Prescription Drug Affordability Act

Summary: The Prescription Drug Affordability Act establishes a Prescription Drug Affordability Board to review and establish fair and affordable drug costs. (Note that state agencies already review and approve costs for such things as health insurance and the rates hospitals can charge for services.)

Based on a bill soon to be filed in Maryland

SECTION 1. SHORT TITLE

This Act shall be called the “Prescription Drug Affordability Act.”

SECTION 2. FINDINGS AND PURPOSE

(A) FINDINGS—The legislature finds that:

1) Prescription medications are essential to the health and safety of state residents.

2) Many prescription drugs have become increasingly unaffordable for residents, employers, and State and local governments because parts of the prescription drug market exert monopoly or oligopoly pressure, creating unmanageable costs for consumers across wide market segments, leading to a rising, unsustainable, strain on State and commercial health plan budgets and lowering equitable access to life-sustaining medications for residents.

3) Other sectors across widely varying industries, such as research universities, academic and safety net hospitals, public utilities, and telecommunications, often receive public funds and State protections and are regulated routinely to ensure affordability but still maintain their ability to innovate and provide accessible products to many consumers.

4) State and federal agencies have a long history of health care rate setting including for name brand pharmaceuticals, biologics, and generic drugs to manage healthcare costs.

5) All public and private healthcare programs, including Medicaid and state employee benefit programs, set payment rates for generic and patient-protected drugs.

6) The State Medicaid program, state employee health benefit programs, and private health insurers set prescription drug payment rates that drive negotiations and financial transactions through the supply chain, which may be out of state.

7) Taxpayers support the pharmacy benefit for almost [one-third] of state residents already.

(B) PURPOSE—This law is enacted to protect the health and welfare of residents and responsibly manage taxpayer funds.

SECTION 3. PRESCRIPTION DRUG AFFORDABILITY

After section XXX, the following new section XXX shall be inserted:

(A) DEFINITIONS—In this section:

1) “Board” means the Prescription Drug Affordability Board.

2) “Manufacturer” means an entity that:

a) engages in the manufacture of a prescription drug or biologic for which it owns the FDA approved license, or

b) leases the marketing rights for an FDA licensed prescription drug or biologic from another, and

c) sets or changes the wholesale acquisition cost of the FDA licensed prescription drug or biologic it manufactures or markets.

3) “Stakeholder Council” means the Prescription Drug Affordability Stakeholder Council.

(B) PRESCRIPTION DRUG AFFORDABILITY BOARD

1) There is a Prescription Drug Affordability Board, the purpose of which is to protect state residents, state and local governments, commercial health plans, health care providers, pharmacies licensed in the state, and other stakeholders within the health care system from unduly high costs of prescription drugs.

2) The Board shall consist of the following members who have expertise in health care, economics or clinical medicine:

a) one member appointed by the governor;

b) one member appointed by the president of the senate;

c) one member appointed by the speaker of the house of delegates;

d) one member appointed by the attorney general; and

e) the chairperson, who shall be jointly appointed by the president of the senate and the speaker of the house of delegates.

3) The governor, the senate president and the speaker of the house of delegates shall appoint one member each to serve as alternate members who shall as designated by the board chairperson participate in deliberations of the board when a member is recused.

4) No member shall be an employee, board member, or consultant to any prescription drug manufacturer or prescription drug manufacturer trade association.

5) Any conflict of interest, including whether the individual has an association, including a financial or personal association that has the potential to bias or has the appearance of biasing an individual’s decisions in matters related to the board or the conduct of the board’s activities, shall be considered and disclosed when appointing members to the board.

6) The term of a member is 5 years and the end date of the terms are to be staggered.

7) The chair shall hire an executive director, general counsel, and staff for the Board. Staff of the Board shall receive a salary as provided in the budget of the Board.

8) A member of the Board may receive compensation as a member of the Board in accordance with the state budget and is entitled to reimbursement for expenses under the standard state travel regulations, as provided in the state budget.

9) Except as provided in this paragraph, the Board shall meet in open session at least every 6 weeks to review prescription drug product information.

10) Notwithstanding the Open Meetings Act, the Board may meet in closed session to discuss proprietary data and information, but decisions of the Board shall be made in open session.

11) The following actions by the Board shall be made in open session:

a) deliberations on whether to subject a prescription drug to a full cost review; and

b) any vote on whether to impose a cost or payment limit on payors for a prescription drug product.

12) Public notice of each Board meeting shall be provided at least 2 weeks in advance of the meeting and materials for each Board meeting shall be made available to the public at least 1 week in advance of the meeting.

13) The chair may cancel or postpone a meeting if there are no prescription drug product submissions to review.

14) The Board shall provide an opportunity for public comment at each open meeting of the board and the Board shall provide the public with the opportunity to provide written comments on pending decisions of the Board.

