June 07, 2016

Vermont's Verity: First-in-Nation Drug Price Transparency Law

On June 3, 2016, Vermont Gov. Peter Shumlin (D) signed a bill into law that aims to increase the transparency and rationale for prescription drug prices. The law gives a new state board responsibility to identify up to 15 prescription drugs on which the state “spends significant health care dollars” with price increases of “50 percent or more over the past five years or by 15 percent or more over the past 12 months.”

For each prescription drug identified, the state Attorney General will require the drug’s manufacturer to justify the price increase in an “understandable and appropriate” manner. In this justification, the manufacturer will provide an explanation of the role of each factor in contributing to this increase. The drug price justification will be publicly posted, though the law does provide drug manufacturers the opportunity to keep certain types of information non-public. If the drug manufacturer fails to provide this information, the company may experience a financial penalty of up to $10,000 per violation. The filings will be annual, and they will be reviewed by state officials — and reported to legislature.

The Vermont law also requires health insurers participating in the Vermont health insurance exchange to provide additional information on their drug formularies. The formularies must be posted online, searchable and include information about applicable cost-sharing amounts, drug tiers, prior authorization and step therapies. The same state board that will establish the list of drugs for price transparency reporting will also advise the state exchange on out of pocket drug costs for bronze-level plans on the exchange. This rule will go into effect January 1, 2017.

Vermont is a small liberal state not known for setting national precedent. But drug price transparency bills have been introduced in 13 other states. Ohio and California also have ballot measures that would cap the price of certain drugs. All of this suggests that a little-noticed law in a small state could have big implications.

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