Update: What’s New in State Drug Pricing Legislation?

twitterWith 80 bills introduced in 2017, there is a high level of interest in pharmaceutical pricing among state legislators. However, despite legislative sessions wrapping up, very few laws have been enacted. To date, bills have passed in Maryland, Montana, New Mexico, New York, and Utah.

In 2016, Vermont led the way with a price transparency law that, in brief, requires the state to identify up to 15 drugs that account for significant state spending and which have seen price increases of either 50 percent over five years or 15 percent over one year. Manufacturers of those products have to submit price increase justifications to the Attorney General and that information will be made public.

2017 legislation built on Vermont’s first initiative and went a bit further to address drug pricing.

Legislation in Utah directs the Department of Health to study the feasibility of a prescription drug importation program that could be certified by the Secretary of the U.S. Department of Health and Human Services. The Utah Department is to report back to the Legislature by November 2017. Similarly, in Montana a bill directs the State Legislative Council to establish an interagency committee to study drug pricing and state drug spending trends, and make recommendations about drug spending by September 2018.

In New Mexico, the bill would have created an interagency group of state agencies to explore ways of reducing the cost of prescription drugs on state programs. The bill provided direction for what the group should explore but did not require the individual agencies to adopt any of the recommendations. It died on the Governor’s desk.

Maryland’s bill, which is awaiting the Governor’s signature, will give the State Attorney General and Circuit Courts authority to penalize the makers of essential generic and essential off-patent medications for excessive price increases.

This bill permits the Medicaid agency to notify the attorney general when an essential generic medication or off-patent brand drug has an excessive price increase. There are several criteria for what may constitute an excessive price increase among drugs where total cost of 30-day supply is greater than $80 or where the drug price increased more than 50 percent in a year. For these drugs, the attorney general can request manufacturer and wholesaler documentation of product cost increases, or costs associated with increased access and health benefits. If the increase is found to be unjustified, the Circuit Court may impose civil penalties of $10,000 for each violation, roll back the increase, refund to all public and private payers and consumers the excess price and extend to pre-increase drug price for all state health programs for up to one year.

The New York legislation, which passed as part of the state budget and was approved by the Governor, imposes a Medicaid prescription drug spending growth cap. When it appears the Medicaid spending cap will be breached, the Commissioner of Health may select a drug for referral to the state Drug Utilization Review Board (DURB). The DURB is given new authority to assess product value and recommend back to the Commissioner a target Medicaid supplemental rebate amount which would be in addition to the federal Medicaid minimum rebate amount.

If the Commissioner cannot negotiate a rebate for Medicaid that is at least 75 percent of the recommended target amount, the Commissioner is authorized to place the drug on Medicaid prior authorization requiring prescriber justification. It appears that these Medicaid supplemental rebates can be in addition to existing Medicaid supplemental rebate agreements. The law is not specific about how the Commissioner would select a Medicaid drug for referral to the DURB. And the Commissioner could negotiate a Medicaid supplemental rebate with the manufacturer after the manufacturer has received notice of the pending referral to the DURB. The provision is estimated to save $55 million in SFY 2017-2018 and $85 million in SFY 2018-2019.

These legislative milestones are exciting developments in states’ quest to constrain spending on prescription drugs that result from high prices. States are acting in the absence of federal action and attempting a variety of approaches. Since legislatures are still in session in a number of states where drug pricing is a topic of debate, there may be more legislation passed and enacted as these sessions wrap up. For instance, California SB 17 is moving through the State Senate. It is a price transparency bill that goes further than many other proposals and is generating a lot of interest.

NASHP is tracking legislative and executive branch state activity on prescription drug pricing and spending. And we can provide states with expert technical and policy resources to facilitate drug price policy work. Key to the effort is the NASHP state official’s Work Group on Pharmacy Costs, which is building on its 2016 work by developing model legislation and model program design for any state interested in pursuing any of a variety of concrete actions to stem rising drug prices.

Interested state officials should contact Jane Horvath for more information at jhorvath@nashp.org or 202-238-3337.