Connecticut’s New Drug Pricing Law Requires Transparency from PBMs, Health Carriers, and Pharmaceutical Manufacturers
On May 31st, Connecticut’s governor Daniel Malloy signed into law Substitute House Bill 5384, which imposes cost disclosure and reporting requirements on pharmacy benefit managers (PBMs), health carriers, and pharmaceutical manufacturers (now, Public Act No. 18-41).
A summary of the law is provided below and partially taken from the Office of Legislative Research analysis.
[Public Act No. 18-41] makes several changes related to prescription drugs, pharmacy benefit managers (PBMs), and health carriers (e.g., insurers and HMOs). Among other things, it requires:
“1. PBMs to report information financial information about drug formulary rebates to the insurance commissioner, who must report aggregated data to the Insurance and Real Estate Committee;
“2. Health carriers to submit to the insurance commissioner, and the commissioner to report to the Insurance and Real Estate Committee, information on covered outpatient prescription drugs, including
- 25 most frequently prescribed drugs,
- 25 drugs provided at the greatest cost
- 25 drugs with the highest year over year increase in cost
- Impact of drug costs on the health plan and members
“3. health carriers to certify to the commissioner that they account for all rebates when calculating plan premiums;
“4. a prescription drug “sponsor” (i.e., the entity responsible for its clinical trials) to notify the Office of Health Strategy (OHS) when it files certain applications for new drugs 60 days after PDUFA date is issued; and
“5. OHS to annually identify up to 10 outpatient prescription drugs provided at substantial state cost or critical to public health and drug manufacturers to report information to OHS on those drugs.”
The law becomes effective January 1, 2020; impacted manufacturers will begin reporting after January 1, 2020, health carriers after January 1, 2021 (submission happens only if the carrier submits a rate filing), and PBM rebate reporting after March 1, 2021.
Comptroller Kevin Lembo believes the law “establish[es] new groundbreaking transparency for pharmaceutical corporations when drug prices skyrocket” and represented an “extraordinary victory for Connecticut patients who pay outrageous prices at the counter while powerful corporations are enriched by big discounts.”
Despite unanimous support in both the House (149 Yea; 0 Nay) and Senate (36 Yea; 0 Nay), the public hearing testimony was slightly less unanimous. The Connecticut State Insurance Department (the “Department”), which is responsible under the new law of PBM and health carrier reporting, submitted public testimony opposing many of the bill’s provisions. For instance, the Department stated it “does not have the subject matter expertise to oversee PBMs and lacks the personnel required to implement [the reporting provisions].” On provisions related to health carriers, the Department stated the additional reporting requirements were “unnecessary as all of the requested data is already collected and published…on the Department’s website….” Regulatory powers granted to regulate manufacturers were described as “improper” and the Department noted it lacked “subject matter expertise” and “personnel.” The final language of the bill switched manufacturer oversight to the state’s Office of Health Strategy (“OHS”).
The PBM’s trade group, Pharmaceutical Care Management Association (“PCMA”), believed that PBM rebate reporting was unconstitutional and preempted by federal law. Even though rebate data would not be publicly disclosed, PCMA expressed fear, along with Express Scripts, of the information not being “adequately protect[ed].” The Pharmaceutical Research and Manufacturers of America (“PhRMA”) stated the “legislation correctly recognizes the role of other supply chain entities in prescription drug costs” and highlights that “[h]ealth insurance and plan administration costs are rising at more than twice the rate of drug spending” [emphasis in original]. Similar comments were shared by Boehringer Ingelheim.
Based on the final language of the law, PBM rebate information submitted to the Department will be treated as confidential and exempt from disclosure under the state’s Freedom of Information Act, while information submitted by health carriers and manufacturers does not seem to be afforded the same level of protection. PBMs, health carriers, and manufacturers that violate any of the law’s provisions can be fined up to $7,500 for each violation. We note that PBMs and health carriers are impacted the most, while provisions that apply to manufacturers seem minimal given the scope.
This is the first state to require reporting from insurance companies on the impact of prescription drug prices to their plans, insurance plans are a major employer in the state. It will be interesting to note if the rebate information collected remains confidential as promised and whether confidentiality provisions will be added by regulation.
Nicodemo Fiorentino, JD contributed to this article.