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Model Legislation and Contracts: Prescription Drug Pricing

NASHP has developed model legislation and resources for state officials working to rein in prescription drug costs. Select the model legislation you wish to review below. You will find additional briefing documents and bill text from states that have already passed the legislation. To request state-only materials, email jreck@nashp.org.

Medicare Reference Rates

The landmark Inflation Reduction Act (IRA) allows Medicare, for the first time, to negotiate the price of certain high-cost drugs. NASHP’s model bill enables states to extend the benefits of federal negotiations to state-regulated markets by using the negotiated Medicare rates as reference rates to set upper payment limits for state and private purchasers — and to use the savings that are achieved to help consumers.

International Reference Rates

Recognizing that drug costs in other countries are often many times lower than in the United States, this model act authorizes a state’s department of insurance to establish international reference rates — used by Canada and other countries — for the 250 most costly drugs in that state. The department determines the reference rates based on prices in Canada’s four largest provinces. The lowest price in those provinces will become the legal upper payment limit for those drugs for participating purchasers in the state.

August 2020

This white paper by Rachel Sachs, JD, MPH, describes the international reference rate-setting proposal, considers key design choices, articulates and responds to potential legal challenges, and provides guidance on several potential implementation issues.

August 2020

State officials interested in this model legislation will be provided with a legislator’s guide and additional background materials. Contact Jennifer Reck to request this material, which is for state officials-only.

Affordability Review

NASHP’s prescription drug affordability review board legislation enables states to set allowable rates for certain high-cost drugs, similar to the process states use to regulate utilities or insurance premiums. Under this law, a state drug affordability review board would establish the maximum amount that payers would pay for individual drugs. While transparency laws expose the true cost of drugs, this approach takes the next step to protect consumers and payers from over-priced drugs.

August 2022

This white paper by Rachel Sachs, JD, MPH, discusses the Prescription Drug Affordability Board model, including legal challenges states may face in developing and implementing PDABs, suggesting opportunities for states to design their Boards to avoid legal concerns.

Transparency

NASHP developed two versions of a model drug cost transparency bill to enable states to take a comprehensive approach to unlock the black box of pharmacy pricing and increase consumer awareness.

This bill includes language detailing the data components. Download the following reporting templates to capture the data required:

This version of the transparency model legislation does not have the provisions that detail the data components.

Pharmacy Benefit Manager — Model Legislation

NASHP’s Center for State Rx Drug Pricing has developed model legislation that allows states to define new standards for pharmacy benefit manager (PBM) business practices. This model bill addresses PBMs’ fiduciary responsibilities and bans PBM gag clauses that prevent pharmacists from sharing lower cost drug options with consumers.

This model legislation enables states to directly regulate PBMs, and gives states flexibility to identify which agency should oversee PBMs.

This PBM model legislation allows states to regulate PBMs through their state insurance departments. It is modeled after Maine’s Bill 1504, approved in 2019.

This blog highlights Montana’s approach to address PBM business practices by leveraging its insurance department’s regulatory authority over insurance carriers.

Commonly asked questions and answers about PBMs’ role in the drug supply chain and NASHP’s model legislation.

This blog explores how states can use this model legislation to license PBMs, ban gag clauses that prevent pharmacists from sharing lower-price drug options with consumers, and require more transparency into exactly who profits from rebates.

States took varied approaches to regulating PBMs in 2018. This chart details each state’s approach and how their laws compare with NASHP’s PBM Model Legislation A.

Pharmacy Benefit Manager — Model Contract

States, as major purchasers of drugs for their employee health plans, can control prescription drug costs by negotiating more favorable contract terms with PBMs. Achieving advantageous contract terms with a PBM during the procurement process may supplement or provide an alternative to direct regulation of PBMs for states that do not wish to pursue legislation.

