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:

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

hereby amended by adding the following chapter:

CHAPTER 13.1

PRICE GOUGING OF PRESCRIPTION DRUGS PROHIBITED

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

during market shortages.

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

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

American people;

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

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

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

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

such conduct be prohibited and made subject to criminal penalties.

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

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

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

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

human beings;

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

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

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

practitioner licensed by law to administer such drug; or

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

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

by law to administer such drug;

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

or by declaration by the President;

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

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

demand at the user level;

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

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

drugs that occurs during the normal course of business;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

market shortage under this chapter.

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

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

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.

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

chapter.

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

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

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

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

during such period.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

whether:

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

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

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

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

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

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

shortage;

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

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

     (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

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

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

market conditions.

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

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

National Association of Wholesalers, group purchasing organizations, pharmaceutical

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

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

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

reassessment.

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

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

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

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

accordance with this chapter shall terminate if:

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

general assembly after a national market shortage is declared; or

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

whichever comes first.

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

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

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

(6) month period.

     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

***

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

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

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

Rhode Island.

     This act would take effect upon passage.

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