2001 -- H 5909
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LC01774
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S T A T E O F R H O D E I S L A N D
IN GENERAL ASSEMBLY
JANUARY SESSION, A.D. 2001
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A N A C T
CREATING THE RHODE ISLAND PRESCRIPTION DRUG REDUCTION ACT OF 2001
It is enacted by the General Assembly as follows:
SECTION 1. Title 23 of the General Laws entitled "Health and Safety" is hereby amended by adding thereto the following chapters:
CHAPTER 72
THE RHODE ISLAND PRESCRIPTION DRUG PRICE REDUCTION ACT OF 2001
23-72-1. Findings. -- This chapter may be known and cited as the "Rhode Island Prescription Drug Price Reduction Act of 2001." The legislature finds that affordability is critical in providing access to prescription drugs for Rhode Island residents. This chapter is enacted by the legislature as a positive measure to make prescription drugs more affordable for qualified Rhode Island residents, thereby increasing the overall health of Rhode Island residents, promoting healthy communities and protecting the public health and welfare of Rhode Island residents.
23-72-2. Definitions.-- As used in this chapter and chapters 23-73 and 23-74, unless the context otherwise indicates, the following term has the following meaning:
(a) "Director" means the director of the department of health.
23-72-3. Prescription drug advisory commission. -- The prescription drug advisory commission, hereinafter referred to in this chapter as the "commission," is established to review access to and the pricing of prescription drugs for residents of the state, to advise the director on prescription drug pricing and to provide periodic reports to the director, the governor and the legislature.
23-72-4. Membership. -- The commission consists of the following eleven (11) members, as follows:
(a) Three (3) members of the public, appointed by the speaker of the house, one (1) of whom shall represent the interests of senior citizens. Of the initial appointees, one (1) must be appointed for a two (2) year term, and two (2) for three (3) year terms;
(b) Three (3) members of the public, appointed by the Senate majority leader, one (1) of whom shall represent the interests of senior citizens. Of the initial appointees, one (1) must be appointed for a two (2) year term, and two (2) for three (3) year terms;
(c) Two (2) members of the health care community who are authorized by the laws of this state to prescribe drugs, appointed by the governor. Of the initial appointees, one (1) must be appointed for a two (2) year term and one (1) for a three (3) year term;
(d) Two (2) pharmacists, appointed by the governor. Of the initial appointees, one (1) must be appointed for a two (2) year term and one (1) for a three (3) year term. To be appointed to and remain on the commission, each pharmacist must:
(1) Be licensed to practice pharmacy and be engaged in the practice of retail pharmacy in this state;
(2) Have at least five (5) years of experience in this state as a licensed pharmacist; and
(3) Be a resident of this state; and
(e) The director of the department of health or his or her designee.
23-72-5. Terms. -- With the exception of the initial appointees, all members of the commission serve for terms of three (3) years and may be reappointed. With the exception of the pharmacist members, if the profession or qualifications of a commission member change during the term of commission membership, the member may continue to complete the term for which the appointment was made.
23-72-6. Meetings -- Chair. -- The commission shall meet at least four (4) times per year. The members shall select a chair from among the members. Additional meetings may be called by the chair.
23-72-7. Duties. -- The duties of the commission shall include the following:
(a) To review access to prescription drugs for residents of the state, including, but not limited to, pricing and affordability information;
(b) To advise the director of the department of health on access to prescription drugs and prescription drug prices, including, but not limited to, insurance and third party payments for prescription drugs, the need for maximum retail prices, and, if maximum retail prices are established, the procedures for adoption and periodic review of maximum retail prices, the procedures for establishing maximum retail prices for new prescription drugs and for reviewing maximum retail prices of selected drugs and the procedures for phasing out or terminating maximum retail prices;
(c) To advise the director of the department of health on the adoption of rules necessary to implement this chapter; and
(d) To report to the director of the department of health, the legislature and the governor by April 1, 2002, and annually thereafter by the second week in January, including in the report any recommendations for action regarding access to and the pricing of prescription drugs.
23-72-8. Staffing. -- The department of health shall provide staffing for the commission.
