A Round Up of New State Laws to Control Drug Prices

While the federal government continues to debate the hot topic of drug prices, states continue to pass new laws designed to tackle drug pricing, price reporting, and discounting.  We’ve previously reported on the laws passed in California, Connecticut, Louisiana, Maryland, Nevada, New York, Oregon, Vermont (see here, here, and here).  We’ve also reported on the laws passed in Colorado, Florida, and Vermont to establish programs for importing drugs from Canada (see here and here).  To help our readers stay informed about state obligations, we’ve summarized below new laws in five states, all of which have been enacted during the past two months.

Colorado

HB 19-1131, which focuses on “Prescription Drug Cost Education,” was signed by Governor Jared Polis on May 16, 2019.  To address concerns that prescribers are unaware of drug costs, this new law requires drug manufacturers to provide information about drug prices and generic availability to prescribers.  More specifically, drug manufacturers (or their representatives) that share information about a product with prescribers must provide the prescribers with the drug’s wholesale acquisition cost (WAC) in writing.  Drug manufacturers (or their representatives) must also provide prescribers with the names of at least three generic prescription drugs from the same therapeutic class.  If three generic drugs are not available, the manufacturer or its representative must provide the names for as many as are available.  This law will take effect on August 2, 2019, unless a petition for referendum is filed.

Maine

Governor Janet Mills signed a package of four prescription drug related bills on June 24, 2019.

1. LD 1162 seeks to “further expand drug price transparency” by authorizing the collection of prescription drug price data from payors, providers, prescription drug manufacturers, wholesale drug distributors, and pharmacy benefit managers (PBMs). Previously, only payors and providers needed to report clinical, financial, and quality data.  In addition, beginning January 30, 2020, the new law requires drug manufacturers to provide notice to the state if (A) the WAC of a brand-name drug increased by more than 20% in the prior calendar year; (B) the WAC of a generic drug that costs more than $10 increased by more than 20% in the prior calendar year; or (C) a new drug was introduced with a WAC greater than the amount that would cause the drug to be considered a specialty drug under Medicare Part D (i.e., $670 per month).  Although the new law provides that information provided by a drug manufacturer, wholesale drug distributor, or PBM is confidential, this information will be used by the state to produce an annual report available on a publicly accessible website.  The report may not disclose information attributable to any particular manufacturer, distributor, or PBM, but will include trends in the cost of prescription drugs, analysis of manufacturer prices and price increases, the major components of prescription drug pricing along the supply chain, the impacts on insurance premiums and cost sharing, and other relevant information to provide greater consumer awareness of the factors contributing to the cost of prescription drugs.  The first report will be published on November 1, 2020.
2. LD 1272 seeks to “increase access to low-cost prescription drugs” by establishing a program to import prescription drugs from Canada. As with the three other states that have enacted similar laws (see here and here), Maine must obtain approval and certification for the proposed wholesale drug importation program from the U.S. Department of Health and Human Services.  The state’s request for approval and certification must be submitted no later than May 1, 2020.
3. LD 1499 establishes the new Maine Prescription Drug Affordability Board. The Board is tasked with (A) determining annual spending targets for prescription drugs purchased by public payors (e.g., health plans for state, county, or municipal government employees); (B) determining spending targets on prescription drugs that may cause affordability challenges to enrollees in a public payor health plan; and (C) determining which public payors are likely to exceed the spending targets.  The Board shall work with each public payor to determine methods for the public payor to meet the spending targets, including negotiating rebates for the prescription drugs that contribute most to excess spending, revising formularies, establishing a common prescription drug formulary for all public payors, purchasing prescription drugs in bulk or through a single purchasing agreement for use among public payors, and collaborating with other states and state prescription drug purchasing consortia.  The Board shall begin holding public meetings no later than March 1, 2020.  The Board’s first report, including its prescription drug spending targets and recommendations, is due by October 1, 2020.
4. LD 1504 seeks to protect consumers from unfair practices related to PBMs by replacing the current registration requirements for PBMs beginning on January 1, 2020. PBMs must obtain a license, which will be valid for three years.  Under the new rules, PBMs may not retain rebates paid by manufacturers and must pass those rebates along to the consumer or health plan.  In addition, a PBM may not require a patient to make “excess payments” at the point of sale for a covered prescription drug.  Excess payments include: (A) the applicable cost-sharing amount for the prescription drug; (B) the amount the patient would pay for the prescription drug if she purchased the prescription drug without using a health plan or any other source of prescription drug benefits or discounts; and (C) the total amount the pharmacy will be reimbursed for the prescription drug from the PBM or carrier, including the cost-sharing amount paid by a patient.

