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California Enacts First State Law to Combat Pay-for-Delay Rx Deals

Last week, California enacted the first-in-the-nation state law to combat pay-for-delay deals between brand-name and generic pharmaceutical drug manufacturers. In a pay-for-delay deal, a brand manufacturer pays a generic competitor to settle patent litigation and keep the lower-cost version of the drug off the market. Delaying market entry of generic drugs limits competition and can keep prices for brand-name drugs high.

The Federal Trade Commission estimates these deals cost consumers $3.5 billion in higher drug costs each year.

Under California’s new law, pay-for-delay agreements are presumed to have anticompetitive effects – unless a company can prove otherwise – if a generic manufacturer receives anything of value from a brand-name drug manufacturer that has sued for patent infringement. The law opens these agreements to civil litigation from California’s Attorney General, who can recover up to $20 million or three-times the value given to parties in the agreement, whichever is greater.

This isn’t the first action California has taken to push back against anticompetitive practices by pharmaceutical manufacturers. Earlier this year, the state reached a $70 million settlement with two manufacturers that allegedly entered into pay-for-delay agreements to delay market entry of cheaper generic drugs. Although a 2013 US Supreme Court case found that pay-for-delay settlements could violate antitrust laws, California’s presumption that these types of deals are anticompetitive gives the Attorney General a stronger platform to investigate and prosecute drug makers who enter into these agreements.

To explore all state legislation across the country to curb prescription drug costs, explore the National Academy for State Health Policy’s Legislative Tracker.

Legal Landmines in Drug Pricing Laws: What’s a State To Do?

September 23, 2019/in Policy Blogs Legal Resources, Prescription Drug Pricing, State Rx Legislative Action /by Trish Riley

Every state in the nation has proposed bills to limit pharmaceutical drug prices and the pace of that legislative work increases each year. The usual responses from pharmaceutical manufacturers and their allies is to threaten to reduce their investments in new drug research and development and challenge the new state laws in federal court. In their appeals, they often argue that the new state laws limit the industry’s free speech, breach patent protections, reveal trade secrets, and extend beyond state boundaries, which they claim violates the federal Dormant Commerce Clause.

Read Navigating Legal Challenges to State Efforts to Control Drug Prices: Pharmacy Benefit Manager Regulation, Anti-Price-Gouging Laws, and Price Transparency.

This brief is the latest addition to NASHP’s Center for State Rx Drug Pricing’s legal resources.

As state legislators prepare for their 2020 sessions amid growing interest in addressing prescription drug prices, the National Academy for State Health Policy (NASHP) commissioned the University of California’s Hastings School of Law to develop a legal brief to help state lawmakers avoid some of the industry’s legal landmines.

The legal brief, Navigating Legal Challenges to State Efforts to Control Drug Prices: Pharmacy Benefit Manager Regulation, Anti-Price-Gouging Laws, and Price Transparency, focuses particularly on bills most commonly introduced in states – pharmacy benefit management (PBM) oversight and pricing transparency – and provides insights into anti-price-gouging proposals.

The authors, who are health policy experts and attorneys, note that laws that require PBMs to be licensed or registered with states or require pharmacy audits have historically avoided legal challenges. But today, legal challenges are increasing as states seek more accountability and propose or enact laws to prohibit spread pricing, regulate use of certain pricing lists, or require fiduciary responsibility. And, as always with state reform efforts, the Employee Retirement Income Security Act (ERISA) rears its head if laws “relate to” self-funded plans regulated by federal law. In the brief, authors Katie Gudiksen, Sammy Chang, and Jaime King suggest strategies states can consider to strengthen legislative language against legal challenge.

To date, pharmaceutical groups have challenged transparency laws in two states – Nevada and California.

Nevada reached a settlement by limiting and defining what information could be publically disclosed and what would be held confidential.
While California moves to implement its law, state officials are awaiting judgment on a lawsuit filed by the industry pending in US District Court in the Eastern District of California.

Industry challenges to transparency laws include alleged violations to trade secret, interstate commerce, and free speech laws. Meanwhile, states are working to thread the needle between consumers’ right to know and protecting industry information.

This new NASHP legal brief is designed to help policymakers navigate the complexity of these laws and help inform their legislative drafting. NASHP’s Center for State Rx Drug Pricing continues to support states as policymakers develop and implement policies to lower drug costs.