23-72-9. Compensation. -- Public members not otherwise compensated by their employers or other entities whom they represent are entitled to receive reimbursement of necessary expenses and a per diem equal to the legislative per diem for their attendance at authorized meetings of the commission.
23-72-10. Emergency drug pricing. -- In order to achieve the public health purposes listed in section 23-72-1, maximum retail prices for prescription drugs sold in Rhode Island shall be established pursuant to this chapter.
23-72-11. Emergency drug-pricing procedures. -- The following provisions apply to determinations regarding maximum retail prices for prescription drugs and to the procedures for establishing those prices.
(a) By July 1, 2002, the department of health shall adopt rules establishing the procedures for adoption and periodic review of maximum retail prices, the procedures for establishing maximum retail prices for new prescription drugs and for reviewing maximum retail prices of selected drugs and the procedures for phasing out or terminating maximum retail prices. Prior to adopting rules pursuant to this paragraph, the director of the department of health shall consult with and consider the recommendations of the commission regarding the rules.
(b) By January 5, 2003, the director of the department of health shall determine whether the cost of prescription drugs provided to qualified residents under the Rhode Island prescription drug program is reasonably comparable to the lowest cost paid for the same drugs delivered or dispensed in the state. In making this determination the following provisions apply:
(1) The director of the department of health shall review prescription drug use in the Medicaid program using data from the most recent six (6) month period for which data is available;
(2) Using the data reviewed, the director of the department of health shall determine the one hundred (100) drugs for which the most units were provided and the one hundred (100) drugs for which the total cost was the highest;
(3) For each prescription drug listed, the director of the department of health shall determine the cost for each drug for qualified residents provided those drugs under the Rhode Island prescription drug program on a certain date. The average cost for each such drug must be calculated;
(4) For each prescription drug listed, the director shall determine the lowest cost for each drug paid by any purchaser on the date that is used, delivered, or dispensed in the state, taking into consideration the federal supply schedule and prices paid by pharmaceutical benefits managers and by large purchasers and excluding drugs purchased through the Rhode Island prescription drug program. The average cost for each such drug must be calculated;
(5) If the average cost for one (1) or more prescription drugs under the Rhode Island prescription drug program as determined is not reasonably comparable to the average lowest cost for the same drug or drugs as determined, the director of the department of health shall establish maximum retail prices for any or all prescription drugs sold in the state. Maximum prescription drug prices established under this chapter must take effect by July 1, 2003.
(c) In establishing maximum retail prices under this paragraph, the director shall consider the advice of the commission and shall follow procedures set forth by rules adopted by the department.
23-72-12. Select prescription drugs. -- In making a determination under this section the director of the department of health may rely on pricing information on a selected number of prescription drugs if that list is representative of the prescription drug needs of the residents of the state and is made public as part of the process of establishing maximum retail prices.
23-72-13. Public health or welfare. -- The director of the department of health may take actions that the director of the department of health determines necessary if there is a severe limitation or shortage of or lack of access to prescription drugs in the state that could threaten or endanger the public health or welfare.
23-72-14. Appeals. -- A retailer of prescription drugs may appeal the maximum retail price of a prescription drug established pursuant to this section in accordance with chapter 42-35, the "administrative procedures act".
23-72-15. Enforcement. -- A violation of the maximum retail prices established under this chapter is a violation of the Rhode Island unfair trade practices act.
CHAPTER 73
PRESCRIPTION DRUG PRICE REDUCTION PROGRAM
23-73-1. Rhode Island prescription drug program established. -- The Rhode Island Prescription Drug Program, referred to in this chapter as the "program," is established to reduce prescription drug prices for residents of the state. The program is designed for the state to utilize manufacturer rebates and pharmacy discounts to reduce prescription drug prices. In implementing the program, the state shall serve as a pharmacy benefit manager in establishing rebates and discounts on behalf of qualified residents.
23-73-2. Program goals. -- The legislature finds that affordability is critical in providing access to prescription drugs for Rhode Island residents. This chapter is enacted by the legislature to enable the state to act as a pharmacy benefit manager in order to make prescription drugs more affordable for qualified Rhode Island residents, thereby increasing the overall health of Rhode Island residents, promoting healthy communities and protecting the public health and welfare. It is not the intention of the state to discourage employers from offering or paying for prescription drug benefits for their employees or to replace employer-sponsored prescription drug benefit plans that provide benefits comparable to those made available to qualified Rhode Island residents under this chapter.
23-73-3. Definitions. -- As used in this chapter, unless the context otherwise indicates, the following terms have the following meanings:
(a) "Average wholesale price" means the wholesale price charged on a specific commodity that is assigned by the drug manufacturer and is listed in a nationally recognized drug-pricing file;
(b) "Director" means the director of the department of health;
(c) "Initial discounted price" means a price that is less than or equal to the average wholesale price, minus six percent (6%), plus the dispensing fee provided under the Medicaid program;
(d) "Labeler" means an entity or person that receives prescription drugs from a manufacturer or wholesaler and repackages those drugs for later retail sale and that has a labeler code from the federal food and drug administration under 21 code of federal regulations, 207.20 (1999);
(e) "Participating retail pharmacy" or "retail pharmacy" means a retail pharmacy located in this state, or another business licensed to dispense prescription drugs in this state, that participates in the program and that provides discounted prices to residents as provided in this chapter;
(f) "Pharmacy benefit manager" means an entity that procures prescription drugs at a negotiated rate under a contract;
(g) "Qualified resident" means a resident of the state who has obtained from the department a Rhode Island prescription drug enrollment card;
(h) "Secondary discounted price" means a price that is equal to or less than the initial discounted price minus the amount of any rebate paid by the state to the participating retail pharmacy.
23-73-4. Rebate agreement. -- A drug manufacturer or labeler that sells prescription drugs in this state through the pharmaceutical care assistance act for the elderly or any other publicly supported pharmaceutical assistance program shall enter into a rebate agreement with the department of health for this program. The rebate agreement must require the manufacturer or labeler to make rebate payments to the state each calendar quarter or according to a schedule established by the department.
23-73-5. Rebate amount. -- The director shall negotiate the amount of the rebate required from a manufacturer or labeler in accordance with this chapter.
(a) The director shall take into consideration the rebate calculated under the Medicaid Rebate Program pursuant to 42 United States Code, Section 1396r-8, the average wholesale price of prescription drugs and any other information on prescription drug prices and price discounts;
(b) The director shall use his or her best efforts to obtain an initial rebate amount equal to or greater than the rebate calculated under the Medicaid program pursuant to 42 United States Code, Section 1396r-8.
(c) With respect to the rebate taking effect no later than October 1, 2001, the director of the department of health shall use the director of the department of health's best efforts to obtain an amount equal to or greater than the amount of any discount, rebate or price reduction for prescription drugs provided to the Federal Government.
23-73-6. Discounted prices for qualified residents. -- Any participating retail pharmacy that sells prescription drugs covered by a rebate agreement pursuant to section 23-73-4 shall discount the retail price of those drugs sold to qualified residents.
(a) The director shall establish discounted prices for drugs covered by a rebate agreement and shall promote the use of efficacious and reduced-cost drugs, taking into consideration reduced prices for state and federally-capped drug programs, differential dispensing fees, administrative overhead and incentive payments.
(b) Beginning January 1, 2002, a participating retail pharmacy shall offer the initial discounted price.
(c) No later than October 1, 2002, a participating retail pharmacy shall offer the secondary discounted price.
(d) In determining the amount of discounted prices, the department shall consider an average of all rebates provided, weighted by sales of drugs subject to these rebates over the most recent twelve (12) month period for which the information is available.
23-73-7. Operation of program. -- The requirements of this chapter apply to participating retail pharmacies.
(a) The director of the department of health shall adopt rules requiring disclosure by participating retail pharmacies to qualified residents of the amount of savings provided as a result of the program. The rules must consider and protect information that is proprietary in nature. Rules adopted pursuant to this chapter.
