HB 6447 — AN ACT CREATING THE COVERED CONNECTICUT PROGRAM TO EXPAND ACCESS TO AFFORDABLE HEALTH CARE.

If the commissioner verifies, upon appeal to and certification by the commissioner, that the fee imposed under this section is the subject of a retaliatory tax, fee, assessment or other obligation by another state, territory or district of the United States, or a foreign country, such fee shall not be assessed against nondomestic insurersand nondomesticexempt insurerspursuant to thissection.

(6)sHB6447 Maintain/ anFile Internet web site through which enrollees and prospective enrollees of qualified health plans may obtain standardized LCO No.

3294383 9 ofsHB6447 25File Governor'sNo. Bill No6447 comparative informationonsuchplansincluding,but not limitedto,the enrollee satisfaction survey information under Section 1311(c)(4) of the Affordable Care Act and any other information or tools to assist enrollees and prospective enrollees evaluate qualified health plans offered through the exchange;

383 (6) Maintain an Internet web site through which enrollees and prospective enrollees of qualified health plans may obtain standardized comparative informationonsuchplansincluding,but not limitedto,the enrollee satisfaction survey information under Section 1311(c)(4) of the Affordable Care Act and any other information or tools to assist enrollees and prospective enrollees evaluate qualified health plans offered through the exchange;

(11) Collaborate with the Department of Social Services, to the extent possible, to allow an enrollee who loses premium tax credit eligibility undersHB6447 Section/ 36BFile of the Internal Revenue Code and is eligible for HUSKY A or any other state or local public program, to remain enrolled LCO No.

3294383 10 ofsHB6447 25File Governor'sNo. Bill No6447 in a qualified health plan;

383 under Section 36B of the Internal Revenue Code and is eligible for HUSKY A or any other state or local public program, to remain enrolled in a qualified health plan;

(B)sHB6447 The/ nameFile and taxpayer identification number of each individual LCO No.

3294383 11 ofsHB6447 25File Governor'sNo. Bill No6447 who was an employee of an employer but who was determined to be eligible for the premium tax credit under Section 36B of the Internal Revenue Code because:

383 (B) The name and taxpayer identification number of each individual who was an employee of an employer but who was determined to be eligible for the premium tax credit under Section 36B of the Internal Revenue Code because:

LCOsHB6447 / File No.

3294383 12 ofsHB6447 25File Governor'sNo. Bill No6447 (B) Distribute fair and impartial information concerning enrollment in qualified health plans and the availability of premium tax credits under Section 36B of the Internal Revenue Code and cost-sharing reductions under Section 1402 of the Affordable Care Act;

383 (B) Distribute fair and impartial information concerning enrollment in qualified health plans and the availability of premium tax credits under Section 36B of the Internal Revenue Code and cost-sharing reductions under Section 1402 of the Affordable Care Act;

LCOsHB6447 / File No.

3294383 13 ofsHB6447 25File Governor'sNo. Bill No6447 (B) Individuals and entities with experience in facilitating enrollment in qualified health plans;

383 (B) Individuals and entities with experience in facilitating enrollment in qualified health plans;

(24) (A) Seek to include the most comprehensive health benefit plans that offer high quality benefits at the most affordable price in the exchange, (B) encourage health carriers to offer tiered health care provider network plans that have different cost-sharing rates for LCOsHB6447 / File No.

3294383 14 ofsHB6447 25File Governor'sNo. Bill No6447 different health care provider tiers and reward enrollees for choosing low-cost, high-quality health care providers by offering lower copayments, deductibles or other out-of-pocket expenses, and (C) offer any such tiered health care provider network plans through the exchange;

383 different health care provider tiers and reward enrollees for choosing low-cost, high-quality health care providers by offering lower copayments, deductibles or other out-of-pocket expenses, and (C) offer any such tiered health care provider network plans through the exchange;

[.] and (26) Annually consult with the Office of Health Strategy, established under section 19a-754a, as amended by this act, Commissioner of Social Services and Insurance Commissioner to develop the annual plan required under subsection (b) of section 3 of this act and, subject to the terms of such planplan, the approval required under subsection (d) of section 3 of this act and within the funds available in the Covered Connecticut account established under section 2 of this act:

(1)sHB6447 "Commissioner"/ meansFile theNo. Commissioner of Revenue Services;

LCO383 15 sHB6447 File No.

3294383 15(1) of"Commissioner" 25 Governor's Bill No6447 (2) "Consumer price index" means the consumerCommissioner priceof index,Revenue annualServices; average, for all urban consumers:

(2) "Consumer price index" means the consumer price index, annual average, for all urban consumers:

(10) "Reference price" means the wholesale acquisition cost of a drug (A) on January 1, 2021, or (B) if the drug is first commercially marketed in the United States after January 1, 2021, on the date such drug is first commerciallysHB6447 marketed/ inFile theNo. United States;

and383 LCO16 sHB6447 File No.

3294383 16commercially ofmarketed 25in Governor's Bill No.6447 (11) "Wholesale acquisition cost" has the sameUnited meaningStates; as provided in 42 USC 1395w-3a, as amended from time to time.

and (11) "Wholesale acquisition cost" has the same meaning as provided in 42 USC 1395w-3a, as amended from time to time.

(2) A pharmaceutical manufacturer may sell a prescription drug in this state at a price that exceeds the amount determined for the prescription drug under subdivision (1) of this subsection if the Secretary of Health and Human Services determines, pursuant to 21 USC 356e, as amended from time to time, that such prescription drug is in shortshortage supply in the United States.

and (B) The revenue that the pharmaceutical manufacturer would have earnedsHB6447 from/ allFile sales of the identified prescription drug in this state LCO No.

3294383 17 ofsHB6447 25File Governor'sNo. Bill No6447 during the calendar year if the pharmaceutical manufacturer had sold such identified prescription drug at a price that did not exceed the amount described in subsection (a) of this section.

383 earned from all sales of the identified prescription drug in this state during the calendar year if the pharmaceutical manufacturer had sold such identified prescription drug at a price that did not exceed the amount described in subsection (a) of this section.

(B)A pharmaceutical manufacturer that isrequiredisrequiredto tofileastatement fileandpay a statementcivilpenaltypursuant andpay acivilpenaltypursuant to subparagraph(A)ofthissubdivision shall electronically file such statement and make such payment by electronic funds transfer in the manner provided by chapter 228g of the general statutes, irrespective of whether the pharmaceutical manufacturer would have otherwise been required to electronically file such statement or make such payment by electronic funds transfer under chapter 228g of the general statutes.

(d) The commissioner may examine such records of a pharmaceutical LCOsHB6447 / File No.

3294383 18 ofsHB6447 25File Governor'sNo. Bill No6447 manufacturer that is subject to the civil penalty imposed under subsection (b) of this section as the commissioner deems necessary.

383 manufacturer that is subject to the civil penalty imposed under subsection (b) of this section as the commissioner deems necessary.

After such hearing, the commissioner may make such order as appears just and lawful to the commissioner and shall furnish a copy of LCOsHB6447 / File No.

3294383 19 ofsHB6447 25File Governor'sNo. Bill No6447 suchorder tothe pharmaceuticalmanufacturer.The commissioner may, by notice in writing, order a hearing on the commissioner's own initiative and require a pharmaceutical manufacturer, or any other person who the commissioner believes to be in possession of relevant information concerning such pharmaceutical manufacturer, to appear before the commissioner or the commissioner's authorized agent with any specified books of account, papers or other documents for examination under oath.

383 suchorder tothepharmaceuticalmanufacturer.The commissioner may, by notice in writing, order a hearing on the commissioner's own initiative and require a pharmaceutical manufacturer, or any other person who the commissioner believes to be in possession of relevant information concerning such pharmaceutical manufacturer, to appear before the commissioner or the commissioner's authorized agent with any specified books of account, papers or other documents for examination under oath.

Said court may grant such relief as may be equitable and, if the civil penalty haswas been paid prior to the granting of such relief, may order the Treasurer to pay the amount of such relief.

If the appeal haswas been taken without probable cause, the court may tax double or triple costs, as the case demands and, upon all such appeals that are denied, costs may be taxed against such pharmaceutical manufacturer at the discretion of the court but no costs shall be taxed against this state.

At any LCOsHB6447 / File No.

