Life Science Compliance Update

17 posts categorized "Transparency"

April 23, 2015

Massachusetts Introduces Drug Cost Transparency Bill That Would Cap Prices For Certain Products; North Carolina and Pennsylvania Also Introduce Bills Requiring Drug Cost Reports


Massachusetts last week introduced a bill that calls for more transparency in the prices drug manufacturers charge for certain “critical prescription drugs.” Like California and Oregon before it, Massachusetts S. 1048 would require that companies report a wide range of cost and pricing information. However, Massachusetts ups the ante further than other states because they do not stop at transparency. As outlined in the bill, if the state determines the price of the prescription drug is “significantly high,” they may set the maximum allowable price that the manufacturer can charge for that prescription drug sold for use in Massachusetts.

North Carolina and most recently Pennsylvania have also released cost transparency legislation. Pennsylvania’s bill would restrict insurance coverage for any company that did not produce a cost report. As an update on other state activity, California’s Assembly Health Committee is debating their Pharmaceutical Cost Transparency Act (Bill 463). The Committee will reportedly dwell on the various suggestions and come back to the bill next week.


The Massachusetts health policy commission, in consultation with the center for health information and analysis, “shall develop a list of critical prescription drugs for which there is a substantial public interest in understanding the development of its pricing.”

In developing the list, the commission would consider: (1) the cost of the drug to public health care programs, including the office of Medicaid and the group insurance commission; (2) the current cost of the drug in Massachusetts; (3) the extent of utilization of the drug within Massachusetts; and (4) the potential impact of the cost of the drug on Massachusetts achievement of the statewide health care cost growth benchmark.

For each drug that makes the commission’s list, the manufacturers of the product would have to report:

  • (1) Total cost of production, and approximate cost of production per dose;
  • (2) Research and development costs of the drug;
  • (3) Marketing and advertising costs for the drug, apportioned by marketing activities that are directed to consumers, directed to prescribers, and the total cost of all marketing and advertising;
  • (4) The prices for the drug that are charged to purchasers outside the United States, by country;
  • (5) Prices charged to typical Massachusetts purchasers, including but not limited to, pharmacies, pharmacy chains, pharmacy wholesalers, or other direct purchasers;
  • (6) True net typical prices charged to prescription drug benefit managers for distribution in Massachusetts, net of any rebates or other payments from the manufacturer to the pharmacy benefit manager and the pharmacy benefit manager to the manufacturer.

The bill specifies that “[a]ny and all public reporting of information submitted [of the shall be aggregated as to protect the financial, competitive, or proprietary nature of the information.”
Massachusetts would also prepare an annual report to be published on the commission’s website on prescription drug prices and their role in overall health care spending.

Maximum Allowable Price

The bill states that the health policy commission will “review and consider all data reported to the commission and the center and determine whether the price of the prescription drug is significantly high given: (i) the prescription drug’s medical benefits, (ii) the cost to develop and manufacture the prescription drug, and (iii) the prices charged by the manufacturer in other countries.” 

“If the commission determines that a prescription drug is significantly high, then the commission may set the maximum allowable price that the manufacturer can charge for that prescription drug that is sold for use in the commonwealth,” states the bill.

An interesting aspect of this bill is that the commission states they will take into consideration a “prescription drug’s medical benefit” when determining a drug’s maximum allowable price. It is unclear based on the bill’s language what type of information Massachusetts will consider, and whether it will include, for example, long-term benefits of certain therapies (like cures that protect against additional healthcare costs), or potential off-label indications for example. 

North Carolina

North Carolina has introduced “An Act to require manufacturers of pharmaceutical drugs to report cost and utilization information.” Text available here. The bill states that each manufacturer of a brand medication that is made available in North Carolina will have to file a report on pharmaceutical costs that would include:

  • (1) Total costs derived in the production of the drug;
  • (2) Average wholesale cost of the drug as filed with the Federal Food and Drug Administration and, for each drug, a five‑year history of average wholesale price expressed as a percentage and the month each increase took effect;
  • (3) Total research and development costs paid by the manufacturer in the production of the drug;
  • (4) Total administrative costs, marketing and advertising costs for the promotion of the drug, and costs associated with direct‑to‑consumer coupons and amount redeemed;
  • (5) Total profit as represented in total dollars and a percentage of total company profit derived from the sale of the drug;
  • (6) Total amount of financial assistance the manufacturer has provided through patient prescription assistance programs if such programs are available.

