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Sweeping Nevada Law to Impact Manufacturers, PBMs, Pharma Sales Representatives, and Nonprofit Organizations

Nevada is the latest state in the Union to adopt some form of a drug pricing transparency law, after Nevada Governor Brian Sandoval signed Senate Bill No. 539 into law on June 15, 2017. The breadth and scope of this particular bill is unlike any other transparency bill that we have seen to date, and has the potential to impact not only the manufacturers of the narrow class of drugs the bill focuses on, but all manufacturers with sales forces in Nevada, as well as non-profit patient assistance programs.  

Focus on Drugs to Treat Diabetes

This law is unique because it focuses its pricing transparency requirements on a narrow class of drugs – insulin and biguanides – used for the treatment of a specific disease - diabetes – rather than a broader list of drugs that have been subject to price increases, regardless of disease state. The law requires manufacturers of drugs used to treat diabetes whose prices have increased by a certain percentage to report some nine different metrics to the State, including drug production costs, profits earned, the total amount of financial assistance that the manufacturer has provided through any patient prescription assistance program, costs associated with coupons provided directly to consumers and for copayment assistance programs, and rebates provided to pharmacy benefit managers (PBMs). A separate report is required to explain the “reasons for the increase in the wholesale acquisition cost of the drug.”

The Nevada law also places a responsibility on the often criticized middle-men, PBMs, to disclose the rebates that they negotiate and retain from dealings with manufacturers related to insulin and biguanides.

But That’s Not All: Focus on Sales Force 

Although the transparency and reporting requirements applicable to manufacturers and PBMs are narrowly tailored to drugs used to treat diabetes, other sections of the law are very broad, and could potentially impact dozens more manufacturers via their sales forces, as well as via the “nonprofit organization[s] that advocate on behalf of patients” (a term, it should be noted, which is not specifically defined in the law) to whom manufacturers provide certain kinds of support. Regardless of the types of drugs produced by a manufacturer, any manufacturer with a sales force that “markets prescription drugs on behalf of the manufacturer to providers of health care licensed” in Nevada must provide the State with a list of all their sales representatives. An individual who is not included on the list “shall not” detail or market prescription drugs to any provider or for sale to any resident of Nevada. In addition, each sales representative must disclose to the State a list of the health care providers to whom the sales representative provided “any type of compensation with a value that exceeds $10 or total compensation with a value that exceeds $100 in the aggregate.” Finally, the sales representative must record and disclose the name and manufacturer of each free sample they distributed – as well as the name of each person to whom they provided the sample.

… And Nonprofit Organizations

Taking the law one step further, nonprofit organizations like patient assistance programs must abide by certain reporting requirements. The requirements imposed on nonprofit organizations could create tension between compliance with the Nevada law, and compliance with individual Advisory Opinions issued by the US Department of Health and Human Services Office of Inspector General (OIG), which prohibit patient assistance programs from disclosing the specific sources of their funding. The Nevada law requires “a nonprofit organization that advocates on behalf of patients or funds medical research in this State and has received a payment, donation, subsidy or anything else of value from a manufacturer, third party or pharmacy benefit manager or a trade or advocacy group for manufacturers, third parties or pharmacy benefit managers” to publicly report the amount of each contribution and the name of the donor, and the percentage of the total gross income of the organization attributable to such donations from manufacturers. Such detailed public reporting is currently not allowed under the Advisory Opinions issued to patient assistance programs from the OIG.

Obviously, this legislation will impact the operations of multiple members of the pharmaceutical supply chain, regardless of whether their activities involve drugs related to the treatment of diabetes. We anticipate that regulations will be issued in the forthcoming months, which should provide manufacturers, PBMs, and patient assistance programs with the opportunity to comment on how this bill will be operationalized and how those regulations will impact the industry.

Arent Fox’s Health Care group regularly monitors and analyzes laws affecting drug pricing and transparency. For more information regarding the Nevada law, or other issues related to pricing transparency or patient assistance programs, contact Stephanie Trunk, Erin Atkins, or the Arent Fox professional who usually handles your matters.