Life Science Compliance Update

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June 19, 2017

What Does the Nevada Law Mean for Pharma?

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We have written several articles on the Nevada bill that requires patient advocacy organizations to report all payments they receive from industry. The bill requires all payments be reported, irrespective of the nature of the payment (i.e., research, education, donations, etc.).  On June 15th the Governor Sandoval signed that bill into law.

This law is the first of its kind, focusing on two specific groups of drugs that are used to treat diabetes: insulin and biguanides. Most other state legislation attempting to quell prescription drug costs focus on drug prices in the general sense.

In general, the law requires that any diabetes drugmakers that have raised the list prices of drugs by a certain amount disclose information about the costs of making and marketing the drugs, along with any rebates they provide. Pharmacy benefit managers (PBMs) will also have to disclose what rebates they negotiate with diabetes drug makers, along with any rebates the PBMs keep.

Another interesting part of the law is it requires pharmaceutical sales representatives register with the state (think, Chicago and Washington, DC), and has them supply certain details about the conversations they have with healthcare providers.

Perhaps the most shocking part of the whole bill is that is requires nonprofits to disclose when they get funding from drug companies, PBMs, and health insurers.

Step-by-Step Digest

Sections 4 and 6

The first bulky section of the legislation is Section 4, which requires the Department of Health and Human Services to create a list of prescription drugs that are used to treat diabetes and that have been subject to a significant price increase. Significant price increase is defined as an increase in the wholesale acquisition cost of the drug of a percentage equal to or greater than the percentage increase in the CPI Medical Care Component during the immediately preceding year or twice the percentage increase in the CPI Medical Care Component within the immediately preceding two calendar years.

Under Section 4, any manufacturers on the list will be required to submit to the Department a report, explaining the reasons behind the cost increase. The report must include a list of each factor that has contributed to the increase; the percentage of the total increase that is attributable to each factor; an explanation of the role of each factor in the increase; and any other information prescribed by regulation by the Department. This report must be submitted on or before July 1 of a year in which a drug is included on the list.

The Department will then analyze the information submitted by manufacturers and compile a report concerning the reasons for, and effect of, the increases. The Department’s report is due on or before September 1.

Section 6 requires the Department to place the aforementioned report on the Department’s website, for public viewing.

Section 18

Section 18 requires a PBM to be licensed by the Commissioner, in addition to being licensed by the Commissioner of Insurance. It also authorizes the Commissioner to adopt regulations governing the management of prescription drug coverage by a PBM.

Section 19

This section provides that a PBM has a fiduciary duty to an insurer with which the PBM has entered into a contract to manage prescription drug coverage. Further, PMBs are required to provide insurers a certain percentage of the rebates issued by a manufacturer to the PBM for the sale to an insured person of a prescription drug used to treat diabetes.

Sections 20 & 21

These sections prohibit PBMs from engaging in certain trade practices (i.e., prohibit a pharmacist or pharmacy from providing information to a covered person concerning the amount of any copayment or coinsurance for a prescription drug or informing a covered person about the clinical efficacy of less expensive alternative drug; prohibit a pharmacy from offering or providing delivery services directly to a covered person as an ancillary service of the pharmacy; or penalize a pharmacist or pharmacy for selling a less expensive alternative drug to a covered person) and requires a PBM to post the rate at which the PBM reimburses each pharmacy for each prescription drug used to treat diabetes that is covered by a prescription drug plan managed by the PBM on its website.

The PBM report that information to the Division of Insurance of the Department of Business and Industry. That information includes the aforementioned reimbursement rate, as well as the total amount of all rebates, under several different categories.

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