Oregon Joins Growing Number of States with New Drug Pricing Transparency Laws
Oregon is the latest state to adopt a drug pricing transparency law, following in the footsteps of Vermont, California, Nevada, and Maryland, which have all adopted pricing and/or transparency laws of some variety over the past year. On March 13, 2018, Oregon governor Kate Brown signed House Bill 4005 into law. Similar to the recently-passed California law, the Oregon law requires drug manufacturers to report increases in drug prices. Fortunately, manufacturers are required to report information on drug price increases over the previous calendar year to the Department of Consumer and Business Services (Department), and are not required to provide advance notice of increases directly to drug purchasers, as with the California law. However, the law obligates manufacturers to report an extensive amount of information about drug price increases, factors that contribute to price increases, and costs and profits. The law also requires manufacturers to report information about patient assistance programs (PAPs) offered by manufacturers – a difference from other state transparency laws – and certain data about drugs that exceed the Medicare Part D price threshold for specialty drugs.
Manufacturer Reporting Requirements Related to Increases in Drug Prices
Pursuant to the new law, manufacturers must report to the Department a wealth of information regarding each of its prescription drugs that had both (a) a wholesale acquisition cost (WAC) of $100 or more for a one-month supply or for a course of treatment lasting less than one month, and (b) a net increase of 10% or more in the WAC over the course of the previous calendar year.
For each applicable drug, manufacturers must report:
- the name, WAC, and net percent increase in the WAC of the drug over the course of the previous calendar year;
- the length of time the drug has been on the market;
- the factors that contributed to the price increase;
- the names of any generics for the drug available on the market;
- the research and development costs associated with the drug that were paid using public funds;
- the manufacturer’s direct costs to manufacture, market, distribute, and conduct ongoing safety and effectiveness research;
- the total sales revenue for the drug during the previous calendar year;
- the manufacturer’s profit attributable to the drug during the previous calendar year;
- the price of the drug when it was approved for marketing by the FDA and the net increase by calendar year in the price of the drug during the previous 5 years;
- the 10 highest prices paid for the drug during the previous calendar year in any country other than the US; and
- any other information the manufacturer deems relevant to the price increase.
Manufacturers must report the information above on price increases over the course of 2018 by July 1, 2019. Unless the information reported qualifies as a trade secret under Oregon law or does not serve the public interest, the Department will make data reported by manufacturers publicly available.
Manufacturer Reporting Requirements Related to Patient Assistance Programs
One difference in the Oregon law from other state drug price transparency laws is the requirement for manufacturers to disclose information related to PAPs that they offer to consumers. In addition to the very detailed information that drug makers must report related to drugs that experienced a price increase over a given calendar year, manufacturers must also include information about the PAPs offered by the manufacturer relating to those specific drugs to consumers residing in Oregon. The manufacturer must disclose:
- the number of consumers that participated in the PAP;
- the total value of the coupons, discounts, copayment assistance, or other reduction in costs provided to consumers in Oregon who participated in the program;
- the number of refills that qualified for the program, if applicable;
- if the program expired after a specified period of time, the period of time that the program was available to each consumer; and
- the eligibility criteria for the program and how eligibility is verified for accuracy.
This information will also be posted online by the Department.
Manufacturer Reporting Requirements for Drugs that Exceed Medicare Part D’s Price Threshold for Specialty Drugs
The new law also mandates that manufacturers that introduce a new prescription drug at a price that exceeds Medicare Part D’s price threshold for specialty drugs (currently $670 per month) must report:
- a description of the marketing used to introduce the new drug;
- the methodology used to establish the WAC;
- whether the FDA granted the drug a breakthrough therapy designation or a priority review;
- if the drug was not developed by the manufacturer, the acquisition date and price paid for the drug by the manufacturer;
- the manufacturer’s estimate of the average number of patients who will be prescribed the drug each month; and
- the research and development costs associated with the new drug that were paid using public funds.
Starting March 15, 2019, manufacturers must report the above information within 30 days of introducing a new drug for sale in the United States with a price in excess of the Medicare Part D price threshold for specialty drugs. This information will also be posted online by the Department.
Health Plan Reporting Requirements on Drug Prices
The law also imposes reporting obligations on health insurers to file information regarding their most frequently prescribed and costliest drugs. Specifically, insurers must include in their filings of schedules and premium rates with the Department the following information regarding drugs reimbursed under the insurers’ policies:
- the 25 most frequently prescribed drugs;
- the 25 most costly drugs as a portion of total annual spending;
- the 25 drugs that have caused the greatest increase in total plan spending from one year to the next; and
- the impact of the costs of prescription drugs on premium rates.
The law includes the possibility of steep financial penalties for noncompliance with the substantial reporting obligations. Manufacturers that fail to timely submit reports, fail to respond in a timely manner to a request for more information from the Department, or provide inaccurate or incomplete information may be subject to civil monetary penalties. The Department will adopt a schedule for the civil monetary penalties, but the law allows penalties of up to $10,000 per day of noncompliance.
Growing Trend of State Laws on Drug Pricing and Legal Challenges to Those Laws
A growing number of states have passed legislation seeking to increase transparency into how prescription drug prices are established, and even to constrain increases in drug pricing. Pharmaceutical industry groups have filed lawsuits challenging these state laws. In September 2017, Pharmaceutical Research and Manufacturers of America (PhRMA) and the Biotechnology Innovation Organization (BIO) filed suit against Nevada over its law requiring manufacturers to disclose pricing and rebate information for diabetes drugs. In July 2017, the Association for Accessible Medicines sued Maryland, challenging the constitutionality of its “price gouging” law. In December 2017, PhRMA filed a lawsuit asserting that the California law, particularly its advance notice requirements, violates the Commerce Clause, the First Amendment, and the Due Process Clause. All three cases are still ongoing. Given the Oregon law’s burdensome reporting requirements, it would be unsurprising to see similar legal challenges brought before the law goes into effect.
Arent Fox’s Health Care group regularly monitors and analyzes laws affecting drug pricing and transparency. For more information regarding Oregon’s new drug pricing law, or other issues related to drug pricing and transparency, contact Stephanie Trunk, Erin Atkins, or Rachel Yount in our Washington, DC office or the Arent Fox professional who usually handles your matters.