Skip to main content
S 2384Pharmaceuticals

Food and Drugs - Prescription Drug Cost Protection

This bill limits the price insurance companies pay for certain prescription drugs to lower costs for Rhode Island residents.

Held for study
Population
Affected
72
Email Legislator
Introduced Jan 30, 2026Committee Senate Health & Human Services

Plain-English Summary

This legislation establishes a "maximum fair price" for certain prescription drugs in Rhode Island, aligning state limits with rates set by the federal government. It prohibits state agencies and health insurance plans from paying more than this designated price. The bill mandates that any savings achieved through these lower prices must be used to reduce costs for consumers, with a focus on addressing health disparities. Additionally, it imposes significant financial penalties on drug manufacturers that attempt to withdraw medications from the state market or refuse to negotiate prices in good faith.

For younger readers

This bill is designed to make medicine cheaper for people who are sick. Sometimes, medicine costs way too much money. This law sets a limit on how much insurance companies are allowed to pay for certain important medicines. If the insurance company saves money because of this rule, they must use that extra money to lower the cost for the people who need the medicine. It also punishes the companies that make the medicine if they try to stop selling it in Rhode Island just because they cannot charge high prices anymore.

Who & Where It Applies

Impacted groups
Prescription drug consumersPharmaceutical manufacturersHealth insurance companiesState government employeesPharmacies
Impacted communities
All

Constitutional & Fiscal Check

The provision penalizing manufacturers for withdrawing drugs from sale in the state (Section 21-38-8) poses a significant constitutional risk. It may violate the Commerce Clause by unduly burdening interstate commerce or constitute a regulatory taking. Furthermore, effectively compelling a business to continue selling a product in a specific jurisdiction against its will could violate Due Process rights. The requirement to negotiate in "good faith" is also vague and may be challenged for lack of clear standards.

Estimated cost
Amount unknown
Estimated revenue
Amount unknown

Bill Analysis

Both viewpoints
For Progressives
  • Directly addresses wealth inequality by capping the cost of essential medications, ensuring that lower-income residents are not priced out of life-saving healthcare.
  • Mandates that savings generated by the price caps be used to promote health equity and address disparities across communities, rather than increasing corporate profits.
  • Combats corporate greed by imposing steep penalties on pharmaceutical manufacturers that attempt to abandon the state market or refuse to negotiate in good faith.
  • Relies heavily on federal definitions of "maximum fair price," meaning if federal protections are weakened, Rhode Island's protections would also diminish.
  • Allows ERISA plans (which cover many private sector employees) to opt-in voluntarily rather than mandating participation, potentially leaving many workers without these protections.
  • The enforcement mechanism regarding "good faith" negotiations may be difficult to prove in court, potentially allowing manufacturers to delay compliance through litigation.
For Conservatives
  • Reduces the financial burden on state-funded healthcare programs, potentially lowering the cost to taxpayers for maintaining public employee health benefits.
  • Increases transparency by requiring annual reporting on drug cost savings, ensuring that entities are held accountable for how they manage funds.
  • The opt-in provision for ERISA plans respects the autonomy of private benefit plans rather than imposing a blanket government mandate on all private employers.
  • Imposes strict government price controls on private businesses, interfering with the free market and the ability of companies to set their own prices.
  • Threatens private enterprise with massive fines ($500,000) for business decisions regarding where to sell their products, effectively compelling commerce.
  • Expands the bureaucracy and power of the Insurance Commissioner and Attorney General to intervene in private business negotiations and transactions.

Votes

Loading votes...

Full Bill Text

Changes to existing Rhode Island law · 103 additions

SECTION 1. Legislative intent. 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: 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, 29 U.S.C. ch. 18 § 1001 et seq.

(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 20.1 of title 27, 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) "Insurance commissioner" or "commissioner" means the director of the department of business regulation or the director's designee.

(4) “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).

(5) “Participating ERISA plan” means an ERISA plan that has elected to participate in the requirements and restrictions of this chapter and provides notice as described in § 21-38-3.

(6) “Price applicability period” means the period of time defined in Section 1191 of P.L. 117-169 (2022).

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

(8) “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 this section 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 shall be used to reduce costs to consumers. Any state entity, health plan or participating ERISA plan shall 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 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 § 21-38-2 is determined to be a separate violation. The attorney general is authorized to enforce the provisions of this statute. The refusal of a manufacturer 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 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 eighty (180) days prior to such withdrawal.

(c) The insurance commissioner shall assess a penalty on any manufacturer 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 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 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 that it determines has failed to negotiate in good faith. With respect to each referenced drug for which the insurance commissioner has determined the manufacturer 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 shall 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.

SECTION 3. This act shall take effect upon passage.