State-Level Diabetes Drug-Pricing Transparency Bills Target PBMs

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Legislation seeks to fight drug cost increases by creating transparency in the pricing activities of manufacturers and pharmacy benefit managers.

In the absence of federal action, Nevada, along with a number of other states, is enacting legislation to combat skyrocketing drug prices and create transparency regarding the pricing activities of drug manufacturers and pharmacy benefit managers (PBMs).

Nevada’s Senate Bill 539 places new reporting requirements on pharmaceutical manufacturers and PBMs for drugs that are determined to be essential for treating diabetes. Pharmaceutical sales representatives and some non-profit organizations are also faced with new reporting requirements under the law.

PBMs must now report certain information on or before April 1 of each year (starting in 2018) to the Nevada Department of Health and Human Services, including:

  • The total amount of all rebates negotiated with the manufacturers of prescription drugs included in “List 1” during the preceding calendar year.
  • The total amount of rebates retained by the PBM.
  • The total amount of rebates negotiated for the purchase of Tier 1 drugs by Medicare, Medicaid, other third-party governmental recipients, other third-party non-governmental recipients, and beneficiaries under certain ERISA plans.

The new law also creates a fiduciary relationship between PBMs and third parties that contract with the PBM for pharmacy benefit management services. PBMs must notify these third parties in writing of any activity, policy, or practice of the PBM that creates a conflict of interest interfering with the PBMs’ ability to discharge that fiduciary duty.

SB 539 imposes substantial penalties for noncompliance with the new reporting requirements. PBMs (and others) may be subject to penalties of up to $5000 per day unless the failure to timely comply is shown to be due to “excusable neglect, technical problems, or other extenuating circumstances.”

The information provided by PBMs, manufacturers, and others will be made publicly available on the internet by the Nevada Department of Health and Human Services.

PBM organizations adamantly opposed the legislation, primarily because both drug manufacturers and PBMs consider drug rebate information proprietary. Some have suggested that the new law and its reporting requirements may be challenged in the courts.

The full text of SB 539 is available here.

Brain E. Dickerson, Esq. is an advisory board member for the American Pharmacy Purchasing Alliance.

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