As their 2023 sessions draw to a close, mostly part-time state legislatures have continued their efforts throughout the spring to promote drug price transparency across the prescription drug supply chain. Notable among these efforts is Florida’s recent enactment of a sweeping drug price transparency act, targeting prescription drug manufacturers and pharmacy benefit managers (PBMs), and the response of the Minnesota state legislature to the state’s publication of its first annual prescription drug price transparency report.

FLORIDA PRESCRIPTION DRUG REFORM ACT

Florida Governor Ron DeSantis signed into law on May 3, 2023 the Prescription Drug Reform Act, coined by the governor’s office as the most comprehensive reform to Florida’s prescription drug market in state history. Among its reforms, and consistent with the structure of drug price transparency reporting laws that preceded it in other states, the act requires manufacturers to report (1) any increase of at least 15% in a drug’s wholesale acquisition cost (WAC) over the preceding 12-month period or (2) any cumulative increase of at least 30% in a drug’s WAC over the preceding three calendar years.

The act’s reporting requirements only apply to drugs with a WAC of at least $100 for a “course of therapy” prior to the effective date of an increase. If a manufacturer implements a reportable price increase, the following information must be reported to the Florida Department of Business and Professional Regulation on the date the increase takes effect:

• The proprietary and nonproprietary names of the drug;
• The WAC prior to the reportable drug price increase;
• The dollar amount of the reportable drug price increase;
• The percentage amount of the reportable drug price increase from the WAC prior to the reportable drug price increase;
• Whether a change or an improvement in the prescription drug necessitates the reportable drug price increase and, if so, a description of the change or improvement; and
• The intended uses of the prescription drug.

Additionally, the manufacturer must by April 1 of each year submit an annual report to the department that provides certain information on drugs affected by a reportable price increase in the past year, including but not limited to the percent price increase from the previous calendar year, the intended use, the length of time the drug has been on the market, factors contributing to and a justification for the price increase, and any actions filed to extend the patent life of the drug.

After submission, the reports are published by the Agency for Health Care Administration, excluding certain information that a manufacturer is permitted to mark as a trade secret.

The act, which goes into effect on July 1, 2023, also creates an extensive regulatory framework around the operations of PBMs, including by instituting a requirement that PBMs pass through 100% of all manufacturer rebates to health plans for the sole purpose of offsetting consumer premiums and cost sharing, as well as prohibitions on clawbacks, mail order mandates, spread pricing, patient steering, affiliate-only networks, and data sharing without the patient’s consent.

The act authorizes the department, in consultation with the Agency for Health Care Administration, to develop rules to implement the new requirements.

MINNESOTA PRESCRIPTION DRUG PRICE TRANSPARENCY REPORT TRIGGERS AMENDMENTS TO TRANSPARENCY LAW

Minnesota Governor Tim Walz signed into law on May 24, 2023 an Omnibus Health Appropriations bill, SF 2995, that seemed designed in part to target weaknesses in the relatively new Minnesota Prescription Drug Price Transparency Act that were identified in the state’s first annual Prescription Drug Price Transparency Report published in February 2023 by the Minnesota Department of Health (MDH).

In addition to the report, Minnesota maintains RXPT Dashboards, which track the volume and types of reports submitted to MDH, analyze yearly and cumulative price increases of reported drugs, create comparative data on the change in price of reported drugs versus similar products, and identify new drugs entering the market.

Though in its infancy, Minnesota’s transparency reporting under the act seeks to identify the factors driving prescription drug prices, as well as further understand how price increases are correlated to the direct costs, revenue, and profits realized by manufacturers.

Similar to Florida’s new Prescription Drug Reform Act and other state drug price transparency reporting statutes, Minnesota law requires manufacturers to report pricing data to MDH when certain triggering events occur, namely when there is a WAC increase of at least 10% over the previous 12-month period or 16% over the previous 24-month period for brand-name drugs or an increase of at least 50% over the previous 12-month period for generic drugs, in each case with respect to a prescription drug for which the WAC was at least $100 for a 30-day supply or for a course of treatment lasting less than 30 days prior to the increase.

The Minnesota law also requires reporting when a new brand-name, generic, or biosimilar drug enters the market with a WAC that is greater than the threshold for a specialty drug under the Medicare Part D program for a 30-day supply, and, for a generic or biosimilar, also is not at least 15% lower than the referenced brand-name drug.

Using data reported by manufacturers during the first half of 2022, the report found that manufacturers raised the list price by as little as 1.5% to as much as 106%, with a median increase of 7.9% and a median reported list price after the increase of $1,062. With respect to new drugs entering the market, 112 new drugs entered the market in excess of the Part D specialty drug threshold, with a median reported list price at market introduction of $6,612.50.

