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HOUSE DOCKET, NO. 3326 FILED ON: 1/20/2023
HOUSE . . . . . . . . . . . . . . . No. 1201
The Commonwealth of Massachusetts
_________________
PRESENTED BY:
Kate Hogan
_________________
To the Honorable Senate and House of Representatives of the Commonwealth of Massachusetts in General
Court assembled:
The undersigned legislators and/or citizens respectfully petition for the adoption of the accompanying bill:
An Act to promote transparency in prescription drug prices.
_______________
PETITION OF:
NAME:DISTRICT/ADDRESS :DATE ADDED:Kate Hogan3rd Middlesex1/18/2023 1 of 16
HOUSE DOCKET, NO. 3326 FILED ON: 1/20/2023
HOUSE . . . . . . . . . . . . . . . No. 1201
By Representative Hogan of Stow, a petition (accompanied by bill, House, No. 1201) of Kate
Hogan relative to the pricing of prescription drugs. Health Care Financing.
[SIMILAR MATTER FILED IN PREVIOUS SESSION
SEE HOUSE, NO. 1272 OF 2021-2022.]
The Commonwealth of Massachusetts
_______________
In the One Hundred and Ninety-Third General Court
(2023-2024)
_______________
An Act to promote transparency in prescription drug prices.
Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority
of the same, as follows:
1 SECTION 1. Section 1 of Chapter 6D of the General Laws is hereby amended by
2inserting after the definition of “Performance penalty” the following definition: -
3 “Pharmaceutical manufacturing company”, an entity engaged in the: (i) production,
4preparation, propagation, compounding, conversion or processing of prescription drugs, directly
5or indirectly, by extraction from substances of natural origin, independently by means of
6chemical synthesis or by a combination of extraction and chemical synthesis; or (ii) packaging,
7repackaging, labeling, relabeling or distribution of prescription drugs; provided, however, that
8“pharmaceutical manufacturing company” shall not include a wholesale drug distributor licensed
9under section 36B of chapter 112 or a retail pharmacist registered under section 39 of said
10chapter 112. 2 of 16
11 SECTION 2. Section 8 of said chapter 6D, as so appearing, is further amended by
12inserting after the word “organization”, in lines 6 and 7, the following words:- , pharmaceutical
13manufacturing company.
14 SECTION 3. Said section 8 of said chapter 6D, as so appearing, is further amended by
15inserting after the word “organizations”, in line 14, the following words:- , pharmaceutical
16manufacturing companies.
17 SECTION 4. Said section 8 of said chapter 6D, as so appearing, is further amended by
18inserting after the word “commission”, in line 59, the first time it appears, the following words:-
19; and (iii) in the case of pharmaceutical manufacturing companies, testimony concerning factors
20underlying prescription drug costs and price increases including, but not limited to, the initial
21prices of drugs coming to market and subsequent price increases, changes in industry profit
22levels, marketing expenses, reverse payment patent settlements, the availability of alternative
23drugs or treatments and any other matters as determined by the commission
24 SECTION 5. Subsection (g) of said section 8 of said chapter 6D, as so appearing, is
25hereby amended by striking out the second sentence and inserting in place thereof the following
26sentence:- The report shall be based on the commission’s analysis of information provided at the
27hearings by witnesses, providers, provider organizations, payers, and pharmaceutical
28manufacturing companies, registration data collected under section 11, data collected or analyzed
29by the center under sections 8, 9, 10, and 10A of chapter 12C and any other available
30information that the commission considers necessary to fulfill its duties under this section as
31defined in regulations promulgated by the commission. 3 of 16
32 SECTION 6. Section 9 of said chapter 6D, as so appearing, is hereby amended by
33inserting after the word “organization”, in line 72, the following words:- , pharmaceutical
34manufacturing company.
35 SECTION 7. Said chapter 6D is further amended by inserting after section 19 the
36following new section:-
37 SECTION 20. Pharmaceutical Cost Transparency
38 (a) As used in this section, the following terms shall have the following meanings:-
39 Pharmaceutical manufacturing company”, an entity engaged in the: (i) production,
40preparation, propagation, compounding, conversion or processing of prescription drugs, directly
41or indirectly, by extraction from substances of natural origin, independently by means of
42chemical synthesis or by a combination of extraction and chemical synthesis; or (ii) packaging,
43repackaging, labeling, relabeling or distribution of prescription drugs; provided, however, that
44“pharmaceutical manufacturing company” shall not include a wholesale drug distributor licensed
45under section 36B of chapter 112 or a retail pharmacist registered under section 39 of said
46chapter 112.
