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COMMITTEE REPORT
April 20, 2006
H. 3711
S. Printed 4/20/06--H.
Read the first time March 08, 2005.
To whom was referred a Bill (H. 3711) to amend Chapter 17, Title 37, Code of Laws of South Carolina, 1976, relating to the regulation of prescription drug discount cards, etc., respectfully
That they have duly and carefully considered the same and recommend that the same do pass:
DANIEL T. COOPER for Committee.
EXPLANATION OF IMPACT:
Secretary of State's Office
The office indicates there will be no impact on the General Fund of the State or on federal and/or other funds.
Department of Consumer Affairs
The department indicates there will be an additional cost of approximately $24,900 in other funds to offset the cost of regulation. The agency estimates it will register thirty companies with one representative each. Based on a fee of $800 per company and $30 per representative, the agency estimates it will collect sufficient other funds revenue to support the program.
SPECIAL NOTES:
The Board of Economic Advisors is the appropriate entity to address any revenue impact associated with this bill.
Approved By:
William C. Gillespie
Board of Economic Advisors
1/ This statement meets the requirement of Section 2-7-71 for a state revenue impact by the BEA, or Section 2-7-76 for a local revenue impact or Section 6-1-85(B) for an estimate of the shift in local property tax incidence by the Office of Economic Research.
TO AMEND CHAPTER 17, TITLE 37, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE REGULATION OF PRESCRIPTION DRUG DISCOUNT CARDS, SO AS TO ENACT THE PRESCRIPTION DRUG DISCOUNT CARD REGISTRATION ACT, PROVIDING FOR REGISTRATION WITH THE DEPARTMENT OF CONSUMER AFFAIRS OF PERSONS AND REPRESENTATIVES ENGAGED IN THE SALE, MARKETING, PROMOTION, ADVERTISEMENT, OR DISTRIBUTION OF PRESCRIPTION DRUG DISCOUNT CARDS OR OTHER PURCHASING DEVICES; EXEMPTIONS FROM REGULATION UNDER THE ACT; REMEDIES FOR VIOLATIONS OF THE ACT, IN ADDITION TO, AND CUMULATIVE OF, OTHER PENALTIES IN TITLE 37 AND IN THE SOUTH CAROLINA UNFAIR TRADE PRACTICES ACT; AND AUTHORITY OF THE DEPARTMENT OF CONSUMER AFFAIRS TO PROMULGATE REGULATIONS TO EFFECTUATE THE PURPOSES OF THIS ACT.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Chapter 17 of Title 37 of the 1976 Code is amended to read:
Section 37-17-10. (A) It is unlawful for a person to sell, market, promote, advertise, or distribute a card or other purchasing mechanism or device which is not insurance that purports to offer discounts or access to discounts from pharmacies for prescription drug purchases unless:
(1) the person is registered with the Department of Consumer Affairs for this express purpose;
(2) the card or other purchasing mechanism or device expressly states in bold and prominent type, prominently placed, that the discounts are not insurance;
(3) documentation is provided to the Department of Consumer Affairs that the discounts are specifically authorized and the person has a separate contract with each pharmacy or pharmacy chain listed in conjunction with the card or other purchasing mechanism or device; and
(4) the discounts or access to discounts offered, or the range of discounts or access to the range of discounts offered, are not misleading, deceptive, or fraudulent.
(B)(1) A person who sells, markets, promotes, advertises, or distributes a card or other purchasing mechanism or device which is not insurance that purports to offer discounts or access to discounts from pharmacies for prescription drug purchases in this State shall designate a resident of this State as an agent for service of process and register the agent with the Secretary of State.
(2) In the absence of proper registration under subsection (B)(1), the Secretary of State is designated as an agent upon whom process may be served. Service of any process on the Secretary of State may be made by delivering to and leaving with the Secretary of State, or with any person designated by him to receive such service, duplicate copies of the process, notice, or demand. The Secretary of State shall forward one of the copies by registered or certified mail, return receipt requested, to the person required to register under subsection (B)(1) at the last known physical address to the party serving process. Refusal to sign the return receipt does not affect the validity of the service. Service is effective under this subsection as of the date shown on the return receipt or five days after its deposit in the mail, whichever is earlier. The Secretary of State may charge a fee of ten dollars for the service. This subsection does not affect the right to serve process in any manner otherwise provided by law.
(C)(1) A person who violates subsection (A) is guilty of a misdemeanor and, upon conviction, must be imprisoned for not more than six months or fined not more than one thousand dollars, or both; for a second or subsequent violation a person must be imprisoned for not more than two years or fined not more than five thousand dollars, or both.
(2) Notwithstanding subsection (C)(1), a person who violates this chapter is subject to all civil and administrative remedies available in this title.