3294383 20 ofsHB6447 25File Governor'sNo. Bill No6447 hearing ordered by the commissioner, the commissioner, or the commissioner's agent authorized to conduct such hearing and having authority by law to issue such process, may subpoena witnesses and require the production of books, papers and documents pertinent to such inquiry or investigation.

383 hearing ordered by the commissioner, the commissioner, or the commissioner's agent authorized to conduct such hearing and having authority by law to issue such process, may subpoena witnesses and require the production of books, papers and documents pertinent to such inquiry or investigation.

If any person disobeys such process or, having appeared in obedience thereto, refuses to answer any pertinent question put to such person by the commissioner, or the commissioner's authorized agent, or to produce any books, papers or other documentary evidence pursuant thereto, the commissioner, or such agent, may apply to the Superior Court of the judicial district wherein the pharmaceutical manufacturer resides or wherein the business haswas been conducted, or to any judge of such court if the same is not in session, setting forth such disobedience to process or refusal to answer, and such court or such judge shall cite such person to appear before such court or such judge to answer such question or to produce such books, papers or other documentary evidence and, upon such person's refusal so to do, shall commit such person to a community correctional center until such person testifies, but not for a period longer than sixty days.

LCO(i) The amount of any civil penalty unpaid under the provisions this sHB6447 / File No.

3294383 21 ofsHB6447 25File Governor'sNo. Bill No6447 (i) The amount of any civil penalty unpaid under the provisions this section may be collected under the provisions of section 12-35 of the general statutes.

383 section may be collected under the provisions of section 12-35 of the general statutes.

When any civil penalty with respect to which a lien haswas been recorded under the provisions of this subsection hasis been satisfied, the commissioner shall, upon request of any interested party, issue a certificate discharging such lien, which certificate shall be recorded in the same office in which such lien was recorded.

(j) (1)Any officer or employee ofapharmaceuticalmanufacturer who owes a duty to the pharmaceutical manufacturer to pay a civil penalty imposed under this section on behalf of such pharmaceutical manufacturer, file a statement with the commissioner pursuant to subsection (c) of this section on behalf of such pharmaceutical manufacturer, keep records or supply information to the commissioner on behalf of such pharmaceutical manufacturer pursuant to this section and wilfully fails, at the time required under this section, to pay such civil penalty, file such statement, keep such records or supply such LCOinformation on behalf of such pharmaceutical manufacturer shall, in addition to any other penalty provided by law, be fined not more than sHB6447 / File No.

3294383 22 ofsHB6447 25File Governor'sNo. Bill No6447 information on behalf of such pharmaceutical manufacturer shall, in addition to any other penalty provided by law, be fined not more than one thousand dollars or imprisoned not more than one year, or both.

Notwithstanding383 theprovisionsofsection54-193ofthegeneralstatutes,one nothousand suchdollars officer or employeeimprisoned shallnot bemore prosecutedthan forone ayear, violation of the provisions of this subdivision committed on or afterboth. July 1, 2021, except within three years next after such violation has been committed.

Notwithstanding theprovisionsofsection54-193ofthegeneralstatutes, no such officer or employee shall be prosecuted for a violation of the provisions of this subdivision committed on or after July 1, 2021, except within three years next after such violation is committed.

(l) Not later than July 1, 2023, and annually thereafter, the commissioner shall prepare a list containing the name of each LCOpharmaceutical No.manufacturer that violated subsection (a) of this section during the preceding calendar year.

3294 23 of 25 Governor's Bill No.6447 pharmaceutical manufacturer that violated subsection (a) of this section during the preceding calendar year.

(m)sHB6447 The/ commissionerFile mayNo. adopt regulations, in accordance with the provisions of chapter 54 of the general statutes, to implement the provisions of this section.

383 23 sHB6447 File No.

383 (m) The commissioner may adopt regulations, in accordance with the provisions of chapter 54 of the general statutes, to implement the provisions of this section.

8 July 1, 2021 New section Statement of Purpose:Legislative Commissioners:

ToIn implementSection the3(a), Governor'sSubdiv. budget recommendations.

LCO(5) No.was deleted to eliminate an unnecessary definition.

3294INS 24Joint ofFavorable 25Subst. Governor's Bill No.

6447sHB6447 [Proposed/ deletionsFile areNo. enclosed in brackets.

