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The growing call for greater transparency into drug prices

by Kyle Forcier, Model N May 20, 2022

Scrutiny on drug prices in the U.S. isn’t a new phenomenon. In the mid-2010s, high-profile increases on drugs like insulin made national news. In their Rx Price Watch Report from 2021, AARP found that retail-level prices for brand-name prescription drugs have consistently risen faster than general inflation. When drugs are unaffordable, people are less likely to take their medications as prescribed. According to the 2021 Medication Debt Survey by GoodRx, 18.7% of adults have delayed refilling a prescription and 16.4 have rationed medication because of drug costs.

These rising prices and their associated impacts have caught the attention of the media and lawmakers. For years – including during the last election – there have been calls for greater transparency into drug prices and even requests for limits on price increases. Despite the attention, the federal government has been unable to address these concerns.

As result, states are taking the reins and proposing and passing legislation to increase visibility into drug pricing, particularly related to market launches and price increases. These regulations are intended to help control pharmaceutical spend and better understand the rationale for price increases.

What are states requiring? 

Under price transparency rules, pharmaceutical companies must generate and send reports based on triggering events, which include wholesale acquisition cost (WAC) price increases, annual price lists, new drug pricing, newly acquired products, and new drug applications.

Each state has designed its own approach for these mandates, which means reporting rules, formats, and timelines vary from state to state. For example, some states require a 60-day advance notice of a WAC increase, whereas others mandate notices on a 30-day or quarterly basis.

Manufacturers are responsible for generating and sending the right reports, in the right formats, on the right timelines to each state. Depending on the nature of a company’s price increases and drug types, reporting volumes can vary drastically. Regardless, the sheer complexity of this landscape is making it difficult for many manufacturers to achieve compliance.

Why is compliance so challenging?

Already 22 states have regulations in place, and they continue to evolve, amend, and add to these regulations. Because federal legislation concerning price transparency is likely to continue to remain elusive, more states are expected to take matters into their own hands. In the next few years, more than 30 states are expected to have some level of price transparency rules on the books.

This ever-evolving landscape can be tough to follow. Manufacturers must stay abreast of legislative activity, and often rely on outside counsel to help them interpret the requirements.

Even if manufacturers can get a handle on tracking current and future legislative activity, reporting can be tedious and challenging. There is little commonality across states regarding their filing formats, deadlines, and required information. Rules can be complex, involving different calculations and/or documentation. Often this documentation spans different operational functions – from marketing and pricing to R&D and finance – requiring cross-departmental collaboration.

Penalties for not reporting or submitting reports on a timely basis can be steep, ranging from $1,000 to $30,000 per day. In just one example, California levied $17.5 million in fines against more than 12 manufacturers for reporting violations in 2020.

How can technology improve the process?

Many manufacturers keep track of these mandates through spreadsheets and calendars, updating them manually with due dates and triggering events. Model N aims to streamline this process with a purpose-built SaaS solution. Built on the Salesforce platform, State Price Transparency Management combines automation and intelligence to operationalize state-specific drug price transparency requirements. This highly configurable, easy-to-use solution enables manufacturers to manage and meet the unique reporting needs of each state.

Stay tuned for our next blog post on drug transparency, in which we will explore Model N’s solution and how it can help pharmaceutical manufacturers minimize the risk of non-compliance with the vast set of growing requirements.

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