As their 2023 sessions draw to a close, mostly part-time state legislatures have continued their efforts throughout the spring to promote drug price transparency across the prescription drug supply chain. Notable among these efforts is Florida’s recent enactment of a sweeping drug price transparency act, targeting prescription drug manufacturers and pharmacy benefit managers (PBMs), and the response of the Minnesota state legislature to the state’s publication of its first annual prescription drug price transparency report.
Florida Governor Ron DeSantis signed into law on May 3, 2023 the Prescription Drug Reform Act, coined by the governor’s office as the most comprehensive reform to Florida’s prescription drug market in state history. Among its reforms, and consistent with the structure of drug price transparency reporting laws that preceded it in other states, the act requires manufacturers to report (1) any increase of at least 15% in a drug’s wholesale acquisition cost (WAC) over the preceding 12-month period or (2) any cumulative increase of at least 30% in a drug’s WAC over the preceding three calendar years.
The act’s reporting requirements only apply to drugs with a WAC of at least $100 for a “course of therapy” prior to the effective date of an increase. If a manufacturer implements a reportable price increase, the following information must be reported to the Florida Department of Business and Professional Regulation on the date the increase takes effect:
Additionally, the manufacturer must by April 1 of each year submit an annual report to the department that provides certain information on drugs affected by a reportable price increase in the past year, including but not limited to the percent price increase from the previous calendar year, the intended use, the length of time the drug has been on the market, factors contributing to and a justification for the price increase, and any actions filed to extend the patent life of the drug.
After submission, the reports are published by the Agency for Health Care Administration, excluding certain information that a manufacturer is permitted to mark as a trade secret.
The act, which goes into effect on July 1, 2023, also creates an extensive regulatory framework around the operations of PBMs, including by instituting a requirement that PBMs pass through 100% of all manufacturer rebates to health plans for the sole purpose of offsetting consumer premiums and cost sharing, as well as prohibitions on clawbacks, mail order mandates, spread pricing, patient steering, affiliate-only networks, and data sharing without the patient’s consent.
The act authorizes the department, in consultation with the Agency for Health Care Administration, to develop rules to implement the new requirements.
Minnesota Governor Tim Walz signed into law on May 24, 2023 an Omnibus Health Appropriations bill, SF 2995, that seemed designed in part to target weaknesses in the relatively new Minnesota Prescription Drug Price Transparency Act that were identified in the state’s first annual Prescription Drug Price Transparency Report published in February 2023 by the Minnesota Department of Health (MDH).
In addition to the report, Minnesota maintains RXPT Dashboards, which track the volume and types of reports submitted to MDH, analyze yearly and cumulative price increases of reported drugs, create comparative data on the change in price of reported drugs versus similar products, and identify new drugs entering the market.
Though in its infancy, Minnesota’s transparency reporting under the act seeks to identify the factors driving prescription drug prices, as well as further understand how price increases are correlated to the direct costs, revenue, and profits realized by manufacturers.
Similar to Florida’s new Prescription Drug Reform Act and other state drug price transparency reporting statutes, Minnesota law requires manufacturers to report pricing data to MDH when certain triggering events occur, namely when there is a WAC increase of at least 10% over the previous 12-month period or 16% over the previous 24-month period for brand-name drugs or an increase of at least 50% over the previous 12-month period for generic drugs, in each case with respect to a prescription drug for which the WAC was at least $100 for a 30-day supply or for a course of treatment lasting less than 30 days prior to the increase.
The Minnesota law also requires reporting when a new brand-name, generic, or biosimilar drug enters the market with a WAC that is greater than the threshold for a specialty drug under the Medicare Part D program for a 30-day supply, and, for a generic or biosimilar, also is not at least 15% lower than the referenced brand-name drug.
Using data reported by manufacturers during the first half of 2022, the report found that manufacturers raised the list price by as little as 1.5% to as much as 106%, with a median increase of 7.9% and a median reported list price after the increase of $1,062. With respect to new drugs entering the market, 112 new drugs entered the market in excess of the Part D specialty drug threshold, with a median reported list price at market introduction of $6,612.50.
Additionally, the report also breaks down the average reported gross revenue distribution for manufacturers, estimating that 35.8% of a manufacturer’s gross revenue was spent on direct costs such as manufacturing, marketing, and distributing, 14.8% on profit, and 6.2% on financial assistance. The distribution of the other 43.2% of the reporting manufacturers’ average gross revenue remains unknown.
Ultimately, the report reaches three key findings:
The Omnibus Health Appropriations bill amends the act to include some technical fixes and clarifications, such as explicitly including “biosimilars” along with generic drugs in the provision that triggers reporting when there is a WAC increase of at least 50% over the previous 12-month period.
The amendments also clarify that “course of treatment” means “the maximum recommended dosage on the FDA-approved prescribing label” if the label includes more than one recommended dosage for a single course of treatment, which is a common ambiguity in state drug price transparency reporting laws that were drafted by legislative staff who do not fully understand the industry.
More importantly, however, the amendments seem designed to advance the act’s public policy goal of identifying factors driving prescription drug prices by addressing the report’s finding that the scope of the act is too limited to take into account the complex market for pharmaceuticals and the impact of the entire supply chain on consumer costs. In particular, the amendments require the Commissioner of Health, starting no later than January 31, 2024 and quarterly thereafter, to produce and post on the department’s website a list of prescription drugs that the department determines represent a substantial public interest.
Although the commissioner has discretion to consider any information determined to be relevant in deciding which drugs represent a substantial public interest, the commissioner must at least consider drug product families for which manufacturers were required to report drug price increases or new market entrants under the Act during the previous calendar year; for which average claims paid amounts exceeded 125% of the price as of the claim incurred date during the most recent calendar year for which claims paid amounts are available; or that are identified by members of the public during a public comment period.
No sooner than 30 days after publicly posting a quarterly list of drugs of substantial public interest, the commissioner is required to notify relevant reporting entities of the requirement to submit certain information to MDH. The law “limits” the commissioner to designating no more than 500 prescription drugs as having substantial public interest in any one such notice.
The reporting entities include not only drug manufacturers (which incorporates entities that engage in the packaging or repackaging of a drug, or the labeling or relabeling of a drug container), but also pharmacies, PBMs, and wholesale drug distributors.
In an effort to better understand all of the factors actually contributing to the cost of prescription drugs in the state, the new reporting requirements for these reporting entities include, in addition to basic descriptive information for a prescription drug on the list:
all for the 12-month period prior to the date of the notification by the Commissioner of the requirement to report.
By extending the scope and scale of the act to focus on net prices rather than list prices and to collect data from entities throughout the supply chain, Minnesota clearly hopes to gain greater insight into pricing dynamics downstream from manufacturers, amounts paid by payers, and overall market trends so as to better be able to evaluate “where along the supply chain pricing power leads to . . . excess prices.”
The Omnibus Health Appropriations bill also authorizes the Commissioner to develop rules to implement the new requirements.
Although many state legislative sessions are drawing to a close, if not already complete, there are still a few drug price transparency reporting bills churning in various statehouses that could yet see the light of day in 2023, including several pending bills in Massachusetts and bills in Michigan, New Jersey, and Rhode Island.
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