Proposed383 additions24 aresHB6447 indicatedFile by underline, except that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not underlined.] LCO No.

3294383 25The following Fiscal Impact Statement and Bill Analysis are prepared for the benefit of 25the members of the General Assembly, solely for purposes of information, summarization and explanation and do not represent the intent of the General Assembly or either chamber thereof for any purpose.

In general, fiscal impacts are based upon a variety of informational sources, including the analyst’s professional knowledge.

Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.

OFA Fiscal Note State Impact:

Agency Affected Fund-Effect FY 22 $ FY 23 $ Insurance Dept.;

Department of GF - Revenue Approx.

30 Approx.

50 Revenue Services Gain million million Department of Revenue Services GF - Cost None Less than 100,000 Department of Revenue Services GF - Potential Less than Less than Cost 500,000 500,000 The Exchange;

Social Services, GF - Potential See Below See Below Dept.

Cost The Exchange GF - Potential None See Below Revenue Gain Note:

GF=General Fund Municipal Impact:

None Explanation The bill requires the Office of Health Strategy (OHS), in consultation with the Connecticut Health Insurance Exchange ("exchange") and the Department of Social Services (DSS) and insurance commissioners, to create a plan for a Covered Connecticut program to reduce the state’s uninsured rate.

There is no anticipated cost to OHS to develop the plan.

ThebillestablishestheCoveredConnecticutAccount,aseparatenon- lapsing General Fund account, to contain all funding for the new program.

The bill results in a revenue gain to this account of at least $30 millioninFY 22 andatleast $50millioninFY23andannually thereafter.

Revenue in FY 23 and thereafter comes from the combination of 1) fines on pharmaceutical manufacturers that violate the provisions of the bill and 2) an annual assessment on health insurers, HMOs, and exempt sHB6447 / File No.

383 25 sHB6447 File No.

383 insurers collected by the Insurance Department (DOI) to cover the funding gap between the fine revenue and $50 million.

In FY 22, the revenue is only from the health carriers' assessment, which is set at $30 million.

The bill authorizes DOI to collect late fees of $100 a day and assess civil penalties of up to $15,000 for other than a "good faith discrepancy" in a carrier's reporting associated with the assessment, which could result in additional minimal revenue to the account.

There is no anticipated cost to DOI to carry out the assessment, as it is similar to others the agency collects from the same entities.

The bill results in an annual cost to the exchange and DSS, up to the amount of funding available in the Covered Connecticut Account, to implement the Covered Connecticut program if the plan is approved by the Insurance and Real Estate Committee each year.

The cost will vary based on the components included in the program and each component's design.

The plan may call for the exchange to establish a state health insurance premium subsidy program, a reinsurance program, and apply for and implement a federal Section 1332 state innovation waiver.

If the plan calls for the exchange to apply for a state innovationwaiver,therewillbeacostofatleast$100,000for anactuarial report to support the state's application.

The plan may also call for DSS to expand eligibility for Medicaid.

The cost of these components could easily match the available funding.

Conditional on seeking and receiving federal approval for a state innovation waiver, the bill may result in an additional revenue gain starting in FY 23 or later.

Generally, state innovation waiver programs generate new state revenue from the federal government (known as "pass-through" funding) that can be used to partially fund the initiative.

The amount is based on how much the program reduces federal premium tax credits for Connecticut exchange enrollees.

Any such Forexample, researchby WakelyConsultingGroup,LLC.conductedfortheexchange in February 2020 estimated that a reinsurance program under a state innovation waiver with a state investment of $19.5 million could generate $23 million or more in federal pass-through funding.

sHB6447 / File No.

383 26 sHB6447 File No.

383 revenue would be received annually while the waiver was in effect.

The bill requires pharmaceutical manufacturers that violated the pricing provisions during the previous calendar year to annually pay the Department of Revenue Services (DRS) commissioner the civil penalty the bill imposes.

This results in:

1) a potential revenue gain to the Covered Connecticut account beginning in FY 23, and 2) a one-time costoflessthan$100,000inFY23associatedwith taxformdevelopment, postage costs, and associated updates to the online Taxpayer Service Center.

It is unclear how violations of the bill's provisions by pharmaceutical manufacturers would be determined.

To the extent the DRS is required to monitor pharmaceutical company sales and investigate potential violations, there is a cost to the agency beginning as early as FY 22.

Any potential cost is anticipated to be less than $500,000 annually.

The Out Years The annualized ongoing fiscal impact identified above would continue into the future subject to the fines and penalties assessed, the design of the annual OHS plan and its approval, including the number of any newly eligible individuals and associated costs under any expansion of Medicaid eligibility, and the actual amount of federal premium tax credit savings achieved under any federally approved state innovation waiver.

sHB6447 / File No.

383 27 sHB6447 File No.

383 OLR Bill Analysis sHB 6447 AN ACT CREATING THE COVERED CONNECTICUT PROGRAM TO EXPAND ACCESS TO AFFORDABLE HEALTH CARE.

SUMMARY This bill requires the Office of Health Strategy (OHS), in consultation with Access Health CT and the Department of Social Services (DSS) and insurance commissioners, to create a plan to reduce the state’s uninsured rate, including by reducing the burden of health care costs on insureds.

The plan requires annual legislative approval, starting by February 1, 2022.

The bill establishes the Covered Connecticut Account as a separate, nonlapsing account within the General Fund.

OHS administers the account, which must contain any money required by law to be deposited into it.Thisincludes(1) anannualassessment thebillimposes on insurers that is proportional to their covered lives in Connecticut and (2)finespaidbypharmaceuticalmanufacturersforsellingaprescription drug for a price higher than the bill allows.

The bill sets the aggregate amount of fees assessed on insurers in the first year at $30 million, but potentially exempts nondomestic insurers from the assessment if other states impose retaliatory taxes on entities domiciled in Connecticut.

Funds in the account must be spent by Access Health CT and DSS according to the annual plan described above.

The bill prohibits pharmaceutical manufacturers from selling a prescription drug for a price higher than the drug’s reference price (i.e., the drug’s wholesale acquisition cost) adjusted for changes in the consumer price index for urban consumers, plus 2% of the reference price per year compounded annually on the anniversary of the date the drug was first commercially marketed.

sHB6447 / File No.

383 28 sHB6447 File No.

383 Under the bill, pharmaceutical manufacturers who violate the price limit are liable to the state for a civil penalty of 80% of the increased revenue the pharmaceutical manufacturer earned by selling the drug higher than allowed.

It also establishes procedures and due process for reporting, collecting, and contesting the penalty.

The bill also subjects pharmaceutical manufacturers to a $500,000 civil penalty if they withdraw a drug from the Connecticut market (a) without giving advance written notice or (b) to avoid paying the civil penalty for selling a drug above the price limit.

It exempts (1) from the price limitations, drugs the Health and Human Services (HHS) secretary determines are in shortage in the United States and (2) from the civil penalty, pharmaceutical manufacturers making less than $250,000 in annual sales in Connecticut in the calendar year the penalty would be imposed.

EFFECTIVE DATE:

July 1, 2021 §§ 1-4 — COVERED CONNECTICUT PROGRAM The bill requires OHS to develop theplan in consultation with Access Health CT and the DSS and insurance commissioners.

The plan may call for Access Health CT to:

1.

establish a program to provide health insurance premium subsidies at defined amounts to individuals in defined income brackets up to and including 600% of the federal poverty level ($131,760 for a family of 3, in 2021);

2.

establish a reinsurance program;

or 3.

in consultation with OHS, seek a federal Section 1332 state innovation waiver, and implement it if approved (a 1332 waiver allows a state to waive certain federal requirements that might otherwise prohibit it from implementing certain programs).

The plan may also call for the DSS commissioner to expand eligibility for medical assistance programs (e.g., Medicaid).

sHB6447 / File No.

383 29 sHB6447 File No.

383 Legislative Approval Beginning by January 1, 2022, OHS must annually submit a report on the plan to the Insurance and Real Estate Committee.

Beginning by February 1, 2022, the committee must annually advise OHS, Access Health CT, and the DSS and insurance commissioners on its approval or rejection of the plan.

If the committee does not act by February 1 annually, the plan is rejected.

§ 4 — COVERED CONNECTICUT INSURER ASSESSMENT Determination of Amount The bill requires OHS, starting by July 1, 2022, to annually calculate the difference between $50 million and the total amount of civil penalties that pharmaceutical manufacturers paid under the bill.

