2016 -- H 7468

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LC004363

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2016

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A N   A C T

RELATING TO COMMERCIAL LAW-- GENERAL REGULATORY PROVISIONS --

UNFAIR SALES PRACTICES

     

     Introduced By: Representatives Lombardi, Regunberg, Handy, Carson, and McEntee

     Date Introduced: February 04, 2016

     Referred To: House Corporations

     It is enacted by the General Assembly as follows:

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     SECTION 1. Title 6 of the General Laws entitled "UNFAIR SALES PRACTICES" is

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hereby amended by adding the following chapter:

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CHAPTER 13.1

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PRICE GOUGING OF PRESCRIPTION DRUGS PROHIBITED

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     6-13.1-1. Purpose. -- To prohibit prescription drug price-gouging or excessive pricing

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during market shortages.

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     6-13.1-2. Findings. -- The general assembly finds:

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     (1) Many pharmaceutical drugs are necessary to maintain the health and welfare of the

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American people;

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     (2) Currently the nation is facing a chronic shortage of vital drugs necessary in surgery, to

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treat cancer, and to fight other life-threatening illnesses; and

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     (3) In order to prevent any party within the chain of distribution of any vital drugs from

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taking unfair advantage of consumers during market shortages, the public interest requires that

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such conduct be prohibited and made subject to criminal penalties.

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     6-13.1-3. Definitions as used in this chapter.-- (1) "Biologic" means a virus, therapeutic

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serum, toxin, antitoxin, vaccine, blood, blood component or derivative, allergenic product, or

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analogous product, or arsphenamine or derivative of arsphenamine (or any other trivalent organic

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arsenic compound), applicable to the prevention, treatment, or cure of a disease or condition of

 

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human beings;

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     (2) "Drug" means a drug intended for use by human beings, which:

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     (i) Because of its toxicity or other potential for harmful effect, or the method of its use, or

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the collateral measures necessary to its use, is not safe for use except under the supervision of a

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practitioner licensed by law to administer such drug; or

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     (ii) Is limited by an approved application under §505 of the Federal Food, Drug, and

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Cosmetic Act (21 U.S.C. 355) to use under the professional supervision of a practitioner licensed

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by law to administer such drug;

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     (3) "Market emergency" means any declaration of a state of emergency by the governor

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or by declaration by the President;

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     (4) "Market shortage" means a situation in which the total supply of all clinically

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interchangeable versions of an FDA-regulated drug is inadequate to meet the current or projected

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demand at the user level;

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     (5) "Price gouging" means charging a consumer an unreasonably high price for any drug

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during a declared market emergency. This section shall not prohibit the fluctuation in the price of

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drugs that occurs during the normal course of business;

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     (6) "Unreasonably excessive drug pricing" means the amount charged represents a gross

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disparity between the average prices at which the same or similar commodity was readily

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available and sold or offered for sale within the local area in the usual course of business during

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the thirty (30) days immediately before the declaration of the market emergency and the

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additional charges are not substantially attributable to increased cost to retailers, imposed by their

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suppliers, including replacement costs imposed by the vendors' source. Additionally, the average

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price calculation during said thirty (30) day period shall not include discounted prices set and

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offered as a result of bona fide manufacturer's or supplier's limited discounts or rebates; and

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     (7) "Vital drug" means any drug or biologic used to prevent or treat a serious or life-

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threatening disease or medical condition, for which there is no other available source with

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sufficient supply of that drug or biologic or alternative drug or biologic available.

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     6-13.1-4. Unreasonably excessive drug pricing. -- (a) The governor may issue an

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executive order or rely on an executive order of the President, declaring a market shortage or

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market emergency for a period of six (6) months with regard to one or more vital drugs due to a

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market shortage under this chapter.

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     (b) If the governor or the President issues an executive order under subsection (a) of this

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section, it shall be unlawful for any person to sell vital drugs at a price that is unreasonably

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excessive and indicates that the seller is taking unfair advantage of the circumstances related to a

 

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market shortage to unreasonably increase prices during such period.

