LawFlash

New Jersey Latest to Join States Signing Drug Price Transparency Reporting Measures into Law

August 16, 2023

Following in the footsteps of other states, New Jersey’s state legislature has recently signed into law three bills for containing prescription drug costs. One bill—Senate Bill 1615—is likely to have a particularly sweeping impact on the state’s burgeoning drug price transparency efforts.

As discussed in our last State Drug Price Transparency Reporting Legislative Update, some states have continued to act on drug price transparency reporting efforts despite many state legislative sessions already having come to a close. New Jersey in particular has answered the question we posed at the end of the last update—“are they done yet?”—just last month when the state’s governor signed three bills into law that are designed to help curb prescription drug costs.

Of note, Senate Bill 1615, slated to take effect on August 1, 2024, implements a variety of reporting requirements across the prescription drug supply chain, culminating in the publication of an annual report, and is supplemented by continuing legislative efforts championed by the establishment of a Drug Affordability Council, the one aspect of the law that will be implemented immediately.

Reporting Requirements

Among the now standard reforms contained in SB 1615 are notification requirements that will be imposed on “manufacturers,” which, consistent with most state laws, is defined to include drug product packagers, repackagers, labelers, relabelers, and distributors.

Manufacturers that will be subject to reporting are those that increase the wholesale acquisition cost (WAC) of (1) a brand drug by more than 10% during any 12-month period, (2) a generic drug costing between $10-$100 by more than 40% during any 12-month period, or (3) a generic drug costing $100 or more by greater than 10% during any 12-month period.

If a manufacturer implements a reportable price increase, the manufacturer must provide written notice to the New Jersey Division of Consumer Affairs (the Division) within 10 days following the effective date of the increase. The Division will then notify consumers of the increase on its website.

If any of the above reporting requirements are triggered, the manufacturer must disclose, at a minimum, the following within 20 days of the reportable price increase:

  • The national drug code, proprietary drug name, nonproprietary drug name, and pricing unit of the drug, as applicable;
  • Sales volume and revenue in New Jersey in the previous calendar year and projected sales volume and revenue for the current calendar year;
  • The wholesale price and related information as specified by the Division, which may include the WAC at market introduction, the WAC in the previous calendar year, and the current WAC;
  • Manufacturer costs associated with sales of the drug in New Jersey in the previous calendar year and projected for the current calendar year;
  • Current calendar-year projections or incurred costs year to date related directly or allocated specifically to sales of the drug in New Jersey; and
  • The reason(s) the manufacturer increased the WAC of the drug from the previous year.

Similarly, a manufacturer must provide written notice to the Division within 10 days following the date of market introduction of either (1) a new drug with a WAC that exceeds the Medicare Part D specialty threshold or (2) a biosimilar with a WAC at least 15% more than the WAC of the referenced brand biologic. In the event of a reportable market introduction, the Division will again notify consumers of the drug’s price on its website.

If either of the above reporting requirements related to market introduction are triggered, the manufacturer must disclose, at a minimum, the following within 20 days of the reportable event:

  • The national drug code, proprietary drug name, nonproprietary drug name, and pricing unit of the drug, as applicable;
  • Projected patient volume and revenue in the current year for the drug in New Jersey; and
  • The WAC at market introduction.

In addition to manufacturers, SB 1615 also imposes a number of reporting requirements on pharmacy benefit managers (PBMs), wholesalers, carriers, and pharmacy services administrative organizations, including but not limited to disclosures on the total discounts and rebates negotiated by PBMs and wholesalers, totals and increases in enrollee cost-sharing for carriers, and reimbursement rates negotiated by pharmacy services administrative organizations.

For any of these entities, including manufacturers, the Division may audit the data submitted in satisfaction of these requirements at the sole expense of the reporting entity and require the entity to submit a corrective action plan to correct reporting deficiencies.

Registration

Each reporting entity identified above is additionally required to register annually with the Division by January 31 of each year, beginning January 31, 2025. Each entity must pay an annual assessment as set by the Division to cover the Division’s operational costs.

Annual Reports

Using the reported information, the Division will also annually prepare and make available on its website a report on emerging trends in prescription drug prices. As stated in SB 1615, the Division’s goal in publishing this report is to identify the major components of prescription drug pricing along the supply chain and the impacts on insurance premiums and consumer cost sharing.

The Division will not include in the report any information deemed to be confidential, which includes all information submitted to the Division by an individual reporting entity unless the information is otherwise publicly available. The Division also is required to conduct an annual public hearing based on the findings in the report, may call one or more additional public hearings, and may subpoena any reporting entity with respect to compliance with the reporting requirements.

Drug Affordability Council

Lastly, SB 1615 established a Drug Affordability Council (the Council), which is designed to formulate legislative and regulatory policy recommendations to protect New Jerseyans, benefit plans, providers, and pharmacies—among others—from the high costs of prescription drugs. The Council will be composed of public members, in part appointed by the governor, who will review the reports issued and data collected by the Division as well as independently collect and review transparency data that the Council may access and find useful for its work.

Upon review of such reported and collected data, the Council will submit to the governor annually legislative, regulatory, or other recommendations that are designed to lower the cost of prescription drug products that, upon the Council’s determination, have led or will lead to an affordability challenge for the state healthcare system and New Jersey patients.

Importantly, and unlike in some other states, the statute expressly requires the Council to consider and address any impact that its recommendations will have on research and development, access to care, or any other direct or indirect economic or social costs that the Council deems relevant when developing these recommendations and issuing its report.

Penalties for Noncompliance

If any of the above-listed reporting entities fails to comply with any section of SB 1615, the Director of the Division may impose civil penalties in the amount of $10,000 for the first day that the reporting entity is in violation, increasing by $1,000 per each additional day of noncompliance, not to exceed $100,000 per day.

Implications

Most of the requirements set forth in SB 1615 will not go into effect until August 1, 2024, save for the Drug Affordability Council, whose members must be appointed within 180 days of the legislation’s effective date and will subsequently hold its first meeting within 30 days following appointment of its members.

With the passage of SB 1615, New Jersey has fallen in line with many other states where similar transparency reporting is becoming part and parcel with drug pricing reforms. While many, but not all, of the states’ drug price transparency reporting laws follow the same basic structure, the disparities among the laws with respect to such things as thresholds that trigger reporting requirements, the timing of reporting cycles, and the specific content and format of the data required to be submitted demonstrate that the already significant cost of compliance increases with each state that joins the bandwagon.

Although manufacturers are understandably remiss to invite additional congressional oversight, the expanding patchwork of disparate state reporting requirements soon may beg for a national standard.

Contacts

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