Life Science Compliance Update

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January 11, 2018

Nevada Proposes Drug Transparency Regulations

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We have written many times on the Nevada law passed in Summer 2017 that requires patient advocacy organizations to report all payments they receive from industry, regardless of the nature of the payment.

The legislation was signed into law by Nevada Governor Brian Sandoval in June 2017 and now the Nevada Department of Health is working on regulations to implement the law.

The current draft regulations require manufacturers and pharmacy benefit managers to submit a report by April 1st of each year for the previous calendar year that outlines the costs and rebates related to drugs listed on the List of Essential Diabetes Drugs.

Pharmaceutical sales representatives that are registered with the Department during any point of the previous year are required to submit a report by March 1st.

The reports for manufacturers shall include the following elements:

  • costs of producing the drug;
  • the total administrative expenditures (including marketing and advertising costs);
  • the profit earned and percentage of total profit attributable to the drug;
  • total amount of financial assistance provided through patient assistance;
  • cost associated with coupons;
  • the wholesale acquisition cost;
  • history of any increase over the 5 years including percentage increase, date of increase, and explanation;
  • aggregate amount of all rebates provided to PBM’s;
  • any additional information prescribed by regulation by DHHS.

Further, for any drugs on the list for which there was a price increase, the report must include the following:

  • a list of each factor that contributed to the increase;
  • the percentage of total increase attributable to each factor;
  • an explanation of the role of each factor in the increase;
  • any other information prescribed by DHHS in regulation.

PhRMA and BIO Involvement

The Pharmaceutical Research and Manufacturers of America (PhRMA) and the Biotechnology Innovation Organization (BIO) filed a lawsuit in response to the law being signed by Governor Sandoval, asking that the Court declare provisions of the law to be preempted by federal law and in violation of the United States Constitution. They argue that the transparency acts as a “cap” by requiring manufacturers disclose the above information.

One argument the organizations make is that the law impedes Congress’ sole authority to set patent policy and that requiring manufacturers to detail the reason behind a price increase “in purpose and effect…punishes manufacturers for the price of their ‘essential’ diabetes drugs.” They further argued that the only way manufacturers can “avoid forfeiting trade-secret protection for the ‘factors’ of a price increase is by limiting its list prices.”

Another argument was that the law as signed by Governor Sandoval conflicts with federal trade and state trade secret laws – the Uniform Trade Secrets Act and the Defend Trade Secrets Act. They argued that because the Nevada law exempts trade secret protections for all of the information the manufacturer must provide in the report, manufacturers lose those protections as soon as the annual list of drugs is published, even before the information is turned over, of advertising, cost, marketing, production, and pricing information associated with the drugs.   

Did Nevada Respond?

Interestingly, included in the draft regulations is a provision for if a manufacturer or PBM believes that a data element in the report meets the standard of the Defend Trade Secrets Act (DTSA). In that case, they shall request to have the element declared confidential by writing to the Department of Health and providing a detailed explanation of why the data element qualifies as a trade secret under the DTSA. This explanation will be made available to the public upon request. Therefore, it seems as though Nevada may have believed PhRMA and BIO had a solid argument about the DTSA. However, only time will tell how the exemption works in practice and whether or not trade secrets are truly being protected.

News, updates, meetings, and public hearings will be uploaded to the Nevada Department of Health’s website here.

Take Action!

Of interest to many of our readers may be the Small Business Impact Survey, available here through January 22, 2018, at 5:00 pm PST. The survey analyzes the impact of the proposed regulation on business with less than 150 employees.

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