Section 1. Statement of Legislative Intent; Purpose
The purpose of this Chapter is to protect the safety, health, and economic well-being of [Name of State] 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 [Name of State] residents to maintain or achieve good health:
- Excessive prices negatively impact the ability of [Name of State] residents to obtain prescription drugs and price increases that exceed reasonable levels thereby endanger the health and safety of [Name of State] residents to maintain or achieve good health;
- Excessive prices for prescription drugs threaten the economic well-being of [Name of State] residents and endanger their ability to pay for other necessary and essential goods and services including housing, food and utilities;
- 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 [Name of State] residents to obtain health coverage and maintain or achieve good health;
- 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
- Based on findings (1) through (4), the legislature finds that excessive prices for prescription drugs threaten the safety and well-being of [Name of State] residents and find it is necessary to act in order to protect [Name of State] residents from the negative impact of excessive costs.
Section 2. Definitions
(a) “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.
(b) “Health Plan” means [States definition of health plan as defined in insurance statute].
(c) “ERISA Plan” means a plan qualified under the Employee Retirement Income Security Act of 1974.
(d) “Participating ERISA Plan” means an ERISA plan that has elected to participate in the requirements and restrictions of this subchapter as described in Section 4 below.
(e) “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).
(f) “Price Applicability Period” means the period of time defined in Section 1191 of P.L. 117-169 (2022)
(g) “Referenced Drug” means a drug subject to a Maximum Fair Price.
Section 3. 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.
Section 4. 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 Section 3 shall notify the Superintendent of Insurance in writing by [PICK A DATE] of each year.
Section 5. Rulemaking Authority
The Superintendent of Insurance shall have the authority to implement regulations under [Cite state’s Administrative Procedures Act] to fully implement the requirements of this chapter.
Section 6. 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
Section 7. Use of Savings
(a) Any savings generated as a result of the requirements in Section 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 Participating ERISA Plan subject to this Chapter shall submit to the Superintendent of Insurance 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) above, including how the savings were used to promote greater health equity by addressing disparities across communities.
(c) The Superintendent of Insurance shall implement rules setting forth the method for calculating savings and the format and submission requirements for the report described in Section 7(b) above.
Section 8. Enforcement
Each violation of this Chapter shall be subject to a fine of $1,000. Every individual transaction in violation of Section 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 Section 9(d) below shall be a valid affirmative defense in any enforcement action brough under this chapter.
Section 9. 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 Section 3 above.
(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 Superintendent of Insurance and to the Attorney General 180 days prior to such withdrawal.
(c) The Superintendent of Insurance 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 Superintendent of Insurance has determined the manufacturer or distributor has withdrawn from the market, the penalty shall be equal to 1) $500,000; or 2) the amount of annual savings determined by the Superintendent of Insurance as described in Subsection 5(e) above, 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 Section 5 above.
(e) The Superintendent of Insurance shall assess a penalty on any manufacturer or distributor that it determines has failed to negotiate in good faith in violation of Subsection 9(d). With respect to each Referenced Drug for which the Superintendent of Insurance has determined the manufacturer or distributor has failed to negotiate in good faith, the penalty shall be equal to 1) $500,000; or 2) the amount of annual savings determined by the Superintendent of Insurance as described in Subsection 5(e) above, whichever is greater.
Section 10. 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 subchapter which can be given effect without the invalid provision or application, and to this end the provisions of this Chapter are severable.
