United States: California Enacts Bill On Drug Pricing Transparency

On October 9, 2017, California Governor Jerry Brown (D) signed into law what may be the most comprehensive prescription drug pricing transparency bill in the country. The bill, SB-17, is intended to foster transparency in connection with drug pricing and its impact on insurance costs, with an eye towards improving competitive pricing and reducing health care spending. The law imposes new reporting requirements on drug manufacturers, pharmacy benefit managers, health care service plans and health insurers operating in California, and mandates state agencies to report to the public about drug price increases and their effects on health care premiums.

California is one of several states to have recently enacted drug pricing laws in response to growing debate over prescription drug costs. For example, Vermont recently passed a law requiring drug manufacturers to justify their price increases. A new law in New York caps Medicaid prescription drug spending. Nevada has passed a new pricing transparency law focused on insulin for diabetes patients. The Maryland attorney general, meanwhile, is now authorized to take action against certain increases in generic drug prices. And drug pricing legislation is currently pending in many other states. For their part, federal lawmakers have also investigated drug pricing and introduced several related bills on the subject, but thus far there has been no major federal legislative action.

Requirements to notify purchasers of drug price increases

The new California law requires a drug manufacturer to provide 60 days' notice to certain purchasers of any planned increase in a drug's wholesale acquisition cost ("WAC") of 16 percent or more over a two-year period, if the drug has a WAC of over $40. The purchasers to be notified pursuant to this requirement include state agencies, health care service plans, health insurers and pharmacy benefit managers. The notice must include the date and amount of the increase, and a statement as to whether the price increase is necessitated by a change or improvement in the drug.

A pharmacy benefit manager that receives such a notice from a manufacturer must, in turn, notify large contracting purchasers with coverage of 500 or more persons.

Requirement to report price increase information to OSHPD

Beginning January 1, 2019, for each drug price increase that meets the criteria set forth above, a drug manufacturer must also provide the following information to the Office of Statewide Health Planning and Development ("OSHPD") on a quarterly basis:

  1. a description of the specific financial and non-financial factors used to make the decision to increase the WAC of the drug and the decision as to the amount of the increase;
  2. if the drug has been manufactured by the company for at least five years, a schedule of WAC increases for the drug for the previous five years; 
  3. if the drug was acquired by the manufacturer within the previous five years, the WAC at the time of acquisition, the WAC in the year prior to acquisition, the name of the company from which the drug was acquired, the acquisition date, the acquisition purchase price, the year the drug was introduced to market, and its WAC at that time;
  4. the patent expiration date, if applicable;
  5. whether the drug is classified as a single source, multiple source, innovator multiple source or non-innovator multiple source drug under 42 U.S.C. § 1396r-8(k)(7)(A);
  6. a description of the change or improvement in the drug, if any, that necessitates the price increase; and
  7. the volume of U.S. sales of the drug for the previous year.

Further requirements apply to certain specialty drugs. A drug manufacturer must notify OSHPD three days after FDA approval of a new prescription drug to market at a WAC that exceeds the Medicare Part D specialty drug threshold (currently $670). Within 30 days of that initial notification, the manufacturer must also provide to OSHPD the following:

  1. a description of the marketing and pricing plans used in the launch of the new drug;
  2. the estimated volume of patients that may be prescribed the drug;
  3. whether the drug was granted breakthrough therapy designation or priority review by the FDA prior to final approval; and
  4. the date and price of acquisition, if the drug was not developed by the manufacturer.

A manufacturer may limit the information that it reports to OSHPD regarding price increases and specialty drug prices to that which is publicly available. OSHPD will publish the reported information on its website, identifying the drug to which it applies. 

A manufacturer that fails to comply with these reporting requirements could face a civil penalty of $1000 per day for every day after the reporting period for which the information is not reported. Any such penalty received by OSHPD will be paid into the state's Managed Care Fund.

Reporting requirements for health care service plans and health insurers

Although the enhanced reporting requirements set forth in the new bill generally apply to drug manufacturers, some of them also apply to certain health care plans and insurers. Under current state law, health care service plans and health insurers that operate in California and are regulated by the California Department of Managed Health Care ("DMHC") and the California Department of Insurance ("CDI") are required to report to those agencies certain rate information related to their health plan contracts and health insurance policies. Under the new law, beginning October 1, 2018, each such plan and insurer will also be required to report to DMHC and CDI, in connection with these rate information reports, the following drug pricing information: 

  1. the plan or insurer's 25 most frequently prescribed drugs; 
  2. the plan or insurer's 25 most costly drugs by total annual plan spending; and 
  3. the 25 drugs with the highest year-over-year increases in the plan or insurer's total annual plan spending. 

Beginning January 1, 2019, DMHC and CDI will compile this information into a public report that demonstrates the overall impact of drug costs on health care premiums. The data available in the report will be aggregated and will not reveal information specific to health care plans and insurers, unlike the information contained in the OSHPD report discussed above. Moreover, beyond publishing the aggregated information in the report, DMHC and CDI will otherwise keep confidential the information that is reported to them. 

In addition, beginning October 1, 2018, health care plans with large group health care service plans contracts will have to report annually certain information regarding the impact of drug prices on patient premiums. This information will be used as part of the large group rate review process rather than in connection with DMHC's and CDI's reports.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Brown Smith Wallace
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Brown Smith Wallace
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions