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State price transparency reporting

Maintain compliance as regulatory pressure builds

Reporting regulations have recently been introduced at the US state, county, and city levels to address prescription drug costs and spending. These changes have further complicated the regulatory landscape and pricing pressures, leading to the need for greater drug price transparency and additional reporting capabilities.

Current environment

In recent years, an increasing number of US states have passed—or are in the process of passing—new regulations designed to limit drug costs by requiring reporting on drug prices and drug price increases. This legislative push has largely been in response to the industry trend of increasing Wholesale Acquisition Cost (WAC) prices and the inability of drug pricing legislation to be passed at the federal level.

States have determined that it's in their interest to take legislative action in order to curb drug price increases and to decrease their annual pharmaceutical spend as a result. It's likely that this type of legislation will continue as more states seek to control the cost of pharmaceuticals in their annual budget.

There are two general types of regulations that have been increasing in frequency among the states:

  1. Transparency reporting requirements for interactions with health care providers (HCPs)
  2. State price transparency reporting requirements

There are distinct reporting and notification requirements for these two types of regulations. Manufacturers already familiar with government price and aggregate spend reporting can leverage synergies for these new drug price transparency requirements based on the processes they may already have in place.

Recently enacted and pending state price transparency legislation as of December 1, 2017

Potential challenges and complexities

Newly enacted state price transparency reporting and HCP transparency reporting legislation isn't consistent across states and will require careful analysis of each requirement to understand the intricacies and reasonable assumptions that will be required for compliant reporting.

Many of the reporting requirements have been designed to increase insights into pricing decisions and manufacturer interactions with HCPs through reporting, with no direct state action required as a result of the reports. Other regulations tie drug spending to additional requirements.

Similar to how the Centers for Medicare and Medicaid publishes HCP transactional data on its Open Payments website, many states plan to publish manufacturers' WAC information online. Therefore, manufacturers will need to address the complexities that may result from reported prices being available to the public. This may create competitive challenges, public relations issues, and potentially provide information that could be misinterpreted. These types of challenges will have to be understood in order to respond to the regulations and act in a compliant manner.

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How are manufacturers responding?

Tracking and assessment
Many manufacturers have begun tracking and reviewing both pending legislation to understand the likelihood of them being enacted and the enacted legislation to understand the new requirements. Due to the unique nature of each piece of legislation, manufacturers should consider starting with the state laws that were enacted and require reporting to assess each set of requirements on an individual basis.

Cross-functional considerations
Manufacturers realize that a diverse set of knowledge and skills are required to comply with state drug price transparency reporting. Consequently, they have begun to organize cross-functional workgroups to evaluate enacted and pending legislation. Many manufacturers have found that the nuances of each piece of legislation are addressed more effectively by a cross-functional team.

Reporting methodologies
In order to comply with new state requirements, manufacturers are likely to need to develop new reporting methodologies. These methodologies should specify the type, content, frequency, and recipient(s) for each report required. In addition, the methodologies and reasonable assumptions should be tailored to each state requirement.

Pricing strategy design
Many manufacturers have also begun to analyze the impact on future business decisions and the potential need to re-evaluate pricing strategies as a result of changes in transparency and reporting requirements. For example, some manufacturers may determine that they need to adjust their pricing strategies in order to stay below statutory thresholds for reporting, while other manufacturers may determine that it's inappropriate to change their future pricing decisions in response to these external factors.

Reasonable assumptions
Finally, where legislation may not be explicit in the timing or manner of reporting, manufacturers have begun to develop reasonable assumptions that will guide their activities related to compliance with specific state legislation. As with reasonable assumptions that manufacturers have developed in response to the other government agency reporting, legal counsel will likely need to drive development of the assumptions to determine what will make sense for their business given the intent of the legislation.

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How Deloitte Risk and Financial Advisory can help

Deloitte Risk and Financial Advisory can assist manufacturers in navigating enacted state drug price transparency requirements and in understanding the potential short- and long-term operational impact and compliance considerations through our:

  • Tailored solutions
  • Defined roles and responsibilities 
  • Operational readiness 
  • Policies and standard operating procedures
  • Ongoing support
  • Transparency Managed Risk Services

To learn more about drug price transparency, HCP transparency, and more, download the full report: State price transparency reporting: Maintain compliance and operational readiness as regulatory pressure builds.

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