(D) This section does not apply to:
(1) a pharmacy holding a permit issued pursuant to Title 40, Chapter 43;
(2) eye or vision care services or glasses or contact lenses provided by an optometrist or ophthalmologist;
(3) any benefit or program offered in conjunction with a health insurance plan administered by a health insurer, health care service contractor, or health maintenance organization regulated under Title 38; or
(4) an insured benefit administered by, or under contract with, the State of South Carolina.
(E) For purposes of this section, "person" means an individual, corporation, partnership, or any other business entity, including, but not limited to, a health maintenance organization, an insurance company, or a third party payor. Representatives of corporations, partnerships, or other business entities must be registered before they shall offer services under this section.
(F) The department may promulgate regulations as necessary to assist in administering this chapter including, but not limited to, regulations concerning assessment of registration fees and standards for corporate and individual representative registration. This chapter may be cited as the Prescription Drug Discount Card Registration Act.
Section 37-17-20. As used in this chapter:
(1) 'Administrator' means the administrator of the South Carolina Department of Consumer Affairs.
(2) 'Card' means a card, device, plan, or program that offers discounts or access to reduced prices from pharmacies for prescription drug purchases.
(3) 'Department' means the South Carolina Department of Consumer Affairs.
(4) 'Person' means an individual, corporation, partnership or other business entity including, but not limited to, a health maintenance organization, an insurance company, or third party payor, who sells, markets, promotes, advertises, or distributes a card or other purchasing mechanism or device that purports to offer discounts or access to discounts from pharmacies for prescription drug purchases in this State.
(5) 'Representative' means an individual who is designated by a person, as defined in this section, and acts or aids on behalf of the person in the solicitation, negotiation, or renewal of a prescription drug discount card with respect to South Carolina citizens.
(6) 'Customer' means an individual who purchases a card, as defined in this section.
Section 37-17-30. (A) It is unlawful for a person to sell, market, promote, advertise, or distribute a card or other purchasing mechanism or device that is not insurance which purports to offer discounts or access to discounts from pharmacies for prescription drug purchases unless:
(1) the person is registered with the department for this express purpose;
(2) the card or other purchasing mechanism or device expressly states in bold and prominent type, prominently placed, that the discounts are not insurance;
(3) documentation is provided to the department that the discounts are specifically authorized and the person has a separate contract with each pharmacy or pharmacy chain listed in conjunction with the card or other purchasing mechanism or device; and
(4) the discounts or access to discounts offered, or the range of discounts or access to the range of discounts offered, are not misleading, deceptive, or fraudulent.
(B)(1) A person who sells, markets, promotes, advertises, or distributes a card or other purchasing mechanism or device that is not insurance that purports to offer discounts or access to discounts from pharmacies for prescription drug purchases in this State shall designate a resident of this State as an agent for service of process and register the agent with the Secretary of State.
(2) In the absence of proper registration pursuant to subsection (B)(1), the Secretary of State is designated as an agent upon whom process may be served. Service of process on the Secretary of State may be made by delivering to and leaving with the Secretary of State, or with a person designated by him to receive service, duplicate copies of the process, notice, or demand. The Secretary of State shall forward one of the copies by registered or certified mail, return receipt requested, to the person required to register pursuant to subsection (B)(1) at the last physical address known to the party service process. Refusal to sign the return receipt does not affect the validity of the service. Service is effective pursuant to this subsection as of the date shown on the return receipt or five days after its deposit in the mail, whichever is earlier. The Secretary of State may charge a fee of ten dollars for the service. This subsection does not affect the right to serve process in a manner otherwise provided by law.
(3) Persons selling, distributing, advertising, marketing, or promoting cards shall register with the department. A contact with South Carolina citizens, including personal contact, telemarketing, direct mail or Internet/electronic mail solicitation, requires registration with the department, and business must not be conducted until the person is approved by the department.
(4) Representatives of corporations, partnerships, or other business entities must be registered before they offer services pursuant to this chapter.
(5) A company offering a card or plan shall make available the plan and its terms for public inspection and provide to each of its customers a complete list of facilities at which the plan may be used and the range of its benefits. At the time of the sale of the card, the company shall provide the customer with a written list of participating facilities in the customer's local area. After that, on an ongoing basis, the company shall make available, upon request, through a toll-free telephone number, the Internet, or in writing, a complete listing of all participating facilities in this State.
(6) Advertised discounts are those that are actually available to customers. Disclaimers or terms of limitation must be no less prominent than those of the discount offer. One-time or short-time promotions may be offered only if limiting terms are as prominent as the special offer. All advertisements must contain the name and address of the company offering the service and must conform to the name on file with the department.
