Massachusetts Governor Charlie Baker has restarted the discussion on health care cost containment in the Commonwealth with a proposed bill that contains a raft of initiatives. Foley & Lardner will be addressing each of the key initiatives in separate blog posts over the coming weeks to invite discussion and testing of the proposals.
Governor Baker’s proposed legislation, an Act to Improve Health Care by Investing in Value (the Act), would, in addition to the already existing health care professional transparency reporting requirements described below, impose a drug price reporting requirement on pharmaceutical drug manufacturers throughout the Commonwealth.
Current Reporting Requirements for Drug Manufacturers
Currently, under M.G.L. § 111N and the implementing regulations (105 CMR 970.000), pharmaceutical drug and medical device manufacturing companies that employ a person to sell or market a drug, medicine, chemical, device, or appliance in the Commonwealth are required to disclosure data relating to provision of economic benefits to health care providers annually to the Massachusetts Department of Public Health. Specifically, manufacturers must disclose the value, nature, purpose, and particular recipient of any fee, payment, subsidy, or other economic benefit with a value of at least $50, which the company provides either directly or via an agent to a “covered recipient” in connection with the company’s sales and marketing activities. In Massachusetts, a “covered recipient” is defined as any person authorized to prescribe, dispense, or purchase prescription drugs or medical devices in Massachusetts, including a physician, hospital, nursing home, pharmacist, health benefit plan administrator, or a health care practitioner.
Proposed Additional Reporting
If passed, the Act would also require pharmaceutical manufacturers to disclose information relating to the pricing of their drug(s) to the Health Policy Commission (HPC). The Act requires reporting the following information:
- A schedule of the drug’s wholesale acquisition cost (a pharmaceutical manufacturer’s list price for a drug to wholesalers or direct purchasers not including discounts or rebates) increases over the previous five calendar years;
- The manufacturer’s aggregate, company-level research and development, and other relevant capital expenditures, including facility construction, for the most recent year for which final audited data are available;
- A written, narrative description, suitable for public release, of factors that contributed to reported changes in wholesale acquisition cost during the previous five calendar years; and
- Any other information that the manufacturer wishes to provide to the HPC.
The information disclosed by manufacturers will not become public records and will remain confidential.
Risks and Consequences of the Proposed Transparency Requirements
Based on the records furnished, the HPC may identify a proposed value for a prescribed drug. Within sixty days of receiving the required information from the manufacturer, the HPC is required to issue a determination on whether the manufacturer’s pricing of a drug is unreasonable or excessive in relation to the HPC’s proposed value of the drug. The consequences of such a determination were not articulated in the Act.
The Act includes a penalty provision for pharmaceutical manufacturers who fail to timely comply with the HPC’s request. The HPC notes that it aims to promote compliance with the reporting requirements, therefore, it would only impose a civil penalty (including monetary penalties up to $500,000 in each instance) on manufacturers as a last resort.
If the Act is passed, Massachusetts would join the ranks of states that already collect data on drug costs from their pharmaceutical manufacturers such as Louisiana, Maine, and Nevada. The proposed Act provides an opportunity for pharmaceutical manufacturers to begin considering implementation and compliance, e.g., how internal systems may need to be adjusted to accommodate the required reporting under the Act and who within each company will be tasked with reporting, management, and oversight.