By David C. Gibbons & Alan M. Kirschenbaum –
Nevada has become the most recent state to enact a law addressing drug prices. S.B. 539, enacted on June 15, 2017, places new reporting requirements on pharmaceutical manufacturers and pharmacy benefit managers (“PBMs”) related to diabetes treatments and health care provider (“HCP”) payments. Patient advocacy groups are also required to report certain payments from pharmaceutical manufacturers, PBMs, and other third parties.
S.B. 539 requires the Nevada Department of Health and Human Services (“NDHHS”) to compile a list of prescription drugs that it determines are “essential for treating diabetes” in Nevada, along with the wholesale acquisition cost (“WAC”) of each drug on the list (“List #1”). NDHHS must then list the subset of those drugs whose WAC has increased by a percentage equal to or greater than either the Consumer Price Index, Medical Care Component (“CPI Medical”) during the preceding calendar year or twice the CPI Medical during the preceding two years (“List #2”).
Every year, on or before April 1, manufacturers whose drugs appear on List #1 are required to report to NDHHS the following information regarding such drugs:
Costs of producing the drug;
Total administrative expenditures relating to the drug, including marketing and advertising costs;
Profit earned by the manufacturer from the drug and the percentage of total profit for the period attributable to the drug;
Total amount of financial assistance provided by the manufacturer through any patient assistance program;
Cost associated with coupons provided directly to consumers and for copayment assistance programs, along with the cost to the manufacturer attributable to the coupons and copay programs;
The drug’s WAC;
History of WAC increases over the preceding five years, including the amount of each such increase expressed as a percentage of the total WAC, the month and year in which each increase became effective, and any explanation for the increase;
Aggregate amount of all PBM rebates provided by the manufacturer for sales of the drug in Nevada; and
Any additional information prescribed by NDHHS regulation.
In addition, manufacturers whose drugs appear on List #2 are required to report each factor that contributed to the increase in WAC along with the percentage of the increase attributable to each factor, the role played by each factor in the WAC increase, and any other information prescribed by NDHHS regulation.
Sales Representative Reports
All pharmaceutical manufacturers are required to provide NDHHS with an annually updated list of sales representatives who market the manufacturer’s prescription drugs to Nevada-licensed, -certified, or -registered HCPs, pharmacies, medical facilities, or individuals licensed or certified under the Nevada insurance code (“enumerated HCPs”). NDHHS will then provide access to this list to all enumerated HCPs. A sales representative not on the list is prohibited from marketing prescription drugs to enumerated HCPs. Sales representatives who are on the list and permitted to market prescription drugs in Nevada must provide a list to NDHHS of all enumerated HCPs that were provided with any type of compensation exceeding $10 in individual value or $100 in aggregate value. These sales representatives are also required to report information concerning free prescription drug samples, including the name of each enumerated HCP to whom a free drug sample was provided. The provisions pertaining to sales representatives are not limited to diabetes drugs.
PBMs are required to submit annual reports to NDHHS on or before April 1 that include the following:
The total amount of all rebates negotiated by the PBM with manufacturers during the preceding calendar year for drugs included on List #1;
The total amount of such rebates retained by the PBM; and
The total amount of such rebates negotiated for purchases of such drugs for use by:
Beneficiaries of third party plans provided by governmental entities (but not Medicare or Medicaid);
Beneficiaries of third party plans not provided by governmental entities; and
Beneficiaries of certain plans subject to the Employee Retirement Income Security Act of 1974 (“ERISA”).
Nonprofit Organization Reports
Finally, nonprofit organizations that advocate on behalf of patients or that fund medical research in Nevada and receive a “payment, donation, subsidy, or anything else of value” from either a pharmaceutical manufacturer, PBM, or other third party, or a trade or advocacy group for the same, must compile a report on or before February 1 of each year. The report must detail the amount and source of each payment and the percentage of the total gross income of the organization during the immediately preceding calendar year attributable to such payment(s). These reports must either be posted on the nonprofit’s own publicly-accessible website or submitted to NDHHS if the nonprofit does not maintain such a website.
S.B. 539 imposes administrative penalties for noncompliance with its provisions. Pharmaceutical manufacturers, PBMs, or nonprofit organizations that fail to provide the required reports described above may be subject to administrative penalties of not more that $5,000 per day unless such failure to timely comply with the requirements is due to “excusable neglect, technical problems, or other extenuating circumstances.” Pharmaceutical sales representatives who do not timely submit required reports may be subject to administrative penalties of not more than $500 per day.
Disclosure of Reported Information
S.B. 539 mandates that NDHHS compile a report on the information it receives pursuant to the requirements described above and make such information publicly available. First, the NDHHS must place “on the Internet website maintained by [NDHHS]” its report comprising the information on List #1. Second, NDHHS must compile a report based on its analysis of information provided by manufacturers regarding their drugs on Lists #1 and #2 and from PBMs regarding rebates. Third, NDHHS is also required to analyze and prepare a report on the information reported by sales representatives; however, the identity of individual sales representatives or the entities they represent may not be disclosed and only reported in aggregate. Finally, NDHHS must place information reported by nonprofit organizations on its website for those nonprofits who submit reports to NDHHS because they do not maintain a website of their own.
With this statute, Nevada joins the growing list of states seeking to limit pharmaceutical costs and marketing activities through legislation requiring reporting, pricing restrictions, and/or marketing prohibitions. Reporting and/or prohibitions on manufacturer payments to practitioners and providers have long existed in Connecticut, DC, Minnesota, Massachusetts, and Vermont. More recently, state focus has shifted from drug marketing activities to drug prices, with New York, Maryland, and Vermont enacting requirements for reporting or outright restrictions on price increases on certain drugs. The Nevada reporting law encompasses both payments to practitioners and price increases (though the latter is limited to diabetes drugs), and adds PBM and patient advocacy organization transparency requirements. Though numerous bills addressing drug prices have been introduced in Congress (mostly by Democrats) and the Trump Administration has objected to high drug prices and held stakeholder meetings on the subject, these initiatives appear unlikely to produce any hard results in the near future. In the absence of federal action, states are clearly taking the lead, with 30 states considering over 150 bills on pharmaceutical pricing and payments (see data available at the National Conference of State Legislatures here). We will be following these state activities closely.