NASHP looks forward to its continuing collaboration with colleagues at the University of California’s Hastings College of Law as we advance this important work.

NASHP’s Center for State Rx Drug Pricing, with support from Arnold Ventures, commissioned the analysis from experts affiliated with The Source on Healthcare Price & Competition at the University of California’s Hastings College of Law.

NASHP Updates Model Drug Price Transparency Legislation, Featuring a Common Data Set for Cross-State Comparisons and Stronger Enforcement

April 23, 2019/in Policy Maine Blogs Legislative Tracker, Model Legislation, Prescription Drug Pricing, State Rx Legislative Action /by Jennifer Reck

Maine state Sen. Eloise Vitelli presents legislation, based on NASHP’s new drug cost transparency model legislation, to the joint Committee on Health Coverage, Insurance and Financial Services.

As drug price transparency measures proliferate across states, the National Academy of State Health Policy (NASHP) has released revised model transparency legislation featuring a common data set to reduce reporter burden and yield standardized, actionable data that will be comparable across states. The data — to be reported by manufacturers, pharmacy benefit managers (PBMs), wholesalers, and insurers — will help state policymakers understand what is driving high drug prices through a comprehensive look across the entire drug supply chain.
This 2.0 version of NASHP’s model transparency bill also contains stronger penalties for failure to report. States will have the ability to audit any data submitted, and require a reporting entity to submit a corrective action plan for reporting deficiencies. If reporting entities do not provide the required data or if the data they provided is inadequate, the model bill allows states to invoke subpoena authority.
NASHP developed the model bill and common data set in collaboration with a work group of states currently implementing or considering transparency laws and Mathematica Policy Research. Last week, Maine State Sen. Eloise Vitelli introduced legislation based on NASHP’s updated model transparency legislation. The model bill is available in a streamlined formed as enabling legislation, as well in a longer, comprehensive version that includes in-depth information detailing the reporting requirements of the minimum data set. Additional information about the legislation, including reporting thresholds and data elements that must be reported, are available in this Q&A document. In coming weeks, NASHP will also publish customized reporting templates for manufacturers, PBMs, wholesalers, and insurers.
While NASHP’s model transparency bill builds off existing transparency measures, the common data set requires the collection of additional information not otherwise publically available, including specific information about past and projected costs and revenues at the individual drug level. Some of this information may be considered proprietary, and the model bill includes language to protect it while still requiring an annual report and public hearing to share and explore findings – although in a manner that does not reveal information specific to any one reporting entity. This reporting will provide states with more information to determine what drives high prices – and how to take effective action to address them.
States interested in this model legislation will have access to NASHP’s technical assistance. Please contact Jennifer Reck for more information.

Comparison of Bills Creating State Prescription Drug Affordability Review Boards

March 18, 2019/in Policy Charts Administrative Actions, Cost, Payment, and Delivery Reform, Model Legislation, Newly-Enacted Laws, Prescription Drug Pricing, State Rx Legislative Action /by NASHP Staff

State Laws Help Spur Congressional Action on Drug Prices

February 19, 2019/in Policy Blogs Administrative Actions, Model Legislation, Newly-Enacted Laws, Prescription Drug Pricing, State Rx Legislative Action /by Jennifer Reck

