Advocate, and last month Gov. Joe Manchin named the first advocate.

Some provisions of the original legislation are now back before the Legislature in a bill specifying the role of the pharmaceutical advocate. And, as might be expected, not without controversy.

The key to the original plan was to increase the state’s buying power through increased control of market share and volume discounts. The controversy focuses on the dynamics of the state/manufacturer negotiations.

The original bill required that the council establish a pricing schedule for negotiations. Manufacturers were free to justify higher prices by requesting waivers based on evidence of “development, production, distribution costs, other reasonable costs and reasonable profits, but exclusive of all marketing and advertising costs.” The council later selected the Federal Supply Schedule as that price schedule.

The FSS lists prices available to federal agencies such as the Department of Veterans Affairs, Department of Defense and Public Health Service. Freely negotiated by the manufacturers, these prices average only about half of wholesale.

The current governor’s bill (HB2852 and SB430) specifies that the FSS prices serve only as a benchmark for agreements and ignores any waiver provisions. But the House Finance Committee restored the original waiver language in the version passed on to the Senate.

Drug industry representatives and various legislators now label the current provisions “price-fixing,” and are championing the governor’s bill.

Is it really price-fixing?

No wise purchaser makes a purchase without some idea of the value of the item in question. You enter negotiations with an eye on how much you want to spend, or how much others are paying. If the product is offered at that price, well and good. If not, you need a good reason to pay more. You don’t simply pay what is asked. Higher prices must be justified.

Procedures in the current committee substitute are twice removed from price-fixing.

For one, the price is simply not fixed. Only the opening bid is fixed. Manufacturers can negotiate higher prices so long as they offer evidence to support that price.

And two, the benchmark FSS price is neither fixed nor imposed. Drug manufacturers freely negotiated these prices for other purchasers, a price at which, one can only assume, they still make a reasonable profit. In point of fact, it is not uncommon for manufacturers to sell drugs below the FSS price.

Want real price-fixing? Look to the federal government. Doctors and hospitals are told exactly how much they will be reimbursed for services and products under Medicare and Medicaid. The reimbursement level is set. There is no negotiation. That is not what is proposed here.

Conversely, the new Medicare prescription drug law in effect sanctions price-fixing by the manufacturers. The government is forbidden to negotiate lower prices.

It is against that background that the state now wants to move forward. The state asks to enter into negotiations with a reasonable price in mind, and only deviate for documented economic or medical reasons.

Then why the smoke screen? Why yell “price-fixing” if it’s not? One must always be wary discerning another’s motives. Yet it would seem plain that the issue is not the price schedule (much as the industry might prefer a higher starting point) but the necessity of obtaining a waiver.

And therein lie two issues. First, the exclusion of advertising and marketing costs. Second, the need to justify claims of high research and development costs.

For years, the industry has relied on claims of extensive research and development costs to justify drug prices, a claim often challenged outside the industry. And in recent years, we have all seen direct-to-consumer advertising of prescription drugs skyrocket — promotional campaigns banned from television prior to 1997 and currently allowed in only two countries, America and New Zealand. West Virginia has offered to determine price based on the effectiveness of drugs, not on the cost of their ad campaigns. The state is willing to reward new and innovative drugs with higher prices, but wants evidence to justify paying more than the price offered to others.

One would hope that this is a challenge the industry would be happy to engage. If nothing else, one might expect the industry to challenge the bill on real issues, not shoot itself in the foot with false claims that hide the real issues.

And finally, one would hope the governor comes to recognize the advantages to the state of maintaining “the hammer” of the waiver procedure in current law.

Kurland is health action coordinator of Covenant House and creator of the Web site www.criticalreading.com.