Editor’s Note: This month, we offer updates on two significant topics: Medicaid rebate caps and state price transparency reporting updates in several states. As always, if you have questions on any of the content found in this or previous market updates, please reach out to your IntegriChain Consulting Lead or consulting@integrichain.com and we would be happy to talk you through it.

Table of Contents:

• Medicaid (MDRP) Rebate Caps End January 1, 2024 
• State Price Transparency Reporting (STPR) Updates

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Medicaid (MDRP) Rebate Caps End January 1, 2024 

Pharmaceutical manufacturers participating in the Medicaid Drug Rebate Program (MDRP) should be aware of the upcoming change in the Medicaid Unit Rebate Amount (URA) calculation codified by the American Rescue Plan Act of 2021.

As we know, the quarterly Medicaid Basic URA is calculated as the great of:

• Quarter AMP minus BP or
• Quarter AMP times 23.1% for branded drugs (or 13% for generics)

Next, an “Additional Rebate” calculation is performed to assess if there have been price increases greater than the rate of inflation over the marketed life of the product. For many older products or those whose prices have increased substantially over the years, the Additional Rebate (sometimes called a CPI penalty) can exceed the amount of the basic URA or AMP:

Total URA = Basic URA + Additional Rebate

Since 2009, if the total URA is greater than quarterly AMP, the URA is capped by the quarterly AMP.

Beginning January 1, 2024 (1Q2024), the Medicaid AMP Cap will be removed. This means that the full calculated additional rebate will be applied to the basic URA to arrive at the Total URA. We’ve illustrated an example in the below table:

In this example, the product has accumulated an additional rebate nearly as great as AMP itself. With the URA capped at AMP, the quarter URA is 99% of WAC. However, with the AMP Cap removed, Total URA is actually 109% of WAC.

Pharma manufacturers should take into consideration the financial ramifications of these circumstances with products that currently have high CPI penalties. These considerations could include future price planning, contracting strategies, as well as accrual planning for 2024 and beyond.

Reference: 

• American Rescue Plan Act of 2021, § 9816 amending Section 1927(c)(2)(D) of the Social Security Act
  

State Price Transparency Reporting (STPR) Updates

Pharma manufacturers should be aware of the recent state price transparency reporting updates Connecticut, Florida, New Hampshire, New Jersey, Minnesota, and Illinois have all issued.

Connecticut

Connecticut amended its existing drug price transparency law on June 27, 2023, signing HB 6669 into law. This bill, effective October 1, 2023, amends the existing trigger for potential inclusion on the state’s annual list of ten outpatient drugs to state that the list shall now not include any drugs unless the WAC has increased by not less than 16% cumulatively during the immediate preceding two calendar years and is not less than $40 for a course of treatment. The executive director will create a preliminary list and post this list for public comment. Any manufacturer of an outpatient prescription drug included on the preliminary list may produce documentation to establish that the WAC of such listed drug, less all rebates paid to the state of such outpatient prescription drug during the immediately preceding calendar year, does not exceed the limits established. If the documentation establishes that the WAC of the drug, less all rebates paid to the state, does not exceed the limits established, then not later than 15 days after the closing of the public comment period, the drug shall be removed from the preliminary list before publishing the annual list.

Florida

The Florida Department of Business and Professional Regulation has published two emergency rules to implement its recent state drug transparency law, SB 1550, which requires manufacturers to notify the department and submit additional information on reportable drug price increases. These emergency rules for the price increase reports and annual price reports provide the process and reporting forms for submission. The reporting form requires manufacturers to submit their current permit information (license type, permit number, etc.), reporting establishment information (business information, address, and contact information), and the required price increase information. The online or printable forms for submitting the price increase report and annual price increase report are available on the Department. These rules were effective July 12, 2023.

New Hampshire

On June 20, 2023, New Hampshire signed HB 2 into law, amending one of the state’s price transparency regulations – HB 1280 (RSA 126-BB:9), the state’s Prescription Drug Affordability Board transparency law.  To eliminate government redundancies related to the collection, analysis, and reporting on prescription drug prices between the Department of Insurance (pursuant to HB 703) and the Prescription Drug Affordability Board, HB 2 suspends the drug price notification and disclosure requirements, confidentiality provisions, and registration requirements within HB 1280 for the biennium ending June 30, 2025. Currently, the HB 1280 provision requires manufacturers to register with the board annually, submit price increase and new drug price notices to the Board by January 30 each year, and comply with the board’s additional information requests. In addition, HB 2 repeals the annual assessment fee provisions for manufacturers and other entities. The enacted bill also repeals the civil penalty provisions set forth under the law, which provided the board with the power to impose civil penalties of not more than $1,000 per day (not to exceed $25,000 for any one occurrence) in the case of manufacturers that violate the requirements under Chapter 126-BB. The HB 2 amendments do not impact the new drug notification and reporting requirements under HB 703, which are administered by the Insurance Department. HB 2 was made effective July 1, 2023.

