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Legal Insights and Perspectives for the Healthcare Industry

HB 2536 requires pharmaceutical manufacturers to disclose to the Texas Health and Human Services Commission (HHSC) when a drug’s price increases 15% or more compared to the previous year, or 40% or more over three calendar years. The new law also requires annual reporting of detailed price information by manufacturers, pharmacy benefit managers, and health benefit plans, and charges the HHSC with making this information available online to the public.

Texas Governor Greg Abbott recently signed legislation into law requiring drug manufacturers, pharmacy benefit managers (PBMs), and health benefit plans to report aggregate drug price data to the HHSC. Considered by many to be one of the nation’s most aggressive drug price transparency measures, HB 2536 reflects a larger trend among states to track and use drug pricing information to help curb escalating costs in the absence of federal legislation. To that end, drug manufacturers, PBMs, and health benefit plans should prepare to comply with the new reporting requirements and deadlines, as summarized below.

Drug Manufacturers

Not later than January 15 of each calendar year, each drug manufacturer must submit a report to the HHSC stating the current wholesale acquisition cost (WAC) information for FDA-approved drugs sold in or into Texas by the manufacturer. The new law further requires drug manufacturers to report to the HHSC within 30 days after the effective date of an increase of 40% or more in the WAC of a drug over three calendar years, or 15% or more in the preceding calendar year. This provision only applies to prescription drugs with a WAC cost of at least $100 for a 30-day supply before the effective date of the increase.

The “quality” and type of information required for the price increase report must be “consistent” with the manufacturer’s Form 10-K, or any other public disclosure, and include the following:

  • The name of the drug
  • Whether the drug is a brand name or generic
  • The effective date of the change in the WAC
  • Aggregate, company-level research and development costs for the most recent year for which final audit data is available
  • The name of each of the manufacturer’s prescription drugs approved by the FDA in the previous three calendar years
  • The name of each of the manufacturer’s prescription drugs that lost US patent exclusivity in the previous three calendar years
  • A statement regarding the factor or factors that caused the increase in the drug’s WAC and an explanation of how each factor affected the costs

HB 2536 charges the HHSC executive commissioner with making the information reported by drug manufacturers available to the public within 60 days of receipt by the HHSC, either by using a dedicated link prominently displayed on the HHSC home page, or under a separate “easily identifiable” internet address.

Pharmacy Benefit Managers

PBMs are required to file annual reports by February 1 with HHSC stating the aggregated rebates, fees, price protection payments, and any other payments collected from the manufacturers for the immediately preceding calendar year, and the aggregated dollar amount of these payments passed to health benefit plans or enrollees at the point of sale of a prescription drug, or retained as revenue by the PBM. The first year’s PBM report, due February 1, 2020, must provide this information for the immediately preceding three calendar years.

PBM reports may not disclose the identity of a specific health benefit plan or enrollee, the price charged for a specific prescription drug or class of prescription drugs, or the amount of any rebate or fee provided for a specific prescription drug or class of prescription drugs.

Health Benefit Plans

A health benefit plan issuer is defined as an insurance company, a health maintenance organization, or a hospital or medical service corporation. Health benefit plan issuers are also required to annually report to the HHSC on the following by February 1, for the immediately preceding calendar year:

  • The names of the 25 most frequently prescribed prescription drugs across all plans
  • The percent increase in annual net spending for prescription drugs across all plans
  • The percent increase in premiums that were attributable to prescription drugs across all plans
  • The percentage of specialty drugs with utilization management requirements across all plans
  • The premium reductions that were attributable to specialty drug utilization management

The new legislation should not affect most employers with respect to health plans for their employees. Most employers will fall outside of the definition of a health benefit plan issuer. In addition, for self-insured plans maintained by employers subject to ERISA, the new Texas law is likely to be preempted by ERISA. Similar to the prohibition on PBMs, reports by the health benefit plans may not disclose the identity of a specific plan or the price charged for a specific prescription drug or class of prescription drugs.

The aggregated data from all PBM and health benefit plan reports for the year will be published annually on the HHSC’s website no later than May 1 and “in a manner that does not disclose or tend to disclose proprietary or confidential information” of any PBM or health benefit plan.

The HHSC executive commissioner may adopt rules to implement the new changes.

The new law is effective September 1, 2019. According to the legislation, manufacturers, health plans, and PBMs are not required to submit their reports before January 1, 2020.