Massachusetts 2023-2024 Regular Session

Massachusetts House Bill H1201 Compare Versions

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22 HOUSE DOCKET, NO. 3326 FILED ON: 1/20/2023
33 HOUSE . . . . . . . . . . . . . . . No. 1201
44 The Commonwealth of Massachusetts
55 _________________
66 PRESENTED BY:
77 Kate Hogan
88 _________________
99 To the Honorable Senate and House of Representatives of the Commonwealth of Massachusetts in General
1010 Court assembled:
1111 The undersigned legislators and/or citizens respectfully petition for the adoption of the accompanying bill:
1212 An Act to promote transparency in prescription drug prices.
1313 _______________
1414 PETITION OF:
1515 NAME:DISTRICT/ADDRESS :DATE ADDED:Kate Hogan3rd Middlesex1/18/2023 1 of 16
1616 HOUSE DOCKET, NO. 3326 FILED ON: 1/20/2023
1717 HOUSE . . . . . . . . . . . . . . . No. 1201
1818 By Representative Hogan of Stow, a petition (accompanied by bill, House, No. 1201) of Kate
1919 Hogan relative to the pricing of prescription drugs. Health Care Financing.
2020 [SIMILAR MATTER FILED IN PREVIOUS SESSION
2121 SEE HOUSE, NO. 1272 OF 2021-2022.]
2222 The Commonwealth of Massachusetts
2323 _______________
2424 In the One Hundred and Ninety-Third General Court
2525 (2023-2024)
2626 _______________
2727 An Act to promote transparency in prescription drug prices.
2828 Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority
2929 of the same, as follows:
3030 1 SECTION 1. Section 1 of Chapter 6D of the General Laws is hereby amended by
3131 2inserting after the definition of “Performance penalty” the following definition: -
3232 3 “Pharmaceutical manufacturing company”, an entity engaged in the: (i) production,
3333 4preparation, propagation, compounding, conversion or processing of prescription drugs, directly
3434 5or indirectly, by extraction from substances of natural origin, independently by means of
3535 6chemical synthesis or by a combination of extraction and chemical synthesis; or (ii) packaging,
3636 7repackaging, labeling, relabeling or distribution of prescription drugs; provided, however, that
3737 8“pharmaceutical manufacturing company” shall not include a wholesale drug distributor licensed
3838 9under section 36B of chapter 112 or a retail pharmacist registered under section 39 of said
3939 10chapter 112. 2 of 16
4040 11 SECTION 2. Section 8 of said chapter 6D, as so appearing, is further amended by
4141 12inserting after the word “organization”, in lines 6 and 7, the following words:- , pharmaceutical
4242 13manufacturing company.
4343 14 SECTION 3. Said section 8 of said chapter 6D, as so appearing, is further amended by
4444 15inserting after the word “organizations”, in line 14, the following words:- , pharmaceutical
4545 16manufacturing companies.
4646 17 SECTION 4. Said section 8 of said chapter 6D, as so appearing, is further amended by
4747 18inserting after the word “commission”, in line 59, the first time it appears, the following words:-
4848 19; and (iii) in the case of pharmaceutical manufacturing companies, testimony concerning factors
4949 20underlying prescription drug costs and price increases including, but not limited to, the initial
5050 21prices of drugs coming to market and subsequent price increases, changes in industry profit
5151 22levels, marketing expenses, reverse payment patent settlements, the availability of alternative
5252 23drugs or treatments and any other matters as determined by the commission
5353 24 SECTION 5. Subsection (g) of said section 8 of said chapter 6D, as so appearing, is
5454 25hereby amended by striking out the second sentence and inserting in place thereof the following
5555 26sentence:- The report shall be based on the commission’s analysis of information provided at the
5656 27hearings by witnesses, providers, provider organizations, payers, and pharmaceutical
5757 28manufacturing companies, registration data collected under section 11, data collected or analyzed
5858 29by the center under sections 8, 9, 10, and 10A of chapter 12C and any other available
5959 30information that the commission considers necessary to fulfill its duties under this section as
6060 31defined in regulations promulgated by the commission. 3 of 16
6161 32 SECTION 6. Section 9 of said chapter 6D, as so appearing, is hereby amended by
6262 33inserting after the word “organization”, in line 72, the following words:- , pharmaceutical
6363 34manufacturing company.