(b) The department of health may not impose transaction charges under this program on retail pharmacies that submit claims or receive payments under the program.
(c) A participating retail pharmacy shall submit claims to the department of health to verify the amount charged to qualified residents under this chapter.
(d) On a weekly or biweekly basis, the department of health must reimburse a participating retail pharmacy for discounted prices provided to qualified residents under section 23-73-6 and professional fees, which must be set by the department of health. The amount of the initial professional fee must be set at three dollars ($3) per prescription.
(e) The department of health shall collect utilization data from the participating retail pharmacies submitting claims necessary to calculate the amount of the rebate from the manufacturer or labeler. The department of health shall protect the confidentiality of all information subject to confidentiality protection under state or federal law, rule or regulation.
23-73-8. Action with regard to non-participating manufacturers and labelers. -- The names of manufacturers and labelers who do not enter into rebate agreements pursuant to this chapter are public information. The department of health shall release this information to health care providers and the public. The department of health shall impose prior authorization requirements in the Medicaid program under this chapter, as permitted by law, for the dispensing of prescription drugs provided by those manufacturers and labelers.
23-73-9. Discrepancies in rebate amounts. -- Discrepancies in rebate amounts must be resolved using the process established in this chapter.
(a) If there is a discrepancy in the manufacturer's or labeler's favor between the amount claimed by a pharmacy and the amount rebated by the manufacturer or labeler, the department of health, at the department of health's expense, may hire a mutually agreed upon independent auditor. If a discrepancy still exists following the audit, the manufacturer or labeler shall justify the reason for the discrepancy or make payment to the department of health for any additional amount due.
(b) If there is a discrepancy against the interest of the manufacturer or labeler in the information provided by the department to the manufacturer or labeler regarding the manufacturer's or labeler's rebate, the manufacturer or labeler, at the manufacturer's or labeler's expense, may hire a mutually agreeable independent auditor to verify the accuracy of the data supplied to the department of health. If a discrepancy still exists following the audit, the department of health shall justify the reason for the discrepancy or refund to the manufacturer or labeler any excess payment made by the manufacturer or labeler.
(c) Following the procedures established in paragraph (a) or (b), either the department or the manufacturer or labeler may request a hearing before the administrative hearings unit. Supporting documentation must accompany the request for a hearing.
23-73-10. Dedicated fund. -- The Rhode Island prescription drug dedicated fund, referred to in this section as the "fund," is established to receive revenue from manufacturers and labelers who pay rebates as provided in section 23-73-5, and any appropriations or allocations designated for the fund. The purposes of the fund are to: reimburse retail pharmacies for discounted prices provided to qualified residents pursuant to section 23-73-6; to reimburse the department for contracted services, administrative and associated computer costs, professional fees paid to participating retail pharmacies and other reasonable program costs; and to benefit the elderly low-cost drug program.
23-73-11. Annual summary report. -- The department of health shall report the enrollment and financial status of the program to the legislature by the second week in January each year.
23-73-12. Obligations of department. -- The director of the department of health shall establish simplified procedures for determining eligibility and issuing Rhode Island prescription drug enrollment cards to qualified residents and shall undertake outreach efforts to build public awareness of the program and maximize enrollment of qualified residents. The director of the department of health may adjust the requirements and terms of the program to accommodate any new federally funded prescription drug programs.
23-73-13. Contracting. -- The director of the department of health may contract with a third party or third parties to administer any or all components of the program, including, but not limited to, outreach, eligibility, claims, administration and rebate recovery and redistribution.
23-73-14. Medical assistance programs. -- The director of the department of health shall administer the program and other medical and pharmaceutical assistance programs under this title in a manner that is advantageous to the programs and to the enrollees in those programs. In implementing this subsection the department may coordinate the other programs and this program and may take actions to enhance efficiency, reduce the cost of prescription drugs and maximize the benefits to the programs and enrollees, including providing the benefits of this program to enrollees in other programs.
23-73-15. Rulemaking. -- The director of the department of health may adopt rules to implement the provisions of this chapter.