Unrelenting and unpredictable increases in prescription drug prices have spurred states to try to unlock the black box of manufacturer pricing strategies by requiring disclosure of how prices are set and how rebates are handled throughout the supply chain.
Six states already have transparency laws on their books and almost two dozen more have introduced transparency bills during the 2019 session. In 2017, Maryland enacted a first-in-the-nation law prohibiting price gouging by drug manufacturers. Though the law is tied up in legal challenges, other states have introduced related bills to curb rapid and large drug price increases.
On the heels of ongoing state actions, federal lawmakers introduced a number of similar bills in Congress this month. These bills are able to leverage enforcement mechanisms beyond those available to states. For example, Sen. Richard Durbin (IL) and Rep. Jared Golden (ME) have introduced the Forcing Limits on Abusive and Tumultuous (FLAT) Prices Act. FLAT would require companies to report price hikes and would limit the market exclusivity period granted with a drug patent if the price of the drug goes up more than 10 percent in one year, 18 percent in two years, or 25 percent in three years. Failure to report price hikes would limit a drug’s exclusivity period further.
Sen. Ron Wyden (OR) also introduced several transparency bills. The Stopping the Pharmaceutical Industry from Keeping Drugs Expensive (SPIKE) Act requires the Health and Human Services secretary to request price justifications from manufacturers if prices increases surpass a threshold of 100 percent over one year or 300 percent over five years. Justification is also required if a drug has a more modest price increase yet falls within the top 50th percentile of Medicare or Medicaid spending. The bill allows manufacturers to forego reporting if they lower their prices.
Wyden also followed states’ leads in pursuing transparency around undisclosed rebates that pharmacy benefit managers (PBMs) negotiate with manufacturers. (Click here for a comparison of 31 PBM laws passed by 20 states.) Wyden’s Creating Transparency to Have Drug Rebates Unlocked (C-THRU) Act requires reporting by PBMs on the total amount of rebates they receive. Following an initial two years of reporting on these rebates, the law would establish a yet-to-be-determined percentage of rebates that PBMs must pass through to health plans in order to lower premiums or other consumer cost sharing.
Last October, Congressional legislation mirrored state laws when two federal bills regulating PBMs became law. Both federal laws prohibit gag clauses — once common provisions in PBM’s contracts with pharmacists that prevented them from disclosing lower-cost drug options to consumers. One bill prohibits gag clauses under Medicare Part D starting in 2020 and the other, affecting private insurance markets, went into effect immediately.
Thirty-three states had outlawed gag clauses before passage of the federal ban, another example of how state initiatives are now reflected in federal law. To track state activity to bring down drug costs, visit the National Academy for State Health Policy’s Center for State Rx Drug Pricing.

New Tools Help States Document Rx Costs and Identify Potential Savings

January 22, 2019/in Policy Maine Blogs Administrative Actions, Prescription Drug Pricing, State Rx Legislative Action /by NASHP Staff

Just how much are states spending on prescription drugs? And, which drugs account for their greatest expense? As state policymakers grapple with solutions to the problem of rising drug costs, officials are performing research to provide critical evidence and tools needed to inform policy. Two recent state efforts to document their prescription drug costs may provide a roadmap for other states.
In Vermont, a new law approved in 2018 required its Agency for Human Services to research and report back a plan to the state legislature to evaluate and implement wholesale importation of high-cost drugs from Canada. The recently-released report found that significant savings would result from importation. Based on just 17 drugs identified for two of the state’s three major carriers, compared to Canadian prices the savings would range from $1 to $5 million annually.

Maine’s Five Top Costliest Drugs (July 2016 – June 30, 2017)

Humira Pen (Autoimmune drug)
Enbrel (Autoimmune drug)
Eliquis (Anticoagulant)
Lantus Solostar (Insulin)
Tecifidera (Multiple sclerosis drug)

The National Academy for State Health Policy (NASHP) was pleased to work with the state on the study and developed a new tool and worksheets states can use to identify the drugs that account for the highest “spend” (factoring in cost and volume) for payers in the state and compare their prices to those charged in Canada for the same drug.
Seven states have enacted transparency laws to provide detailed information about high-cost drugs. California led the way and recently the Maine Health Data Organization (MHDO) used its all-payer claims database to respond to a legislative mandate to collect information and report on:

The 25 most frequently prescribed drugs in the state;
The 25 costliest drugs, determined by the total amount spent on those drugs in the state; and
The 25 drugs with the highest year-over-year cost increases as determined by the total amount spent on those drugs in the state.

MHDO has issued its report and made the data available to the public in the form of a dashboard that allows users to toggle between payer types (commercial, Medicaid, Medicare Advantage, and all-payers) and brand-name or generic drugs.
These are just two examples of the value of researching and evaluating drug costs, and they provide strategies and tools other states can adopt to identify high-cost drugs — a critical first step to inform policy choices.

Pharmacy Benefit Manager Model Legislation: Questions and Answers

August 9, 2018/in Policy Administrative Actions, Model Legislation, Prescription Drug Pricing, State Rx Legislative Action /by Chris Kukka and Jane Horvath

These questions and answers explain the role pharmacy benefit managers (PBM) play in the drug supply chain and highlight NASHP’s model PBM legislation that states can use to better oversee PBMs and protect consumers.