6464 35 SECTION 7. Said chapter 6D is further amended by inserting after section 19 the
6565 36following new section:-
6666 37 SECTION 20. Pharmaceutical Cost Transparency
6767 38 (a) As used in this section, the following terms shall have the following meanings:-
6868 39 Pharmaceutical manufacturing company”, an entity engaged in the: (i) production,
6969 40preparation, propagation, compounding, conversion or processing of prescription drugs, directly
7070 41or indirectly, by extraction from substances of natural origin, independently by means of
7171 42chemical synthesis or by a combination of extraction and chemical synthesis; or (ii) packaging,
7272 43repackaging, labeling, relabeling or distribution of prescription drugs; provided, however, that
7373 44“pharmaceutical manufacturing company” shall not include a wholesale drug distributor licensed
7474 45under section 36B of chapter 112 or a retail pharmacist registered under section 39 of said
7575 46chapter 112.
7676 47 “Prescription drug”, as defined in 21 U.S.C. § 321.
7777 48 (b)(1) The Health Policy Commission, in collaboration with the Center for Health
7878 49Information and Analysis, shall identify annually up to 25 prescription drugs on which the State
7979 50spends significant health care dollars and for which the wholesale acquisition cost has increased
8080 51by 50 percent or more over the past five years or by 15 percent or more over the past 12
8181 52months, or is a new drug whose price may have a significant impact on the cost growth 4 of 16
8282 53benchmark. When determining whether a drug price may have a significant impact on the cost
8383 54growth benchmark, the commission shall consider both the volume of prescriptions issued in the
8484 55commonwealth and single dose wholesale acquisition cost.
8585 56 The drugs identified shall represent different drug classes.
8686 57 (2) The Commission shall provide to the Office of the Attorney General the list of
8787 58prescription drugs developed pursuant to this subsection and the percentage of the wholesale
8888 59acquisition cost increase for each drug and shall make the information available to the public on
8989 60the Commission’s website.
9090 61 (c)(1) For each prescription drug identified pursuant to subsection (b) of this section, the
9191 62commission shall require the drug’s pharmaceutical manufacturing company to provide a
9292 63justification for the increase in the wholesale acquisition cost of the drug in a format that the
9393 64commission determines to be understandable and appropriate. The pharmaceutical manufacturing
9494 65company shall submit to the commission all relevant information and supporting documentation
9595 66necessary to justify the manufacturer’s wholesale acquisition cost increase, which may include:
9696 67 (A) all factors that have contributed to the wholesale acquisition cost increase;
9797 68 (B) the percentage of the total wholesale acquisition cost increase attributable to each
9898 69factor; and
9999 70 (C) an explanation of the role of each factor in contributing to the wholesale acquisition
100100 71cost increase. 5 of 16
101101 72 (2) Nothing in this section shall be construed to restrict the legal ability of a
102102 73pharmaceutical manufacturing company to changes prices to the extent permitted under federal
103103 74law.
104104 75 (d) The commission shall publish an Annual Prescription Drug Transparency Report on
105105 76or before December 1 of each year based on the information received from pharmaceutical
106106 77manufacturing companies pursuant to this section.
107107 78 (e) In carrying out this section, the commission shall ensure the protection of confidential
108108 79commercial information and trade secrets.
109109 80 (f) The commission shall promulgate regulations to implement and enforce this section
110110 81and may impose financial penalties on a pharmaceutical manufacturing company that fails to
111111 82provide the information required by subsection (c) of this section in an amount not to exceed
112112 83$10,000.00 per violation. Each unlawful failure to provide information shall constitute a separate
113113 84violation.
114114 85 SECTION 8. Said chapter 6D, as so appearing, is further amended by inserting after
115115 86section 20 the following new section:-
116116 87 SECTION 20A. Transparency in Patient Advocacy
117117 88 The commission shall require a pharmaceutical manufacturing company to annually
118118 89disclose payments and other transfers of value provided to a patient advocacy organization,
119119 90consumer advocacy organization, voluntary health agency, or a coalition of such organizations,
120120 91including a disease-specific advocacy organization. The commission shall issue an annual report
121121 92identifying the payments or other transfers of value made by manufacturers to a patient advocacy 6 of 16
122122 93organization, consumer advocacy organization, voluntary health agency, or a coalition of such
123123 94organizations, including a disease-specific advocacy organization and analyzing the impact of
124124 95such payments or transfers of value on health care public policy in the commonwealth.
