Drug Price Disclosure Legislation

Price Disclosure Law in California

California passed Senate Bill 17, a law that states any manufacturer of a prescription drug must report, 60 days in advance, price increases over 16% (including the current year and previous two years) to all health insurers and government health plans in the state
of California.

The manufacturer must include the date of the increase, the current wholesale distribution cost (WAC), and expected amount of the increase. A reason for the increase must be given, including whether a change or improvement requires it. All information is posted online for public view.

Other requirements include mandatory reporting for all new products with a WAC of over $670 (for a monthly supply) within three days of launch.

According to biopharmaceutical research company PhRMA, California voters care more about access to care and quality coverage than they do about prescription drug price transparency. However, any pricing-related legislation has the potential to effect more legislation and thus more need for manufacturers to understand what’s required to remain compliant.

Price Disclosure Law in Oregon

Reports from manufacturers must include:

• Contributing factors for the price increase
• Costs for marketing, manufacturing and distribution for the prescription drug
• Costs for ongoing research related to drug safety and effectiveness
• The prescription drug’s profit the previous year
• The prescription drug’s 10 highest prices paid outside of the U.S. the previous year
• Supporting documentation

In addition to several other filing requirements, manufacturers must report to Oregon’s Department of Consumer and Business Services within 30 days of introducing a new prescription drug for sale in the U.S. with a cost exceeding the Medicare Part D threshold for specialty drugs. For 2019, that cost is $670 per month.

This legislation also includes a temporary 18-member task force created to develop strategies for price transparency across the pharmaceutical product supply chain.³

Lastly, public disclosure in Oregon is unlike other transparency laws. HB 4005 requires the Oregon Department of Consumer and Business Services to publish online all information reported except in limited cases.⁴

It’s difficult to say exactly what effect laws related to price transparency will have. Generally speaking, we believe more legislation aimed at lowering costs is forthcoming. As of this writing, Senate Bill 5292 was making its way through Congress. This effort to increase transparency in drug pricing for the state of Washington just became law.

SB5292 is almost a blend of California and Oregon price disclosure laws with an apparently higher increase threshold and higher WAC thresholds for reporting new products. The bill proposed a WAC of $10,000 or more for new products and an increase threshold of 20 percent or more, including the prior two calendar year increases. Reporting obligations for manufacturers in Washington begin October 1, 2019.

Among additional aspects of SB5292:

• Drug manufacturers would be required to list justification of price increases to the Washington Healthcare Authority (HCA).
• Health insurance companies and pharmacy benefit managers would need to provide the HCA a list of drugs that are most frequently prescribed and costliest, and have the highest increases year over year.

Some states are exploring other means to address price transparency or control, such as adding proposals on public ballots. Beyond the probable continued legislation around price transparency, it’s likely that some legislation may produce unintended consequences.