Alert October 19, 2021

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

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 to the state or state-affiliated entities. Throughout 2021 we saw an uptick in the passage of state drug price transparency legislation, bringing the total up to nearly twenty states with such laws. Reporting requirements vary on a state-by-state basis and are evolving quickly with new implementing regulations and guidance forthcoming.

Failing to comply with these requirements can result in substantial penalties in some states. For example, in 2019, Nevada’s Department of Health and Human Services imposed $17.4 million in fines on non-compliant manufacturers, which individually ranged from $735,000 to $910,000. In 2020, California similarly levied $17.5 million in fines against manufacturers for reporting violations.

Below is an overview of recently passed price transparency laws to help navigate this complicated and evolving regulatory framework.

  • North Dakota: HB1032 (effective August 31, 2022) requires drug companies to submit quarterly reports disclosing the Wholesale Acquisition Cost (WAC)[1] of all prescription drugs sold in the state. Manufacturers must also notify the state if (1) one of their drugs with a WAC of $70 or more for a manufacturer-packaged drug container, has undergone a WAC increase of at least 40% over the past five years or at least 10% over the past year; and (2) any new drugs introduced into the state have WACs that exceed the Medicare Part D specialty drug threshold (currently set at $670). It does not afford manufacturers any trade secret protections and collected information will be posted on a public website. Penalties for non-compliance may cost up to $10,000 per violation.

  • Virginia: HB2007 (effective January 1, 2022) appoints a data service organization to collect information pertaining to prescription drug pricing. Manufacturers with applicable drugs must report information regarding the drug’s brand name or generic status, the effective date of any change in WAC, associated production costs, and other factors which caused the WAC increase. If any products have received FDA approval within the previous three years, manufacturers must report if the product has become subject to generic competition. This law applies to (1) brand-name drugs and biologics with a WAC of $100 or more for a 30 day supply that have undergone a 15% or more WAC increase since the past year; (2) biosimilars with a WAC that is not at least 15% less than their corresponding biological product; and (3) generic drugs with a WAC equal to or greater than $100 that have experienced a 200% or greater WAC increase over the past year. Information collected under HB2007 will be kept confidential, except for compiled aggregated information. Penalties for non-compliance may cost up to $2,500 per day from the date on which such reporting is required.

States with pre-existing transparency laws have had mixed results with implementation as some states have signaled that a combination of COVID-19, logistical, and funding complications may delay the implementation of their drug price transparency programs. However, New York, has used Sec. 111 of its State Insurance Law to initiate an investigation into the price increase of six generic drugs connected to COVID-19. The applicable manufacturers have been required to provide information on the dates these pricing decisions were made, the officers or employees involved in those decisions, any analysis conducted by the manufacturers prior to the price increase, and the manufacturer’s internal justifications for the price change. No finding has been made on the lawfulness of these price increases. Notably, New York has not finalized a state drug transparency law. 

Several states have also passed legislation to amend prior reporting requirements or establish price transparency oversight boards:

  • Colorado: SB175 (effective January 1, 2022) creates the Colorado Prescription Drug Affordability Review Board. The board is tasked with identifying (1) any prescription brand-name drug or biological with a WAC of $30,000 or more for a yearly supply or a WAC increase of 10% or more over the past year; (2) any biosimilar with a WAC that is not at least 15% lower than its corresponding biological product; and (3) any generic drug with a WAC of $100 or more for up to a 30 day supply or single dose which has undergone a 200% WAC increase over the preceding year. The board may collect information pertaining to the manufacturer’s selection of the introductory price or price increase and can set upper limits on drug prices. Information collected under SB175 is confidential.

  • Maine: LD686 (effective January 30, 2022) authorizes the Maine Health Data Organization (MHDO) to post a list of prescription drugs for which the manufacturer has (1) increased the WAC of brand-name drugs by more than 20% per unit; (2) increased the WAC of generic drugs that costs at least $10 by more than 20% per unit; or (3) introduced a new drug to the state’s market which has a WAC greater than the Medicare Part D specialty drug threshold. The MHDO will also post a list of drug families for which it may request pricing component data. Information collected under LD686 will be kept confidential except for the aggregate of collected information and information shared with the Maine Bureau of Insurance as necessary to carry out the bureau’s duties.

  • Nevada: SB380 (effective October 1, 2021) expands existing state reporting requirements, which currently apply only to “essential” asthma and diabetes drugs. Manufacturers must now report all prescription drugs with a WAC over $40 that have undergone a 20% or greater WAC increase over the past two years or 10% or greater over the past year. Manufacturers must now also report the drug’s National Drug Code; name, strength, dosage and package size; as well as information pertaining to the drug’s acquisition, if its intellectual property had been acquired over the past five years.

  • Oregon: SB844 (effective January 1, 2022) establishes a Prescription Drug Affordability Board. The board is tasked with reviewing lists of prescription drug information collected by the state drug price transparency act, each quarter and, from this list, identifying nine drugs and at least one insulin product that the board determines may create high out-of-pocket costs for patients. The board may then launch inquiries into the price of these drugs, set upper limits on prices, and implement annual fees for manufacturers selling drugs in the state. Information collected for review will be kept confidential by the state agency.

  • Texas: HB1033 (effective September 1, 2021) creates new penalties for manufacturers. The Texas Department of Health and Human Services may now charge penalties of up to $1,000 per day for reporting violations and create fees of up to $400 for the submission of transparency reports to the state.

We also continue to monitor pending price transparency legislation in Pennsylvania (SB579, HB321, and HB209), Iowa (HSB46, HF464, and HF526), Massachusetts (HB1272, S736, S771, and H1254), New York (A00741), and North Carolina (S411) as well as two federal drug price transparency bills which were introduced into the U.S. House of Representatives (HB4418 and HB5260). Rhode Island’s recent attempts at creating drug price transparency laws (H5494 and S0494) have not progressed. We will provide further updates on these and other drug pricing transparency measures as additional information becomes available.

For a more in-depth analysis of these and other drug pricing transparency 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.

 


 

[1] “Wholesale Acquisition Cost,” or WAC, is a drug manufacturer’s list price when sold to a drug wholesaler or other direct purchasers, exclusive of any discounts or rebates.