Pharmaceutical Manufacturers Beware: New State Drug Transparency Laws and Enforcement Mechanisms Are Coming In 2022

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In 2016, states began passing pharmaceutical price reporting laws.  These laws are designed to bring transparency to a pharmaceutical manufacturer’s drug pricing process by requiring drug manufacturers to report pricing and other information related to the cost, development, and sale of drugs.  By October 2021, approximately twenty states have passed or are implementing transparency laws.  While many of these laws are applicable to drug manufacturers, pharmacy benefit managers, and health carriers, recent enforcement of these laws has focused only on drug manufacturers.

Each state has its own set of unique requirements that drug manufacturers must meet in order to distribute drugs within each individual state.  Reporting is often completed via an online portal administered by the state’s implementing agency.  Some states will use this submitted data to produce public reports about the cost of prescription drugs with a goal of educating the state legislature and the public about the cost of drugs and to provide accountability for increased prices.

Enforcement of these state reporting laws is beginning to take shape as states pass legislation and implement administrative guidance – the majority of which provide for civil or administrative penalties.  Enforcement authorities typically assess fines for each day a manufacturer is in violation and may increase penalties the longer the violation persists.  Additionally, the appeals process for any enforcement action typically follows either a prescribed process codified by the state law or defaults to the appeals process under the state’s administrative procedure act.

Accordingly, pharmaceutical manufacturers will need to be vigilant as more sates pass and implement drug transparency laws. These laws require different reporting deadlines, the reporting of different information, disclosures based on different dollar thresholds, and have different requirements and processes for protecting confidential information and trade secrets.  For the latest developments in this area, please see Goodwin’s recent client alert.  For an in-depth analysis of these laws, please see our publication, State Drug Transparency Laws: Considerations for Pharmaceutical Manufacturers, in Chapter 8 of the American Health Law Association’s 2021 edition of Health Law Watch.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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