February 2020

These model contract terms enables states to restrict PBM compensation to an administrative-fee-only model, eliminate spread-pricing, require 100 percent pass-through of rebates, and provides robust transparency for greater monitoring and enforcement.

January 2020

This blog explores how states, as major drug purchasers, can leverage their buying power by demanding favorable contract terms with PBMs using NASHP’s model PBM contract terms.

Unsupported Price Increases

This model act fines pharmaceutical manufacturers whose drug price increases are unsupported by new clinical evidence and uses that revenue to provide cost assistance to consumers. The model impacts the most frequently prescribed, high-cost drugs, and minimizes a state’s administrative burden by using existing data sources. 

June 2020

This analysis by Michelle Mello, JD, PhD, and Stacie B. Dusetzina, PhD, provides a roadmap for states that want to design legislation to regulate excessive price increases, and offers recommendations for avoiding legal challenges. An accompanying chart, highlights how NASHP’s model legislation addresses recommendations from this analysis.

July 2020

State officials interested in this model legislation will be provided with a legislator’s guide and additional background materials. Contact Jennifer Reck to request this material, which is for state officials-only.

Anti-Price-Gouging

This model legislation prohibits manufacturers from hiking prices for generic and off-patent drugs. Price increases that surpass a specific threshold identified in the law trigger action by a state’s attorney general. Manufacturers that price-gouge face fines and must stop charging the excessive price. NASHP’s model addresses the legal challenges that led to the demise of Maryland’s 2017 anti-price-gouging law.

June 2020

This white paper by Michelle Mello, JD, PhD, provides states with a roadmap to help navigate legal issues and offers recommendations to state legislators who are drafting anti-price-gouging legislation.

July 2020

This blog explores how NASHP’s anti-price-gouging model act builds on information revealed by state drug pricing transparency programs and addresses excessive price increases.

Importation

NASHP’s drug importation model legislation creates a state wholesale importation program to purchase lower-cost drugs from Canada and make them available to state residents through an existing supply chain that includes local pharmacies.

December 2018

NASHP and a team of consultants, including FDAImports.com, LLC, provided staff support to Vermont’s effort, which concluded that significant savings would result from importation. Based on just 17 high-volume, high-cost drugs identified for two of the state’s three major carriers the savings from Canadian importation would be between $1 and $5 million annually.

January 2019

This worksheet helps states prioritize which prescriptions drugs are candidates for wholesale importation from Canada by prompting payers to identify their top-spend drugs based on cost times utilization.

January 2019

This worksheet builds on the top-spend drug list and allows payers to determine potential savings from wholesale importation from Canada.

January 2019

 NASHP released a press release after Vermont published its report on wholesale importation in December 2018.

State Purchasing Pool Buy-in

This model legislation allows small businesses and individuals to buy into a state employee prescription drug benefit purchasing pool. It authorizes non-state public employers, self-insured private employers, and insurance carriers who cover small groups or individuals to purchase drugs for their beneficiaries under the purchasing authority of the state. By adding more lives to a purchasing pool, purchasers can negotiate better prices for public employees and others who join the purchasing pool.

October 2019

This white paper provides a roadmap to help states navigate legal issues and implement a state purchasing pool.

January 2020

This blog explains how establishing favorable PBM contract terms can be a state’s first step toward leveraging additional savings through a second strategy – implementing a state purchasing pool for prescription drugs.

Licensing Pharmaceutical Representatives

This model legislation gives states the authority to license pharmaceutical sales representatives to increase transparency surrounding their activities and influence and to require training on ethical standards. It also incorporates an approach, first enacted in Colorado, to require representatives to disclose the wholesale acquisition cost of the drugs they market and to share the names of generic options in the same therapeutic class when available.

January 2020

This brief describes the types of marketing tactics that pharmaceutical companies use and the adverse impacts those tactics can have on patients, clinicians, and the health care system.

January 2020

This blog explores the impact of pharmaceuticals sales representatives on drug marketing and sales and highlights the need for state action.

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