Life Science Compliance Update

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.

June 14, 2017

Nevada Bill Requiring Patient Advocacy Transparency – Governor Expected to Sign Soon

Stern Lecture

After being vetoed the week before the Nevada State Legislature passed a bill to combat drug prices but also requires patient advocacy organizations to report all payments they receive from industry regardless of the nature of payment including research, education, and donations.

The bill was delivered to the governor on June 8th and is expected to be signed by the Governor as early as Thursday, June 15th, the Governor stated to the local press that he would be proud to sign the bill.

Relative association language includes:

On or before February 1 of each year, a nonprofit organization that advocates on behalf of patients or funds medical research in this State and has received a payment, donation, subsidy or anything else of value from a manufacturer, third party or pharmacy benefit manager or a trade or advocacy group for manufacturers, third parties or pharmacy benefit managers during the immediately preceding calendar year shall:

(a) Compile a report which includes:

(1) For each such contribution, the amount of the contribution and the manufacturer, third party or pharmacy benefit manager or group that provided the payment, donation, subsidy or other contribution; and

(2) The percentage of the total gross income of the organization during the immediately preceding calendar year attributable to payments, donations, subsidies or other contributions from each manufacturer, third party, pharmacy benefit manager or group; and

 (b) Except as otherwise provided in this paragraph, post the report on an Internet website that is maintained by the nonprofit organization and accessible to the public. If the nonprofit organization does not maintain an Internet website that is accessible to the public, the nonprofit organization shall submit the report compiled pursuant to paragraph (a) to the Department

There are applicable fines in the bill of up to $5,000 per day fine for failure to provide information requested.

If a manufacturer fails to provide to the Department the information required by section 3.8, 4 or 4.6 of this act, a pharmacy benefit manager fails to provide to the Department the information required by section 4.2 of this act, a nonprofit organization fails to post or provide to the Department, as applicable, the information required by section 4.9 of this act or a manufacturer, pharmacy benefit manager or nonprofit organization fails to post or provide, as applicable, such information on a timely basis and the failure was not caused by excusable neglect, technical problems or other extenuating circumstances, the Department may impose against the manufacturer, pharmacy benefit manager or nonprofit organization, as applicable, an administrative penalty of not more than $5,000 for each day of such failure.

Analysis

What this will mean for any nonprofits who host annual meetings would be required to report the exhibit revenue, the sponsorship for their fundraisers and all types of other receipts on their websites.  If the nonprofit receives support in the way of product for their clinical trials they will have to report that.  If they provide patient assistance all that will have to be reported.  This could be devastating to a small nonprofit as they would be required to keep track of all the potential transactions that take place between them and industry.  In reality, this is a mess designed to discredit nonprofits and vindictive for the state to require this.

Constitutionality

The US Supreme Court has been clear on states, not requiring reporting nonprofit revenue.   Forcing the disclosure of nonprofit supporters was ruled unconstitutional by the Supreme Court in its 1958 Alabama v. NAACP decision.

Connecticut was considering requiring nonprofits to report political donations and after Citizens United and Alabama vs NAACP this was shelved.

Contact the Governor

If you are a nonprofit, you may want to contact the governor’s office:

If you have any comments or wish to reach out to the Nevada governor to offer your opinion on this bill, you can submit an email here or call his office at (775) 684-5670 or (702) 486-2500.

Maine and Missouri Propose Legislation Restricting Industry and Physician Interactions

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As we are all aware, many states have started to take notice of the heat industry is under for its interactions with physicians. In order to “jump on the bandwagon,” many states have started to introduce legislation to place restrictions on such interactions, believing that the legislation will bring down drug prices. Two of the latest states to join this trend are Missouri and Maine.

Missouri

State Representative Rick Brattin of Missouri introduced House Bill 1021 during the 1st Regular Session of the 99th General Assembly. Representative Brattin introduced the measure in February 2017, which was then referred to the Committee on Health and Mental Health Policy. The last action taken was April 26, 2017, when a public hearing was scheduled, but the bill was not heard.

The bill proposed that it become unlawful for any drug (not device) manufacturer or distributor to offer or give any gift of value to a practitioner. Excluded from that basic requirement are the following: samples of a drug for free distribution to patients; items with a total combined retail value of more than $50 in any calendar year; publications and educational materials; sponsoring a medical conference, professional meeting, or other educational program, as long as the payment is not made directly to a practitioner and is used solely for bona fide educational purposes; and compensation for substantial professional or consulting services of a practitioner in connection with a genuine research project; among others.

Maine

In Maine, state representative Scott Hamann introduced legislation that would curtail gifts, free food, and speaking/consulting payments from drug companies to Maine physicians. Representative Hamann said he got the idea from a December 25, 2016, article in a local paper that detailed increased spending by pharmaceutical companies to promote opioids in Maine despite the ongoing attempts by the medical community to persuade physicians to cut back on prescribing opioids.

The language of the bill is largely based on ethics legislation in Minnesota, which has been in effect since 2005. The Minnesota law makes it illegal for doctors to receive more than $50 in gifts (including food) per year, as well as mandating that consulting and speaking fees be “reasonable” and for “bona fide” educational purposes. 

Interestingly, several medical centers in Maine have already made the decision for their doctors how much interaction with pharmacy they can have. For example, drug company representatives are not permitted in the door at Penobscot Community Health Care, and some health organizations – such as Maine Medical Center in Portland, Eastern Maine Medical Center in Bangor and Maine General Medical Center in Augusta – have strict policies limiting or banning such sales representatives from doctor’s offices.

Gordon Smith, executive vice president of the Maine Medical Association, which represents doctors before the Legislature, said he is “conflicted” about the idea and would need to see the details of the bill before taking a position.

Smith said accepting more than a “modest” gift is against the medical association’s code of ethics. He said if all doctors followed the guidelines spelled out in the ethics code, this wouldn’t be an issue. He believes that the central question is whether there is a need for a law to make such practices illegal, or whether current policies and guidelines are sufficient.

Dr. Douglas Jorgensen of Manchester, Maine received $42,522 from August 2013 through December 2015 from drug companies. Jorgensen was criticized by several colleagues for receiving the payments, saying they represented a conflict.

Jorgensen, in a letter to the Portland Press Herald four days after the story was published, defended the drug company payments, stating that, “My utilization of pharmaceutical companies for information … is no different than a computer software developer interacting with Microsoft or an oncologist seeking updates on chemotherapy from a pharmaceutical company,” Jorgensen wrote. “Medical experts, like non-medical experts, always seek competent and reliable sources of knowledge and information.”

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