47 “Prescription drug”, as defined in 21 U.S.C. § 321.
48 (b)(1) The Health Policy Commission, in collaboration with the Center for Health
49Information and Analysis, shall identify annually up to 25 prescription drugs on which the State
50spends significant health care dollars and for which the wholesale acquisition cost has increased
51by 50 percent or more over the past five years or by 15 percent or more over the past 12
52months, or is a new drug whose price may have a significant impact on the cost growth 4 of 16
53benchmark. When determining whether a drug price may have a significant impact on the cost
54growth benchmark, the commission shall consider both the volume of prescriptions issued in the
55commonwealth and single dose wholesale acquisition cost.
56 The drugs identified shall represent different drug classes.
57 (2) The Commission shall provide to the Office of the Attorney General the list of
58prescription drugs developed pursuant to this subsection and the percentage of the wholesale
59acquisition cost increase for each drug and shall make the information available to the public on
60the Commission’s website.
61 (c)(1) For each prescription drug identified pursuant to subsection (b) of this section, the
62commission shall require the drug’s pharmaceutical manufacturing company to provide a
63justification for the increase in the wholesale acquisition cost of the drug in a format that the
64commission determines to be understandable and appropriate. The pharmaceutical manufacturing
65company shall submit to the commission all relevant information and supporting documentation
66necessary to justify the manufacturer’s wholesale acquisition cost increase, which may include:
67 (A) all factors that have contributed to the wholesale acquisition cost increase;
68 (B) the percentage of the total wholesale acquisition cost increase attributable to each
69factor; and
70 (C) an explanation of the role of each factor in contributing to the wholesale acquisition
71cost increase. 5 of 16
72 (2) Nothing in this section shall be construed to restrict the legal ability of a
73pharmaceutical manufacturing company to changes prices to the extent permitted under federal
74law.
75 (d) The commission shall publish an Annual Prescription Drug Transparency Report on
76or before December 1 of each year based on the information received from pharmaceutical
77manufacturing companies pursuant to this section.
78 (e) In carrying out this section, the commission shall ensure the protection of confidential
79commercial information and trade secrets.
80 (f) The commission shall promulgate regulations to implement and enforce this section
81and may impose financial penalties on a pharmaceutical manufacturing company that fails to
82provide the information required by subsection (c) of this section in an amount not to exceed
83$10,000.00 per violation. Each unlawful failure to provide information shall constitute a separate
84violation.
85 SECTION 8. Said chapter 6D, as so appearing, is further amended by inserting after
86section 20 the following new section:-
87 SECTION 20A. Transparency in Patient Advocacy
88 The commission shall require a pharmaceutical manufacturing company to annually
89disclose payments and other transfers of value provided to a patient advocacy organization,
90consumer advocacy organization, voluntary health agency, or a coalition of such organizations,
91including a disease-specific advocacy organization. The commission shall issue an annual report
92identifying the payments or other transfers of value made by manufacturers to a patient advocacy 6 of 16
93organization, consumer advocacy organization, voluntary health agency, or a coalition of such
94organizations, including a disease-specific advocacy organization and analyzing the impact of
95such payments or transfers of value on health care public policy in the commonwealth.
96 SECTION 9. Said chapter 6D is further amended by inserting after section 20 the
97following new section:-
98 SECTION 21. Early Notice of High Cost Drugs
99 (a) As used in this section, the following terms have the following meanings:-
100 “Average Manufacturer Price”, as defined in section 1927(k)(1) of the Social Security
101Act (42 U.S.C. 1396r–8(k)(1)).
102 “Pharmaceutical manufacturing company”, an entity engaged in the: (i) production,
103preparation, propagation, compounding, conversion or processing of prescription drugs, directly
104or indirectly, by extraction from substances of natural origin, independently by means of
105chemical synthesis or by a combination of extraction and chemical synthesis; or (ii) packaging,
106repackaging, labeling, relabeling or distribution of prescription drugs; provided, however, that
107“pharmaceutical manufacturing company” shall not include a wholesale drug distributor licensed
108under section 36B of chapter 112 or a retail pharmacist registered under section 39 of said
109chapter 112.
110 (b)(1) A pharmaceutical manufacturing company shall submit a report to the commission
111notifying the commission of each price increase of a prescription drug that will result in an
112increase in the average manufacturer price of that drug that is equal to 10 percent or more over a
11312-month period, or the introduction of a new drug whose price may threaten the cost benchmark 7 of 16
114either due to anticipated volume of prescriptions filled in the commonwealth or the increase in
115the average manufacturer price for a single dose.
