MODEL BILLS

Prohibition on Price Gouging for Essential Generic Drugs Act

Summary: The Prohibition on Price Gouging for Essential Generic Drugs Act allows the Attorney General to stop unconscionable price increases for certain medicines.

Based on Maryland SB 415 (2017)

SECTION 1. SHORT TITLE

This Act shall be called the “Prohibition on Price Gouging for Essential Drugs Act.”

SECTION 2. PROHIBITION ON PRICE GOUGING

After section XXX, the following new section XXX shall be inserted:

(A) DEFINITIONS—In this section:

(1) “Essential generic drug” means any prescription drug that is made available for sale in the state and for which any exclusive marketing rights granted under federal law have expired:

(a) that appears on the Model List of Essential Medicines most recently adopted by the Word Health Organization; or

(b) that has been designated by the Secretary as an essential medicine due to its efficacy in treating a life-threatening health condition or a chronic health condition that substantially impairs a person’s ability to engage in activities of daily living.

“Essential generic drug” includes any drug-device combination product for the delivery of an essential generic drug.

(2) “Price gouging” means an unconscionable increase in the price of a prescription drug.

(3) “State health plan” has the meaning stated in [cite state law].

(4) “State health program” has the meaning stated in [cite state law].

(5) “Unconscionable increase” means an increase in the price of a prescription drug that:

(a) Is excessive and not justified by the cost of producing the drug or the cost of appropriate expansion of access to the drug to promote public health; and

(b) Results in consumers for whom the drug has been prescribed having no meaningful choice about whether to purchase the drug at an excessive price because of the importance of the drug to their health and insufficient competition in the market for the drug.

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

(B) PRICE GOUGING PROHIBITED

A manufacturer or wholesale distributor may not engage in price gouging in the sale of an essential generic drug.

(C) ENFORCEMENT

(1) The [State Medicaid program] shall notify the Attorney General of any increase in the price of an essential generic drug when the price increase, by itself or in combination with other price increases:

(a) would result in an increase of 50% or more in the wholesale acquisition cost of the drug within the preceding one-year period; or

(b) would result in an increase of 50% or more in the price paid by the Medical Assistance program for the drug within the preceding one-year period.

(2) On request of the Attorney General, the manufacturer of an essential generic drug identified in a notice under subsection (1) within in 45 days of the request shall submit a statement to the Attorney General:

(a) Itemizing the components of the cost of producing the drug and identifying the circumstances and timing of any expenditures made by the manufacturer to expand access to the essential generic drug;

(b) Explaining any improvement in public health associated with those expenditures; and

(c) Providing any other information that the manufacturer believes to be relevant to a determination of whether a violation of this subtitle has occurred.

(3) The Attorney General may require a manufacturer to produce any records or documents that may be relevant to a determination of whether a violation of this subtitle has occurred.

(4) On petition of the Attorney General, a [circuit court] may issue an order:

(a) Compelling a manufacturer or wholesale distributor to provide a statement required under subsection (2) of this section, or to produce specific records or documents requested by the Attorney General under subsection (3) of this section that may be relevant to a determination of whether a violation of this subtitle has occurred;

(b) Restraining or enjoining a violation of this subtitle;

(c) Restoring to any consumer, including any third-party payor, any money acquired as a result of a price increase that violates this subtitle;

(d) Requiring a manufacturer that has engaged in price gouging in the sale of an essential generic drug to make the drug available to participants in any State health plan or State health program for a period of up to one year at the price at which the drug was made available to participants in the State health plan or State health program immediately prior to the manufacturer’s violation of this subtitle; and

(e) Imposing a civil penalty of up to $10,000 for each violation of this subtitle.

(5) In any action brought by the Attorney General under subparagraph (4) of this subtitle, a person who is alleged to have violated a requirement of this subtitle may not assert as a defense that the person did not deal directly with a consumer in this state.

SECTION 3. EFFECTIVE DATE

This Act shall take effect on July 1, 20XX