In recent months President Trump, Food and Drug Administration Commissioner Scott Gottlieb, and Health and Human Services Secretary Alex Azar have all spoken publicly about the need to lower prescription drug prices and make the pricing models used by the nation’s drug manufacturers more transparent to consumers. While at the federal level there has been talk, many States have begun to take active measures, proposing a number of laws designed to either lower drug prices, make pricing more transparent, or both. Legislators in more than 30 States proposed bills on drug pricing during their legislative sessions in 2017.
Each State, however, has its own take on the problem. Several recent transparency and pricing laws are summarized below.
California: In the fall of 2017, California Governor Jerry Brown signed into law SB 17 and a companion bill, AB 265, both designed to regulate drug prices in the State starting in 2019. SB 17 requires health insurers to disclose the costs of certain drugs and requires drug makers to explain, and justify, price increases above a threshold of 16% when combined with increases from the previous two years. AB 265 limits the use of copay coupons and other discounting strategies for branded prescription drugs in situations where cheaper generics are available. SB 17 is currently under legal challenge by PhRMA, a trade industry group that represents some of the world’s largest drug makers. PhRMA has filed similar suits in Maryland and Nevada, which enacted similar laws in 2017.
Florida: House Bill 351 does away with so called “gag clauses” in which insurance and drug companies prohibited pharmacists from being able to mention if patients could get medications at a lower price, namely by purchasing generic versions of name brand drugs. Effective July 1, 2018, pharmacists are required to inform customers of generic equivalents to their prescribed medications and whether any co-pays would actually exceed the cost of the generic. The bill also requires pharmacy benefit managers (PBMs) to register with the State.
New Jersey: New Jersey already maintains a drug price registry of the 150 most frequently prescribed prescription drugs. In January 2018, however, the State began to tackle the issue of PBMs and the role they play in drug pricing with the signing of S-3185/A-4676. The legislation, which took effect on April 16, 2018, mandates that PBMs register with the State and comply with all New Jersey Department of Banking and Insurance requirements for Organized Delivery Systems. This change places PBMs under much greater scrutiny and means that they will have to comply with the State’s Health Care Quality Act, and Health Claims Authorization, Processing and Payment Act.
Ohio: The State enacted multiple reforms several years ago in order to create greater transparency in PBM pricing, requiring PBMS to update Maximum Allowable Pricing (MAC) lists every seven days, give pharmacies MAC price appeal rights, requiring PBMs to disclose discrepancies in MAC reimbursements to pharmacies versus amounts charged to plan sponsors, along with other measures. The Ohio Department of Insurance has now taken additional steps to address drug price transparency issues by issuing a departmental bulletin, effective April 4, 2018, that requires insurers and PBMs to remove “gag clauses” from all contracts with Ohio pharmacists. As in Florida, Ohio pharmacists will now be able to direct consumers to lower cost generic drugs that might be available for less than the consumer’s insurance co-pay. Though this action has been taken within the executive branch, a bill is currently in the Ohio Statehouse, House Bill 479, which would put into law many of the same protections outlined in the Department of Insurance bulletin.
Oregon: Last month Oregon governor Kate Brown signed House Bill 4005. The bill requires drug manufacturers who increase the price of a drug by 10 percent or more to report to the state the reasons for the increase, including research and development costs, marketing costs, profits, the amount charged for the drug in overseas markets, and whether or not generic versions of the drug are available. Parts of the measure also place additional requirements on insurers, who must report the 25 most expensive drugs in their plans, which drugs have shown the greatest price increase, and how those additional costs factor in to plan premiums. The new reporting requirements go into effect July 1, 2019, and there are significant penalties for failures to comply, including penalties of up to $10,000 per day.
The FisherBroyles Pharmacy and Health Care Law team will continue to track legislation and regulations affecting the pharmaceutical and health care industries. We welcome your questions. Please contact any of the following attorneys: