Continued Emergence of Drug Price Disclosure Legislation
Tips for staying compliant with an accelerating trend
The summer of 2019 saw an 86 percent increase in the number of states enacting pharmaceutical drug price disclosure laws.
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.
BY MARK PATTON
The Purpose of Price Disclosure Legislation
Proponents of drug transparency legislation want to understand factors that drive drug price increases and why some drugs cost what they do. Consensus seems to be that drug price transparency legislation will not result in lower drug costs. Nevertheless, it is a first step toward more regulation and a heavier compliance burden for pharma companies.
Legislative efforts developed to influence what consumers pay for high-cost drugs is already underway. According to the National Academy for State Health Policy, a nonprofit advocacy group, some states are launching programs that directly affect what they and their residents pay for drugs.
For major change to gain traction, federal legislation is necessary. But as noted previously, the current administration is beginning to act. As yet another example, Congress passed a federal law in October 2019 that bans gag clauses in “PBM-pharmacy contracts nationwide and under the Medicare Part D prescription drug benefit.”2
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:
- Vermont has a significant healthcare spend, and with WACs that exceed legal levels.
- Vermont has a significant healthcare spend, and whose costs to the Department of Vermont Health Access exceed legal levels.
- 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.
Recommendations for Pharmaceutical Manufacturers
Define an owner. Opinions vary on who is responsible for ensuring compliance with transparency legislation requirements. Is it the Compliance department, Government Pricing, or some other department? Once you understand what price transparency compliance entails, you can more logically define who should own it. It may turn out to be more than one department. Wherever responsibility lands, formally designate one person to lead and take responsibility.
Create committees. Large pharma companies with subsidiaries may want to create multiple committees, each with a single owner, to manage compliance activities and report to a single leader who holds everyone accountable. Consider involving individuals from different departments or different branches of your company, ensuring diversity of knowledge and skills.
Hire well. Chances are that right now your organization does not have the people or resources in place to handle the coming increase in workload. Identify what it’s going to take, assuming you plan to manage reporting in-house. Determine if it’s necessary to outsource. If you do hire a third party, charge your people with being a knowledgeable, accessible resource to your vended partner.
Develop a consistent methodology. Just as companies have standard operating procedures in place for managing government pricing, so should they have an SOP for legislative compliance. New laws likely will require pharma companies to develop new reporting methodologies tailored to each state’s mandates.
Track and assess legislation. Keep a watchful eye on pending and new legislation, and know what may be required of you. Laws typically give manufacturers time to prepare, so take advantage of that time. Whether involving internal or external legal counsel, assign knowledgeable people. Counsel may need to interpret complex legislation with several moving parts.
Review strategies. New legislation may prompt you to reassess current and future pricing strategies. Know how legislation could affect drugs in your pipeline. You may decide it’s better to change pricing and avoid thresholds that trigger reporting.
Prepare for fallout. Legislation that mandates publication of pricing can lead to misunderstanding and swift backlash on social media, whether unfounded or not. Craft messages ahead of time. Corporate communications must be aware if their company is required to disclose its pricing and other corporate information. Be prepared for media inquiries and potential negative coverage.
If you’d like additional ideas on preparing for the changing environment of price disclosure laws, call us or email your questions to email@example.com. We uncover, manage and model data to help pharma companies gain confidence for making crucial strategic and operational business decisions.
Pharma companies should assess each new transparency law and determine who will lead compliance and then take certain actions to mitigate financial and brand risk. Source: Prescription Analytics