Connecticut Becomes Seventh State to Enact Drug Price Transparency Law

With the enactment of Public Act 18-41 on May 31, 2018, Connecticut joined the growing list of states (see our posts here and here) requiring drug manufacturers to submit reports on price increases. Three different reporting requirements are imposed on manufacturers under the law. First, beginning January 1, 2020, a sponsor of an NDA or BLA for a new molecular entity must notify the Connecticut Office of Health Strategy (OHS), within 60 days after receiving an action date from FDA, that the marketing application has been submitted. (FDA typically informs a sponsor of the action date (PDUFA date) in the Filing Communication, or “Day-74 letter”.)

Second, beginning January 1, 2020, OHS may conduct a study, not more frequently than annually, of each drug that is subject to the above notice requirement and that may have a significant impact on state drug expenditures. The manufacturer of the drug must report information on the disease or condition for which the drug was studied, the route of administration, clinical trial comparators (if applicable), the estimated year of market entry, whether the drug has orphan drug, fast track, or breakthrough therapy designation, and whether it has been designated for accelerated or priority review.

Third, similar to list-based price transparency laws in other states, the Connecticut law requires OHS, by March 1, 2020 and annually thereafter, to compile a list of no more than 10 outpatient prescription drugs, including at least one generic, that meet the following criteria: (1) the drug is determined to impose substantial costs on the state, or to be critical to public health; (2) the course of treatment costs at least $60 for a 30-day supply or for a course of treatment less than 30 days; and (3) the WAC, minus all rebates paid to the state, for the immediately preceding calendar year increased by at least 20% during that calendar year or 50% during the immediately preceding three calendar years. Manufacturers of drugs on this list must submit a narrative description, “suitable for pubic release,” of all factors that caused the WAC increase, as well as aggregate research and development costs and relevant capital expenditures. The information is to be submitted on a standardized form that will be developed after consulting with pharmaceutical manufacturers, and the type of information submitted will be consistent with the quality and types of information included in the manufacturer’s SEC Form 10-K or any other public disclosure. There is no provision for confidentiality of this information.

The law also requires PBMs to report to the state (subject to confidentiality protections) on formulary rebates received from drug manufacturers, including the portion of such rebates provided to health insurance carriers, and requires health insurance carriers to report a variety of information on spending for drugs covered under the carrier’s health plans.

The Connecticut law is unique among state price transparency laws in requiring notifications to the state before FDA approval. Development stage companies not yet marketing drugs can no longer assume they can wait until launch before state reporting requirements are triggered.