The result is the aggregate amount for which insurers and HMOs will be assessed.

But for the 2022 calendar year, the bill requires OHS, by July 1, 2021, to report the result as $30 million (thus, making the initial aggregate assessment $30 million).

Assessment The bill requires the insurance commissioner to annually assess insurers and HMOs doing business in Connecticut, including exempt insurers (i.e., insurers that administer self-insured health benefit plans and are exempt from third-party administrator licensure), a fee proportionate to their covered lives that is sufficient to fully meet the aggregate assessment amount reported above.

This money is deposited into the Covered Connecticut account.

Covered Lives Reporting.

Beginning July 1, 2021, each insurer, HMO, and exempt insurer must annually report to the commissioner, in a form and manner he prescribes, the number of enrolled or insured lives in the state that are covered by certain health insurance plans as of theprecedingMay1.Thenumber mustexcludeanyindividualscovered by fully-insured plans sold in the small group market, Medicare, any DSS medical assistance program, Medicare Part C plans, or workers’ compensation insurance.

sHB6447 / File No.

383 30 sHB6447 File No.

383 This requirement applies to health insurance policies that cover (1) basic hospital expenses;

(2) basic medical-surgical expenses;

(3) major medical expenses;

or (4) hospital or medical services, including those provided under an HMO plan.

Beginning by August 1, 2021, the commissioner must annually:

1.

determine the fee using a factor that is based on the amount of covered lives reported to him in July and the aggregate assessment amount OHS determines and 2.

submit a proposed fee statement to each insurer and HMO, which must pay the assessed fee by November 1 of that year.

Insurers and HMOs who fail to file the report of covered lives or pay the assessment must pay a late filing or payment fee, as applicable, of $100 per day from the date the report or fee was due.

The bill authorizes the insurance commissioner to require insurers and HMOs to produce any supporting documents used to prepare the report.

If the commissioner determines there is anything other than a good faith discrepancy between the actual and reported number of covered lives, he must impose a civil penalty of up to $15,000 for each report with a discrepancy.

Grievances and Overpayments.

An aggrieved insurer may appeal the assessment in the same manner that existing law allows for other insurance assessments, which includes appealing to the New Britain Superior Court (CGS § 38a-52).

The bill requires the insurance commissioner to apply an overpayment of the assessment as a credit against the next year’s fee if (1) the overpayment is more than $5,000 and (2) by April 1 of that year, the insurer or HMO notifies the commissioner about the overpayment and provides sufficient supporting evidence.

Within 90 days after receiving the notice and supporting evidence, the insurance commissioner must determine if an overpayment sHB6447 / File No.

383 31 sHB6447 File No.

383 occurred and notify the payor of his determination.

Insurers who fail to notify the commissioner within this timeframe, waive their right to an overpayment refund.

However, this does not prohibit or limit their rights to appeal the assessment under existing law or the bill’s provisions.

Retaliatory Taxes The bill establishes circumstances under which nondomestic insurers (i.e., insurersdomiciledoutsideofConnecticut)may beexempt fromthe Covered Connecticut assessment.

Under the bill, if another jurisdiction imposes a retaliatory fee on a Connecticut-domiciled insurer, fraternal benefit society, hospital or medical service corporation, HMO, or other entity, it may appeal to the Connecticut insurance commissioner within days for a verification that the Covered Connecticut assessment is causing a retaliatory fee.

If the commissioner verifies that the fee is retaliatory, he must exempt nondomestic insurers and nondomestic exempt insurers from the Covered Connecticut assessment.

These decisions can be appealed in the same manner as assessments under existing law, as described above.

Implementing Regulations The bill authorizes the commissioner to adopt implementing regulations.

§§ 1 & 6-8 — PHARMACEUTICAL MANUFACTURER PRICING LIMITS Beginning January 1, 2022, the bill prohibits pharmaceutical manufacturers from selling a prescription drug for more than:

1.

the drug’s reference price, adjusted for any change in the consumer price index for urban consumers, plus 2.

2% for each 12-month period since the date the reference price was determined, compounded annually on the anniversary of that date.

sHB6447 / File No.

383 32 sHB6447 File No.