15) The Board may allow expert testimony at Board meetings, including when the Board meets in closed session.

16) To the extent feasible and practicable, the Board shall access drug pricing information by:

a) entering into memoranda of understanding with states to which manufacturers already report drug pricing information, and

b) accessing other available drug pricing information.

17) A majority of members of the Board constitutes a quorum.

18) A member of the board shall recuse the member from the decisions related to a prescription drug under review if the member, or a close relative of the member, has received or could receive any of the following:

a) a direct financial benefit of any amount deriving from the result or findings of a study or determination by or for the Board; or

b) a financial benefit from individuals or companies that own, manufacture, or provide prescription drugs, services, or items to be studied by the Board that in the aggregate exceeds $5,000 per year.

19) A financial benefit as described in this paragraph includes honoraria, fees, stock, the value of the member’s or close relative’s stock holdings, and any direct financial benefit deriving from the findings of a review conducted under this subtitle.

(C) STAKEHOLDER COUNCIL 

1) There is a Prescription Drug Affordability Stakeholder Council, the purpose of which is to provide stakeholder input to the Board on its decisions.

2) The Stakeholder Council shall consist of twenty-one members to be appointed by the governor, the president of the senate and the speaker of the house of delegates in the manner described in this subsection. The Board chair shall choose two members of the Stakeholder Council to be cochairs of the Stakeholder Council.

3) The speaker of the house of delegates shall choose: one representative of a statewide health care advocacy coalition; one representative of a statewide advocacy organization for seniors; one representative of a statewide organization for diverse communities; one representative of a labor union; two health services researchers specializing in prescription drugs; and one public member at the discretion of the speaker of the house of delegates.

4) The president of the senate shall choose: one representative of doctors; one representative of nurses; one representative of hospitals; one representative of health insurers; one representative of the department of budget and management; one clinical researcher; and one public member at the discretion of the president of the senate.

5) The governor shall choose: one representative of brand name drug corporations; one representative of generic drug corporations; one representative of employers; one representative of pharmacy benefit managers; one representative of pharmacists; one pharmacologist; and one public member at the discretion of the governor.

6) The members of the Stakeholder Council shall have knowledge of one or more of the following:

a) the pharmaceutical business model;

b) supply chain business models;

c) the practice of medicine or clinical training;

d) consumer or patient perspectives;

e) health care costs trends and drivers;

f) clinical and health services research; or

g) the state’s health care marketplace.

7) The term of a member is 3 years and the members of the stakeholder council shall serve staggered terms.

8) a member of the Stakeholder Council:

a) shall not receive compensation as a member of the advisory council; but

b) is entitled to reimbursement for expenses under the standard state travel regulations, as provided in the state budget.

(D) AVOIDANCE OF CONFLICTS OF INTEREST

1) Any conflict of interest shall be disclosed in the following manner:

a) by the Board when hiring Board staff;

b) by the appointing authority when appointing members to the Board and the Stakeholder Council; and

c) by the Board, describing any recusal by a member of the Board in any final decision resulting from a review of a prescription drug product.

2) A conflict of interest shall be disclosed:

a) in advance of any open meeting; and

b) within 5 days after the conflict is identified.

3) A conflict of interest disclosed under this subsection shall be posted on the website of the Board unless the member recuses the member from any final decision resulting from a review of a prescription drug product.

4) A posting under this subsection shall include the type, nature, and magnitude of the interests of the member involved.

5) Members of the Board, board staff, and third-party contractors may not accept any gift or donation of services or property that indicate a potential conflict of interest or have the appearance of biasing the work of the Board.

(E) REVIEW OF PRESCRIPTION DRUGS

1) This section does not apply to a drug used in an inpatient setting if the drug is regulated by the health services cost review commission.

2) Nothing in this section may be construed to prevent a manufacturer from marketing a product approved by the federal food and drug administration while the product is under review by the Board.

3) Nothing in this subtitle may be construed to affect:

a) an entity’s eligibility for the 340b prescription drug discount program; or

b) the discounts that are available to an entity that is eligible for the 340b prescription drug discount program.

4) The Board will identify:

a) brand-name drugs and biologics, including biosimilars, licensed under a new drug application or biologics license application that have a launch price of $30,000 or more for a year or course of treatment, or a price increase of $3,000 or more in any twelve-month period, or course of treatment if less than 12 months.

b) generic drugs licensed under an abbreviated new drug application with a price increase of $300 or more in any twelve-month period, or course of treatment if less than 12 months; and

c) in consultation with the Stakeholder Council, prescription drug costs that may create affordability challenges for the state healthcare system, including patients.

