Oregon Jumps on the Drug Pricing Transparency BandwagonMarch 15, 2018
On March 13, 2018, Oregon became the latest state to enact a law focused on transparency in drug pricing (see our roundup of other recent state laws). The Prescription Drug Price Transparency Act, H.B. 4005, places new reporting requirements on drug manufacturers related to price increases and patient assistance programs. Insurers are also required to report certain information about prescription drugs use and costs to the Department of Consumer and Business Services.
Under Oregon’s new law, manufacturers must report certain information for each prescription drug that has a price of $100 or more for a one-month supply or for a course of treatment lasting less than one month, and that had a net increase of 10% or more in the price over the course of the previous calendar year. Price is defined as the wholesale acquisition cost. By July 1, 2019, and by March 15 of every year thereafter, manufacturers must report extensive pricing and cost information for each such drug, including:
- Net increase, expressed as a percentage, in the price of the drug over the course of the previous calendar year;
- Factors that contributed to the price increase;
- Research and development costs associated with the prescription drug that were paid using public funds;
- Direct costs incurred by the manufacturer to (1) manufacture the prescription drug, (2) market the prescription drug, (3) distribute the prescription drug, and (4) for ongoing safety and effectiveness research associated with the prescription drug;
- Total sales revenue for the prescription drug during the previous calendar year;
- Manufacturer’s profit attributable to the prescription drug during the previous calendar year;
- The introductory price of the prescription drug when it was approved for marketing by FDA and the net yearly increase, by calendar year, in the price of the prescription drug during the previous five years.
The manufacturer must also provide the following information about each patient assistance program (including coupons and other copay assistance) offered by the manufacturer to consumers in Oregon for each prescription drug:
- Number of consumers who participated in the program;
- Total value of the coupons, discounts, copayment assistance or other reduction in costs provided to Oregon consumers who participated in the program;
- For each drug, the number of refills that qualify for the program;
- The period of time that the program is available to each customer.
Oregon’s new law also includes price transparency reporting requirements for new prescription drugs. Beginning on March 15, 2019, if a manufacturer introduces a new drug for sale in the U.S. at a price that exceeds the threshold for specialty drugs set in the Medicare Part D program ($670 in 2018), within 30 days of introducing the new drug for sale, the manufacturer must report:
- A description of the marketing used in the introduction of the new prescription drug;
- The methodology used to establish the price of the new prescription drug;
- Whether the FDA granted the new prescription drug a breakthrough therapy designation or a priority review;
- The date and price of acquisition if the new prescription drug was not developed by the manufacturer;
- The manufacturer’s estimate of the average number of patients who will be prescribed the new prescription drug each month; and
- The research and development costs associated with the new prescription drug that were paid using public funds.
Manufacturers who do not comply with the new law may be subject to civil penalties of up to $10,000 per day of violation. The Department of Consumer and Business Services may establish fees to be paid by manufacturers to cover the costs of this law.
The new law includes an element of public shaming. The Oregon Department of Consumer and Business Services will post a list of the prescription drugs that have net increases of more than 10% on its website. In addition, the information provided by the manufacturers will be posted on the same website. Trade secrets protected under Oregon’s public records law may not be posted on the website, if “the public interest does not require disclosure of the information.” There is no further elaboration concerning circumstances in which the public interest may justify posting of trade secret information. The Department is also going to develop a process for consumers to notify the state about an increase in the price of a prescription drug.
Oregon is not only seeking pricing information from manufacturers. Under the new law, insurers must report:
- The 25 most frequently prescribed drugs;
- The 25 most costly drugs as a portion of total annual spending;
- The 25 drugs that have caused the greatest increase in total plan spending from one year to the next; and
- The impact of the costs of prescription drugs on premium rates.
As we have previously reported, in the absence of federal action, a growing number of states are seeking to limit drug costs through legislation. Some states have focused on marketing prohibitions and/or limitations on payments to practitioners (for example, see our post on New Jersey’s new limits). Other states, like Oregon, have focused on drug prices, with some states enacting requirements for reporting or outright restrictions on price increases on certain drugs (for example, Maryland and Vermont).
Many of the new state drug price reporting laws are facing legal challenges that argue these laws are unconstitutional (see our coverage of the challenges to laws in Maryland, Nevada, and California). Due to the amount of information that manufacturers are required to report under the new Oregon law, and the fact that this information will be made available to the public, we anticipate that similar legal challenges may be raised before the new Oregon law goes into effect. We will continue to monitor this law and similar developments in other states.