23-73-16. Waivers. -- The director of the department of health may seek any waivers of federal law, rule or regulation necessary to implement the provisions of this chapter.
CHAPTER 74
PROFITEERING IN PRESCRIPTION DRUGS PROHIBITED
23-74-1. Profiteering in prescription drugs. -- Prescription drugs are a necessity of life. Profiteering in prescription drugs is unlawful and is subject to the provisions of this section. The provisions of this section apply to manufacturers, distributors and labelers of prescription drugs.
23-74-2. Definitions. -- As used in this chapter, unless the context otherwise indicates, the following terms have the following meanings:
(a) "Labeler" means an entity or person that receives prescription drugs from a manufacturer or wholesaler and repackages those drugs for later retail sale and that has a labeler code from the federal food and drug administration under 21 code of federal regulations, 207.20 (1999);
(b) "Manufacturer" means a manufacturer of prescription drugs and includes a subsidiary or affiliate of a manufacturer.
23-74-3. Profiteering. -- A manufacturer, distributor or labeler of prescription drugs engages in illegal profiteering if that manufacturer, distributor or labeler:
(a) Exacts or demands an unconscionable price;
(b) Exacts or demands prices or terms that lead to any unjust or unreasonable profit;
(c) Discriminates unreasonably against any person in the sale, exchange, distribution or handling of prescription drugs dispensed or delivered in the state; or
(d) Intentionally prevents, limits, lessens or restricts the sale or distribution of prescription drugs in this state in retaliation for the provisions of this chapter.
23-74-4. Right of action and damages. -- The state may bring a civil action in district court or superior court for a direct or indirect injury to any person, group of persons, the state or a political subdivision of the state caused by a violation of this chapter. There is a right to a jury trial in any action brought in superior court under this section. If the state prevails, the defendant shall pay three (3) times the amount of damages and the costs of suit, including necessary and reasonable investigative costs, reasonable expert fees and reasonable attorney's fees. For a willful or repeated violation of this chapter, punitive damages may be awarded. After deduction of the costs of distribution, the damages must be equitably distributed by the state to all injured parties.
23-74-5. Civil violation. -- Each violation of this chapter is a civil violation for which the attorney general may obtain, in addition to other remedies, injunctive relief and a civil penalty in an amount not to exceed one hundred thousand dollars ($100,000), plus the costs of suit, including necessary and reasonable investigative costs, reasonable expert fees and reasonable attorney's fees.
23-74-6. Unfair trade practice. -- A violation of this chapter is also a violation of the Rhode Island unfair trade practices act.
23-74-7. Investigation by attorney general. -- (a) The attorney general, upon the attorney general's own initiative or upon petition of the director or of fifty (50) or more residents of the state, shall investigate suspected violations of this chapter.
(b) The attorney general may require, by summons, the attendance and testimony of witnesses and the production of books and papers before the attorney general related to any such matter under investigation. The summons must be served in the same manner as summonses for witnesses in criminal cases, and all provisions of law related to criminal cases apply to summonses issued under this section so far as they are applicable. All investigations or hearings under this section to which witnesses are summoned or called upon to testify or to produce books, records or correspondence are public or private at the choice of the person summoned and must be held in the county where the act to be investigated is alleged to have been committed, or if the investigation is on petition, it must be held in the county in which the petitioners reside.
(c) A justice of the superior court may by order, upon application of the attorney general, compel the attendance of witnesses, the production of books and papers, including correspondence, and the giving of testimony before the attorney general in the same manner and to the same extent as before the superior court. Any failure to obey such an order may be punishable by that court as a contempt.
SECTION 2. This act shall take effect upon passage.
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LC01774
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EXPLANATION
BY THE LEGISLATIVE COUNCIL
OF
A N A C T
CREATING THE RHODE ISLAND PRESCRIPTION DRUG REDUCTION ACT OF 2001
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This act would create the Rhode Island Prescription Drug Price Reduction Act, which establishes a price reduction program and prohibits the practice of profiteering in prescription drugs.
This act would create a prescription drug advisory commission and would designate the Director of the Department of Health the facilitator of the program.
This act would take effect upon passage.