125125 96 SECTION 9. Said chapter 6D is further amended by inserting after section 20 the
126126 97following new section:-
127127 98 SECTION 21. Early Notice of High Cost Drugs
128128 99 (a) As used in this section, the following terms have the following meanings:-
129129 100 “Average Manufacturer Price”, as defined in section 1927(k)(1) of the Social Security
130130 101Act (42 U.S.C. 1396r–8(k)(1)).
131131 102 “Pharmaceutical manufacturing company”, an entity engaged in the: (i) production,
132132 103preparation, propagation, compounding, conversion or processing of prescription drugs, directly
133133 104or indirectly, by extraction from substances of natural origin, independently by means of
134134 105chemical synthesis or by a combination of extraction and chemical synthesis; or (ii) packaging,
135135 106repackaging, labeling, relabeling or distribution of prescription drugs; provided, however, that
136136 107“pharmaceutical manufacturing company” shall not include a wholesale drug distributor licensed
137137 108under section 36B of chapter 112 or a retail pharmacist registered under section 39 of said
138138 109chapter 112.
139139 110 (b)(1) A pharmaceutical manufacturing company shall submit a report to the commission
140140 111notifying the commission of each price increase of a prescription drug that will result in an
141141 112increase in the average manufacturer price of that drug that is equal to 10 percent or more over a
142142 11312-month period, or the introduction of a new drug whose price may threaten the cost benchmark 7 of 16
143143 114either due to anticipated volume of prescriptions filled in the commonwealth or the increase in
144144 115the average manufacturer price for a single dose.
145145 116 (2) Each report described in paragraph (1) shall be submitted to the commission not later
146146 117than 30 days prior to the planned effective date of such price increase.
147147 118 (c) A report under subsection (b) shall, at a minimum, include:
148148 119 (1) With respect to the prescription drug—
149149 120 (A) the percentage by which the pharmaceutical manufacturing company will raise the
150150 121average manufacturer price of the drug on the planned effective date of such price increase;
151151 122 (B) a justification for, and description of, each pharmaceutical manufacturing company’s
152152 123price increase that occurred during the 12-month period described in subsection (b)(1);
153153 124 (C) the identity of the initial developer of the drug;
154154 125 (D) a description of the history of the pharmaceutical manufacturing company 's price
155155 126increases for the drug since the approval of the application for the drug under section 505 of the
156156 127Federal Food, Drug, and Cosmetic Act or the issuance of the license for the drug under section
157157 128351, or since the pharmaceutical manufacturing company acquired such approved application or
158158 129license;
159159 130 (E) the current list price of the drug;
160160 131 (F) the total expenditures of the pharmaceutical manufacturing company on—
161161 132 (i) materials and manufacturing for such drug; and 8 of 16
162162 133 (ii) acquiring patents and licensing for such drug;
163163 134 (G) the percentage of total expenditures of the pharmaceutical manufacturing company
164164 135on research and development for such drug that was derived from Federal funds;
165165 136 (H) the total expenditures of the pharmaceutical manufacturing company on research and
166166 137development for such drug that is used for—
167167 138 (i) basic and preclinical research;
168168 139 (ii) clinical research;
169169 140 (iii) new drug development;
170170 141 (iv) pursuing new or expanded indications for such drug through supplemental
171171 142applications under section 505 of the Federal Food, Drug, and Cosmetic Act; and
172172 143 (v) carrying out post market requirements related to such drug, including those under
173173 144section 505(o)(3) of such Act;
174174 145 (I) the total revenue and the net profit generated from the prescription drug for each
175175 146calendar year since the approval of the application for the drug under section 505 of the Federal
176176 147Food, Drug, and Cosmetic Act or the issuance of the license for the drug under section 351, or
177177 148since the pharmaceutical manufacturing company acquired such approved application or license;
178178 149and
179179 150 (J) the total costs associated with marketing and advertising for the prescription drug;
180180 151 (2) With respect to the pharmaceutical manufacturing company: 9 of 16
181181 152 (A) the total revenue and the net profit of the pharmaceutical manufacturing company for
182182 153the 12-month period described in subsection (b)(1);
183183 154 (B) the amount the pharmaceutical manufacturing company has spent on dividends and
184184 155stock repurchases and the specific metrics used by the pharmaceutical manufacturing company to
185185 156determine executive compensation, including any stock-based performance metrics, for the 12-
186186 157month period described in subsection (b)(1); and
187187 158 (C) the amount the pharmaceutical manufacturing company has provided in funding to
188188 159consumer and disease advocacy groups for the 12-month period described in subsection (b)(1);
189189 160 (D) any additional information the manufacturer chooses to provide related to drug
190190 161pricing decisions, such as total expenditures on—
191191 162 (i) drug research and development; or
192192 163 (ii) clinical trials on drugs that failed to receive approval by the Food and Drug
193193 164Administration; and
194194 165 (3) such other related information as the commission considers appropriate.
195195 166 (d) The commission shall promulgate regulations to implement and enforce this section
196196 167and may impose financial penalties on a pharmaceutical manufacturing company that fails to
197197 168provide the information required by subsection (c) of this section in an amount not to exceed
198198 169$10,000.00 per violation. Each unlawful failure to provide information shall constitute a separate
199199 170violation.
200200 171 (e)(1) Not later than 30 days after the submission of a report under subsection (b), the
201201 172commission shall post the report on the public website of the commission. 10 of 16
202202 173 (2) In carrying out this section, the commission shall ensure the protection of confidential
203203 174commercial information and trade secrets.
204204 175 SECTION 10. Section 1 of chapter 12C of the General Laws, as so appearing, is hereby
205205 176amended by inserting after the definition of “Patient-centered medical home” the following
206206 177definition:-
207207 178 “Pharmaceutical manufacturing company”, an entity engaged in the: (i) production,
208208 179preparation, propagation, compounding, conversion or processing of prescription drugs, directly
209209 180or indirectly, by extraction from substances of natural origin, independently by means of
210210 181chemical synthesis or by a combination of extraction and chemical synthesis; or (ii) packaging,
211211 182repackaging, labeling, relabeling or distribution of prescription drugs; provided, however, that
212212 183“pharmaceutical manufacturing company” shall not include a wholesale drug distributor licensed
213213 184under section 36B of chapter 112 or a retail pharmacist registered under section 39 of said
214214 185chapter 112.
215215 186 SECTION 11. Section 3 of said chapter 12C, as so appearing, is hereby amended by
216216 187inserting after the word “organizations”, in lines 13 and 14, the following words:- ,
217217 188pharmaceutical manufacturing companies.
218218 189 SECTION 12. Said section 3 of said chapter 12C, as so appearing, is hereby further
219219 190amended by striking out, in line 24, the words “and payer” and inserting in place thereof the
220220 191following words:- , payer, and pharmaceutical manufacturing company.
221221 192 SECTION 13. Section 5 of said chapter 12C, as so appearing, is hereby further amended
222222 193by striking out, in line 15, the words “and affected payers” and inserting in place thereof the
223223 194following words:- affected payers, and affected pharmaceutical manufacturing companies. 11 of 16
224224 195 SECTION 14 Said chapter 12C is hereby further amended by inserting after section 10
225225 196 the following new section:-
226226 197 Section 10A. (a) The center shall promulgate regulations necessary to ensure the uniform
227227 198reporting of information from pharmaceutical manufacturing companies that enables the center
228228 199to analyze: (i) year-over-year changes in wholesale acquisition cost and average manufacturer
229229 200price for prescription drug products; (ii) year-over-year trends in net expenditures; (iii) net
230230 201expenditures on subsets of biosimilar, brand name and generic drugs identified by the center; (iv)
231231 202trends in estimated aggregated drug rebates, discounts or other remuneration paid or provided by
232232 203a pharmaceutical manufacturing company to a pharmacy benefit manager, wholesaler,
233233 204distributor, health carrier client, health plan sponsor or pharmacy in connection with utilization
234234 205of the pharmaceutical drug products offered by the pharmaceutical manufacturing company; (v)
235235 206discounts provided by a pharmaceutical manufacturing company to a consumer in connection
236236 207with utilization of the pharmaceutical drug products offered by the pharmaceutical
237237 208manufacturing company, including any discount, rebate, product voucher, coupon or other
238238 209reduction in a consumer’s out-of-pocket expenses including co-payments and deductibles under
239239 210section 3 of chapter 175H; (vi) research and development costs as a percentage of revenue; (vii)
240240 211annual marketing and advertising costs, identifying costs for direct-to-consumer advertising;
241241 212(viii) annual profits over the most recent 5-year period; (ix) cost disparities between prices
242242 213charged to purchasers in the commonwealth and purchasers outside of the United States; and (x)
243243 214any other information deemed necessary by the center.