383 Under the bill, a “pharmaceutical manufacturer” is anyone manufacturing and selling a prescription drug, either directly or through another person, for distribution in Connecticut.

A drug’s “reference price” is the drug’s wholesale acquisition cost as of January 1,2021,orfornewdrugs,thedatewhenitisfirstcommerciallymarketed in the United States.

A drug’s “wholesale acquisition cost” is generally the manufacturer’s list price for the drug to wholesalers or direct purchasers in the United States, excluding discounts, rebates, or reductions, for the most recent month for which data is available.

The bill requires OHS, beginning by February 1, 2023, to annually provide the Department of Revenue Services (DRS) commissioner with a list of drugs the HHS secretary determines are in shortage.

These drugs are exempt from the above provisions on pricing limitations.

Civil Penalty Under the bill, a pharmaceutical manufacturer selling a prescription drug above the price limit is subject to a civil penalty, determined and collected on a calendar year basis.

The penalty equals 80% of the increased revenue the pharmaceutical company made by selling the drug at the higher price compared to a price allowed under the bill.

Under the bill, all money collected from the civil penalty must be deposited into the Covered Connecticut account.

The penalties are deemed a civil fine or penalty under federal law (thus excluding them from state tax revenue for certain federal benefit calculations) and cannot be waived by the Revenue Services Penalty Review Committee or under any other applicable law.

Additionally, the bill prohibits tax credits from being applied towards the penalty.

Penalty Payment Provisions.

Beginning March 1, 2023, the bill requires pharmaceutical manufacturers that violated the pricing provisions during the previous calendar year to annually pay the DRS commissioner the civil penalty the bill imposes.

They must also file with the DRS commissioner a statement containing information in a form and manner he prescribes.

The sHB6447 / File No.

383 33 sHB6447 File No.

383 statement and civil penalty must be electronically filed and paid, regardless of how themanufacturer would have otherwise filed with, or paid money to, DRS.

If no statement is filed by the due date, the bill authorizes the commissioner to make the statement at any time after the due date according to the best obtainable information and prescribed form.

Tax Warrants and Liens.

The bill allows the civil penalty to be collected in accordance with existing law that authorizes DRS and other state collection agencies to:

(1) issue a tax warrant on the intangible personal property (e.g., bank accounts, receivables, and securities) of a taxpayer who fails to pay state taxes and (2) serve the warrant on a third party (e.g., bank or payment settlement entity) who possesses the property or is obligated to it in some way (CGS § 12-35).

Under the bill, the warrant must be signed by the DRS commissioner or his authorized agent.

Additionally, the amount of the civil penalty becomes a lien on the pharmaceutical manufacturer’s real property, beginning on the last day of the month before the penalty was due, until it is paid.

The commissioner may record the lien in the records of the town in which the manufacturer is located, but the bill prohibits the lien from being enforced against a bona fide purchaser or qualified encumbrancer of the property.

If the lien is satisfied, the commissioner must discharge it upon request from an interested party.

The bill allows the (1) attorney general to bring a foreclosure action against the lien in the Superior Court in the judicial district where the property is located and (2) court to make any order it deems equitable.

It also applies existing laws on collecting taxes and related penalties from taxpayers to the civil penalties imposed under the bill.

Examination Authority and Record Keeping.

If a pharmaceutical manufacturer is subject to the civil penalty, the bill authorizes the DRS commissioner to examine its books and determine if it paid the full penalty amount.

If the commissioner determines that it did not, he must sHB6447 / File No.

383 34 sHB6447 File No.

383 bill the pharmaceutical manufacturer for the full amount.

The commissioner, or any person he authorizes, may additionally examine the books, papers, records, and equipment of anyone liable for the civil penalty, and investigate the character of their business to verify the accuracy of the filed statement (or if no statement is filed, to ascertain and determine the civil penalty amount).

The bill authorizes the commissioner to require all pharmaceutical manufacturers subject to a civil penalty to keep any records he prescribes and produce books, papers, documents, and other data he needs to determine the penalty amount and collect it.

The bill grants the commissioner and his agents the power to administer oaths and take testimony under oath in matters related to an inquiry or investigation.

Requests for a Hearing and Reduction.

