*Updated Oct. 15, 2018
Despite a short legislative season, state lawmakers across the country introduced an unprecedented 174 bills to stem the rising cost of prescription drugs and have enacted 45 into law — with seven state legislatures still in session. Last year, state legislatures introduced 100 Rx cost control bills and passed 27.
States are pursuing a range of strategies to tackle drug costs and below is a summary of their 2018 action to date.
Pharmacy Benefit Managers (PBMs)
Last year, a handful of states passed PBM bills, including Nevada’s Chapter 592, that defined new standards for PBM business practices. These laws addressed their fiduciary responsibilities and banned PBM gag clauses that prevent pharmacists from sharing lower cost drug options with consumers. This year, 36 states drafted PBM legislation and 31 were enacted. These new generation of PBM bills included requirements for more drug cost transparency and disclosure, as well as increased regulation and licensure requirements. For example, Tennessee enacted H.B. 1857 that requires PBMs to obtain a license to operate from the state’s Department of Commerce and Insurance.
Many state legislatures also sought to improve consumer protections by removing gag clauses in contracts between PBMs and pharmacies and pharmacists. Mississippi enacted H.B. 709 to prevent a PBM from prohibiting or penalizing a pharmacy or pharmacist from informing a patient of a lower cost treatment or payment option, including simply paying cash for the drug. Colorado’s H.B. 1284 goes further by banning gag clauses completely and prohibiting PBMs from charging a copayment that exceeds the total charges submitted by the network pharmacy.
Wholesale Drug Importation from Canada
In 2018, eight states introduced wholesale drug importation legislation and Vermont became the first state in the nation to enact a law authorizing wholesale drug purchasing from Canada. The first wholesale importation bill to gain traction occurred last year when Utah’s legislature considered H.B. 163, which would have created a program and reporting requirements for safely importing certain prescription drugs at lower costs from Canada. Despite passing the House, the bill fell short of the necessary votes in the Senate. However, the bill did gain bi-partisan interest and as a result, legislative leadership requested a study from the Utah Department of Health on how to make drug importation work for the state in advance of the next legislative session.
Vermont passed S175 and has become the first state to enact a wholesale prescription drug importation program to purchase some lower-cost prescription drugs from Canada to benefit all Vermont residents. Vermont’s new law is carefully crafted to meet federal requirements by establishing checks and balances to guarantee it meets the federally mandated cost savings and drug safety requirements. Before the state can implement its importation program, Vermont’s Agency for Human Services must seek approval to do so from the US Secretary of Health and Human Services. The state is currently developing its program and will construct a proposal for federal approval.
Twenty-six bills were introduced in 2018 to make prescription drug pricing more transparent and five became law in 2018. Examples include Oregon’s H.B. 4005 and Connecticut’s H.B. 5384, both of which require drug manufacturers to provide additional data justifying price increases over specified thresholds. (Click here for NASHP’s national chart comparing states’ reporting requirements for state transparency laws.) While mandating transparency is a first legislative step to understanding drug pricing , by itself it does little to control prices. NASHP is working with states that enacted transparency laws in 2017 and 2018 to encourage cross-state collaboration and action.
Anti-Price-Gouging and Rate-Setting Legislation
Transparency helps states understand how the pharmaceutical industry sets prices, but anti-price-gouging and rate-setting legislation are two strategies states are exploring to make information gleaned from transparency laws useful in efforts to protect consumers from excessive price increases imposed by pharmaceutical manufacturers. Maryland enacted the nation’s first anti-price-gouging law designed to address excessive price increases and give the state the power to seek civil penalties and fines for unconscionable increases. Though the pharmaceutical industry has challenged Maryland’s law in federal court, across the country states introduced 13 anti-price-gouging bills. Despite strong support, no other state has passed an anti-price-gouging bill to date. Illinois’s version, H.B. 4900, did pass in its House of Representatives, and as of Oct. 15, 2018, the New Jersey state legislation was still considering its anti-price-gouging bill.
A bill in New Jersey was still under consideration as of October 15, 2018.
NASHP’s Rate-Setting Model Legislation goes beyond transparency and anti-price-gouging laws to protect payers from high drug costs by limiting how much payers can pay for a drug. Similar to a public utility commission or hospital rate-setting, a state can establish a payment rate for certain high-cost drugs and require all payers to pay no more than that ceiling. Minnesota and Maryland proposed rate-setting bills this session but were unable to enact them into law. A bill in New Jersey was still under consideration as of July 24, 2018.
NASHP tracks state legislative and executive branch efforts to control prescription drug prices and spending and will continue to develop resources to help states curb rising prescription drug costs. To get a complete overview of newly-enacted laws, visit NASHP’s Center for Rx Drug Pricing website.