California Price Transparency Legislation Passes Legislature

California’s drug price transparency legislation, SB 17, passed the State Assembly on September 11 by a vote of 66-9.  The bill included several amendments to the version of the bill that passed the State Senate at the end of May.  The State Senate then passed the amended legislation on September 13.  Among the most important amendments were changes to “triggers” for price reporting, and for advance notice requirements relative to WAC increases.

SB 17 requires that manufacturers of drugs with WAC increases meeting a certain trigger to 1) provide advance notice to various purchasers and 2) report price transparency data to the California Office of Statewide Health Planning and Development (OSHPD) within a certain period after the price increase takes effect.  As passed by the Senate in May, SB 17 would have set reporting triggers for WAC increases at 10% over the three years prior to the current calendar year for drugs with a WAC above the Part B specialty drug threshold, and 25% over three years for drugs with a WAC under the threshold.  Under the final version of the legislation, these reporting requirements will apply to manufacturers of prescription drugs with a WAC of more than $40 per course of therapy that experience a cumulative increase in WAC in excess of 16% over the previous two years plus the current calendar year.  This language, when compared to the provisions of the Senate bill, would have the effect of raising the reporting threshold for Part D specialty drugs, but lowering it for non-specialty drugs.

The final version of SB 17 also reduces the deadline for advance notice of WAC increases from 90 to 60 days.  Another amendment would limit advance notice to 1) state purchasers and 2) only those other purchasers (licensed health care service plans, health insurers, and PBMs) who register with OSHPD, whereas the Senate bill required reporting to these purchasers regardless of whether they registered with OSHPD.

For prescription drugs newly introduced to market at a WAC above the Part D specialty drug threshold, the final bill changes the notice requirement from three days after FDA approval, to three days after the commercial release of the drug.  In addition, the final bill would require OSHPD to publish price transparency data reported for newly introduced drugs quarterly rather than monthly.  This data is due to OSHPD 30 days after advance notice of the launch of the new drug.

Other amendments in the final bill include revisions to specific (post-effectiveness) price transparency reporting requirements to OSHPD, both for drugs experiencing increases in WAC above 16% and for new drugs introduced at a WAC above the Part D specialty drug threshold.  One new provision specifies that the manufacturer may limit disclosures to publicly available information.  The final version also largely eliminates the requirement for a manufacturer to state if there have been no improvements to clinical efficacy, and to report marketing budget and patient assistance program information.  However, the manufacturer still must notify purchasers whether a change or improvement in the drug necessitates the reported price increase.

The reporting requirements to OSHPD in SB 17 would take effect in 2019, and manufacturers would face a civil penalty of $1,000 per day for failure to report pricing-related data to OSHPD during the required reporting period after the drug becomes effective.  SB 17 now goes to Governor Jerry Brown for his signature.

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