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     (c) Authority. -- The attorney general is authorized to enforce penalties under this

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chapter.

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     6-13.1-5. Unreasonably excessive drug pricing. -- (a) If the governor or President

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issues an executive order as described in §6-13.1-4, it shall be unlawful for any person to sell

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vital drugs at a price that is unreasonably excessive and indicates that the seller is taking unfair

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advantage of the circumstances related to a market shortage to unreasonably increase prices

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during such period.

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     (b) Authority.-- The attorney general is authorized to enforce penalties under this chapter.

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     6-13.1-6. Penalties. -- (a) Whoever sells, or offers to sell, any vital drug during a

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declared market shortage with the knowledge and intent to charge a price that is unreasonably

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excessive under the circumstances shall be guilty of a felony and shall be imprisoned for up to

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five (5) years and by a fine of up to ten thousand dollars ($10,000) or both.

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     (b) Multiple Offenses.-- In assessing the penalty provided by subsection (a) of this

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section each day of a continuing violation shall be considered a separate violation.

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     (c) Whenever it shall appear to the attorney general that any person or entity is engaged

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in practices constituting a violation of any provision of this chapter and until such complaint is

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dismissed by the attorney general or set aside by a court upon review, the attorney general may in

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their discretion bring an action in the superior court for the county in which the violation has

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occurred, to enjoin such acts or practices, and upon a proper showing a permanent or temporary

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injunction or restraining order shall be granted in the interest of the general public.

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     6-13.1-7. Determination of unreasonably excessive. -- (a) The attorney general, in

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determining whether an alleged violator's price was unreasonably excessive, shall consider

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whether:

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     (1) The price reasonably reflected additional costs, not within the control of that person

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or company, that were paid, incurred, or reasonably anticipated by that person or company;

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     (2) The price reasonably reflected additional risks taken by that person or company to

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produce, distribute, obtain, or sell such product under the circumstances;

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     (3) There is a gross disparity between the challenged price and the price at which the

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same or similar goods were readily available in the state and prior to the same declared market

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shortage;

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     (4) The marginal benefit received by the wholesaler or distributor is significantly changed

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in comparison with marginal earnings in the year before a market shortage was declared;

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     (5) The price charged was comparable to the price at which the goods were generally

 

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available in the New England area if the wholesaler or distributor did not sell or offer to sell the

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prescription drug in question prior to the time a market shortage was declared; and

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     (6) The price was substantially attributable to local, regional, national, or international

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market conditions.

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     (b) Consultation. Not later than one year after the date of enactment of this chapter and

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annually thereafter, the attorney general or designee, shall consult with representatives of the

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National Association of Wholesalers, group purchasing organizations, pharmaceutical

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distributors, hospitals, manufacturers, patients, and other interested community organizations to

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reassess the criteria set forth in subsection (a) of this section in determining unreasonably

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excessive and prepare and submit to the general assembly a report on the results of the

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reassessment.

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     6-13.1-8. Duration. -- (a) Any market shortage declared by the governor or President in

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accordance with this chapter shall be in effect for a period of not to exceed six (6) months from

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the date on which the governor or President issues the executive order.

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     (b) Termination.-- Any market shortage declared by the governor or President in

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accordance with this chapter shall terminate if:

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     (1) There is enacted a law terminating the market shortage which shall be passed by the

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general assembly after a national market shortage is declared; or

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     (2) The governor or President issues a proclamation terminating the market shortage;

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whichever comes first.

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     (c) Declaration Renewal. The governor or President may renew the state of market

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shortage declared under subsection (a) of this section, if the governor or President declares that

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the severe shortage continues to affect the health and well-being of citizens beyond the initial six

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(6) month period.

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     SECTION 2. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO COMMERCIAL LAW-- GENERAL REGULATORY PROVISIONS --

UNFAIR SALES PRACTICES

***

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     This act would prohibit price gouging of prescribed drugs or pharmaceuticals in times of

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market emergency or market shortages and would make violators guilty of a felony and would

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make them subject to injunctive relief upon suit brought by the attorney general of the State of

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Rhode Island.

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     This act would take effect upon passage.

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