116 (2) Each report described in paragraph (1) shall be submitted to the commission not later
117than 30 days prior to the planned effective date of such price increase.
118 (c) A report under subsection (b) shall, at a minimum, include:
119 (1) With respect to the prescription drug—
120 (A) the percentage by which the pharmaceutical manufacturing company will raise the
121average manufacturer price of the drug on the planned effective date of such price increase;
122 (B) a justification for, and description of, each pharmaceutical manufacturing company’s
123price increase that occurred during the 12-month period described in subsection (b)(1);
124 (C) the identity of the initial developer of the drug;
125 (D) a description of the history of the pharmaceutical manufacturing company 's price
126increases for the drug since the approval of the application for the drug under section 505 of the
127Federal Food, Drug, and Cosmetic Act or the issuance of the license for the drug under section
128351, or since the pharmaceutical manufacturing company acquired such approved application or
129license;
130 (E) the current list price of the drug;
131 (F) the total expenditures of the pharmaceutical manufacturing company on—
132 (i) materials and manufacturing for such drug; and 8 of 16
133 (ii) acquiring patents and licensing for such drug;
134 (G) the percentage of total expenditures of the pharmaceutical manufacturing company
135on research and development for such drug that was derived from Federal funds;
136 (H) the total expenditures of the pharmaceutical manufacturing company on research and
137development for such drug that is used for—
138 (i) basic and preclinical research;
139 (ii) clinical research;
140 (iii) new drug development;
141 (iv) pursuing new or expanded indications for such drug through supplemental
142applications under section 505 of the Federal Food, Drug, and Cosmetic Act; and
143 (v) carrying out post market requirements related to such drug, including those under
144section 505(o)(3) of such Act;
145 (I) the total revenue and the net profit generated from the prescription drug for each
146calendar year since the approval of the application for the drug under section 505 of the Federal
147Food, Drug, and Cosmetic Act or the issuance of the license for the drug under section 351, or
148since the pharmaceutical manufacturing company acquired such approved application or license;
149and
150 (J) the total costs associated with marketing and advertising for the prescription drug;
151 (2) With respect to the pharmaceutical manufacturing company: 9 of 16
152 (A) the total revenue and the net profit of the pharmaceutical manufacturing company for
153the 12-month period described in subsection (b)(1);
154 (B) the amount the pharmaceutical manufacturing company has spent on dividends and
155stock repurchases and the specific metrics used by the pharmaceutical manufacturing company to
156determine executive compensation, including any stock-based performance metrics, for the 12-
157month period described in subsection (b)(1); and
158 (C) the amount the pharmaceutical manufacturing company has provided in funding to
159consumer and disease advocacy groups for the 12-month period described in subsection (b)(1);
160 (D) any additional information the manufacturer chooses to provide related to drug
161pricing decisions, such as total expenditures on—
162 (i) drug research and development; or
163 (ii) clinical trials on drugs that failed to receive approval by the Food and Drug
164Administration; and
165 (3) such other related information as the commission considers appropriate.
166 (d) The commission shall promulgate regulations to implement and enforce this section
167and may impose financial penalties on a pharmaceutical manufacturing company that fails to
168provide the information required by subsection (c) of this section in an amount not to exceed
169$10,000.00 per violation. Each unlawful failure to provide information shall constitute a separate
170violation.
171 (e)(1) Not later than 30 days after the submission of a report under subsection (b), the
172commission shall post the report on the public website of the commission. 10 of 16
173 (2) In carrying out this section, the commission shall ensure the protection of confidential
174commercial information and trade secrets.
175 SECTION 10. Section 1 of chapter 12C of the General Laws, as so appearing, is hereby
176amended by inserting after the definition of “Patient-centered medical home” the following
177definition:-
178 “Pharmaceutical manufacturing company”, an entity engaged in the: (i) production,
179preparation, propagation, compounding, conversion or processing of prescription drugs, directly
180or indirectly, by extraction from substances of natural origin, independently by means of
181chemical synthesis or by a combination of extraction and chemical synthesis; or (ii) packaging,
182repackaging, labeling, relabeling or distribution of prescription drugs; provided, however, that
183“pharmaceutical manufacturing company” shall not include a wholesale drug distributor licensed
184under section 36B of chapter 112 or a retail pharmacist registered under section 39 of said
185chapter 112.
186 SECTION 11. Section 3 of said chapter 12C, as so appearing, is hereby amended by
187inserting after the word “organizations”, in lines 13 and 14, the following words:- ,
188pharmaceutical manufacturing companies.
189 SECTION 12. Said section 3 of said chapter 12C, as so appearing, is hereby further
190amended by striking out, in line 24, the words “and payer” and inserting in place thereof the
191following words:- , payer, and pharmaceutical manufacturing company.
192 SECTION 13. Section 5 of said chapter 12C, as so appearing, is hereby further amended
193by striking out, in line 15, the words “and affected payers” and inserting in place thereof the
194following words:- affected payers, and affected pharmaceutical manufacturing companies. 11 of 16
195 SECTION 14 Said chapter 12C is hereby further amended by inserting after section 10
196 the following new section:-
197 Section 10A. (a) The center shall promulgate regulations necessary to ensure the uniform
198reporting of information from pharmaceutical manufacturing companies that enables the center
199to analyze: (i) year-over-year changes in wholesale acquisition cost and average manufacturer
200price for prescription drug products; (ii) year-over-year trends in net expenditures; (iii) net
201expenditures on subsets of biosimilar, brand name and generic drugs identified by the center; (iv)
202trends in estimated aggregated drug rebates, discounts or other remuneration paid or provided by
203a pharmaceutical manufacturing company to a pharmacy benefit manager, wholesaler,
204distributor, health carrier client, health plan sponsor or pharmacy in connection with utilization
205of the pharmaceutical drug products offered by the pharmaceutical manufacturing company; (v)
206discounts provided by a pharmaceutical manufacturing company to a consumer in connection
207with utilization of the pharmaceutical drug products offered by the pharmaceutical
208manufacturing company, including any discount, rebate, product voucher, coupon or other
209reduction in a consumer’s out-of-pocket expenses including co-payments and deductibles under
210section 3 of chapter 175H; (vi) research and development costs as a percentage of revenue; (vii)
211annual marketing and advertising costs, identifying costs for direct-to-consumer advertising;
212(viii) annual profits over the most recent 5-year period; (ix) cost disparities between prices
213charged to purchasers in the commonwealth and purchasers outside of the United States; and (x)
214any other information deemed necessary by the center.
215 The center shall require the submission of available data and other information from
216pharmaceutical manufacturing companies including, but not limited to: (i) changes in wholesale 12 of 16
217acquisition costs and average manufacturer prices for prescription drug products as identified by
218the center; (ii) aggregate, company-level research and development costs to the extent
219attributable to a specific product and other relevant capital expenditures for the most recent year
220for which final audited data are available for prescription drug products as identified by the
221center; (iii) annual marketing and advertising expenditures; and (iv) a description, suitable for
222public release, of factors that contributed to reported changes in wholesale acquisition costs and
223average manufacturer prices for prescription drug products as identified by the center.
224 (b) Except as specifically provided otherwise by the center or under this chapter, data
225collected by the center pursuant to this section from pharmaceutical manufacturing companies
226shall not be a public record under clause Twenty-sixth of section 7 of chapter 4 or under chapter
22766.
228 SECTION 15. Said chapter 12C is hereby further amended by striking out section 11, as
229appearing in the 2018 Official Edition, and inserting in place thereof the following section:-
230 Section 11. The center shall ensure the timely reporting of information required under
231sections 8, 9, 10 and 10A. The center shall notify payers, providers, provider organizations, and
232pharmaceutical manufacturing companies of any applicable reporting deadlines. The center shall
233notify, in writing, a private health care payer, provider, provider organization, or pharmaceutical
234manufacturing company that it has failed to meet a reporting deadline and that failure to respond
235within 2 weeks of the receipt of the notice may result in penalties. The center may assess a
236penalty against a private health care payer, provider, provider organization, or pharmaceutical
237manufacturing company that fails, without just cause, to provide the requested information
238within 2 weeks following receipt of the written notice required under this section of not more 13 of 16
239than $1,000 per week for each week of delay after the 2-week period following receipt of the
240written notice. Amounts collected under this section shall be deposited in the Healthcare
241Payment Reform Fund established in section 100 of chapter 194 of the acts of 2011.
242 SECTION 16. Section 12 of said chapter 12C, as so appearing, is hereby amended by
243striking out, in line 2, the words “and 10” and inserting in place thereof the following words:- ,
244 10 and 10A.
245 SECTION 17. Subsection (a) of section 16 of said chapter 12C, as so appearing, is hereby
246amended by striking out the first sentence and inserting in place thereof the following sentence:-
247 The center shall publish an annual report based on the information submitted under: (i)
248 sections 8, 9, 10 and 10A concerning health care provider, provider organization, private
249and public health care payer, and pharmaceutical manufacturing company costs, and cost and
250price trends; (ii) section 13 of chapter 6D relative to market power reviews; and (iii) section 15
251of said chapter 6D relative to quality data.
