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State price transparency reporting
Operational considerations for 2020
Over the past few years, several states have enacted state price transparency legislation to address prescription drug costs and spending. As more states continue to introduce and enact legislation, it will be important for pharmaceutical manufacturers to understand the requirements and the implications for their current and future business.
- Current environment
- Potential challenges and complexities
- How Deloitte Risk and Financial Advisory can help
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Many states have determined that it’s in their preferred interest to take legislative action in order to curb drug price increases and to decrease their annual pharmaceutical spend. This momentum is likely to continue in the years ahead. As public and legislative scrutiny on drug prices continues, and as more states continue to introduce and pass legislation, it will be important for pharmaceutical manufacturers to understand the requirements and the implications for their current and future business.
Many of the enacted state price transparency regulations fall into the following categories:
- Advance notice of price increases: Manufacturers that plan to take wholesale acquisition cost (WAC) increases that exceed defined thresholds are required to provide advance notice to certain purchasers or state agencies.
- Price-increase reporting: Manufacturers that increase the price of a drug at a rate that exceeds a defined threshold (for example, 20 percent per unit over a calendar year) are required to report information regarding the drug and the price increase.
- Drug pricing reports: Manufacturers that sell drugs in certain states are required to periodically report pricing to the state.
- New drug entry: Triggered when a manufacturer launches a new drug product that has a price that exceeds a specific threshold (for example, WAC at launch exceeds the Medicare Part D specialty drug threshold).
- Price disclosure to HCPs and states: Requires manufacturers to disclose WAC or the average wholesale price (AWP) of a drug to the state or health care providers (HCP).
Potential challenges and complexities
State price transparency reporting legislation is not consistent across states and requires careful analysis of each requirement to understand the intricacies and reasonable assumptions that will be required for compliant reporting.
Cross-functional complexity. Many of the regulations have cross-functional complexity that affects multiple departments throughout an organization, such as legal, compliance, government pricing, government affairs, and market access. A lack of interdepartmental understanding and communication may pose challenges implementing and maintaining consistent processes and documentation that is needed to report information in a consistent and timely fashion.
Implications for pricing strategies. With additional states drafting price transparency regulations, manufacturers should be conscious of their pricing strategy and the implications from a legal and public perception perspective. Future enacted regulations may affect future business decisions and pricing strategies. Additionally, in order to stay below statutory reporting thresholds, manufacturers may need to consider adjusting pricing strategies.
Impact of public disclosures. Manufacturers may need to address the complexities that could result from reported prices being available to the public and should assess the legal implications of what to report. The specific information that manufacturers are required to report varies and often touches upon sensitive information, ranging from the profit earned for a specific drug to the direct costs incurred to manufacture the drug. This may create competitive challenges and public relations issues or lead to information being misinterpreted.
Complex and evolving reporting requirements. Reporting requirements are complex, rapidly evolving, and often include penalties for noncompliance. Resource constraints may limit a manufacturer’s ability to actively monitor newly enacted or enhanced legislation and understand the details of each reporting requirement. Manufacturers can face fines for failure to report specified information, failure to report information on time, or failure to report complete information. This may require in-depth legal and operational assessment of the reporting requirements.
How Deloitte Risk & Financial Advisory can help
Deloitte Risk & Financial Advisory works with manufacturers to assist with policies and standard operating procedures, correct and timely reporting, and reasonable assumptions. We also help with ongoing reporting including the development of a state drug price transparency system and tools that contain pricing information to run pricing scenarios and generate reports required for reporting. Our solutions include:
- Tailored offerings
- Operational readiness and assessment
- Documentation (policies, procedures, and reasonable assumptions)
- Systems and tools
- Ongoing support
To learn more about drug price transparency, download the full report: State price transparency: Operational considerations for 2020.
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