2023 -- H 5678

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LC001788

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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 STATE AFFAIRS AND GOVERNMENT – THE RHODE ISLAND HEALTH

CARE REFORM ACT OF 2004 – HEALTH INSURANCE OVERSIGHT

     Introduced By: Representatives Potter, Kislak, Casey, Voas, Stewart, Morales, Tanzi, J.
Lombardi, Carson, and Donovan

     Date Introduced: February 17, 2023

     Referred To: House Health & Human Services

     It is enacted by the General Assembly as follows:

     SECTION 1. Section 42-14.5-2.1 of the General Laws in Chapter 42-14.5 entitled "The

Rhode Island Health Care Reform Act of 2004 — Health Insurance Oversight" is hereby amended

to read as follows:

     42-14.5-2.1. Definitions.

     As used in this chapter:

     (1) “Accountability standards” means measures including service processes, client and

population outcomes, practice standard compliance and fiscal integrity of social and human service

providers on the individual contractual level and service type for all state contacts of the state or

any subdivision or agency to include, but not limited to, the department of children, youth and

families (DCYF), the department of behavioral healthcare, developmental disabilities and hospitals

(BHDDH), the department of human services (DHS), the department of health (DOH), and

Medicaid. This may include mandatory reporting, consolidated, standardized reporting, audits

regardless of organizational tax status, and accountability dashboards of aforementioned state

departments or subdivisions that are regularly shared with the public.

     (2) “Consumer Price Index” means the consumer price index, annual average, for all urban

consumers, CPI-U: US city average, all items, reported by the United States Department of Labor,

Bureau of Labor Statistics, or its successor or, if the index is discontinued, an equivalent index

reported by a federal authority or, if no such index is reported, "Consumer Price Index" means a

comparable index chosen by the bureau of labor statistics.

     (3) “Executive Office of Health and Human Services (EOHHS)” means the department

that serves as “principal agency of the executive branch of state government” (§ 42-7.2-2)

responsible for managing the departments and offices of: health (RIDOH), human services (DHS),

healthy aging (OHA), veterans services (VETS), children, youth and families (DCYF), and

behavioral healthcare, developmental disabilities and hospitals (BHDDH). EOHHS is also

designated as the single state agency with authority to administer the Medicaid program in Rhode

Island.

     (4) “Identified drug” means any prescription drug that has at any time been identified as

having an unsupported price increase.

     (5) “Prescription drug” has the same meaning as prescription as defined in § 15-19.1-2.

     (3)(6) “Rate review” means the process of reviewing and reporting of specific trending

factors that influence the cost of service that informs rate setting.

     (4)(7) “Rate setting” means the process of establishing rates for social and human service

programs that are based on a thorough rate review process.

     (5)(8) “Social and human service program” means a social, mental health, developmental

disability, child welfare, juvenile justice, prevention services, habilitative, rehabilitative, substance

use disorder treatment, residential care, adult or adolescent day services, vocational, employment

and training, or aging service program or accommodations purchased by the state.

     (6)(9) “Social and human service provider” means a provider of social and human service

programs pursuant to a contract with the state or any subdivision or agency to include, but not be

limited to, the department of children, youth and families (DCYF), the department of behavioral

healthcare, developmental disabilities and hospitals (BHDDH), the department of human services

(DHS), the department of health (DOH), and Medicaid.

     (7)(10) “State government and the provider network” refers to the contractual relationship

between a state agency or subdivision of a state agency and private companies the state contracts

with to provide the network of mandated and discretionary social and human services.

     (11) “Unsupported price increase” means an increase in price for a prescription drug for

which there was no, or inadequate, new clinical evidence to support the price increase. In order to

determine whether a price increase for a prescription drug is unsupported by new clinical evidence,

the state shall utilize and rely upon the analyses of prescription drugs prepared annually by the

Institute for Clinical and Economic Review (ICER) and published in its annual unsupported price

increase report.

     (12) “Wholesale acquisition cost” has the meaning set forth in 42 U.S.C. § 1395w-3a.

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     SECTION 2. Chapter 42-14.5 of the General Laws entitled “The Rhode Island Health Care

Reform Act of 2004 – Health Insurance Oversight” is hereby amended by adding thereto the

following section:

     42-14.5-6. Penalty imposed and collection power.

     (a) A penalty shall be assessed on the sales within the state of identified drugs and payable

by the manufacturers of the identified drugs. The penalty shall be calculated as described in

subsection (a)(1) of this section.

     (1) The penalty in any calendar year shall equal eighty percent (80%) of the difference

between the revenue generated by sales within the state of the identified drugs and the revenue that

would have been generated if the manufacturer had maintained the wholesale acquisition cost from

the previous calendar year, adjusted for inflation utilizing the Consumer Price Index.

     (2) In order to be subject to the penalty a manufacturer must have at least two hundred fifty

thousand dollars ($250,000) in total annual sales within the state in the calendar year for which the

penalty is assessed.

