June 6, 2016—Vermont Gov. Peter Shumlin has signed a bill into law requiring makers of prescription drugs with rapidly escalating prices to document and justify the increases. Failure to comply could lead to a $10,000 civil penalty. [ms-protect-content id=”2799″]
“The General Assembly finds that: (1) The costs of prescription drugs have been increasing dramatically without any apparent reason. (2) Containing health care costs requires containing prescription drug costs. (3) In order to contain prescription drug costs, it is essential to understand the drivers of those costs, as transparency is typically the first step toward cost containment,” the bill’s preamble states.
On Twitter, the governor posted a photograph of former Turing Pharmaceuticals chief executive Martin Shkreli with the caption, “This CEO jacked the price of a life-saving drug 5000%. I’ve signed a law to require answers when that happens in [Vermont.]”
The new law directs the Green Mountain Care Board and the Department of Vermont Health Access annually to identify “up to 15 prescription drugs on which the State spends significant health care dollars and for which the wholesale acquisition cost has increased by 50 percent or more over the past five years or by 15 percent or more over the past 12 months, creating a substantial public interest in understanding the development of the drugs’ pricing. The drugs identified shall represent different drug classes.”
The board will give the list and the percentage of the WAC increase for each drug to the state Office of the Attorney General. It also will post the information on its website. The attorney general will require manufacturers of listed drugs “to provide a justification for the increase” in an “understandable and appropriate” format. The attorney general and state health department will submit an annual report based on the information to the state legislature on or before Dec. 1.
Pharmaceutical Research and Manufacturers of America testified before the legislature in April that the cost transparency requirements could lead to higher prices and could hurt patients.
This coming November, Californians will vote on a proposed state initiative regulating drug prices by requiring state agencies to pay the same prices as the U.S. Department of Veterans Affairs pays for prescription drugs. According to a 2005 Congressional Budget Office report, the VA pays about 42 percent of list prices. By February 2016, opponents and supporters of the initiative reported had already spent more than $68 million, with the opposition outspending supporters by about 15 to one.
PhRMA argues the initiative will raise drug prices for veterans and California consumers.
Californians for Lower Drug Prices, which backs the initiative, argues it “would utilize California’s bulk-purchasing power to secure lower drug prices for prescription drugs, saving taxpayers and consumers billions of dollars.” California-based AIDS Healthcare Foundation, which operates HIV/AIDS clinics that participate in the 340B drug discount program, is the principal member of Californians for Lower Drug Prices and took the lead in funding the collection of signatures to place the measure on the ballot.
The new Vermont law also requires health insurers that offer plans on Vermont’s health insurance exchange to post information about the plans’ drug formularies online in a standard format. Each database must include information about the prescription drugs covered, applicable cost-sharing amounts, drug tiers, prior authorization, step therapy, and utilization management requirements.
The law also directs the Department of Vermont Health Access to use the same dispensing fee in its reimbursement formula for 340B prescription drugs as the department uses to pay for non-340B prescription drugs under Medicaid. The new requirement does not apply to federally qualified health centers and Title X family planning clinics.
A related section of the law directs the state health department to:
- determine the formula used by other states’ Medicaid programs to reimburse covered entities that use 340B pricing for dispensing prescription drugs to Medicaid beneficiaries
- evaluate the advantages and disadvantages of using the same dispensing fee in its reimbursement formula for 340B prescription drugs as the department uses to pay for non-340B prescription drugs under the Medicaid program
- identify the benefits, if any, of 340B drug pricing to consumers, other payers, and the overall health care system
The department has a March 15, 2017 deadline to report to the state House and Senate healthcare committees “regarding its findings and recommendations, including recommended modifications to Vermont’s 340B reimbursement formula, if any, and the financial implications of implementing any recommended modifications.” [/ms-protect-content]