Continued Emergence of Drug Price Disclosure Legislation

This paper, our second in a series that looks at the rising number of transparency laws and their attention-grabbing compliance ramifications for pharma companies, offers tips on preparing for this new reality.

Fourteen states have now passed drug price transparency laws targeting pharmaceutical companies, and many more have introduced bills. Currently, 28 states have proposed 51 bills to address price transparency and rising prescription drug costs.¹

The federal government is also taking action. Although its recently announced regulatory changes targeting hospitals and insurers do not directly affect drug manufacturers, the announcement portends greater willingness to answer the public’s call to do something about healthcare costs. As legislation addressing the rising cost of healthcare increases, so does the likelihood of more laws aimed at drug manufacturers.

Let’s take a look at legislation enacted this year in Washington, Maine, Texas and Vermont. New laws in these states either levy substantial penalties for non-compliance or mandate more requirements compared with other price transparency laws enacted over summer.

There are steps you can take as a drug manufacturer to avoid non-compliance. Start by keeping an eye on what’s happening at the legislative level, and consider taking the actions outlined in this paper, many of which we gathered from both private conversations and speaker panels at the 2019 Medicaid Drug Rebate Program Conference.

Fines are already being assessed. The Nevada Department of Health and Human Services alone levied more than $17 million in fines on 21 drug manufacturers in 2019 for non-compliance with its price transparency law. These manufacturers either failed to comply or were late in complying with the Nevada law passed in 2017. Individual fines ranged from $735,000 to $910,000.

New Laws in Washington

Washington is a leading state when it comes to legislative efforts related to healthcare reform. The bill to increase transparency in drug pricing in Washington became law on October 1, 2019. It requires, among other mandates, that prescription drug manufacturers provide advance notice of drug price increases to the Washington State Health Care Authority.

Manufacturers must submit a report when the WAC for a new drug at launch is $10,000 or more for a course of treatment lasting less than one month or a 30-day supply, whichever is longer.

For existing drugs, if the WAC is more than $100 and increases by either 20 percent from the prior calendar year or 50 percent from the prior three calendar years (including the proposed increase), manufacturers must submit a report.

Among additional aspects of the law:

• When the thresholds above have been met, manufacturers must submit a detailed price-increase report and notice of the increase at least 60 days ahead of time.
• When it’s not possible to provide reports in advance – for ANDA or biosimilar drugs – reports are due no later than the effective price-increase date.
• When a manufacturer has filed new drug applications and biologics license applications for pipeline drugs, they must notify the state. (The information filed may be limited to what’s in the public domain.)

The fine for noncompliance is $1,000 per day.

New Laws in Maine

Drug manufacturers doing business in Maine will risk a far stiffer civil penalty than in Washington for non-compliance: $30,000 per day.

This new law is a “report-to-state” law requiring prescription drug manufacturers to annually notify the Maine Health Data Organization (MHDO) when:

• The WAC for a brand-name drug increases by more than 20 percent per pricing unit.
• The WAC for a generic drug that costs at least $10 per pricing unit increases by more than 20 percent.
• A new drug for distribution in Maine gets introduced with a WAC greater than the amount that would classify it as specialty drug under the Medicare Part D program.

Manufacturers must also provide information on pricing, such as evidence of cost and payments received to make the drug available, to the MHDO within 60 days of MHDO’s request.

The Maine legislature also passed an Affordability Board law, establishing the Maine Prescription Drug Affordability Board. In part, the Board determines annual prescription drug spending targets for drugs purchased by public payors and spending targets for specific prescription drugs that might create problems with affordability for public payor health plan members.

On a price-related side note, Source on Healthcare Price & Competition reported, “Maine has become the first in the country to enact a law that would require drugs distributed in the state to be made available at a fair market price and without restrictions to generic companies for use as samples to accelerate the development of lower-cost generics.”

New Laws in Texas

Texas implemented four new laws and regulations. A new state-reporting law requires drug manufacturers to report a drug’s AMP, and the price each wholesaler in Texas pays them to purchase it, to the Texas Health and Human Services Commission.

A report-to-state law requires drug manufacturers to submit an annual report of current WAC information for FDA-approved drugs sold within or into Texas. Drugs with a WAC of $100 or greater for a 30-day supply with a price increase of 40 percent or more over the preceding three calendar years, or 15 percent or more in the preceding calendar year, require reporting within 30 days of the date of increase. AARP claims that this bipartisan legislation is “one of the strongest drug price transparency laws in the nation.”³

Two new regulations also have taken effect, requiring drug manufacturers to report:

• The most recent AMP reported under the Medicaid Drug rebate program if requested by the Texas Department of Health, Bureau of Food and Drug Safety.
• Changes to the prices in the Certification of Information for the Addition of a Drug Product to the Texas Drug Code Index, when requested.

New Laws in Vermont

The state of Vermont will levy a $10,000 civil penalty per violation for a manufacturer’s failure to provide any information related to its new state-list law.

The Office of the Attorney General and the Green Mountain Care Board must publish, on their websites, annual lists of the 10 prescription drugs for which:

1. Vermont has a significant healthcare spend, and with WACs that exceed legal levels.
2. Vermont has a significant healthcare spend, and whose costs to the Department of Vermont Health Access exceed legal levels.
3. A health insurance plan has a significant healthcare spend, with costs to the plans exceeding legal levels.

A new report-to-state law requires prescription drug manufacturers to notify the Office of the Attorney General after they introduce a new prescription drug to the market at a WAC that exceeds the threshold set for a specialty drug under Medicare Part D.

And a new report-to-prescriber law directed at drug company marketers requires disclosure of the AWP for drugs being marketed, per pill, as well as the price relationship between that drug and other drugs within the same therapeutic class.