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Massachusetts Considers Drug Pricing Transparency Laws

As we recently detailed in another blog post, Massachusetts is one of several states considering legislation that would require pharmaceutical manufacturers to disclose certain pricing information.  Governor Charlie Baker’s proposed Act to Improve Health Care by Investing in Value (Governor’s Bill) would expand upon current reporting requirements for drug manufacturers in Massachusetts.  Additionally, in November 2019, the Massachusetts Senate passed its own legislation, An Act Relative to Pharmaceutical Access, Costs and Transparency (PACT Act). The PACT Act includes drug price transparency requirements and increased regulatory oversight of the pharmaceutical industry in Massachusetts.  The PACT Act is now under review by the Massachusetts House of Representatives.

Five Things to Know about the Governor’s Bill

Under the Governor’s Bill:

  1. Drug manufacturers must provide to the Health Policy Commission (HPC): (i) a schedule of a drug’s wholesale acquisition cost increases over the past 5 years; and (ii) a written description, drafted for public release, of the factors that contributed to such increases.
  2. Drug manufacturers must provide to HPC aggregate, company-level research and development costs, and other applicable capital expenditures, for the most recent year for which final audited data is available.
  3. The HPC is authorized to determine the proposed value for a drug, including drugs reimbursed by both public and private payers. Within 60 days of receiving required information from a drug manufacture on drug pricing, the HPC shall issue a finding on the reasonableness of the drug manufacturer’s pricing.  The Governor’s Bill is silent on what happens if the HPC finds a drug manufacturer’s pricing to be excessive.
  4. Penalties of up to $500,000 may be imposed by the HPC for a drug manufacturer’s failure to timely comply with an HPC request.
  5. Under M.G.L. ch. 111N, drug manufacturers in Massachusetts are currently required to disclose any provision of economic benefits to health care providers, including the value, nature, purpose, and recipient of any fee, payment, subsidy or other economic benefit with a value of at least $50.

Five Things to Know about the PACT Act

  1. Similar to the Governor’s Bill, the HPC is empowered to review the cost and value of certain drugs.  If the HPC finds that the price of an eligible drug substantially exceeds the proposed value, the HPC can request that a drug manufacturer file an access improvement plan. The PACT Act defines an “eligible drug” as a: (i) brand name drug or biologic, not including a biosimilar, that has a launch wholesale acquisition cost of $50,000 or more for a 1-year supply or full course of treatment; (ii) biosimilar drug that has a launch wholesale acquisition cost that is not at least 15% lower than the referenced brand biologic at the time the biosimilar is launched; or (iii) public health essential drug with a significant price increase over a defined period of time as determined by the HPC by regulation or with a wholesale acquisition cost of $25,000 or more for a 1-year supply or full course treatment. Each access improvement plan shall be generated by the drug manufacturer,  identify the reasons for the drug manufacturer’s drug price, and include specific strategies, adjustments and action steps for the drug manufacturer to implement to address the cost of the drug to improve patient access. If the drug manufacturer fails to provide complete and accurate information, the HPC may impose penalties of up to $500,000 in each instance.
  2. If the HPC determines a drug manufacturer is not acting in good faith to develop an acceptable and complete access improvement plan, the HPC may hold a public hearing, with testimony from the drug manufacturer and comment from the public.  After the hearing, the HPC will post the recommendations publicly online and submit recommendations to the Massachusetts Senate and House of Representatives, the joint committee on health care financing and the house and senate committees on ways and means for the legislatures review.
  3. The PACT Act limits the cost of insulin by eliminating deductibles and coinsurance and limiting co-pays to $25 per month.
  4. Under the PACT Act, drug manufacturers must provide early notice of new drugs coming to market, including pipeline drugs, generic drugs, and biosimilar drugs.  Such notice must include a description of the primary disease, condition or therapeutic area being studied and the indication; route of administration being studied; clinical trial comparators; and estimated year of market entry.  All early notices must be submitted within 60 days after receipt of the FDA action date for pipeline and biosimilar drugs, and 60 days before the a generic drug’s effective date of distribution.
  5. The PACT act would also require drug manufacturers and pharmacy benefit managers to participate in the HPC’s annual health care costs trends hearing process. This process would require drug manufacturers and pharmacy benefit managers to publicly testify, and provide supporting documentation, on factors that increase pharmaceutical costs.

Through Governor Baker’s filed legislation and the Senate’s passage of the PACT Act, it is clear that Massachusetts is seriously considering joining other states in collecting data and attempting to influence the cost curve of pharmaceutical drugs. The proposed legislation gives pharmaceutical stakeholders an opportunity to consider and comment on the legislation and review internal programs and procedures related to drug pricing and reporting.

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Author

David A. Chorney’s practice focuses on health care issues. He counsels providers such as academic medical centers, acute care hospitals, physician practice groups, and MCOs and advises purchasers on corporate structure, fraud and abuse, anti-kickback, and regulatory and licensure matters.