What are pharmacy benefit managers?

Pharmacy benefit managers (PBMs) contract with health plans to administer their pharmacy benefits. Depending what a health plan needs for pharmacy services, a PBM can:

Set up a health plan’s pharmacy network (which can include “preferred” pharmacies) to supply drugs and services to members;
Design its formulary — the plan’s list of covered prescription drugs that can include multiple tiers with varying copays that act as financial incentives to drive consumers to preferred drugs;
Establish how much health plan members pay out-of-pocket (copays) for prescription drugs; and
Pay the pharmacy claims, which the health plan reimburses.

While PBMs do not buy drugs directly from manufacturers (wholesalers or distributors perform that task), when they create drug formularies for their health plan clients, they designate which “preferred” drugs the insurance plans will cover, which puts them in a powerful bargaining position. PBMs can insist on discounts or rebates from manufacturers in exchange for placing their drug products in a health plan’s formulary. If a manufacturer’s drug is not in a formulary, insurers won’t cover the drug and physicians won’t prescribe it, so PBMs have great leverage when negotiating prices.
These negotiations, which are confidential, result in rebates paid by the manufacturer to the PBM based on the volume of drugs dispensed to the PBM’s health plan enrollees. However, these rebates are not discounts that are shared with consumers at the point of service. Instead, PBMs share some portion of their rebates with their health plan clients. Some of the manufacturer rebates do go to lower the net cost of drugs to the health plan, but it’s not clear how much of that discount is shared with consumers. The three largest public PBMs in the United States (CVS Caremark, Express Scrips, and OptumRx) control 72 percent of the US market.

Why are states legislating PBM business practices?

Many aspects of the current PBM business model have come under scrutiny as anti-consumer and anti-competitive because some PBMs have:

Designed drug formularies that benefit the PBM at expense of consumers;
Required consumers to purchase drugs only from PBM-controlled pharmacies;
Restricted how much price and cost information pharmacies can share with consumers; and
Failed to act as the fiduciary and safeguard the financial interest of their health plan clients.

Most important, the typical PBM business model appears to have a very basic conflict of interest – the rebates a PBM receives from drug manufacturers are based on a percentage of the drug’s price – so the higher the price, the higher the rebate – and only part of the rebate is shared with health plans . While higher drug prices generate more net revenue for the PBM, health plans, pharmacies, and consumers end up paying more in higher prices .It is hard to determine the impact of the PBM business model on health care system costs, but there is growing concern that PBMs do not add value to the health system and may, in fact, be contributing to rising prescription drug costs. This is why more transparency is needed about how PBMs operate.

Why are concerns about PBMs surfacing now?

Today, PBMs select and manage formularies (the lists of prescription drugs covered by each insurance plan) and pharmacy networks. PBMs pay drug claims, and they negotiate rebates with drug manufacturers that they share with their health plan clients. As a result, PBMs can have a significant impact on consumers. They can determine which drugs are included and/or preferred (and available at a lower cost) in the formularies they design and manage. They often select (and may own) the pharmacies that are part of the health plan’s network, and they can control how much patients pay in out-of-pocket costs (copays, deductibles, coinsurance). PBMs tend to take on more of these functions for smaller health plans while larger plans retain more of control over their pharmacy benefit designs.
The PBM business model has evolved over years. Originally, the PBM industry contracted with health plans to run their retail pharmacy benefit. For example PBMs would put together the pharmacy network, negotiate pharmacy-dispensing fees, and pay claims on behalf of the health plans. Today, it is a massive industry that has an increasing ability to raise revenue from drug manufacturers in the form of rebates. There is concern that this rebate model has a perverse impact on pharmacy costs and patient out-of-pocket costs.

What is the big concern about drug rebates?

