Vermont Passes Manufacturer and Insurer Pharmaceutical Cost Transparency — Strengthens Current Law

On May 30^th, Vermont Governor Phil Scott (R) signed Senate Bill 92 into law (now, Act 193).   A law that adds new reporting requirements to disclose price information on prescription drugs for both manufacturers and insurance companies.  This bill comes on the heals of a 2016 Vermont law requiring manufactures to report prices.

While the language and intent of the original bill concerned interchangeable biological products only, a revision was agreed and adopted to add disclosure provisions targeting health insurers and drug manufacturers, as well as convening a working group to study to study and create a drug transparency report. Some of these added provisions, such as manufacturer high-cost drug notification, were in the original importation bill (see here).

The provisions discussed within this article took effect upon passage of the bill (May 30, 2018).

As you will see, there is a lot to unravel within the new law.

Health Insurer Disclosure Requirements

Per Act 193’s legislative summary, health insurers will be required “to report certain information to the Green Mountain Care Board about their plans’ spending on prescription drugs and the effect of prescription drug costs on the premiums for their plans.” Disclosure impacting health insurers can be found under Sections 7 and 8 of Act 193.

Under Section 7 of Act 193, health insurers will be required to submit information at the time it submits a rate filing. Reportable information includes providing:

1.  The percentage of the premium rate attributable to prescription drug costs for the prior year for each category of prescription drugs;
2.  The percentage of the premium rate attributable to prescription drugs administered by a health care provider in an outpatient setting that are part of the medical benefit as separate from the pharmacy benefit (if available); and
3. Information on the insurer’s use of a pharmacy benefit manager (“PBM”) or managers, what components that are included within the disclosure are managed by the PBM, and the PBM name(s).

Section 8 adds to health insurer disclosure. While the law limits the scope to only those insurers “with more than 1,000 covered lives in [Vermont] for major medical health insurance,”…it applies to “all covered prescription drugs, including generic drugs, brand-name drugs, and specialty drugs provided in an outpatient setting or sold in a retail setting.” The following will be submitted to the Green Mountain Care Board (“GMCB”):

1. The 25 most frequently prescribed drugs and the average wholesale price for each drug;
2. The 25 most costly drugs by total plan spending and the average wholesale price for each drug; and
3. The 25 drugs with the highest year-over-year price increases and the average wholesale price for each drug.”

The GMCB will use the information to create a report that will be published on or after January 1^st of each year; the report will not reveal information that identifies a specific health benefit plan.

Manufacturer Cost Transparency Requirements

Act 93 impacts manufacturers in two ways:

1. Strengthens the existing cost transparency requirements (i.e., requires manufacturers to annually report costs for certain drugs identified by the state);
2. Adds a new law that requires manufacturers to provide notice before introducing a high-cost prescription drug to the market; and

Strengthening Existing Requirements

Existing Law: Two years ago, Vermont became the first-in-the-nation to require manufacturers of high-cost drugs to annually report pricing information for those drugs (see our article here). The law permitted a state agency to identify up to 15 drugs per year; the last two years, the agency identified ten 10 prescription drugs (see 2017 list here). Manufacturers of those drugs were required to submit information to the Vermont Attorney General (“AG”), such as providing justification for the increase in the wholesale acquisition cost (“WAC”). In turn, the AG created and submitted a report to the legislature by December 1^st (see the 2017 report here).

What has changed? The new law empowers the Department of Vermont Health Access (“DVHA”) to “create annually a list of 10 prescription drugs on which the State spends significant health care dollars and for which the [WAC] has increased by 50 percent or more over the past five years or by 15 percent or more over the past 12 months during the previous calendar year, creating a substantial public interest in understanding the development of the drugs’ pricing.” The DVHA, including health insurers with more than 5,000 covered lives in Vermont, must also “create annually a list of 10 prescription drugs on which the State spends significant health care dollars and for which the cost to the [DVHA], net of rebates and other price concessions, has increased by 50 percent or more over the past five years or by 15 percent or more during the previous calendar year, creating a substantial public interest in understanding the development of the drugs’ pricing.” The DVHA and health insurers will then submit the information to the AG by June 1^st.

The AG is responsible for reviewing these lists and identifying 15 drugs in accordance with the law’s selection guidelines. Next, manufacturers of the 15 drugs are required to provide justification for the increase in the net cost of the drug to the AG. Additional information must be submitted, such as “each factor that specifically caused the net cost increase over to the [DVHA], to one or more health insurers, or both during the specified period of time.”

Previously, manufacturer reports were not subject to public disclosure. Now, reports submitted by the manufacturers will be posted online (known as the “public version”). While the manufacturer can request to redact certain information in the public version as proprietary or confidential, the request is subject to the AG’s approval. Separately, the AG will provide a report to the legislature by December 1st. Both reports will be publicly available on the AG’s website.

Notice of Introduction of New High-Cost Prescription Drugs

This new provision requires a prescription drug manufacturer to notify the AG, in writing, if it is introducing a prescription drug to market at a WAC that exceeds the threshold set for a specialty drug under the Medicare Part D program (for CY 2018, the threshold is set at $670; for additional information on the threshold see here).

If applicable to your company, then the notification must be provided within 3 calendar days following the release of the drug in the commercial market. Within 30 calendar days following the 3-day notification, the manufacturer must provide certain information to the AG, such as “a description of the marketing and pricing plans used in the launch of the new drug in the United States and internationally” and “the date and price of acquisition if the drug was not developed by the manufacturer.”

The AG will post information quarterly on its website, but done “in a manner that would not allow identification of the drug.”

It should be noted that this notice provision is similar to language found within a California bill signed into law in 2017 and an Oregon bill signed into law earlier this year.

The Working Group

The Vermont Secretary of Human Services or its designee must “convene a working group comprising one representative each from the Department of Vermont Health Access, the Green Mountain Care Board, the Vermont Board of Pharmacy, the Vermont Association of Chain Drug Stores, the Vermont Pharmacists Association, the Vermont Retail Druggists, Bi-State Primary Care Association, and the Vermont Association of Hospitals and Health Systems….” (collectively, the “Working Group”).  The Working Group will be responsible for “investigat[ing] and analyz[ing] prescription drug pricing throughout the prescription drug supply chain in order to identify opportunities for savings for Vermont consumers and other payers and for increasing prescription drug price transparency at all levels of the supply chain….”

The Working Group must submit the report on or before November 18, 2018 to the legislature.