244244 215 The center shall require the submission of available data and other information from
245245 216pharmaceutical manufacturing companies including, but not limited to: (i) changes in wholesale 12 of 16
246246 217acquisition costs and average manufacturer prices for prescription drug products as identified by
247247 218the center; (ii) aggregate, company-level research and development costs to the extent
248248 219attributable to a specific product and other relevant capital expenditures for the most recent year
249249 220for which final audited data are available for prescription drug products as identified by the
250250 221center; (iii) annual marketing and advertising expenditures; and (iv) a description, suitable for
251251 222public release, of factors that contributed to reported changes in wholesale acquisition costs and
252252 223average manufacturer prices for prescription drug products as identified by the center.
253253 224 (b) Except as specifically provided otherwise by the center or under this chapter, data
254254 225collected by the center pursuant to this section from pharmaceutical manufacturing companies
255255 226shall not be a public record under clause Twenty-sixth of section 7 of chapter 4 or under chapter
256256 22766.
257257 228 SECTION 15. Said chapter 12C is hereby further amended by striking out section 11, as
258258 229appearing in the 2018 Official Edition, and inserting in place thereof the following section:-
259259 230 Section 11. The center shall ensure the timely reporting of information required under
260260 231sections 8, 9, 10 and 10A. The center shall notify payers, providers, provider organizations, and
261261 232pharmaceutical manufacturing companies of any applicable reporting deadlines. The center shall
262262 233notify, in writing, a private health care payer, provider, provider organization, or pharmaceutical
263263 234manufacturing company that it has failed to meet a reporting deadline and that failure to respond
264264 235within 2 weeks of the receipt of the notice may result in penalties. The center may assess a
265265 236penalty against a private health care payer, provider, provider organization, or pharmaceutical
266266 237manufacturing company that fails, without just cause, to provide the requested information
267267 238within 2 weeks following receipt of the written notice required under this section of not more 13 of 16
268268 239than $1,000 per week for each week of delay after the 2-week period following receipt of the
269269 240written notice. Amounts collected under this section shall be deposited in the Healthcare
270270 241Payment Reform Fund established in section 100 of chapter 194 of the acts of 2011.
271271 242 SECTION 16. Section 12 of said chapter 12C, as so appearing, is hereby amended by
272272 243striking out, in line 2, the words “and 10” and inserting in place thereof the following words:- ,
273273 244 10 and 10A.
274274 245 SECTION 17. Subsection (a) of section 16 of said chapter 12C, as so appearing, is hereby
275275 246amended by striking out the first sentence and inserting in place thereof the following sentence:-
276276 247 The center shall publish an annual report based on the information submitted under: (i)
277277 248 sections 8, 9, 10 and 10A concerning health care provider, provider organization, private
278278 249and public health care payer, and pharmaceutical manufacturing company costs, and cost and
279279 250price trends; (ii) section 13 of chapter 6D relative to market power reviews; and (iii) section 15
280280 251of said chapter 6D relative to quality data.
281281 252 SECTION 18. The General Laws are hereby amended by inserting after chapter 63B the
282282 253following new chapter: -
283283 254 Chapter 63D. Penalty on drug manufacturers for excessive price increases
284284 255 Section 1. As used in this section, the following terms shall have the following
285285 256meanings:- “Commissioner”, the commissioner of revenue.
286286 257 “Consumer price index”, the consumer price index for all urban consumers for Boston, as
287287 258most recently reported by the federal Bureau of Labor Statistics. 14 of 16
288288 259 “Drug”, any medication, as identified by a National Drug Code, approved for sale by the
289289 260U.S. Food and Drug Administration.
