Vermont Responds to Drug Price Increases With Transparency Law

By Jenifer R. Stach & Alan M. Kirschenbaum –

In our blog post last Fall reporting on an a new price increase penalty imposed on generic drugs under the Medicaid Drug Rebate Program, we predicted more drug price legislation to come. The next statutory response to rapidly increasing pharmaceutical prices has emerged from Vermont in the form of a transparency requirement. On June 3, 2016, Vermont Governor Peter Shumlin signed into law S. 216, which requires pharmaceutical manufacturers to submit justifications for price increases for certain drugs. (See pp. 2250-51.)

Under the law, each year the Green Mountain Care Board, in collaboration with the Department of Vermont Health Access (DVHA), will identify 15 drugs on which the state spends significant health care dollars, and “for which the wholesale acquisition cost [WAC] has increased by 50 percent or more over the past five years or by 15 percent or more over the past 12 months.” The Board will provide this list to the Vermont Attorney General (AG), which will require the manufacturer of each drug on the list to provide a justification that the AG determines to be “understandable and appropriate”. The list, and the respective WAC increases, will also be posted on the Board’s web site.

The manufacturer’s justification must include all relevant information and documentation to support the WAC increase, which may include:

• all factors that have contributed to the WAC increase;
• the percentage of the total WAC increase attributable to each factor; and
• an explanation of the role of each factor in contributing to the WAC increase.

Before December 1 of each year, the DVHA and the AG must submit a report to the Vermont General Assembly based on the information received from manufacturers, and the AG must also post the report on its web site. However, the law prohibits the disclosure of the reported information in a manner that identifies an individual drug or manufacturer.

If a manufacturer fails to provide “the information required” by the statute, the AG may bring an action in civil court for injunctive relief and impose a civil fine of $10,000 for each violation – i.e., each failure to provide required information.

This law leaves many questions unanswered. Most importantly, what criteria will the AG use to determine whether a WAC increase is “understandable and appropriate,” and what are the consequences if an increase is not? While it is clear that the AG can seek penalties for a failure to report information, are penalties contemplated against manufacturers that do submit information but the AG does not deem it “understandable and appropriate” support for a WAC increase? It would appear the answer to the latter question is “no”, because the law provides that “nothing in this section shall be construed to restrict the legal ability of a manufacturer to change prices to the extent permitted under Federal law.” With respect to procedure, no process or timeline is established for the annual submissions, other than the December 1 deadline for the submission of the AG/DVHA report Congress.

We expect that the DVHA and/or the AG will be issuing guidance to implement this law. We will be updating our readers on relevant issuances.