Section 37-17-40. (A) A person applying for an initial registration must submit:
(1) a formal application in the form and detail the administrator requires;
(2) if a corporation:
(a) articles of incorporation;
(b) proof of existence and good standing from the Secretary of State's office; and
(c) an affidavit or sworn statement from each individual officer, director, or principal that the person is eligible for individual representative status;
(3) a bond in a form to be prescribed by the department in the amount of fifty thousand dollars denoting the department as beneficiary;
(4) the most recent financial statement prepared in accordance with generally accepted accounting principles and certified by two principal officers of the applicant or, if the applicant is not a corporation, other persons the administrator requires;
(5) a 'Designation of Registered Agent for Drug Card Sellers' form from the Secretary of State's office;
(6) a filing fee of eight hundred dollars;
(7) the discount card, a description of the offered plan, advertising and solicitation brochures, and consumer enrollment materials the person uses or intends to use; and
(8) other relevant material information required by the administrator.
(B) Registration is annually on a form prescribed by the department. An annual filing fee of eight hundred dollars must accompany each filing and be retained by the department for purposes of administering the filings. The registration runs from September first until August thirty-first, and the annual renewal period begins August first and ends on August thirty-first. A person who files its renewal on a timely basis may continue operating unless the registration is denied or revoked by the department.
(C) A person shall provide annually the department with a list of all active agents by August thirty-first of each year and shall notify the department of a change in status.
Section 37-17-50. (A) An individual may not act as a representative of a person, as defined in Section 37-17-20(4), without the person having registered the representative with the department. Registration as a representative must be made to the department upon forms prescribed and furnished by the administrator.
(B) The representative shall furnish information concerning his identity, business address, personal history, business experience, and other information the administrator considers pertinent and germane. An annual filing fee of thirty dollars must accompany each individual representative's filing and be retained by the department for purposes of administering the filings. Initial and renewal filings are considered incomplete until the filing fee is received. Filings are good for one year and run from September first until August thirty-first. The annual renewal period begins August first and ends August thirty-first.
(C) Representative status may be denied or revoked if the applicant is convicted of a felony, crime of moral turpitude or deceit or dishonesty within ten years before the filing. Evidence of any license suspension or revocation or administrative disciplinary actions based on criminal activities or acts of moral turpitude or deceit or dishonesty within ten years may serve as grounds for registration revocation or denial. Violations of Title 37 within ten years may serve as grounds for denial or revocation licensing status.
Section 37-17-60. This does not apply to:
(1) a pharmacy holding a permit issued pursuant to title 40, Chapter 43;
(2) eye or vision care services or glasses or contact lenses provided by an optometrist or ophthalmologist;
(3) a benefit or program offered in conjunction with a health insurance plan administered by a health insurer, health care service contractor, or health maintenance organization regulated pursuant to Title 38; or
(4) an insured benefit administered by, or under contract with, the State of South Carolina.
Section 37-17-70. (A) The department or a person injured by another's use of any method, act, or practice in violation of this chapter, may file an action to enjoin an act in violation of this chapter and for the recovery of damages.
(B) If the court finds that the defendant has violated a provision of this chapter, the court shall enjoin the defendant from continuing the acts that are in violation of this chapter. In addition to the injunction, upon conviction, a person who violates this chapter is guilty of a misdemeanor and must be imprisoned not more than six months or fined not more than one thousand dollars, or both; for a second or subsequent violation, a person must be imprisoned not more than two years or fined not more than five thousand dollars, or both.
(C) An injured party also may recover from the defendant:
(1) a statutory penalty of not less than one hundred dollars and not more than one thousand dollars for each card the injured party purchased from the defendant, or three times the amount of actual damages, whichever is greater;
(2) reasonable attorney's fees;
(3) costs; and
(4) other relief the court considers proper.
(D) An action pursuant to this section must be brought within three years after the date on which the violation occurred, or after the person bringing the action discovered, or in the exercise of reasonable diligence should have discovered, the occurrence of a violation.
(E) Notwithstanding the remedies provided in this section, a person who violates this chapter is subject to all civil and administrative remedies available in Title 37.
Section 37-17-80. A violation of a provision of this chapter is considered a violation of Section 39-5-20 of the South Carolina Unfair Trade Practices Act. A remedy pursuant to Section 39-5-20 of the South Carolina Unfair Trade Practices Act is cumulative of and in addition to those available pursuant to this chapter.
Section 37-17-90. (A) Upon satisfactory evidence that a person has violated or failed to comply with a provision of this chapter or regulation promulgated pursuant to the authority of this chapter, the person is subject to any combination of the following:
(1) an administrative order to cease and desist from committing violations of this chapter;
(2) administrative fines up to ten thousand dollars; and
(3) revocation or denial of its license.
(B) Upon satisfactory evidence that a company representative has violated or failed to comply with a provision of this chapter or regulation promulgated pursuant to the authority of this chapter, the administrator may issue an order requiring the company representative to cease and desist from engaging in the violation or may revoke or suspend the company representative's authority.
Section 37-17-100. The department may promulgate regulations necessary to effectuate the purposes of this chapter."
SECTION 2. This act takes effect upon approval by the Governor.
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