2023 -- S 0098 SUBSTITUTE A

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LC000307/SUB A

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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 FOOD AND DRUGS -- PRESCRIPTION DRUG COST PROTECTION

     Introduced By: Senators DiPalma, Miller, Pearson, DiMario, Valverde, and Goodwin

     Date Introduced: February 01, 2023

     Referred To: Senate Health & Human Services

     It is enacted by the General Assembly as follows:

     SECTION 1. Legislative Intent.

     (1) The purpose of this chapter is to protect the safety, health, and economic well-being of

Rhode Island residents by safeguarding them from the negative and harmful impact of excessive

and unconscionable prices for prescription drugs. In enacting this act, the legislature finds that

access to prescription drugs is necessary for Rhode Island residents to maintain or achieve good

health:

     (i) Excessive prices negatively impact the ability of Rhode Island residents to obtain

prescription drugs and price increases that exceed reasonable levels thereby endanger the health

and safety of Rhode Island residents to maintain or achieve good health;

     (ii) Excessive prices for prescription drugs threaten the economic well-being of Rhode

Island residents and endanger their ability to pay for other necessary and essential goods and

services including housing, food and utilities;

     (iii) Excessive prices for prescription drugs contribute significantly to a dramatic and

unsustainable rise in health care costs and health insurance that threaten the overall ability of Rhode

Island residents to obtain health coverage and maintain or achieve good health;

     (iv) Excessive prices for prescription drugs contribute significantly to rising state costs for

health care provided and paid for through health insurance programs for public employees,

including employees of the state, municipalities and counties, school districts, institutions of higher

education, and retirees whose health care costs are funded by public programs, thereby threatening

the ability of the state to fund those programs adequately and further threatening the ability of the

state to fund other programs necessary for the public good and safety, such as public education and

public safety; and

     (v) Based on findings in subsections (i) through (iv) of this section, the legislature finds

that excessive prices for prescription drugs threaten the safety and well-being of Rhode Island

residents and find it is necessary to act in order to protect Rhode Island residents from the negative

impact of excessive costs.

     SECTION 2. Title 21 of the General Laws entitled "FOOD AND DRUGS" is hereby

amended by adding thereto the following chapter:

CHAPTER 38

PRESCRIPTION DRUG COST PROTECTION

     21-38-1. Definitions.

     As used in this chapter:

     (1) “ERISA Plan” means a plan qualified under the Employee Retirement Income Security

Act of 1974.

     (2) “Health Plan” means any entity subject to the insurance laws and regulations of this

state, or subject to the jurisdiction of the commissioner, that contracts or offers to contract to

provide, deliver, arrange for, pay for, or reimburse any of the costs of healthcare services, including,

without limitation, an insurance company offering accident and sickness insurance, a health

maintenance organization licensed under chapter 41 of title 27, a nonprofit hospital service

corporation organized under chapter 19 of title 27, a nonprofit medical service corporation

organized under chapter 20 of title 27, a nonprofit dental service corporation organized under

chapter 41 of title 20.1, a nonprofit optometric service corporation organized under chapter 20.2 of

title 27, a domestic insurance company subject to chapter 1 of title 27 that offers or provides health

insurance coverage in the state, and a foreign insurance company subject to chapter 2 of title 27

that offers or providers health insurance coverage in the state.

     (3) “Maximum fair price” means the maximum rate for a drug published by the Secretary

of the United States Department of Health and Human Services pursuant to Section 1195 of P.L.

117-169 (2022).

     (4) “Participating ERISA plan” means an ERISA plan that has elected to participate in the

requirements and restrictions of this subchapter as described in § 21-38-4.

     (5) “Price applicability period” means the period of time defined in Section 1191 of P.L.

117-169 (2022)

     (6) “Referenced drug” means a drug subject to a maximum fair price.

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     (7) “State entity” means any agency of state government that purchases prescription drugs

on behalf of the state for a person whose health care is paid for by the state, including any agent,

vendor, fiscal agent, contractor, or other party acting on behalf of the state. State entity does not

include the medical assistance program established under 42 U.S.C. §1396 et seq.

     21-38-2. Payment in excess of referenced rate prohibited.

     (a) The maximum fair price is the maximum payment for a referenced drug and applies to

all purchases of a referenced drug and reimbursements for a claim for the referenced drug during

the price applicability period when the referenced drug is dispensed, delivered, or administered to

an individual in the state in person, by mail, or by other means

     (b) It is a violation of this chapter for any purchaser to purchase a referenced drug or seek

reimbursement for a referenced drug to be dispensed, delivered, or administered to an individual in

the state in person, by mail, or by other means for a cost higher than the maximum fair price. The

maximum fair price does not include a dispensing fee paid to a pharmacy for dispensing a

referenced drug and nothing in this chapter shall be interpreted to prevent a retail pharmacy from

receiving a dispensing fee above the maximum fair price.

     21-38-3. ERISA plan opt-in.

     An ERISA plan may elect to participate in the provisions of this chapter. Any ERISA plan

that desires its purchase of prescription drugs to be subject to the prohibition described in § 21-38-

3 shall notify the insurance commissioner in writing by February 1 of each year.

     21-38-4. Rulemaking authority.

     The insurance commissioner shall have the authority to implement regulations pursuant to

chapter 35 of title 42 ( "administrative procedures") to fully implement the requirements of this

chapter.

     21-38-5. Registered agent and office within the state.

     Any entity that sells, distributes, delivers, or offers for sale any drug in the state is required

to maintain a registered agent and office within the state.

     21-38-6. Use of savings.

     (a) Any savings generated as a result of the requirements in §21-38-3 during the referenced

rate applicability period above must be used to reduce costs to consumers. Any state entity, health

plan or participating ERISA plan must calculate such savings and utilize such savings directly to

reduce costs for its members. In determining how to utilize savings in order to comply with this

provision, purchasers are directed to consider strategies that promote greater health equity by

addressing disparities across communities.

     (b) No later than April 1 of each calendar year, each state entity, health plan and

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participating ERISA plan subject to this chapter shall submit to the insurance commissioner a report

describing the savings achieved for each referenced drug for the previous calendar year and how

those savings were used to achieve the requirements of subsection (a) of this section, including how

the savings were used to promote greater health equity by addressing disparities across

communities.

     (c) The insurance commissioner shall implement rules setting forth the method for

calculating savings and the format and submission requirements for the report described in

subsection (b) of this section.

     21-38-7. Enforcement.

     Each violation of this chapter shall be subject to a fine of one thousand dollars ($1,000).

Every individual transaction in violation of § 21-38-3 is determined to be a separate violation. The

attorney general is authorized to enforce the provisions of this statute. The refusal of a manufacturer

or distributor to negotiate in good faith as described in § 21-38-8(d) shall be a valid affirmative

defense in any enforcement action brought under this chapter.

     21-38-8. Prohibition on withdrawal of referenced drugs for sale.

     (a) It shall be a violation of this chapter for any manufacturer or distributor of a referenced

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

the impact of the rate limitations set forth in § 21-38-3.

     (b) Any manufacturer that intends to withdraw a referenced drug from sale or distribution

from within the state shall provide a notice of withdrawal in writing to the insurance commissioner

and to the attorney general one hundred eight (180) days prior to such withdrawal.

     (c) The insurance commissioner shall assess a penalty on any manufacturer or distributor

that it determines has withdrawn a referenced drug from distribution or sale in the state in violation

of subsection (a) or (b) of this section. With respect to each referenced drug for which the insurance

commissioner has determined the manufacturer or distributor has withdrawn from the market, the

penalty shall be equal to:

     (1) Five hundred thousand dollars ($500,000); or

     (2) The amount of annual savings determined by the insurance commissioner as described

in § 21-38-6, whichever is greater.

     (d) It shall be a violation of this chapter for any manufacturer or distributor of a referenced

drug to refuse to negotiate in good faith with any payor or seller of prescription drugs a price that

is within the referenced rate as determined in § 21-38-2.

     (e) The insurance commissioner shall assess a penalty on any manufacturer or distributor

that it determines has failed to negotiate in good faith in violation of § 21-38-7. With respect to

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each referenced drug for which the insurance commissioner has determined the manufacturer or

distributor has failed to negotiate in good faith, the penalty shall be equal to:

     (1) Five hundred thousand dollars ($500,000); or

     (2) The amount of annual savings determined by the insurance commissioner as described

in § 21-38-6, whichever is greater.

     21-38-9. Severability clause.

     If any provision of this chapter or the application thereof is determined to be invalid, the

invalidity does not affect other provisions or applications of this chapter which can be given effect

without the invalid provision or application, and to this end the provisions of this chapter are

severable.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO FOOD AND DRUGS -- PRESCRIPTION DRUG COST PROTECTION

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     This act would prohibit the state, participating ERISA or any health plan from purchasing

referenced drugs for a cost higher than the referenced rate.

     This act would take effect upon passage.

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