Life Science Compliance Update

May 17, 2016

Vermont: First State to Pass Pharmaceutical Cost Transparency Bill

Vermont is soon to be the first state in the nation that requires pharmaceutical manufacturers to explain the reasons behind their price increases. This new law  will be the result of recent legislation passed by the Vermont House and Senate, and expected to be signed by the Governor over the next few weeks.

Bill Background

The bill, originally introduced as a minor amendment to the Prescribed Product Gift Ban & Disclosure Law, was passed to increase pharmaceutical cost transparency. The bill was introduced by Senator Kevin Mullin and proposes mandating health insurance plans to make information about their prescription drug formularies available to enrollees, potential enrollees, and health care providers. The bill also requires hospitals to provide prescription drug cost-sharing information to hospital-affiliated physicians through the hospital's electronic prescribing system.

Text of the Bill, Demystified

While the bill also covers things like 340B drug dispensing fees (they shall use the same dispensing fee for 340B prescription drugs as non-340B prescription drugs under Medicaid) and out-of-pocket prescription drug limits for their Vermont Health Benefit Exchange plans (establishing an advisory group to meet and submit plan designs to the Green Mountain Care Board for approval), the main text of the bill focused on pharmaceutical transparency.

Pharmaceutical Transparency

The bill, as passed by the Vermont House and Senate, requires the Green Mountain Care Board, in collaboration with the Department of Vermont Health Access, to annually identify up to fifteen prescription drugs on which the State spends significant health care dollars, and for which the wholesale acquisition cost has increased by 50% or more over the past five years, or by 15% or more over the past twelve months. The drugs should represent different drug classes.

The Board then shall provide the list to the Office of the Attorney General, including the percentage of the wholesale acquisition cost increase for each drug. This information shall be made public on the Board's website.

The very interesting part, however, is the part of the bill that will have the Office of the Attorney General require the manufacturer of any drug on that list to provide a justification for the increase in the wholesale acquisition cost of the drug – in a format that the Attorney General deems "understandable and appropriate."

That report to the Office of the Attorney General will form the basis of a report developed by the Attorney General to the General Assembly on or before December 1 of each year. The report will also be made public, as it will be posted to the Office of the Attorney General's website. The actual information provided to the Office of the Attorney General by manufacturers, however, seems to be protected from public inspection. How that will operate in practice remains to be seen.

Any manufacturer who does not abide by this law may have an action brought against them for "injunctive relief, costs, and attorney's fees, and to impose on a manufacturer that fails to provide the information … a civil penalty of no more than $10,000.00 per violation."


It was expected with all the controversy around drug prices that Vermont would be the first state to pass a price increase transparency bill. Vermont has not been shy in the past of passing legislation aimed at the pharmaceutical industry, from opting out of prescriber lists that were thrown out by the supreme court in IMS vs Sorrell to reporting payments from industry to banning payments to healthcare providers. Other states have considered similar measures but none have passed the legislature in a state were a governor is likely to sign it into law.

Even this bill is significantly scaled down and requires a manufacturer to provide a memo explaining the reasons for the price increases.  Because the law will be based on percentage price increases, generic drugs with a low base cost will more than likely be most of the drugs on the top 15 list.

The Vermont legislators who passed this bill fail to recognize that, among other things, prescriptions can actually help to control health care costs as it prevents hospitalizations and more expensive procedures.

By forcing manufacturers to use time, energy, and money to explain the reasons behind their price increases (to the liking of the Office of the Attorney General, no less), the price of drugs may actually increase because of added time spent on complying with laws and R&D.

According to Priscilla VanderVeer, spokeswoman for the Pharmaceutical Research and Manufacturers of America (PhRMA), "[i]nstead of passing legislation that makes a political point, we believe the legislature should have focused instead on giving patients and families what they actually need: predictable and accessible information about the out-of-pocket costs they will face and enforceable, common-sense rules…that remove barriers to receiving care."

This issue has been front and center and look for congressional hearings in 2017-18 with more focus on drug price transparency.

April 21, 2016

Washington State Convenes Task Force on Drug Prices

"Don't stop trying" that is the theme of the Washington State legislature as overrode a governor's veto to push through a scaled down version of a pharmaceutical pricing bill .