252 SECTION 18. The General Laws are hereby amended by inserting after chapter 63B the
253following new chapter: -
254 Chapter 63D. Penalty on drug manufacturers for excessive price increases
255 Section 1. As used in this section, the following terms shall have the following
256meanings:- “Commissioner”, the commissioner of revenue.
257 “Consumer price index”, the consumer price index for all urban consumers for Boston, as
258most recently reported by the federal Bureau of Labor Statistics. 14 of 16
259 “Drug”, any medication, as identified by a National Drug Code, approved for sale by the
260U.S. Food and Drug Administration.
261 “Excessive price,” the price of a drug if it exceeds the sum of (a) the reference price of
262that drug, as adjusted for any increase or decrease in the consumer price index since the
263reference price was determined, and (b) an additional two percent of the reference price for each
264twelve-month period that has elapsed since the date on which the reference price was
265determined. The two percent increment provided in (b) of the preceding sentence shall
266compound annually on the first day of the first calendar quarter commencing after the end of
267each 12-month period described therein.
268 “Excessive price increase”, the amount by which the price of a drug exceeds the sum of
269(a) the reference price of that drug, as adjusted for any increase or decrease in the consumer price
270index since the reference price was determined, and (b) an additional two percent of the
271reference price for each twelve-month period that has elapsed since the date on which the
272reference price was determined. The two percent increment provided in (b) shall compound
273annually on the first day of the first calendar quarter commencing after the end of each twelve-
274month period described therein.
275 “Person”, any natural person or legal entity.
276 “Price”, the wholesale acquisition cost of a drug, per unit, as reported to the First Data
277Bank or other applicable price compendium designated by the commissioner.
278 “Reference price”, the price of a drug as of October 1, 2019, or in the case of any drug
279first commercially marketed in the United States after October 1, 2019, the price of the drug on
280the date when first marketed. 15 of 16
281 “Related party”, an entity is a related party with respect to a person if that entity belongs
282to the same affiliated group as that person under section 1504 of the Internal Revenue Code, as
283amended and in effect for the taxable year, or if the entity and the person are otherwise under
284common ownership and control.
285 “Unit”, the lowest dispensable amount of a drug.
286 Section 2. (a) Any person who manufactures and sells drugs, directly or through another
287person, for distribution in the commonwealth and who establishes an excessive price for any
288such drug directly or in cooperation with a related party, shall pay a per unit penalty on all units
289of the drug ultimately dispensed or administered in the commonwealth. The penalty for each unit
290shall be 80 percent of the excessive price increase for each unit, determined at the beginning of
291the calendar quarter.
292 (b) A person who establishes an excessive price for a drug as described in subsection (a)
293shall file a return as provided in section 4 declaring all units of excessively priced drug sold for
294distribution in the commonwealth during the quarter. In the event that a person filing such a
295return pays a penalty with regard to one or more units of drug that are ultimately dispensed or
296administered outside of the commonwealth, the person may claim a credit for such penalty
297amounts on the return for the tax period during which such units are ultimately dispensed or
298administered.
299 Section 3. The penalty under section 2 shall apply for any calendar quarter only to a
300person who maintains a place of business in the commonwealth or whose total sales of all
301products, directly or through another person, for distribution in the commonwealth were more 16 of 16
302than $100,000 in the prior twelve-month period. The penalty shall not apply more than once to
303any unit of drug sold.
304 Section 4. Any person subject to the penalty under section 2 shall file a return with the
305commissioner and shall pay the penalty by the fifteenth day of the third month following the end
306of each calendar quarter, subject to such reasonable extensions of time for filing as the
307commissioner may allow. The return shall set out the person’s total sales subject to penalty in the
308immediately preceding calendar quarter and shall provide such other information as the
309commissioner may require.
310 Section 5. The penalty imposed under this chapter shall be in addition to, and not a
311substitute for or credit against, any other penalty, tax or excise imposed under the General Laws.
312 Section 6. The commissioner may disclose information contained in returns filed under
313this chapter to the department of public health for purposes of verifying that a filer’s sales subject
314to penalty are properly declared and that all reporting is otherwise correct. Return information so
315disclosed shall remain confidential and shall not be public record.
316 Section 7. To the extent that a person subject to penalty under section 2 fails to pay
317amounts due under this chapter, a related party of such person that directly or indirectly
318distributes in the commonwealth any drug whose sales are subject to this chapter shall be jointly
319and severally liable for the penalty due.
320 Section 8. The commissioner may promulgate regulations or issue other guidance for the
321implementation of this chapter.