Rebates are confidential price concessions between a PBM and a drug manufacturer that occur after a drug has been dispensed and the pharmacist reimbursed. The PBM’s rebate based on a percentage of the price of the dispensed drug. The higher the price of the dispensed drug, the higher the PBM’s per unit rebate. The more units dispensed, the more revenue a PBM gains.
Because of recent industry consolidation – today just three companies control 75 to 80 percent of insured lives – PBMs’ negotiating clout with manufacturers has grown. PBMs’ ability to use formulary design to generate greater rebates may dictate which drugs they place on lower-cost formulary tiers (which cost consumers less out-of-pocket) and which drugs they placed on higher-cost tiers (which cost consumers more out-of-pocket). The ability to place a manufacturer’s drug on a formulary tier gives PBMs the ability to affect a drug manufacturer’s market share.
While tier placement represents the PBM’s net cost (after rebates), tier placement does not necessarily mean lower-tier drugs are the least-costly for consumers. Consumers pay the list price – without rebates factored in to reduce prices.
Some portion of rebates is shared with a health plan, and some is retained by PBMs as revenue. However, it is not clear what percentage is retained by PBMs and what percentage is passed on to health plans.
The bottom line is transparency is needed to understand the impact of PBMs’ complex financial arrangements on health care spending, consumer access to drugs, and consumer costs.

What would the NASHP PBM model act do?

The NASHP Pharmacy Benefit Manager (PBM) Model Act is a compilation of provisions from proposed and enacted state legislation. In 2018, for example, there were more than 80 PBM bills introduced in state legislatures across the country and 27 became law as of Aug. 1, 2018. Here are some of the model act’s components :
State licensure: States have a long history of licensing other parts of the drug supply chain, such as pharmacies, wholesalers, and similar entities, but only recently have they begun to license and regulate PBMs. This section of the act requires a PBM operating in a state to become licensed.
Fiduciary responsibility: The model act requires PBMs to have a fiduciary duty to its health plan clients. This means PBMs have a legal responsibility to protect the financial interests of their health plan clients.
Gag clause ban: This bans PBM contract provisions that limit a pharmacist’s ability to inform customers about the least expensive way for customers to pay for a prescription. For example, some current PBM bans prevent a pharmacist from telling consumers when they will spend less if they pay in cash rather than use insurance or select a less costly generic drug or a therapeutic alternative.
Patient out-of-pocket costs: This section prevents a health plan or its PBM from setting patient copays or coinsurance at a higher level than the actual cost of the drug to the health plan (or its PBM).
Conflict of interest: The model act requires a PBM to notify health plan clients if the PBM has a conflict of interest. For example, when a PBM owns its own pharmacy operations, it may want to drive business there, instead of focusing on the most cost-effective drug distribution for its health plan client.
Protecting consumers from conflicts of interest: The model act prohibits penalizing patients who do not use pharmacy services in which the PBM has an ownership stake or other financial interest.
Rebate transparency: The model act requires a PBM to report rebates and fees in a variety of ways. The state would make public the reported information that is not a trade secret.
Limiting PBM requirements on pharmacies: Some PBM contracts limit which drug wholesaler or distributor a pharmacy can buy from. Those PBM-specified distributors may serve the PBM’s financial interests more than a pharmacy’s. The model act would prohibit a PBM from establishing pharmacy network requirements that exceed what are defined by state law.

Has the PBM industry ever sued a state after it approved PBM legislation?

To date, there has been one challenge of a state’s PBM legislation. In July 2017, the PBM industry challenged two North Dakota 2017 laws (SB 2258 and SB 2301) (PCMA v Mylynn Tufte et al July 2017. Docket No. 1:17-cv-00141 and No. 1:19-02.1-16.1). The industry’s suit claims North Dakota’s laws violated the federal preemption of the Employee Retirement Income Security Act (ERISA). The court denied the industry request for an injunction in November 2017 and the case is currently pending.
Interestingly, there were 12 lawsuits filed against the PBM industry in 2016 and 2017. Many of these are consumer class action suits. These lawsuits focused on PBMs’:

History of charging consumers more than the PBM’s actual cost of the drug;
Lack of transparency about rebates; and
Other business practices.

Stronger state regulation of PBMs may obviate the need for future consumer lawsuits.

Twenty-Eight States Passed 45 Bills to Curb Rising Rx Drug Costs in the Short 2018 Legislative Session

July 24, 2018/in Policy Blogs Administrative Actions, Newly-Enacted Laws, Prescription Drug Pricing, State Rx Legislative Action /by NASHP Writers

*Updated Oct. 15, 2018
Despite a short legislative season, state lawmakers across the country introduced an unprecedented 174 bills to stem the rising cost of prescription drugs and have enacted 45 into law — with seven state legislatures still in session. Last year, state legislatures introduced 100 Rx cost control bills and passed 27.