The state legislature of Washington State had an extended special session this year to come up with a balanced budget. However, state legislators had an even bigger idea in mind: override vetoes by Governor Jay Inslee of twenty-seven bills in early March. Gov. Inslee actually vetoed these bills out of frustration that the legislature did not complete their work during the regular session, i.e. coming up with a balanced budget. In his March 10, 2016, veto message he stated, "This is a worthy bill, but it has preceded the passage of the 2016-2017 supplemental operating budget, which is a greater legislative priority. Until a budget agreement is reached, I cannot support this bill."

One bill Gov. Inslee vetoed is SB 6569, "An Act Relating to the creation of a task force on patient out-of-pocket costs." The House and Senate re-passed the bill again, following the veto, with enough votes to make the bill become law. Following the March 28th and 29th veto votes, the bill was filed with the Secretary of State and will become effective June 28, 2016.

This particular bill was drafted because, according to the drafters, 43% of people in fair or poor health and 38% of those taking four or more medications a year say that it is either somewhat difficult or very difficult to pay for their medications. The legislature did give credit where credit is due, noting that pharmaceutical companies provide many patients financial assistance in paying for their medications. However, the legislature had difficulty with the fact that these programs do not – and cannot – provide relief from "extraordinary out-of-pocket costs for all affected patients."

By July 1, 2016, the Washington state Department of Health will convene the task force, which shall be comprised of various groups – including pharmaceutical companies, prescribers, pharmacists, hospitals, the office of the insurance commissioner, the healthcare authority, a business association, and biotechnology – and coordinate task force meetings. It is encouraged that potential participants submit a letter of interest to the department of health, and the secretary shall invite representatives of interested groups to participate in the task force.

The task force shall meet and discuss and evaluate factors that are contributing to the out-of-pocket costs for patients, including but not limited to: prescription drug cost trends and plan benefit design. The task force is also asked to consider patient treatment adherence and the impacts on chronic illness and acute disease, considering long-term outcomes and patient costs.

By December 1, 2016, the task force shall present their recommendations, or a summary of task force discussions, to the appropriate committees of the legislature. This is a change from the original bill, which gave the task force an additional year, until December 1, 2017, to provide this information to relevant committees.

We estimate next year that the legislature will reintroduce SB 6471 (annual reporting for manufacturers with a wholesale price of $10k or more per year or per course of treatment) or something similar.

Thanks to Nico Fiorentino at G&M Healthcare LLC for bringing this to our attention.

April 18, 2016

District of Columbia Makes Changes Transparency Law to Align with Open Payments

Late last week with only a photo attachment, the District of Columbia Department of Health announced to the pharmaceutical industry that the District is changing its gift reporting requirements to meet the requirements with the new Open Payments reporting.

Chapter Eighteen of the District of Columbia Municipal Regulations requires manufacturers and labelers of prescription drugs dispensed in the District who engage in marketing in D.C. to report to the Department of Health their costs for pharmaceutical drug marketing in the District. Each manufacturer or labeler is required to report their annual prescription drug marketing costs in a report filed with the Department of Health on or before July 1 of each year.

This year, the aforementioned changes will be reflected in the Nature of Payment, Form of Payment, and Primary Purpose sections. The categories will have to align with Open Payments categories. Some responses will now be limited to the updated set of values.

While payments made to physicians or teaching hospitals must be reported to the United States Department of Health and Human Services (HHS), companies are not required to report this information to the District of Columbia. However, payments made to recipients other than physicians and teaching hospitals must be reported to the District of Columbia. Reporting requirements for aggregate and advertising expenses remain unchanged.

The D.C. Department of Health recommends that companies who have filed reports in previous years use the Microsoft Excel file published online, as it will reflect changes and updates in the law. Complete instructions for filling out the forms are found in the PDF document, as well as on the fifth tab of worksheet of the Excel document.

The Company Information, Gift Expenses, Advertising Expenses, and Aggregate Cost worksheets should be filled out electronically according to the instructions, and submitted in Excel format to The Company Information worksheet should also be printed and sent to the D.C. Department of Health, along with a $5,000 filing fee check made payable to "D.C. Treasurer."

This change was supposed to take place in 2013 when the Physician Payment Sunshine Act preempted state reporting. The District of Columbia is a little late to this change.



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