Maryland

After having its drug price gouging prohibition struck down by federal courts as unconstitutional (see our coverage here), Maryland enacted HB 768 on May 25, 2019.  This law creates a new Prescription Drug Affordability Board to protect state residents from the high costs of prescription drugs.  The Board will work with a new Prescription Drug Stakeholder Council consisting of 26 members from various groups, including generic and brand-name drug manufacturers, insurance carriers, PBMs, advocacy organizations, labor unions, and healthcare providers (e.g., pharmacists, physicians, nurses, dentists, and hospitals).  The Board plans to enter into Memoranda of Understanding with states that require reporting on the cost of prescription drugs in order to “aid in the collection of transparency data for prescription drug products.”

The new Board is tasked with identifying drugs that may create affordability challenges, including: brand name drugs or biologics that have a WAC of $30,000 or more per year or course of treatment at launch; brand name drugs or biologics that have a WAC increase of $3,000 or more in any 12-month period, or course of treatment if less than 12 months; biosimilar drugs that have a WAC that is not at least 15% lower than the reference brand biologic at launch; generic drugs that have a WAC of $100 or more for a supply lasting 30-days or fewer, or for one unit of the drug; and generic drugs whose WAC increased by 200% or more during the immediately preceding 12-month period.  After identifying these drugs, the Board will determine whether to conduct a cost review of the drugs.  If publicly available information is not available for the cost review, the Board may request information from the manufacturer, PBMs, health insurance carriers and managed care organizations.  Information and data obtained by the Board that is not publicly available is considered confidential and proprietary information.  If the Board determines that spending on a drug leads to an affordability challenge, the Board may set an upper payment limit for that drug.  The Board’s first reports are due by December 31, 2020.

Texas

HB 2536 was signed by Governor Greg Abbott on June 14, 2019.  It will become effective on September 1, 2019, but the affected drug manufacturers, PBMs, and health benefit plans are not required to submit reports before January 1, 2020.

Under this new law, drug manufacturers are required to disclose when a drug’s WAC increases 15% or more compared to the previous year or 40% or more over the past three calendar years.  The new law applies to drugs with a WAC of at least $100 for a 30-day supply.  Manufacturers must report, among other things, the aggregate, company-level research and development costs for the most recent year for which final audit data is available, and a statement regarding the factor(s) that caused the increase in WAC and an explanation of the role of each factor’s impact on cost.  The information submitted to the Texas Health and Human Services Commission (HHSC) shall be made public.

HB 2536 also contains annual reporting requirements for PBMs and health benefit plans.

Washington

HB 1224 was signed by Governor Jay Inslee on May 9, 2019.  This new law requires drug manufacturers to report and provide justification for certain launch prices and price increases.  Beginning October 1, 2019, for each covered drug, manufacturers must report, among other things:

• A description of the specific financial and nonfinancial factors used to make the decision to set or increase the WAC. For a WAC increase, the manufacturer must provide the amount of the increase and an explanation of how these factors explain the increase.
• Itemized cost for production and sales, including manufacturing costs, annual marketing and advertising costs, total research and development costs, total costs of clinical trials, and total cost for acquisition of the drug;
• Total financial assistance given through assistance programs, rebates, and coupons;
• A schedule of WAC increases for the past 5 years, if applicable.

Covered drugs include (A) a new prescription drug that will be introduced to the market at a WAC of $10,000 or more for a course of treatment lasting less than one month or a 30-day supply, whichever is longer; or (B) a prescription drug that is currently on the market, has a WAC of more than $100 for a course of treatment lasting less than one month or a 30-day supply, and the WAC increased at least 20% over the prior calendar year, or 50% over the prior three calendar years.  Reports must be submitted 60-days in advance of a price increase or within 30-days after release of a new covered drug to the market.  The law specifies that information submitted by manufacturers is not subject to public disclosure.

Drug manufacturers are also required to submit written notice within 60-days after receiving FDA approval for a new drug application or biologics license application.  The state may request additional information from the manufacturer if it expects the drug to have a significant impact on state expenditures.

Finally, beginning October 1, 2019, a manufacturer of a covered drug must notify the state of a price increase in writing at least 60-days prior to the planned effective date of the increase.  The notice must include the date of the increase, the current WAC, the dollar amount of the future increase in WAC, and a statement regarding whether a change or improvement in the drug necessitates the price increase.  The state will provide recommendations on how manufacturers should provide advance notice of price increases by December 1, 2020.

HB 1224 also contains reporting requirements for health carriers and PBMs.

We can expect further new federal and state laws addressing drug pricing, and we will continue to report on these new laws.