Register Now to Attend NASHP’s Summit to Lower Rx Drug Prices
To learn more about state efforts to curb Rx drug costs, attend NASHP’s annual conference, Aug. 15-18, 2018 in Jacksonville, FL, and attend the Summit on State Strategies and Tactics to Lower Rx Prices, for state officials only.
Registration is still open for state officials who wish to attend.

States are pursuing a range of strategies to tackle drug costs and below is a summary of their 2018 action to date.

Pharmacy Benefit Managers (PBMs)

Last year, a handful of states passed PBM bills, including Nevada’s Chapter 592, that defined new standards for PBM business practices. These laws addressed their fiduciary responsibilities and banned PBM gag clauses that prevent pharmacists from sharing lower cost drug options with consumers. This year, 36 states drafted PBM legislation and 31 were enacted. These new generation of PBM bills included requirements for more drug cost transparency and disclosure, as well as increased regulation and licensure requirements. For example, Tennessee enacted H.B. 1857 that requires PBMs to obtain a license to operate from the state’s Department of Commerce and Insurance.
Many state legislatures also sought to improve consumer protections by removing gag clauses in contracts between PBMs and pharmacies and pharmacists. Mississippi enacted H.B. 709 to prevent a PBM from prohibiting or penalizing a pharmacy or pharmacist from informing a patient of a lower cost treatment or payment option, including simply paying cash for the drug. Colorado’s H.B. 1284 goes further by banning gag clauses completely and prohibiting PBMs from charging a copayment that exceeds the total charges submitted by the network pharmacy.

Wholesale Drug Importation from Canada

In 2018, eight states introduced wholesale drug importation legislation and Vermont became the first state in the nation to enact a law authorizing wholesale drug purchasing from Canada. The first wholesale importation bill to gain traction occurred last year when Utah’s legislature considered H.B. 163, which would have created a program and reporting requirements for safely importing certain prescription drugs at lower costs from Canada. Despite passing the House, the bill fell short of the necessary votes in the Senate. However, the bill did gain bi-partisan interest and as a result, legislative leadership requested a study from the Utah Department of Health on how to make drug importation work for the state in advance of the next legislative session.
Vermont passed S175 and has become the first state to enact a wholesale prescription drug importation program to purchase some lower-cost prescription drugs from Canada to benefit all Vermont residents. Vermont’s new law is carefully crafted to meet federal requirements by establishing checks and balances to guarantee it meets the federally mandated cost savings and drug safety requirements. Before the state can implement its importation program, Vermont’s Agency for Human Services must seek approval to do so from the US Secretary of Health and Human Services. The state is currently developing its program and will construct a proposal for federal approval.

Transparency

Twenty-six bills were introduced in 2018 to make prescription drug pricing more transparent and five became law in 2018. Examples include Oregon’s H.B. 4005 and Connecticut’s H.B. 5384, both of which require drug manufacturers to provide additional data justifying price increases over specified thresholds. (Click here for NASHP’s national chart comparing states’ reporting requirements for state transparency laws.) While mandating transparency is a first legislative step to understanding drug pricing , by itself it does little to control prices. NASHP is working with states that enacted transparency laws in 2017 and 2018 to encourage cross-state collaboration and action.

Anti-Price-Gouging and Rate-Setting Legislation

Transparency helps states understand how the pharmaceutical industry sets prices, but anti-price-gouging and rate-setting legislation are two strategies states are exploring to make information gleaned from transparency laws useful in efforts to protect consumers from excessive price increases imposed by pharmaceutical manufacturers. Maryland enacted the nation’s first anti-price-gouging law designed to address excessive price increases and give the state the power to seek civil penalties and fines for unconscionable increases. Though the pharmaceutical industry has challenged Maryland’s law in federal court, across the country states introduced 13 anti-price-gouging bills. Despite strong support, no other state has passed an anti-price-gouging bill to date. Illinois’s version, H.B. 4900, did pass in its House of Representatives, and as of Oct. 15, 2018, the New Jersey state legislation was still considering its anti-price-gouging bill.
A bill in New Jersey was still under consideration as of October 15, 2018.
NASHP’s Rate-Setting Model Legislation goes beyond transparency and anti-price-gouging laws to protect payers from high drug costs by limiting how much payers can pay for a drug. Similar to a public utility commission or hospital rate-setting, a state can establish a payment rate for certain high-cost drugs and require all payers to pay no more than that ceiling. Minnesota and Maryland proposed rate-setting bills this session but were unable to enact them into law. A bill in New Jersey was still under consideration as of July 24, 2018.
NASHP tracks state legislative and executive branch efforts to control prescription drug prices and spending and will continue to develop resources to help states curb rising prescription drug costs. To get a complete overview of newly-enacted laws, visit NASHP’s Center for Rx Drug Pricing website.

