While the introduction of state legislation that would require drug manufacturers to disclose pricing and other information did not slow down in 2018, the number of bills that were made law did slow down. During 2018, 22 state legislatures considered bills seeking to require drug manufacturers to disclose pricing information; however, most of the legislation failed.
Two New State Laws
Since my Drug Manufacturer Pricing Disclosures: Mid-Year 2018 Update, two states—Vermont and New Hampshire—passed laws that arguably touch on requiring pharmaceutical manufacturers to report drug prices.[1]
Further, the new law requires a drug manufacturer to notify the AG if it intends to introduce a new drug with a wholesale acquisition cost (“WAC”) that exceeds the $670 threshold set for specialty drugs under Medicare Part D. The notification must be provided three days prior to commercial release of the drug. Thereafter, within 30 days of the three-day notification, the manufacturer must provide additional information to the AG including a description of marketing and pricing plans and, if the drug was acquired from another company, the acquisition date and price of the drug. The AG will make information available on its website, but do so in a manner that does not allow identification of the drug. The law also creates a working group to study drug pricing throughout the supply chain to identify opportunities for savings and for increasing price transparency.
On May 30, 2018, Vermont, one of the few states that previously passed legislation requiring drug manufacturer pricing disclosures, expanded its reporting requirements. Specifically, Vermont Act No. 93 (S. Bill 92), expanded Vermont’s transparency law by requiring the Department of Vermont Health Access and health insurers with more than 5,000 covered lives to create lists of 10 prescription drugs for which the payer’s net cost has increased by 50 percent or more over the past five years or more than 15 percent annually. From those lists, the Attorney General (“AG”) will identify 15 drugs for which the drugs’ manufacturers must provide a justification for the price increases which will be made public. Previously, manufacturer reports were not publicly disclosed. Under the new law, a public version of such reports will be posted online. In the public versions, manufacturers can request to redact proprietary or confidential information, subject to the AG’s approval.
In the end, among other recommendations, the Commission suggested the Legislature consider “[l]egislation similar to other states that requires transparency and disclosure on the part of pharmaceutical manufacturers when increasing wholesale drug costs on drugs already in distribution and publish all disclosure information on the state’s website.” The Commission also suggested “[l]egislation relating to a manufacturer’s introduction of new high-cost prescription drugs.” Finally, the Commission recommended legislation that allows consumers to report price gouging, in tandem price raising, or the introduction of new high-cost drugs and enables the AG or the Commission to request certain information from, among others in the pharmaceutical supply chain, drug manufacturers so that an investigation could be conducted.Since 2016, 11 states have passed laws requiring drug manufacturers to report drug pricing and/or other cost and price related information. Thus far, only three state laws have required manufacturers to report pricing information. Except possibly for Nevada’s disclosure requirement, which is limited to certain diabetes drugs, states have made little progress toward their goal of drug pricing transparency for purposes of lowering drug costs for state programs and consumers. Arguably, state laws mandating manufacturer price disclosures are in their infancy, but at some point, states need to decide whether the complex and inconsistent reporting requirements are resulting in lower prices or simply adding another layer of burdensome compliance costs for manufacturers. Manufacturers should be asking similar questions and whether they should advocate for a uniform price reporting system.
One would hope states considering such legislation in the future heed some of the “lessons learned” by other states. For example, a state needs to assess whether there truly are benefits in obtaining prices and related information when the use of such information is limited by the protection of manufacturers’ trade secrets. Further, regardless of the information a state collects, a state needs to determine if that information can be used to lower state healthcare program costs and/or the prices paid by consumers. A good example is requesting that manufacturers report WACs. WACs are list prices and have no relationship to what consumers pay and have fallen out of favor for Medicaid reimbursement purposes.
Drug Manufacturers’ Pricing Disclosures in 2019
On July 2, 2018, New Hampshire enacted House Bill 1418, which established a commission to study greater transparency in pharmaceutical costs and drug rebate programs. HB 1418 did nothing more than establish a commission to study drug costs. As required by the law, on November 1, 2018, the Commission to Study Greater Transparency in Pharmaceutical Costs and Drug Rebate Programs submitted its Report. Unsurprisingly, the Commission was unable to complete its work in the less than four months it was allotted. The Commission noted that, among other work, it reviewed the pharmaceutical transparency laws enacted by other states, but, because such laws are relatively new, the Commission stated, “it is too early to tell if these laws will have an effect on transparency or lower costs.”
In the meantime, manufacturers should follow the guidance I have previously provided, which can be found at governmentcontractsnavigator.com/2018/07/25/drug-manufacturer-pricing-disclosures-mid-year-2018-update.
[1] On January 7, 2019, California Governor Gavin Newsom signed an Executive Order to “create the nation’s biggest single purchaser system for drugs. …” While the Executive Order does not mandate manufacturer pricing disclosures, it requires the creation of “a list of prescription drugs that could appropriately be prioritized for future bulk purchasing initiatives or reexamined for potential renegotiation with the manufacturer.” Among other things, the drug list will be based on “the price of the drug and the extent to which the drug is subject to competition, such as a sole-source drug without a generic or alternative option.” The list will be provided to the Governor by March 15, 2019, and include a rationale for why any of the 25 highest-cost drugs have not been included.