North Carolina’s bill makes no reference to a dollar cap that the state would impose on pharmaceutical products sold in the state.


On April 21, Pennsylvania House Bill 1042, or the “Pharmaceutical Cost Transparency Act” (text available here) was introduced by Bipartisan Reps Anthony DeLuca (D) and Tina Pickett (R).

View the reps' announcement here

For prescription drug with an average wholesale price of $5,000 or more annually or per course of treatment, a health insurance policy or government program providing benefits for prescriptions shall not be required to provide the benefits if the manufacturer of the prescription drug has not filed a cost transparency report (emphasis added).

On or before March 1 of each year, manufacturers would have to file with the Insurance Department the following information:

The costs for the production of the drug, including the following information (which must be audited and certified by an independent third party auditor prior to filing):

  • (1) The research and development costs paid by the manufacturer, and separately, the research and development costs paid by any predecessor in the development of the drug.
  • (2) The costs of clinical trials and other regulatory costs paid by the manufacturer, and separately, the costs of clinical trials and other regulatory costs paid by any predecessor in the development of the drug.
  • (3) The costs for materials, manufacturing and administration attributable to the drug.
  • (4) The costs paid by any entity other than the manufacturer or predecessor for research and development, including, but not limited to, any amount from Federal, State or other governmental programs or any form of subsidies, grants or other support.
  • (5) The other costs to acquire the drug, including costs for the purchase of patents, licensing or acquisition of a corporate entity owning rights to the drug while in development, or all of the costs under this subparagraph.
  • (6) The marketing and advertising costs for the promotion of the drug directly to consumers, including, but not limited to: (a) costs associated with coupons or discounts, that are directed to consumers and the amount redeemed, (b) marketing and advertising costs for promotion of the drug directly or indirectly to prescribers; (c) any other advertising for the drug.

Manufacturers would also have to report information related to the average whole sale price of the product, the profit attributable to the drug, and a detailed list and description of manufacturers' patient prescription assistance programs.


It will be important to follow the progression of these cost transparency bills through the legislative process, and also to track additional states as they introduce similar language. Clearly prescription drug prices are a hot topic now--some have suggested drug costs will be the "next big thing" for 2016 presidential candidates. As manufacturers have introduced revolutionary treatments and cures, the new frontier in drug legislation seems aimed at the cost of these products and whether, based on yet-undetermined review processes, these prices are considered acceptable. 

March 19, 2015

Oregon Introduces Pharmaceutical Cost Transparency Bill; PhRMA and BIO Outline Serious Concerns To Oregon State Legislature During Public Hearing

Oregon State Legislature

On March 11, the Oregon House of Representatives introduced House Bill 3486, which would require pharmaceutical manufacturers to file an annual report with the Oregon Health Authority on costs in the previous year associated with prescription drugs that cost $10,000 or more per year or per course of treatment. This bill is similar to California’s recently introduced “Pharmaceutical Cost Transparency Act of 2015,” and seems to represent a trend up the west coast. During this past week, Oregon’s House Committee on Health Care held a public meeting on HB 3486. Industry groups PhRMA and BIO urged the committee members that such a proposal would end up being harmful to patients, especially those living in Oregon. Insurance companies spoke in support of the bill as a way to reduce drug costs.

HB 3486 Requirements

If a prescription drug has an annual wholesale acquisition cost of $10,000 or more, or has a wholesale acquisition cost of $10,000 or more per course of treatment, and the manufacturer distributes the drug for sale in Oregon, the manufacturer must file an annual report with the Oregon Health Authority on costs associated with the prescription drug for the previous year. The annual report would have to include an itemized account of the following:

  • (a) Costs paid by the manufacturer for researching and developing the prescription drug;
  • (b) Costs paid by any predecessor manufacturer for researching and developing the prescription drug;
  • (c) Costs paid by the manufacturer and any predecessor manufacturer for researching and developing the prescription drug with moneys made available to the manufacturer or predecessor manufacturer through a federal, state or other governmental program or through a subsidy, grant or other form of monetary support;
  • (d) Costs paid by the manufacturer for clinical trials for the prescription drug;
  • (e) Costs paid by any predecessor manufacturer for clinical trials for the prescription drug;
  • (f) Costs paid by the manufacturer for manufacturing and distributing the prescription drug;
  • (g) Costs paid by the manufacturer for acquiring the prescription drug, including costs paid by the manufacturer for purchasing patents for or licensing the prescription drug or costs paid by the manufacturer for acquiring property rights to the prescription drug;
  • (h) Costs paid by the manufacturer for marketing and advertising the prescription drug to consumers of the prescription drug, including any costs associated with offering and redeeming coupons; and
  • (i) Costs paid by the manufacturer for marketing and advertising the prescription drug to prescribers of the prescription drug.