Under the bill, an aggrieved pharmaceutical manufacturer may apply in writing to the commissioner for a hearing, laying out why ahearing should be granted and how much the civil penalty should be.

The pharmaceutical manufacturer must apply within 60 days after receiving the penalty notice or after it is delivered or mailed to the manufacturer.

The commissioner may also order a hearing on his own initiative.

The commissioner must promptly consider and either grant or deny each application.

If he denies it, he must immediately notify the applicant;

if he approves it, he must provide the hearing date, time, and place.

Following the hearing, he must provide the applicant a copy of any order he makes.

Additionally, the bill allows him to require a pharmaceutical manufacturer or any other person he believes possesses relevant information to appear, along with any specified documents for examination under oath.

In any hearing, the bill allows the commissioner or his authorized agents to subpoena witnesses and require the production of books, sHB6447 / File No.

383 35 sHB6447 File No.

383 papers, and documents related to the investigation.

A witness may not be excused from testifying or from producing documents solely because doing so would incriminate him or her.

However, the bill prevents such evidence from being used in a criminal proceeding against the witness.

The bill allows the commissioner to apply to the Superior Court that has jurisdiction over the pharmaceutical manufacturer being investigated, or another court of competent jurisdiction, to compel any person to obey a subpoena.

The bill requires the court to commit an individual still disobeying a subpoena or summons to a community correctional center until they do so, for up to a maximum of 60 days.

The bill requires that officers serving subpoenas and witnesses attending hearings receive fees and compensation at the same rate as they would for appearing in court.

Appeals.

Any pharmaceutical manufacturer aggrieved by the commissioner’s orders, decisions, determinations, or disallowances may appeal, within 30 days after receiving notice of the commissioner’s action, to the Superior Court for the New Britain judicial district.

The appeal must be accompanied by a citation to the commissioner to appear.

It must besigned,served,andreturnedinthesame way existing law requires for a civil summons in a civil action.

The authority issuing the citation must take from the person appealing thecase, a bondor recognizance, withsurety,to prosecute the appeal to effect and to comply with the court orders and decrees.

These appeals must be preferred cases, to be heard at the first session of the court or an appointed committee, unless cause appears to the contrary.

Under the bill, the court may grant equitable relief, and if the civil penalty has already been paid, may order the treasurer to refund it.

If the appeal has been taken without probable cause, the court may tax double or triple costs, as the case demands.

After an appeal is denied, the court may, at its discretion, tax the manufacturer the costs of the appeal, but no costs must be taxed against the state.

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383 Officer or Employee Penalties Under the bill, a pharmaceutical manufacturer officer or employee who owes a duty to pay a civil penalty, file statements, or keep or produce records under the bill’s provisions and willfully fails to do so issubjecttoafineupto$1,000,uptoayearinprison,orboth.Regardless of other state law, the bill establishes a three-year statute of limitations for officers or employees to be prosecuted after each violation.

Additionally, any officer or employee who willfully delivers or discloses any false list, statement, return, account statement, or other document to the commissioner is guilty of a class D felony, punishable by a fine up to $5,000, up to 5 years in prison, or both.

The bill prohibits an officer or employee from being charged with an offense under both the provisions described above in connection with the same civil penalty.

However, it allows the officer or employee to be charged for both offenses upon the same information.

List of Offenders Beginning by July 1, 2023, the bill requires the commissioner to annually prepare, and make publicly available, a list of each pharmaceutical manufacturer that violated the bill’s provisions during the preceding year.

Implementing Regulations The bill authorizes the DRS commissioner to adopt implementing regulations.

Pharmaceutical Manufacturer’s Withdrawing Prescription Drugs (§ 8) Additionally, the bill prohibits a pharmaceutical manufacturer from withdrawing a prescription drug in Connecticut after it has been identified as being sold above the bill’s price limits to avoid the civil penalty.

Pharmaceutical manufacturers must notify OHS in writing at least 180 days before withdrawing one of these drugs from the Connecticut market.

Under the bill, a pharmaceutical manufacturer that violates either of these provisions is subject to a $500,000 civil penalty.

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383 COMMITTEE ACTION Insurance and Real Estate Committee Joint Favorable Substitute Yea 14 Nay 4 (03/22/2021) sHB6447 / File No.

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