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.
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.
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.