Drug price transparency (DPT) laws have been in effect in several states for a few years now. Starting with Vermont in 2016, more than half of the U.S. states are now collecting pricing data from manufacturers in the hopes it will assist in creating effective policies to reduce drug prices for their constituents. The question of whether this goal will be realized or not remains unanswered for now.
Many wonder if DPT requirements will instead prove too complex and serve only as an arbitrary monitor, demanding to know why and how manufacturers price their products in a free and open market. When the states realize that price discovery and competition already exist and that the real mark-ups take place at the pharmacy benefit manager (PBM) and retail pharmacy levels, manufacturers will have to comply and report.
The most important thing to know about DPT, like most things involving multi-state compliance, is that every state is different. Some states require only a yearly assessment from reporters, while others demand quarterly reports of all manufacturers’ wholesale acquisition costs (WAC) or filings when new product presentations are launched. A WAC increase by unit or course of treatment, depending upon the specifics of that increase, could trigger the need to file many state reports in varying formats, through diverse filing procedures. To top it all off, none of this is set in stone as the boards continue to refine their systems of reporting.
Assigning a Designee
Whether you manage all DPT activities internally or utilize an outside vendor, the first line of defense is hiring or appointing an in-house designee who will be responsible for all things “Drug Price Transparency.” The DPT designee should monitor evolving DPT laws, understand their triggers, deadlines, filing requirements, and, most importantly, the impact these laws have on your products and pricing.
The DPT designee should be present in price committee meetings and act as secretary, taking notes to memorialize the methodology and factors considered when new or changed WAC prices are determined. These notes will prove invaluable when any state should ask for justification of pricing decisions later.
Tips for a DPT designee:
- Stay involved and add yourself to all DPT board mailing lists.
- When setting up new reporting accounts as a covered manufacturer, be sure to add another person in your organization as an additional point user in case you are away or unable to keep up with the monitoring of any filings, deficiencies received, or payments due. Make sure user account logins are recorded and accessible to at least one other colleague.
- Create and maintain a living, breathing spreadsheet to track each state’s triggers, filing requirements, filing formats, deadlines, fees, board contacts, and login information.
- Review deadlines and filing requirements at least once a month and immediately after any pricing committee discussions involving any proposed WAC changes or addition to your product line.
- Be aware of the nuances of filing. Each state has their own required filing method, file formatting, and even file naming conventions.
- There is bleed through in some states with detailer reporting. The Sunshine Act years ago pushed the states to begin monitoring payments and other transfers of value to physicians and teaching hospitals. Some state DPT laws have similar reporting requirements for manufacturers’ salespeople which overlap those older laws.
- Some states require reporting based on the unit WAC price while others base reporting on the course of treatment WAC price. Determine the maximum dosage for a course of treatment (COT) of 30 days or less for each National Drug Code (NDC) and calculate its WAC price. Save the calculation for later reference. An example would be, “Max daily dosage for 67kg adult, 25mg per day x 30 days = 750mg COT. Unit volume is 473mL, strength is 7.5mg per 15mL. 473/15=32.5 X 7.5 = 236.5mg per bottle. 750/236.5 = 3.17 X WAC Unit price of 156.00 X 3.17 = 494.52 COT WAC.
- Remember that reporting is always on the NDC presentation level, not the product level. If you are introducing a new presentation of a product that may have been approved 10 years prior, the new NDC is reportable as a “new drug” in most states.
- All states have different triggers (e.g., WAC increase of 10% or more for products with a course of treatment cost of $40 or more.)
Developing the SOP
Next, it is essential that every manufacturer create a strong standard operating procedure (SOP) to outline the steps taken when any WAC change or product addition is considered. This SOP should require that an explanation of pricing methodology and rationale be completed and saved. Research into competitor pricing should also be documented and saved, as should the estimated costs of production, marketing, distribution, and acquisition. Note any percentages used in determining any new price off the branded comparator or other generics. Many manufacturers are now struggling to respond to states such as Oregon and New York, which will demand this type of documentation.
Your SOP should also include your approach to protecting sensitive proprietary information. Keep in mind that some states will allow you to claim this exclusion from public disclosure while others grant this protection to a very small number of companies. When formulating a written sensitive response, you may look up previously published reports of manufacturers for the same drug or drug class to determine the minimum information given by these reporters that previously satisfied the board.
The time to get DPT compliance under control is now. In one example, this year, the state of California will be identifying all manufacturers that have failed to report all new drugs over the Medicare Part D Threshold ($670 until January 18, 2022, when CMS increased the amount to $830) and/or a cumulative increase of 16% or more since January 1, 2019, when reporting began in this state. Fines are set at $1,000 per day. A manufacturer of just one NDC with a WAC of more than $670.00 entering the market on January 15, 2019, will owe the state of California $1,095,000 if a fine is levied by the board in mid-2023. This will be the next shoe to drop for the industry as it relates to DPT compliance.
Requirements are likely to evolve significantly over time as new states enact DPT laws and regulations change. Couple this with dizzying deadlines, arbitrary filing triggers, and automatic fines for late filings, managing DPT compliance might appear daunting, but it must be done.