In addition, manufacturers would have to report the total profits attributed to the drug and any financial assistance provided to patients through patient prescription assistance programs. The bill would require manufacturers to submit this report by May 1, 2017.

Public Hearing

On Monday, the House Committee on Health Care heard public comments on this bill. These comments were continued and wrapped up yesterday. 

PhRMA and BIO urged the Committee that HB 3486 will ultimately not only harm patients, but could take valuable business away from the state of Oregon. Representatives from the trade group, however, had to deal with some push-back from Committee Chair, Rep. Mitch Greenlick, who co-sponsored the bill. Despite the push-back, members of the committee, Greenlick included, understand some important issues remain in the bill. 

Jim Gardner of PhRMA noted that venture capital interest in the pharmaceutical sector should be a chief concern for Oregon. Gardner echoed previous testimony from the CEO of a small pharmaceutical manufacturer focused on cancer immunotherapy, who testified "unambiguously and explicitly" that he would cease selling his product in Oregon due to the "punitive legislation in the bill."

Gardner noted that many miraculous cures are emerging, but the upfront cost is high for health insurers accustomed to paying for cheaper generic drugs. Eventually insurance companies greatly benefit when patients avoid expensive hospital visits, but due to "beneficiary churn" (when someone moves from one insurance company to another, as they may often do), the insurance company that pays for the cure may not see the downstream benefits. However, the government certainly benefits in the long run. 

The Oregon BioScience Association also spoke to the administrative burden this bill would cause, noting that the proposed legislation would force therapeutic drug companies to "incur needless reporting costs, disclose proprietary information (potentially including trade secrets), and erect even more administrative hurdles for the emerging biotechnology cluster in Oregon." Other stakeholders also mentioned the bill's potential to require manufacturers to divulge proprietary information because, while public companies do have to report aggregate costs in their SEC filings, privately-held companies do not. Furthermore, public companies do not break the costs down into the detailed buckets required by the bill. 

They also stressed that looking at annual cost of a drug is short-sighted:

Oregon Bio believes pharmaceuticals should be judged based on the medical efficacy and the long-term cost savings generated from significantly improved patient outcomes. As written, HB 3486 unfairly focuses only on the costs associated with a single drug for a limited span of time. In reality, pharmaceutical companies often maintain a portfolio of research and development initiatives. As a result, HB 3486 not only fails to provide a realistic estimate of the total costs associated with delivering innovative drugs to Oregon patients, it also diverts scarce industry resources to conform to this new tier of state regulation.

The Biotechnology Industry Association debated whether this drug transparency initiative even fulfilled its chief purpose: transparency:

The requirements proposed in HB 3486...[do] not provide adequate context for the complex issue of pricing, which is based not just on manufacturers’ costs, but also on market forces and an assessment of value that cannot simply be reduced to a line on a balance sheet. Moreover, these proposed “transparency” requirements cannot capture fully, and may even interfere with, the market-based environment in which pricing decisions are made, including negotiations between manufacturers and payers that impact how a therapy is covered and reimbursed by a given insurance plan.

These issues raised by industry were well taken by members of the Health Care Committee. Representative Knute Buehler had some pointed questions for supporters of the bill. Specifically, he indicated that HB 3486 takes market forces out of the equation. He voiced his belief that competition will not only be best for innovation, but also acts as a market-based price check on expensive medication.

Furthermore, Buehler asked, "if this bill passed, why would any manufacturer of a miracle drug provide it in the state of Oregon?" Representative Jim Weidner echoed this sentiment as he cautioned the committee in moving forward on HB 3486. "Oregon is a small player," he noted. He did not want the initiative to hurt patients in Oregon by causing manufacturers to withdraw from the state altogether. 

As the meeting concluded, Committee Chair Mitch Greenlick noted that he would be putting a work group together to deal with specialty drugs pricing, taking into consideration the comments received.

We will continue to monitor drug transparency legislation and provide updates accordingly. 

For the recorded video of comments click here

For a list of comment in support of and in opposition to HB 3486, click here

Thanks to Nico Fiorentino, JD, Sr. Advisor, Research & Compliance, G&M Health, LLC for alerting us to the Oregon bill. 


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