290290 261 “Excessive price,” the price of a drug if it exceeds the sum of (a) the reference price of
291291 262that drug, as adjusted for any increase or decrease in the consumer price index since the
292292 263reference price was determined, and (b) an additional two percent of the reference price for each
293293 264twelve-month period that has elapsed since the date on which the reference price was
294294 265determined. The two percent increment provided in (b) of the preceding sentence shall
295295 266compound annually on the first day of the first calendar quarter commencing after the end of
296296 267each 12-month period described therein.
297297 268 “Excessive price increase”, the amount by which the price of a drug exceeds the sum of
298298 269(a) the reference price of that drug, as adjusted for any increase or decrease in the consumer price
299299 270index since the reference price was determined, and (b) an additional two percent of the
300300 271reference price for each twelve-month period that has elapsed since the date on which the
301301 272reference price was determined. The two percent increment provided in (b) shall compound
302302 273annually on the first day of the first calendar quarter commencing after the end of each twelve-
303303 274month period described therein.
304304 275 “Person”, any natural person or legal entity.
305305 276 “Price”, the wholesale acquisition cost of a drug, per unit, as reported to the First Data
306306 277Bank or other applicable price compendium designated by the commissioner.
307307 278 “Reference price”, the price of a drug as of October 1, 2019, or in the case of any drug
308308 279first commercially marketed in the United States after October 1, 2019, the price of the drug on
309309 280the date when first marketed. 15 of 16
310310 281 “Related party”, an entity is a related party with respect to a person if that entity belongs
311311 282to the same affiliated group as that person under section 1504 of the Internal Revenue Code, as
312312 283amended and in effect for the taxable year, or if the entity and the person are otherwise under
313313 284common ownership and control.
314314 285 “Unit”, the lowest dispensable amount of a drug.
315315 286 Section 2. (a) Any person who manufactures and sells drugs, directly or through another
316316 287person, for distribution in the commonwealth and who establishes an excessive price for any
317317 288such drug directly or in cooperation with a related party, shall pay a per unit penalty on all units
318318 289of the drug ultimately dispensed or administered in the commonwealth. The penalty for each unit
319319 290shall be 80 percent of the excessive price increase for each unit, determined at the beginning of
320320 291the calendar quarter.
321321 292 (b) A person who establishes an excessive price for a drug as described in subsection (a)
322322 293shall file a return as provided in section 4 declaring all units of excessively priced drug sold for
323323 294distribution in the commonwealth during the quarter. In the event that a person filing such a
324324 295return pays a penalty with regard to one or more units of drug that are ultimately dispensed or
325325 296administered outside of the commonwealth, the person may claim a credit for such penalty
326326 297amounts on the return for the tax period during which such units are ultimately dispensed or
327327 298administered.
328328 299 Section 3. The penalty under section 2 shall apply for any calendar quarter only to a
329329 300person who maintains a place of business in the commonwealth or whose total sales of all
330330 301products, directly or through another person, for distribution in the commonwealth were more 16 of 16
331331 302than $100,000 in the prior twelve-month period. The penalty shall not apply more than once to
332332 303any unit of drug sold.
333333 304 Section 4. Any person subject to the penalty under section 2 shall file a return with the
334334 305commissioner and shall pay the penalty by the fifteenth day of the third month following the end
335335 306of each calendar quarter, subject to such reasonable extensions of time for filing as the
336336 307commissioner may allow. The return shall set out the person’s total sales subject to penalty in the
337337 308immediately preceding calendar quarter and shall provide such other information as the
338338 309commissioner may require.
339339 310 Section 5. The penalty imposed under this chapter shall be in addition to, and not a
340340 311substitute for or credit against, any other penalty, tax or excise imposed under the General Laws.
341341 312 Section 6. The commissioner may disclose information contained in returns filed under
342342 313this chapter to the department of public health for purposes of verifying that a filer’s sales subject
343343 314to penalty are properly declared and that all reporting is otherwise correct. Return information so
344344 315disclosed shall remain confidential and shall not be public record.
345345 316 Section 7. To the extent that a person subject to penalty under section 2 fails to pay
346346 317amounts due under this chapter, a related party of such person that directly or indirectly
347347 318distributes in the commonwealth any drug whose sales are subject to this chapter shall be jointly
348348 319and severally liable for the penalty due.
349349 320 Section 8. The commissioner may promulgate regulations or issue other guidance for the
350350 321implementation of this chapter.