On June 3, 2016, the Governor of Vermont signed into law a bill that would highlight drugs on which the State spends significant amounts of money, with the goal of regulating the drug manufacturers’ setting of acquisition and list prices. Under the law, pharmaceutical companies producing those specific drugs could be fined up to $10,000 if the State determines that Wholesale Acquisition Cost (WAC) rises too quickly and the company fails to disclose the reasons for such hikes.
Specifically, this new law requires State officials to identify annually up to 15 drugs that the State spends “significant health care dollars” on, and where the drug’s WAC rose by 50% or more over the previous 5-year period. Alternatively, the State officials must identify list prices for 15 drugs that rose 15% or more over the previous 12-month period. Once these drugs are identified, the State Attorney General will contact the makers of the drugs in order to obtain an explanation for the price increases, including all the factors that contributed to the price hikes. If such justification is not provided, the Vermont Attorney General may bring a civil action against the drug company, which carries a potential maximum of $10,000 per violation.
This law comes in the aftermath of the recent exposures of the large, and often unexplained, price increases in the pharmaceutical industry. To date, Vermont is the first and only State to sign into law a bill that requires drug makers to justify price hikes on their medicines. However, thirteen other States, including New York, California, Ohio, Massachusetts and Virginia are currently drafting new price transparency bills.
The true impact of these laws is that drug manufacturers may face regulatory exposure at the State level, depending on the manner of how the drug prices were set. This comes at a time when there has been scant regulation to date – both at the State and Federal levels – regarding manufacturers’ setting of drug prices. Drug manufacturers must be increasingly concerned with ensuring compliance when setting acquisition prices, reporting benchmark pricing, or adjusting pricing for medications. Frier Levitt has experience in representing drug manufacturers and distributors in setting acquisition and benchmark prices for drugs, and ensuring compliance with applicable laws and regulations. Contact us today for help ensuring that your company remains in compliance with ever-changing regulations.
