State Price Transparency Requirements Are No Longer Cut and Paste

Kyle Forcier, Sr. Director of Corporate Strategy at Model N

For pharmaceutical manufacturing firms, the amount of documentation required around state price transparency regulations continues to expand. As it now stands, more than 22 states have transparency laws on the books, and each of these states requires a complicated and diverse set of reporting information, which was not the case five years ago.

These transparency requirements – including the need to provide data in different formats and on different dates due to “triggering events” – mean that pharma companies face an incredible challenge. Federal regulations are a long way off, and state-by-state reporting requirements are no longer “cut and paste” affairs that can be satisfied with a canned set of reports. As a result, companies need to prepare for greater demands, both today and tomorrow. Here’s what you need to know.

Understand WAC Prices

The priority for all companies should be to effectively track wholesale acquisition cost (WAC) price activity. This is critical because any changes in WAC pricing can trigger reporting requirements for one or more states. The potential for stiff financial penalties, in the form of fines for noncompliance, looms large. And while your company may not be tracking all of the potential WAC price changes, many states surely are. 

For example, if a company with 100 products is only tracking WAC pricing for 90 of those items, the remaining 10 items might go through a series of price changes – and each missed price change can expose companies to a state fine. Multiply that downside potential by 22 states, and the importance of this activity becomes clear. 

Therefore, one of the most effective solutions is to create a consistently refreshed list of all of a company’s National Drug Code (NDC) numbers and their WAC prices. To stay in compliance, most companies need to know their WAC prices on a daily basis – and this is an area where technology can be of great help by aggregating those numbers each day and sending notifications to the appropriate people as needed.

Understand Drug Pricing Legislation

The second key priority is to understand each state’s unique price transparency laws. This can be a daunting task, considering that each state may have its own legal requirements, and those requirements must be read, understood and interpreted. The interpretation of the legislation is labor-intensive; implementation and operationalization of each regulation can be complicated and time-consuming. Not only do legal teams or consultants need to break down what each state requires, but they must also then interpret the law to take appropriate action before the regulations change, often on short notice.

What Data Do Pharma Companies Need?

Companies must also know what ancillary data they need and then develop a methodology for collecting that information. For example, various states may want to know the cost per treatment of an injectable drug and may even require a cost report every single time that drug is administered. The need for this level of detail means a huge amount of data may be required to stay compliant, and it can be very challenging for organizations to collect, appropriately organize and format all this information for consumption by individual states.

A keen understanding of reporting formats is also required. Companies must know what fields go where in each report, and critical details such as understanding the correct report recipient, as well as due dates, must be integrated into the process. What’s more, pharma companies must look toward future reporting requirements. Tracking changes and new regulations also become a significant workstream. 

Understanding the legislation and operationalizing a methodology-driven response is another area where technology can provide companies with a strategic advantage. Leading tech vendors are already well-equipped to support pharma companies across these activities, given that they have done much of the work of legal interpretation as part of product development. They also know what’s coming next in terms of regulation and can help drive timely and accurate reporting because they’re also experts in developing efficient and value-added internal processes (typically workflow-enabled) to gather required data.

What Pharma Companies Must Do to Prepare for the Future

Even as drug prices are being scrutinized and reporting requirements continue to grow, there will likely be more data and documentation required in the future. A full and clear picture of the true cost of a given drug may not be accurately reflected in today’s price transparency reports.

While companies currently provide the mandated data to states, current requirements don’t account for the complexities that would help states to fully understand drug pricing. For example, states don’t have true visibility into how much money companies are paying to health plans and pharmacy benefit managers and in Medicaid rebates. States are also missing the significant sums that are spent to get on various formulary lists for in-patient settings.

States have the data but not the full cost picture. The future of price transparency will necessitate a complete set of drug pricing information – not just WAC prices – that will put states and pharma companies on a more level playing field in terms of understanding (and price negotiation). This is another critical area for companies to leverage technology, using intelligent systems to capture and make sense of drug pricing information.

In today’s rapidly evolving regulatory environment, change continues to lead the way. And when it comes to managing transparency requirements, companies should consider taking a proactive stance. This means preparing themselves by implementing flexible technology platforms and services that meet today’s reporting requirements. In addition, they should be looking to other advanced technologies – including advanced workflow, AI, machine learning, and data analytics – that will enable them to quickly respond to the ever-growing number of regulations. By combining best-of-breed technologies with value-added business services, companies will be best positioned to meet the regulatory requirements of the constantly evolving and complex landscape of state price transparency. 


About Kyle Forcier 

Kyle Forcier is a senior director of corporate strategy for Model N. For more than 15 years, Forcier has focused his time in the life sciences space helping manufacturers increase their revenue, maintain compliance, and bring innovative ideas to the marketplace. He currently helps shape Model N’s strategic direction focusing on bring complex, valuable solutions to the market to solve longstanding operational challenges within the medtech industry.

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