Additionally, the report also breaks down the average reported gross revenue distribution for manufacturers, estimating that 35.8% of a manufacturer’s gross revenue was spent on direct costs such as manufacturing, marketing, and distributing, 14.8% on profit, and 6.2% on financial assistance. The distribution of the other 43.2% of the reporting manufacturers’ average gross revenue remains unknown.

Ultimately, the report reaches three key findings:

• Drug price increases are projected to impact 41,000 people living in Minnesota and raise healthcare spending by an estimated $32 million in 2022;
• Manufacturer data quality and compliance with statutory reporting requirements are poor, with MDH only receiving about half of the expected required reports at the time of publication of the report; and
• The scope of Minnesota’s legislation is limited, which negatively impacts its effectiveness: namely, using list prices instead of net prices does not represent the actual income of manufacturers, a focus on manufacturers alone does not account for the impact of the entire pharmaceutical supply chain on consumer costs, the reporting requirements do not capture the complex market of rebate practices and other incentives, and the act protects trade secrets that shield additional information from public release.

The Omnibus Health Appropriations bill amends the act to include some technical fixes and clarifications, such as explicitly including “biosimilars” along with generic drugs in the provision that triggers reporting when there is a WAC increase of at least 50% over the previous 12-month period.

The amendments also clarify that “course of treatment” means “the maximum recommended dosage on the FDA-approved prescribing label” if the label includes more than one recommended dosage for a single course of treatment, which is a common ambiguity in state drug price transparency reporting laws that were drafted by legislative staff who do not fully understand the industry.

More importantly, however, the amendments seem designed to advance the act’s public policy goal of identifying factors driving prescription drug prices by addressing the report’s finding that the scope of the act is too limited to take into account the complex market for pharmaceuticals and the impact of the entire supply chain on consumer costs. In particular, the amendments require the Commissioner of Health, starting no later than January 31, 2024 and quarterly thereafter, to produce and post on the department’s website a list of prescription drugs that the department determines represent a substantial public interest.

Although the commissioner has discretion to consider any information determined to be relevant in deciding which drugs represent a substantial public interest, the commissioner must at least consider drug product families for which manufacturers were required to report drug price increases or new market entrants under the Act during the previous calendar year; for which average claims paid amounts exceeded 125% of the price as of the claim incurred date during the most recent calendar year for which claims paid amounts are available; or that are identified by members of the public during a public comment period.

No sooner than 30 days after publicly posting a quarterly list of drugs of substantial public interest, the commissioner is required to notify relevant reporting entities of the requirement to submit certain information to MDH. The law “limits” the commissioner to designating no more than 500 prescription drugs as having substantial public interest in any one such notice.

The reporting entities include not only drug manufacturers (which incorporates entities that engage in the packaging or repackaging of a drug, or the labeling or relabeling of a drug container), but also pharmacies, PBMs, and wholesale drug distributors.

In an effort to better understand all of the factors actually contributing to the cost of prescription drugs in the state, the new reporting requirements for these reporting entities include, in addition to basic descriptive information for a prescription drug on the list:

• such supply chain economic metrics as the accrued total rebate amount payable by the manufacturer;
• the total rebate receivable and payable amounts accrued by the pharmacy, the PBM, and the wholesaler;
• the total spent by the wholesaler to acquire the drug prior to rebates;
• the total spent by the pharmacy to acquire the drug prior to rebates;
• the number of pricing units of the drug dispensed by the pharmacy;
• the number of pricing units of the drug filled for which the PBM administered claims;
• the total payments receivable by the pharmacy for dispensing the drug, including ingredient cost, dispensing fee, and administrative fees;
• the total reimbursement amount accrued and payable by the PBM to pharmacies;
• the total reimbursement or administrative fee amount, or both, accrued by the PBM and receivable from payers;
• the manufacturer’s direct costs, total sales revenue, and net profit for the drug; and
• and the wholesaler’s gross revenue from sales of the drug in the United States,

all for the 12-month period prior to the date of the notification by the Commissioner of the requirement to report.

By extending the scope and scale of the act to focus on net prices rather than list prices and to collect data from entities throughout the supply chain, Minnesota clearly hopes to gain greater insight into pricing dynamics downstream from manufacturers, amounts paid by payers, and overall market trends so as to better be able to evaluate “where along the supply chain pricing power leads to . . . excess prices.”

The Omnibus Health Appropriations bill also authorizes the Commissioner to develop rules to implement the new requirements.

ARE THEY DONE YET?

Although many state legislative sessions are drawing to a close, if not already complete, there are still a few drug price transparency reporting bills churning in various statehouses that could yet see the light of day in 2023, including several pending bills in Massachusetts and bills in Michigan, New Jersey, and Rhode Island.

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