Feds Send Mixed Responses on States’ Efforts to Control Medicaid Drug Costs

July 10, 2018/in Policy Administrative Actions, Cost, Payment, and Delivery Reform, Health System Costs, Prescription Drug Pricing, State Rx Legislative Action /by Chris Kukka and Johanna Butler

The Centers for Medicare & Medicaid Services (CMS) had a mixed response to two states’ innovative efforts to control Medicaid drug costs in June. The agency denied Massachusetts’ 1115 waiver request to create a closed Medicaid drug formulary, but it approved Oklahoma’s State Plan Amendment that authorizes supplemental rebates for value-based purchasing arrangements with pharmaceutical manufacturers.
Here’s a snapshot of the two applications :
The Massachusetts 1115 waiver request contained a provision that allowed the state to exclude certain low-value drugs – which render fewer benefits relative to their costs — from its Medicaid drug formulary. Currently, states must cover all prescription drugs as a condition of their participation in the federal Medicaid Drug Rebate Program (MDRP). In its denial of Massachusetts’ waiver provision , CMS reiterated that a state would have to fully forgo participation in the MDRP in order to create a closed formulary, and that federal costs from the closed formulary could not exceed costs that would have been incurred otherwise. CMS’s response to Massachusetts mirrors the Trump Administration’s proposal for a five-state demonstration project to test the impact of allowing states to negotiate their own drug formularies outside of the rebate program.

Learn More at NASHP’s Rx Summit, Aug. 15-17, 2018, Jacksonville, FL
To learn more about these two states’ efforts to control drug costs and other new and emerging state strategies, attend NASHP’s 31^st Annual State Health Policy Conference’s Summit on State Strategy and Tactics to Lower Rx Prices on Aug. 17, 2018, in Jacksonville, FL.
The summit, open only to state officials, includes a panel discussion on “New Tools for Medicaid to Cut Drug Costs” with speakers from Massachusetts, Oklahoma, New York, and other states. Learn more about the conference here and register by July 20 to get the early bird discount.

Oklahoma’s State Plan Amendment, which enables value-based purchasing, was approved by CMS, making it the first state plan to incorporate supplemental rebates for value-based purchasing agreements with drug manufacturers. The state will negotiate additional rebates from drug manufacturers for high-cost drugs that do not achieve agreed-upon outcomes. Through support from the Laura and John Arnold Foundation, NASHP awarded Oklahoma a sub-grant in October 2017 to advance value-based purchasing as a solution to rising drug costs. NASHP’s sub-grant to Oklahoma supports the data analytics required to explore the feasibility and design of contracts for value-based purchasing of specific drugs. The results of this value-based purchasing initiative including findings on how to expedite data analytics will be shared with other states interested in following in Oklahoma’s footsteps.

How the Federal Government Can Help States Address Rising Prescription Drug Costs

February 19, 2018/in Policy Blogs Prescription Drug Pricing /by NASHP Staff

State Medicaid programs, which face rapidly rising drug costs, have few bargaining chips to use when negotiating lower drug costs, due in part to decades-old federal rules that limit their bargaining power. NASHP, with support of The Commonwealth Fund, recently sat down with state and federal policymakers to identify policy and rule changes that could enhance states’ purchasing power. Their recommendations include modernizing the current rebate program, testing new approaches to price negotiation and formulary management, transparent audits to ensure fair pricing for states, and more oversight of pharmacy benefit manager operations. Read the report.
NASHP Executive Director Trish Riley recently wrote about the recommendations in a blog published in the journal Health Policy. The blog originally appeared in Health Affairs on Feb. 16, 2018.