5) The Board will seek Stakeholder Council input about drugs identified in this subsection. To the extent there is no publicly available source for the information, the Board shall request information from manufacturers of identified drugs regarding pricing rationales. The information shall include, but not be limited to any documents and research related to the manufacturer’s selection of the introductory price or price increase, including life-cycle management, net average price in the state, market competition and context, projected revenue, and the estimated value or cost–effectiveness of the product, if available.

6) If the Board conducts a review of the cost of a prescription drug, the review shall determine if utilization of the drug that is fully consistent with the federal Food  and Drug Administration label has led or will lead to affordability challenges for the state health care system, including patients.

7) To the extent feasible, the Board may consider the following factors in determining cost to the health care system and patients:

a) the wholesale acquisition cost for the prescription drug sold in the state;

b) the average monetary price concession, discount, or rebate the manufacturer provides to health plans in the state or is expected to provide to health plans in the state as reported by manufacturers and health plans, expressed as a percent of the wholesale acquisition cost for the prescription drug under review;

c) the total amount of the price concession, discount, or rebate the manufacturer provides to each pharmacy benefit manager operating in the state for the prescription drug under review, as reported by manufacturers and pharmacy benefit managers, expressed as a percent of the wholesale acquisition cost;

d) the price at which therapeutic alternatives have been sold in the state;

e) the average monetary price concession, discount, or rebate the manufacturer provides to health plan payors and pharmacy benefit managers in the state or is expected to provide to provide for therapeutic alternatives;

f) the cost to health plans based on patient access consistent with federal food and drug administration labeled indications;

g) the impact on patient access resulting from the cost of the product relative to insurance benefit design;

h) the current or expected dollar value of drug-specific patient access programs that are supported by the manufacturer;

i) the relative financial impacts to health, medical, or social services costs as can be quantified and compared to baseline effects of existing therapeutic alternatives; and

j) any other factor as determined by the Board in regulations adopted by the Board.

8) If the Board is unable to determine whether a prescription drug product will produce or has produced challenges to the affordability of the drug for the state health care system, using  the  factors  listed  in this subsection, the Board may consider the following factors:

a) manufacturer research and development costs, as indicated on the manufacturer’s federal tax filing or information filed with the federal securities and exchange commission for the most recent tax year in proportion to the manufacturer’s sales in the state;

b) the portion of direct–to–consumer marketing costs eligible for favorable federal tax treatment in the most recent tax year, that are specific to the prescription drug product under review and that are multiplied by the ratio of total manufacturer in–state sales to total manufacturer sales in the united states for the product under review;

c) gross and net manufacturer revenues for the most recent tax year;

d) any additional factors proposed by the manufacturer that the board considers relevant; and

e) any additional factors as established by the Board in regulations.

9) If the Board finds that the spending on a prescription drug product reviewed under this section creates affordability challenges for the state health care system, including patients, the Board shall establish the upper payment limit that applies to all purchases and payor reimbursements of the prescription drug product in the state.

10) Any submission made to the Board related to a drug cost review shall be made available to the public with the exception of information determined by the board to be proprietary. The Board, after public notice and comment, shall establish the standards for such information to be considered proprietary.

(F) ENFORCEMENT AND REVIEW

1) The Office of the Attorney General may pursue any available remedy under state law when enforcing this subtitle.

2) A  person aggrieved by a decision of the Board may request an appeal of the decision within 30 days after the finding of the Board.

3) The Board shall hear the appeal and make a final decision within 60 days of the hearing.

4) Any person aggrieved by a final decision of the Board may take a direct judicial appeal as provided in the Administrative Procedure Act.

(G) FUNDING

1) The Board shall be funded by an assessment on all manufacturers.

2) The Board shall determine the amount of the assessment required under subsection, but not to exceed a total assessment on all manufacturers of $2,500,000 per year.

3) There shall be created a Prescription Drug Affordability Board Fund into which shall be paid all assessments required to paid by manufacturers under this section. This treasurer shall separately hold, and the comptroller shall account for, the fund.

4) The fund created by this section shall be used only to provide funding for the Board and for the purposes authorized under this section including any costs expended by any state agency to implement this subtitle.

5) The fund shall be invested and reinvested in the same manner as other state funds.  Any investment earnings shall be retained to the credit of the fund. The fund shall be subject to an audit by the [office of legislative audits]. This section may not be construed to prohibit the fund from receiving funds from any other source.

6) The Board shall be established using general funds, which shall be repaid to the state with the assessments required under this section.

(H) ANNUAL REPORT

1) The Board shall make available an annual report to the [finance committee of the Senate] and the Health Committee of the House] regarding:

a) prescription drug price trends;

b) the number of products that were subject to Board review, including the results of the review and the number and disposition of appeals and judicial reviews of board decisions; and

c) any recommendations the Board may have on further legislation needed to make prescription drugs more affordable.

SECTION 4. EFFECTIVE DATE

This law shall become effective on July 1, 20XX.

 

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