     (3) Within sixty (60) days of the annual publication by ICER of the unsupported price

increase report, the commissioner shall identify the manufacturers of identified drugs. The

commissioner shall notify each manufacturer that sales within the state of identified drugs shall be

subject to the penalty assessed in this section for a period of two (2) calendar years following the

identified drug’s appearance in the annual publication by ICER.

     (4) Such penalty shall be collected annually. Any manufacturer notified by the

commissioner pursuant to subsection (a)(3) of this section, shall submit to the commissioner a

return on a form prescribed and furnished by the commissioner and pay the penalty by April 15 for

the previous calendar year.

     (5) The form described in subsection (a)(4) of this section shall contain information

including, but not limited to:

     (i) The total amount of sales of the identified drug within the state;

     (ii) The total number of units sold of the identified drug within the state;

     (iii) The wholesale acquisition cost of the identified drug during the tax period and any

changes in the wholesale acquisition cost during the calendar year;

     (iv) The wholesale acquisition cost during the previous calendar year;

     (v) A calculation of the penalty owed; and

     (vi) Any other information that the commissioner determines is necessary to calculate the

correct amount of the penalty owed.

     (6) The commissioner may request any agency to assist in calculation of the penalty and

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collection, including the tax administrator, who may collect the contribution with interest in the

same manner and with the same powers as are prescribed for collection of taxes in title 44.

     (b) Use of revenue.

     (1) The payments required by this section may be made by electronic transfer of monies to

the general treasurer.

     (2) The general treasurer shall take all steps necessary to facilitate the transfer of monies

to a restricted receipt account and made available to the office of the health insurance commissioner

to offset costs to assess and collect the penalty, audit manufacturers that are required to submit

returns pursuant to this section, and defend appeals from manufacturers. The balance shall be

deposited to the "childhood immunization account" described in § 23-1-45(a) and the "adult

immunization account" described in § 23-1-45(c), equally.

     (3) The general treasurer shall provide the commissioner with a record of any monies

received and the director of the department of health with a record of any monies transferred and

deposited to the two (2) immunization accounts set forth in subsection (b)(2) of this section.

     (c) Prohibition on withdrawal of prescription drugs for sale.

     (1) It shall be a prohibition of this chapter for any manufacturer or distributor of an

identified drug to withdraw that drug from sale or distribution within this state for the purpose of

avoiding the penalty set forth in this section.

     (2) Any manufacturer who intends to withdraw an identified drug from sale or distribution

from within the state in order to avoid a penalty as described in this section shall provide a notice

of withdrawal in writing to the board of pharmacy and to the attorney general at a minimum of one

hundred eighty (180) days prior to such withdrawal.

     (3) The attorney general shall assess a penalty of five hundred thousand dollars ($500,000)

on any entity, including any manufacturer or distributor of an identified drug, that it determines has

withdrawn an identified drug from distribution or sale in the state in violation of this section.

     (d) Hearing by commission on application and appeals.

     (1) Any manufacturer aggrieved by the action of the commissioner in determining the

amount of any penalty imposed under the provisions of this section may apply to the commissioner,

within thirty (30) days after the notice of the action is mailed to it, for a hearing relative to the

penalty. The commissioner shall fix a time and place for the hearing and shall so notify the

manufacturer. Upon the hearing the commissioner shall correct manifest errors, if any, disclosed at

the hearing and thereupon assess and collect the amount lawfully due together with any penalty or

interest thereon.

     (2) Appeals from administrative orders or decisions made pursuant to any provisions of

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this section shall be pursued pursuant to chapter 35 of title 42 ("administrative procedures"). The

right to appeal under this section shall be expressly made conditional upon prepayment of all

contributions, interest, and penalties unless the manufacturer demonstrates to the satisfaction of the

court that the manufacturer has a reasonable probability of success on the merits and is unable to

prepay all contributions, interest, and penalties, considering not only the manufacturer’s own

financial resources, but also the ability of the manufacturer to borrow the required funds. If the

court, after appeal, holds that the manufacturer is entitled to a refund, the manufacturer shall also

be paid interest on the amount at the rate provided in § 44-1-7.1, as amended.

     SECTION 3. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO STATE AFFAIRS AND GOVERNMENT – THE RHODE ISLAND HEALTH

CARE REFORM ACT OF 2004 – HEALTH INSURANCE OVERSIGHT

***

     This act would regulate price increases for prescription drugs. Any unsupported price

increase of a prescription drug would be subject to a penalty equal to eight percent (80%) of the

difference between the revenue generated by the sales of the prescription drug and the revenue that

would have been generated if the manufacturer had maintained the wholesale acquisition cost from

the previous calendar year, adjusted appropriately for inflation. Manufacturers would be prohibited

from withdrawing a prescription drug from sale or distribution for the sole purpose of avoiding the

penalty of a price increase.

     This act would take effect upon passage.

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