New Jersey

On July 10, 2023, New Jersey passed a new State Price Transparency Reporting bill, S 1615, which requires drug manufacturers to submit new drug and price increase notifications and reports to the Division of Consumer Affairs. The bill also establishes annual registration and assessment payment requirements and a Drug Affordability Council to formulate legislative and regulatory policy recommendations related to drug pricing. 

Price Increase Reporting

A manufacturer must notify the division if it is increasing the WAC of a brand-name drug by more than 10% per pricing unit during any 12-month period, or increasing the WAC of a generic drug priced at greater than $10 but less than $100 per pricing unit by more than 40% during any 12-month period, or increasing the WAC of a generic drug priced at $100 or more per pricing unit by more than 10% during any 12-month period. 

New Drug Reporting

A manufacturer must notify the division if it introduces a new drug in the State that has a WAC that exceeds the Medicare Part D specialty threshold, or a biosimilar in the State that has a WAC that is not at least 15 percent less than the WAC of the referenced brand biologic at the time the biosimilar is launched. The notices for meeting these requirements are required within 10 days of triggering the requirements and the follow up reports are due within 20 days.

Enforcements and Penalties

S 1615 states that failure of a reporting entity to comply may result in a civil penalty. Civil penalties may be imposed in the amount of $10,000 for the first day that the reporting entity is found in violation, and for subsequent days of non-compliance, an amount starting at $11,000 and increasing by $1,000 for each additional day of non-compliance, not to exceed $100,000 per day. The reporting obligations for this bill will become operative the first day of the thirteenth month following the date of enactment, approximately August 1, 2024.

Minnesota

On May 24, 2023, Minnesota signed SF 2995 into law, amending the current Minnesota drug price transparency law. Following this, the Minnesota Department of Health released updated reporting guidance incorporating the changes to Minnesota’s Prescription Drug Price Transparency reporting. These changes include technical fixes to existing reporting for drugs with applicable price increases and introductions for sale and became effective July 1, 2023. The first reporting deadline under the updated guidance is August 30, 2023 (60 days after the effective date of a new or increased price per the MN statute). The changes to existing reporting include new and revised definitions (‘brand drug’, ‘course of treatment’, ‘reporting entity’, etc.), inclusion of biosimilars in price increase reporting, incorporation of drug acquisition information into applicable price increase reporting for drugs acquired 12-months prior to increase, registration requirements, additional penalties for failure to register, and additional clarifications and reporting specifications. SF 2995 also includes additional reporting requirements for Drugs of Significant Public Interest (beginning in 2024), prohibition of excessive price increases for generic and off-patent drugs sold in the state and establishes the Prescription Drug Affordability Board, which has the authority to conduct cost reviews on certain prescription drugs as well as establish upper payment limits as prescribed by the law.  

Illinois 

The Governor of  Illinois has signed HB 3957 into law, prohibiting manufacturers and wholesale distributors from engaging in price gouging in the sale of an essential off-patent or generic drug that is ultimately sold in Illinois. Price Gouging here is defined as “an unconscionable increase in a prescription drug’s price that would result in the WAC of a 30-day supply of the essential off-patent or generic drug exceeding $20 and would result in an increase in the WAC of the essential off-patent or generic drug of 30% or more within the preceding year, 50% or more within the preceding 3 years, or 75% or more within the preceding 5 years, and is otherwise excessive and unduly burdens consumers because of the importance of the essential off-patent or generic drug to their health and because of insufficient competition in the marketplace.” The law notes that price gouging does not include a price increase that can be reasonably justified by:  an increase in the cost of producing the essential off-patent or generic drug or the cost of appropriate expansion of access to the essential off-patent or generic drug to promote public health. The Director of Healthcare and Family Services must notify the Attorney General of any price increase that amounts to price gouging. If the Attorney General has reason to believe that a violation has occurred, they may send a notice to the manufacturer or wholesale drug distributor requesting additional information. The Attorney General may impose a civil penalty of up to $10,000 per day for each violation of the Act. The bill is effective Jan 1, 2024.

For more information on Medicaid drug rebate caps or state price transparency reporting, please contact the IntegriChain State Price Transparency team: Price.Transparency@integrichain.com.

As always, IntegriChain continues to support pharma manufacturers in breaking down and staying ahead of new regulations. If you have any questions or concerns, please reach out to us at consulting@integrichain.com.

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