Effective June 19, 2024, New York enhanced its existing efforts to monitor prescription drug prices by implementing New York Insurance Law Section 111-A. Section 111-A requires prescription drug manufacturers to report to the state Superintendent of Insurance certain qualifying price increases before they occur. New York joins a growing list of states with price transparency requirements. It behooves manufacturers to become familiar with the outlines of the new law, particularly the scope of its applicability, the reporting obligations, and the penalties for failure to comply.
Does This Apply to My Company?
If you are a manufacturer of prescription drugs that are purchased or reimbursed in New York by any of the following, the new transparency law applies to you:
- An insurance company authorized in New York to write accident or health insurance
- Health maintenance organizations
- Non-profit medical and dental indemnity, or health and hospital service corporations
- Municipal cooperative health benefit plans
- The New York state health insurance plan as established under the Civil Service Law
- A pharmacy benefit manager, including an entity that directly or through an intermediary manages the prescription drug coverage provided by a health insurer
- The New York medical assistance managed care program
- An institution of higher education certified under the Insurance Code
The Reporting Threshold
Provided that you are subject to the requirements of Section 111-A as noted above, the law requires that you report any price increases more than 16% for drugs with a wholesale acquisition cost (WAC) of more than $40 for a “course of therapy.” The manufacturer is required to take into account any proposed or cumulative increases in the immediately preceding 24-month period prior to the planned effective date of the proposed increase. The term “course of therapy” refers to either (i) the federal Food and Drug Administration (FDA) approved recommended daily dosage units of a prescription drug pursuant to its prescribing label as approved by for 30 days; or (ii) the recommended daily dosage units of a prescription drug under its FDA approved prescribing label for a normal course of treatment that is less than 30 days.
The Timing and Content of the Report
If you are required to provide notice, a written report must be transmitted to the superintendent of financial services at least 60 days prior to the planned effective date of the increase. A manufacturer’s notice must include the proposed price increase and any cumulative increases that have occurred in the previous 24 months. With respect to the content of the report, the New York State Department of Financial Services (NYDFS) has updated its website and provides manufacturers with a drug price increase reporting form in a variety of languages (https://www.dfs.ny.gov/search/site?search=drug+price+form). Generally, the notice must include information about the drug, the drug’s current WAC, and the dollar amount and percentage of the planned WAC increase. The notice must also include the date of the increase, the cumulative percentage of the proposed price increase, including any price increases over the preceding 24 months, and whether any information is reasonably designated as a trade secret, and if so, an explanation of why. Additionally, the notice requires a statement regarding whether a change or improvement necessitates the WAC increase and a description of the change or improvement. If your company cannot meet the 60-day notice requirement, you must explain the reason why notice was not provided in a timely manner.
Fines and Penalties for Non-Compliance
According to the law, the Superintendent is specifically empowered to impose penalties of up to $5,000 per day for each day that information is not submitted after the required reporting period.
Legal Challenges to Drug Transparency Laws
Although approximately 24 states have passed drug transparency legislation similar to New York, these laws have not been immune from legal challenges. Most notably, an Oregon federal district court held that Oregon’s drug price transparency statute, House Bill 4005 (HB 4005), is unconstitutional. Specifically, the court held that (i) HB 4005’s price increase reporting requirements violate the First Amendment because they constituted a compelled speech which was not narrowly tailored to serve the government’s interest; and (ii) HB 4005 effects an unconstitutional taking of drug manufacturers’ private property by authorizing the state to publish manufacturers’ trade secrets if the “public interest” requires such publication. The ruling led the Oregon Department of Consumer and Business Services (DCBS) to suspend its price increase reporting and could spur challenges to similar drug price transparency laws in other states. Although New York’s transparency law allows a manufacturer to designate information as a trade secret and does not mandate publication of trade secrets simply because the state deems it in its interest to do so, the Oregon case indicates that Courts may be amenable to challenges on these and other grounds as well.
How Frier Levitt Can Help
Navigating the often-complex regulatory scheme surrounding state prescription drug transparency laws can be onerous. Drug transparency laws signify the latest attempt to control rising drug prices and represent a unique set of challenges to the pharmaceutical manufacturing industry. State price transparency reporting legislation is not consistent across states, transparency processes tend to be highly manual, and reporting requirements can be complex, rapidly evolving, and include significant penalties for noncompliance. In addition, the implementation process for drug transparency laws can be time consuming and resource-intensive, requiring manufacturers to complicate the work of internal pricing committees, provide documented rationales for price increases, submit reports on a timely basis, and identify potential trade secret information. Critically, a multi-state effort to comply with these laws will require long term planning on the part of drug makers. Thus, with significant state efforts to mandate drug pricing transparency and reporting (and consequently impacting pricing methodologies) already in place, manufacturers must get out ahead of these changes and ensure that their operations are compliant, as well as anticipate the long-term impact of the new transparency regime in the states in which they operate.
At Frier Levitt, we regularly engage with regulators and policymakers to successfully influence policy, guide legislation, overcome regulatory issues, and develop vital long-term relationships on a state-by-state basis. Pricing transparency laws may implicate, at a minimum, patient access to life-saving medications, encourage additional attempts at government price negotiations instead of free market solutions, and adversely affect your ability to deliver value to your patients. Accordingly, manufacturers may have rights to address these transparency reporting obligations in litigation, on preemption and other Constitutional grounds. Our intellectual property team can work with you to identify and protect valuable trade secrets. For help understanding the legal requirements applicable to your company, contact Frier Levitt. Our attorneys have the experience and knowledge to help your company operate compliantly in a dynamic environment, including analyzing your existing arrangements to ensure compliance, and guiding you with up-to-date analyses on a state-by-state basis so that you may plan your business strategies accordingly.
