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10 November 2023

2023 State Drug Transparency Law Development Update

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Goodwin Procter LLP
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At Goodwin, we partner with our clients to practice law with integrity, ingenuity, agility, and ambition. Our 1,600 lawyers across the United States, Europe, and Asia excel at complex transactions, high-stakes litigation and world-class advisory services in the technology, life sciences, real estate, private equity, and financial industries. Our unique combination of deep experience serving both the innovators and investors in a rapidly changing, technology-driven economy sets us apart.
In October 2021, we reported on an uptick in the passage of state drug price transparency legislation. As an update to that report, as of October 2023...
United States Food, Drugs, Healthcare, Life Sciences
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In October 2021, we reported on an uptick in the passage of state drug price transparency legislation. As an update to that report, as of October 2023, approximately 22 states have now passed drug price transparency laws creating new requirements for drug manufacturers.

Each state has its own unique set of requirements, but reporting is often completed via an online portal administered by the state's implementing agency. Generally, these laws require manufacturers to report pricing and other information related to the cost, development, and sale of drugs to the state or state-affiliated entities. Some states will use this data to produce public reports about the cost of prescription drugs with the goal of creating pricing transparency for drug manufacturers as well as to educate the state legislature and public about the drug pricing process.

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

  • Florida: FL SB 1550 requires drug manufacturers to report to the state any WAC1 increase of 15% or more during the previous 12-month period or any cumulative WAC increase of 30% or more during the preceding three calendar years for prescription drugs with a WAC of at least $100 for a course of therapy before the day of a price increase. The state also requires manufacturers to submit price reports to the Florida Department of Business and Professional Regulation annually, by April 1. Reports must include a list of factors contributing to reportable price increases (i.e., R&D, manufacturing, advertising, inflation, market dynamics, etc.) and justifications for the increase in the cited factors, among other requirements.
  • Louisiana: LA. Stat. Ann. § 22:1657.1 requires drug manufacturers to notify the commissioner of insurance if one of their drugs with a WAC of $100 or more has undergone a WAC increase of 50% or more for a 30-day supply. Notifications must be made via email.
  • New Jersey: NJ S.B. 1615 requires manufactures to report certain data points (i.e., national drug code, sales volume, manufacturer costs, reasons for WAC increase, etc.) if it is (1) increasing the WAC of a brand-name drug by more than 10% or (2) increasing the WAC of a generic drug priced at $10 or more by more than 10% during any 12-month period. Additionally, the state requires reporting if (1) a new drug has a WAC of $670 per WAC unit or more or (2) a biosimilar has a WAC that is not at least 15% less than the WAC of a referenced brand biologic.
  • Utah: Utah Admin. Code R. 590-287-4 requires manufacturers to report all prescription drugs with a WAC of at least $100 for a 30-day supply that have undergone a WAC increase of 16% or more in the past two years or at least 10% over the past year. Manufacturers with applicable drugs must also 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 that caused the WAC increase. The report is submitted to Utah's Department of Insurance, and the information included must be suitable for public release.

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

  • California: Cal. Health & Safety Code § 127679 modifies previous state reporting requirements. Manufacturers must now submit WAC reports directly to the Department of Health Care Access and Information (HCAI) and/or as mandated on a quarterly basis as prescribed by the agency. This may impact arrangements manufacturers have with consulting firms submitting reports on their behalf.
  • Minnesota:
    • S.F. 2995 amends the Prescription Drug Price Transparency 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 last 12 months. 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.
    • S.F. 2744 expands Minnesota's existing drug pricing activities to establish two mechanisms intended to curb rising drug costs: (1) a prohibition on generic drug manufacturers taking price increases above a specific threshold and (2) a Prescription Drug Affordability Board to identify, review, and establish an upper payment limit on certain high-cost drug products sold in the state.
  • New York: S.B. 7506B ch. 6 Part XX directs the Department of Health to remove Medicaid pharmacy benefits from the managed care benefit package and provide those benefits under the fee-for-service program to promote transparency and efficiency of services. In addition, it empowers the superintendent of insurance to investigate insurers, drug manufacturers, and pharmacy benefit managers for prescription drug price increases of more than 50% over a 12-month period. The superintendent is required to provide investigative findings to the newly created drug accountability board, which is authorized in certain instances to evaluate and report to the superintendent on (among other things) a drug's impact on premium costs, affordability, and price compared to therapeutic benefit.
  • Texas: Tex. Health & Safety Code § 441.0051-441.0054 expands existing state reporting requirements. Manufacturers must now report all prescription drugs with a WAC of $100 or more for a 30-day supply that have undergone a WAC increase of 15% or more since the past year or 40% or more over the past three years. If any FDA-approved drugs are sold in Texas, the manufacturer must also submit a report with the current WAC information to the Texas Health and Human Services Commission. Penalties for noncompliance may be up to $1,000 per day from the date on which such reporting is required, after 45 days from the date the manufacturer receives notice.

Enforcement of 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.

Entities that fail to comply with these requirements may face substantial penalties of up to $25,000 per violation in most states. For example, in 2019, Nevada's Department of Health and Human Services imposed $17.4 million in fines on noncompliant 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.

We continue to monitor pending price transparency legislation in Illinois (HB1034), Massachusetts (H1205, HD1738, HD1748), Michigan (HB4409), Minnesota (HF294), and Oklahoma (SB144), among other jurisdictions. 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.

Footnotes

1. Wholesale acquisition cost, or WAC, is a drug manufacturer's list price when sold to a drug wholesaler or other direct purchaser, exclusive of any discounts or rebates.

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.

ARTICLE
10 November 2023

2023 State Drug Transparency Law Development Update

United States Food, Drugs, Healthcare, Life Sciences
Contributor
At Goodwin, we partner with our clients to practice law with integrity, ingenuity, agility, and ambition. Our 1,600 lawyers across the United States, Europe, and Asia excel at complex transactions, high-stakes litigation and world-class advisory services in the technology, life sciences, real estate, private equity, and financial industries. Our unique combination of deep experience serving both the innovators and investors in a rapidly changing, technology-driven economy sets us apart.
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