Understanding the importance of State Drug Price Transparency (DPT) laws requires an understanding of some recent history.
In 2015, Martin Shkreli, then CEO of Turing Pharmaceuticals, became a household name for his controversial price hike of Daraprim, a life-saving infection treatment. Overnight, he raised the price per pill from $13.50 to $750.
Around the same time, more people started to pay attention to the rising price of insulin. While it had been stable in the early aughts, it began to rise around 2006 when new analogs came into the market.
In response to the public’s building frustration over the high prices, several states have taken measures to further pursue price transparency: passing DPT laws, requiring additional information to support drug price trend monitoring, publishing databases of information on drug prices, or establishing review boards to make recommendations on costs. DPT laws were designed to inform the public which pharma manufacturers are increasing prices, why they are doing so, by how much, and how often.
After the flurry of DPT laws that rolled out in the late 2010s, we continue to see new developments. This year, Florida and Minnesota have already passed new laws, and there are other governors with bills currently on their desks. More than 100 DPT-related bills are pending at the federal and state levels.
Needless to say, you don’t want to be caught unexpecting when it comes to DPT laws. Manufacturers should know what to expect, have the required information ready, and ideally, have someone on their team who can handle conversations with the states in a timely and knowledgeable manner.
Today’s DPT obligations
Some states who are very clear that their goal is to ‘name and shame.’ Vermont and Maine, for example, publish lists of the top drugs that the states are spending money on, effectively putting manufacturers on notice for the financial impact of their pricing strategies.
Specific to price increases, our clients usually ask one of two questions:
- ‘What reporting requirements will this price change trigger?’
- How much of a price increase can we take without triggering reporting requirements?’
In working with clients in real-time to think through DPT laws and implications, we have observed that the clerical burden that comes along with these laws is prompting manufacturers to re-think moves they might have made without question 10 years ago.
Today, they must explain why they are choosing to raise prices and provide all the context that factors into that decision.
When companies do decide to go through with a price hike, the ‘consequence’ (so to speak) is more administrative burden, which varies by state. But all drug manufacturers are subject to DPT laws and will have some degree of reporting obligations.
Noncompliance can cost you
In addition to the added operational burden and potential for name and shame, there are also financial repercussions for failing to comply, as many states are doubling down on disciplinary efforts for failure to meet report requirements. California, for example, fines a manufacturer up to $1,000 per day per NDC.
Not only can the fines be strict, but so can the standard on the quality of information provided. If a state decides that a manufacturer didn’t provide satisfactory information, it can push back and ask for more. In Oregon, manufacturers can face a fine of up to $10,000 per day if the state doesn’t believe they made a good-faith effort to provide a complete and accurate report.
DPT laws are constantly changing and vary from state to state. DPT activity doesn’t need to start as early as state licensing does, but it’s important to be aware of where in your timeline you are likely to trigger a DPT law. Companies should start making plans for DPT reporting about six months before a drug launch and then be ready to do ongoing work since some reporting is done on a quarterly and annual basis.
There is a broad, ongoing push toward health care transparency. Manufacturers set out with the goal of bringing life-changing products to as many patients in need as possible. DPT laws are the result of states wanting to be more in tune and alert to how and why drug prices change. These laws are here to stay, more are coming, and manufacturers need to be prepared to comply.