State Drug Price Transparency Legislative Efforts Continue into 2022

Since 2016, numerous states have enacted legislation in an attempt to provide insight into prescription drug costs and related state healthcare spending.  As more states continue to introduce and enact drug price transparency legislation, it remains important for pharmaceutical manufacturers to continue to understand the ever-changing landscape of reporting and notification requirements.

As of 2022, 19 states have implemented some form of prescription drug price transparency reporting.¹  Additionally, in certain states, manufacturers must also provide advanced notification of qualifying price increases to state agencies or purchasers.²  While these laws are intended to promote transparency by requiring public disclosure of pricing and other information; they also raise important questions related to the trade secret status of much of the requested information.  Our team regularly advises clients in this area.

The ever-expanding scope of state-level prescription drug price transparency requirements has resulted in a substantial compliance burden for manufacturers.  Failure to comply with these requirements can subject manufacturers to substantial statutory penalties.  Indeed, both California and Nevada have levied more than $17 million each in fines against dozens of manufacturers.³

The attorneys at Kendall PC advise pharmaceutical drug companies on a wide range of compliance topics, including assisting clients with state-level prescription drug price transparency reporting.  Our team has helped manufacturers implement strategies to ensure compliance with these requirements.

Recent Developments in Transparency Laws

Price transparency laws are complex and ever-changing.  Below are some of the most recent developments that pertain to prescription drug price reporting.  The information listed below is non-exhaustive and is provided for informational purposes only and not intended as legal advice.

Virginia

Effective January 1, 2022, Virginia HB2007 requires prescription drug pricing information to be collected by a data service organization.  By April 1 of each year, each Drug manufacturer must provide a report to the data service organization of all drugs that underwent a qualifying increase in the previous calendar year.  The threshold for a qualifying increase differs between brand and generic drugs.  These annual reports must contain, amongst other things, information that pertains to the drug’s:

• Brand or generic status
• Generic competition
• Effective date of changes to the Wholesale Acquisition Cost (WAC)
• Associated costs of production
• Other factors that contributed to the WAC increase

Drug companies can be fined up to $2,500 per day (from the date of the reporting violation) for failing to comply with HB2007.

North Dakota

Effective August 31, 2021, North Dakota HB1032 requires drug companies to submit quarterly reports disclosing the WAC of all prescription drugs sold in the state regardless of whether any price increase has been taken.  In addition to this quarterly WAC disclosure, manufacturers must also notify the state if:

1. Within 30 days of a price increase where a drug with a WAC of $70 or more has undergone an increase of at least 10% over the preceding 12 months or at least 40% over the past five calendar years
2. When the WAC of a newly introduced drug exceeds the Medicare Part D specialty drug threshold

Each compliance violation may carry a penalty of up to $10,000.

Texas 

Under Texas HB1033 (effective September 1, 2021), the Texas Department of Health and Human Services may now establish fees up to $400 for transparency-report submissions and charge up to $1,000 per day for violations of the law.

Nevada

Nevada SB380 went into effect on October 1, 2021.  The law expanded existing reporting requirements in the state, which previously applied only to “essential” diabetes and asthma medications.  In 2022, Nevada began publishing lists of prescription drugs whose WAC exceeds $40 and has undergone a 20% or greater WAC increase over the past two years or 10% or greater over the past year.  For each drug contained on the Nevada lists, the reporting obligations may include:

• Cost of Production
• Profit and profit margin
• Administrative Expenses
• Co-Pay and Patient Assistance Program Costs
• Rebates paid to PBMs related to NV Sales

Oregon

Effective January 1, 2022, Oregon SB844 establishes a Prescription Drug Affordability Board that will review a list of prescription drug information collected by the state drug price transparency act every quarter.  From that list, the board will identify nine drugs, and at least one insulin product that it believes may lead to high out-of-pocket costs for patients.

Inquiries into drug pricing may then be conducted by the board, price limits may be set, and annual fees may be implemented for all manufacturers selling in the state.

Colorado

Effective January 1, 2022, Colorado SB175 creates the Colorado Prescription Drug Affordability Review Board.  This board will identify:

1. Brand-name drugs with a WAC increase of 10% or more over the preceding 12 months or an Initial WAC of $30,000 or more for a yearly supply
2. Biosimilars with an initial WAC that is not at least 15% lower than its corresponding biological product
3. Generic drugs with a WAC of $100 or more and has increased 200% over the preceding 12 months

The board may collect information about the manufacturer’s introductory price or price increase and set limits on drug prices.

Maine

Effective January 30, 2022, Maine LD686 authorizes the Maine Health Data Organization (MHDO) to post annually a list of prescription drugs for which a manufacturer has:

1. Increased the WAC of brand-name drugs by more than 20% per unit
2. Increased the WAC of generic drugs that cost at least $10 by more than 20% per unit
3. Introduced a new drug to the state’s market which has a WAC greater than the Medicare Part D specialty drug threshold

Washington

Effective June 9, 2022, Washington SB5532 establishes a Prescription Drug Affordability Board that will meet annually and identify prescription drugs that have been on the market for at least seven years and meet the following thresholds:

1. Brand-name drugs with a WAC increase of 15% or more in any 12-month period or for a course of treatment lasting less than 12 months or a 50% cumulative increase over three years
2. Biosimilars with an initial WAC that is not at least 15% lower than its corresponding biological product
3. Generic drugs with a WAC increase of 200% or more over the preceding 12 months.

The board may collect information about the manufacturer’s pricing elements and may set pricing limits on up to 12 prescription drugs each year.

Pending Price Transparency Legislation

The following price transparency laws are currently pending:

• North Carolina S411
• New York A00741
• Massachusetts HB1272, S736, S771, and H1254
• Iowa HSB46, HF464, and HF526
• Pennsylvania SB579, HB321, and HB209

Additionally, two federal drug price transparency bills were introduced into the U.S. House of Representatives: HB4418 and HB5260.

Contact Our Compliance and Regulatory Attorneys Today

The lawyers at Kendall PC offer comprehensive compliance and regulatory services to clients throughout the healthcare, medical device, and pharmaceutical industries.  We help companies stay compliant with applicable state drug transparency regulatory requirements and industry best practices.

To learn how our attorneys can help your company, contact Kendall PC today online or at (484) 414-4093.  Our firm proudly serves small, midsized, and emerging businesses throughout the United States and across the globe.

¹ Currently, the following states have enacted legislation either requiring disclosure of certain data or allowing state entitles to request certain information from manufacturers related to prescription drug pricing: CA, CO, CT, LA, MD, ME, MN, ND, NH, NJ, NM, NV, OR, TX, UT, VA, VT, WA, and WV.

² Currently, CA, OR and WA have enacted some form of pre-notification requirement.

³ See, e.g., Megan Messerly, Nevada levies $17 million in fines on drug companies for noncompliance with diabetes drug transparency law, The Nevada Independent (Oct. 2, 2019), https://thenevadaindependent.com/article/nevada-levies-17-million-in-fines-on-drug-companies-for-noncompliance-with-diabetes-drug-transparency-law; Ed Silverman, California fines more than a dozen drug makers for not providing drug pricing data, Stat News (Apr. 28, 2020), https://www.statnews.com/pharmalot/2020/04/28/california-drug-prices-transparency-nevada/.