2023 -- H 5111

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LC000162

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2023

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A N   A C T

RELATING TO COMMERCIAL LAW -- GENERAL REGULATORY PROVISIONS -- PRICE

GOUGING OF PRESCRIPTION DRUGS PROHIBITED

     

     Introduced By: Representatives J Lombardi, Hull, Tanzi, and Felix

     Date Introduced: January 12, 2023

     Referred To: House Judiciary

     It is enacted by the General Assembly as follows:

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     SECTION 1. Title 6 of the General Laws entitled "COMMERCIAL LAW – GENERAL

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REGULATORY PROVISIONS" is hereby amended by adding the following chapter:

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CHAPTER 13.4

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PRICE GOUGING OF PRESCRIPTION DRUGS PROHIBITED

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     6-13.4-1. Purpose.

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     The purpose of this act is to prohibit prescription drug price gouging or excessive pricing

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during market shortages.

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     6-13.4-2. Findings.

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     The general assembly finds as follows:

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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, in

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treating cancer, and in fighting 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 such

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conduct be prohibited and made subject to criminal penalties.

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     6-13.4-3. Definitions.

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

 

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     (1) "Biologic" means a virus, therapeutic serum, toxin, antitoxin, vaccine, blood, blood

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component or derivative, allergenic product, or analogous product, or arsphenamine or derivative

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of arsphenamine (or any other trivalent organic arsenic compound), applicable to the prevention,

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treatment, or cure of a disease or condition of human beings;

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

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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 or

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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 available

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

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

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are not substantially attributable to increased cost to retailers, imposed by their suppliers, including

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replacement costs imposed by the vendors' source. Additionally, the average price calculation

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during said thirty (30) day period shall not include discounted prices set and offered as a result of

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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 sufficient

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

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     6-13.4-4. Unreasonably excessive drug pricing.

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     (a) The governor may issue an executive order or rely on an executive order of the

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President, declaring a market shortage or market emergency for a period of six (6) months with

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regard to one or more vital drugs due to a 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 such action indicates that the seller is taking unfair advantage of the circumstances

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related to a market shortage to unreasonably increase prices during such period.

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     6-13.4-5. Penalties.

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     (a) Any person who sells or offers to sell any vital drug during a declared market shortage

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with the knowledge and intent to charge a price that is unreasonably excessive under the

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circumstances shall be guilty of a felony and shall be imprisoned for up to five (5) years and by a

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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 section,

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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 in

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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 department of the attorney

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general may in its discretion bring an action in the superior court for the county in which the

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

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

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     (d) The department of the attorney general is authorized to enforce the penalties set forth

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in this section.

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     6-13.4-6. Determination of unreasonably excessive drug pricing.

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     (a) The attorney general, in determining whether an alleged violator's price was

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unreasonably excessive, shall consider whether:

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

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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 same

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or similar goods were readily available in the state prior to the declared market 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 effective date of this chapter and annually

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

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Association of Wholesalers, group purchasing organizations, pharmaceutical distributors,

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hospitals, manufacturers, patients, and other interested community organizations to reassess the

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criteria set forth in subsection (a) of this section in determining unreasonably excessive drug pricing

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

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     6-13.4-7. Duration.

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     (a) Any market shortage declared by the governor or President in accordance with this

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chapter shall be in effect for a period not to exceed six (6) months from the date on which the

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governor or President issues the executive order.

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

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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 shortage

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

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shortage continues to affect the health and well-being of citizens beyond the initial six (6) month

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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 -- PRICE

GOUGING OF PRESCRIPTION DRUGS PROHIBITED

***

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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 with

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punishment up to five (5) years, a fine up to ten thousand dollars ($10,000) or both. The act would

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further make them subject to injunctive relief upon suit brought by the department of the attorney

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general.

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     This act would take effect upon passage.

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