Prescription Drug Manufacturers
Health and Safety Code §§ 12679 – 127681 define the types of prescription drug cost transparency reporting manufacturers must submit to the Office of Statewide Health Planning and Development (OSHPD). California Code of Regulations §§ 96060 – 96087 provide guidance on complying with the law.
Reporting is specific to individual prescription drug products, as identified by a product’s National Drug Code (NDC). Therefore, each report corresponds to a specific NDC, rather than generally to the prescription drug.
A manufacturer is defined as an entity that:
- Owns the NDC of a human prescription drug, and
- Controls the wholesale acquisition cost (WAC) of the NDC in sales transactions, and
- Whose NDCs are purchased or reimbursed, directly or indirectly, by at least one of the defined California purchasers
Note, a manufacturer does not have to directly supply prescription drug products to a defined California purchaser; nor does the manufacturer have to receive direct payment or reimbursement from a defined California purchaser.
For example, an entity is considered a manufacturer if it controls the WAC of a prescription drug product it sells to wholesalers, who in turn sell the prescription drug product to providers and pharmacies (e.g., medical clinics); AND a California licensed health care services plan (e.g., an HMO licensed in California) reimburses its members who, as patients of the providers, purchase the prescription drug product from the providers or pharmacies.
OSHPD Reporting Method
The law allows OSHPD to specify a method for reporting. Manufacturers must submit all required reporting to OSHPD using OSHPD’s online reporting system. Manufacturers must first register in the system to receive reporting privileges.
Publicly Available Data
Reporting is based on specified information in the statute and regulations. To comply, manufacturers must complete all the required data fields provided of each type of report in the online reporting system. However, the law does allow manufacturers to withhold any information that is not already in the public domain at the time reporting.
Types of CTRx Reports
Manufacturers have three (3) distinct reporting requirements to OSHPD under the statute: (1) Notice of a New Drug, (2) New Drug Report, and (3) Wholesale Acquisition Cost (WAC) Increase Report.
Notice of a New Drug
When a manufacturer introduces a new prescription drug product to market with a wholesale acquisition cost (WAC) greater than the price threshold defined for the specialty drug tier under Medicare Part D, the manufacturer must submit a notice of the new prescription drug product to OSHPD using the online reporting system. Currently, Medicare Part D has set $670 as the threshold for its specialty drug tier.
The notice should be submitted within 3 calendar days from the effective date of market introduction.
New Drug Report
Once the notice is successfully submitted to OSHPD, the manufacturer then has 30 calendar days from the date of notice to submit online the corresponding New Drug Report for the new drug product to OSHPD.
As the New Drug Notice is subject to the prescription drug’s WAC exceeding the Medicare Part D price threshold, the New Drug Report is also subject to the prescription drug’s WAC exceeding the Medicare Part D price threshold.
WAC Increase Report
The report of a WAC increase is required when two (2) thresholds have been exceeded. The prescription drug product of a required report should have a WAC (after increase) that is greater than $40 for a course of therapy. In addition, the WAC increase must result in a greater than 16% cumulative increase over the specified period to require reporting.
The percent WAC increase is based on the percent change of total WAC increases in the current calendar year and the two previous calendar years compared to the WAC before these increases. So the percent change is inclusive of all WAC increase and decreases during the period of the current year and two previous calendar years.
WAC Increase Reports are due no later than one (1) month after the end of the quarter in which the increase was made effective.
What is wholesale acquisition cost (WAC)?
Wholesale Acquisition Cost (WAC) is defined in the U.S. Code as “…the manufacturer’s list price for [a] drug or biological to wholesalers or direct purchasers in the United States, not including prompt pay or other discounts, rebates or reductions in price…”
What is National Drug Code (NDC)?
The U.S. Food and Drug Administration (FDA) websites states, “Drug products are identified and reported using a unique, three-segment number, called the National Drug Code (NDC), which serves as a universal product identifier for drugs. FDA publishes the listed NDC numbers and the information submitted as part of the listing information in the NDC Directory which is updated daily.”
FDA controls the first segment of the code, called the labeler code. FDA assigns a unique labeler code to each drug manufacturer or distributor. The second segment is called the product code, which identifies the strength, dosage form, and formulation of a drug specific to each labeler. The last segment is called the package code, which identifies the labeler’s chosen quantitative and qualitative characteristics of a product’s packaging. Labelers create their own product and package codes that are unique to each prescription drug product marketed.
Different drug products should not have the same NDC.
Does the law cover all prescription drugs?
No. The law only pertains to human prescription drugs that are marketed and sold in California, regardless of a drug’s location of manufacture, packaging, or wholesale distribution. Radiologicals, active pharmaceutical ingredients (API’s), and compounded prescriptions drugs (including compounded radiologicals) are excluded from the reporting requirements.
Prescription drugs sold in medical delivery devices (e.g., syringes, injection pens, and transdermal patches) are subject to reporting. Medical delivery devices sold without a prescription drug included are not subject to reporting.
There is an active lawsuit challenging the constitutionality of the statute. Do manufacturers need to comply with the law while the lawsuit is active?
Yes. Unless a court issues an order preventing OSHPD from implementing law, manufacturers must comply with law. No order is in place at the present time.