Maine Enacts Canadian Reference Pricing Law to Study Savings in Prescription Drug Costs | Insights

Earlier this month, Maine’s Democratic governor, Janet Mills, signed legislation (SP 520/LD 1636) directing the Maine Health Data Organization (MHDO) to report annually on the potential savings if certain drugs were subjected to a referenced rate, which is the lowest of the prices available among Canada’s four largest provinces and the wholesale acquisition cost (WAC), beginning January 1, 2023. Certain provisions that would have likely been subject to legal challenge have been removed from the final legislation. These and other important aspects of the enacted law are addressed below, along with an update on other states that have introduced legislation that incorporate Canadian reference pricing requirements.

Determination of Referenced Rates and Public Disclosure of Information

The new law requires MHDO to use disclosures submitted by manufacturers, distributors, and pharmacy benefit managers under 22 M.R.S.A. § 8732 to

  • identify the 100 most costly prescription drugs and the 100 most frequently prescribed prescription drugs in the state
  • determine the referenced rate for each identified drug by selecting the lowest of the costs in official publications of the governments of Ontario, Quebec, British Columbia, and Alberta (or, if not included in those resources, the ceiling price as reported in other official Canadian publications) and the WAC for the “most recent 12-month period”
  • calculate the savings that could be achieved by subjecting those drugs to the referenced rate

By January 1, 2023, and annually thereafter, MHDO is required to post a report containing the above-referenced information on a publicly accessible website and submit copies to the Office of Affordable Health Care, the Maine Prescription Drug Affordability Board, and the joint standing committee of the legislature having jurisdiction over health data reporting and prescription drug matters.

Other Prohibitions, Requirements, and Penalties Removed

Notably, the enacted law omits prohibitions and requirements for payors, pharmacies, manufacturers, and distributors originally proposed in May 2021, based on model legislation drafted by the National Academy for State Health Policy (NASHP). These provisions would have likely been the subject of legal challenge had they been enacted. As introduced, the original legislation sought to, among other things,

  • prohibit state entities, health plans, participating Employee Retirement Income Security Act plans, and retail pharmacies from purchasing referenced drugs for a cost higher than the referenced rate
  • prohibit manufacturers and distributors of a referenced drug from withdrawing the drug from sale or distribution within the state “for the purpose of avoiding the effect of the rate limitations” (subject to a $500,000 penalty)
  • require manufacturers that wish to withdraw a referenced drug for some other reason to provide written notice of withdrawal to the Superintendent of Insurance and the Attorney General 180 days prior to the withdrawal (subject to a $500,000 penalty)

History of Other State Canadian Reference Pricing Legislation

Several states have introduced legislation that incorporate Canadian reference pricing requirements, including these:

  • Hawaii introduced legislation based on NASHP’s model (HB 18/SB 604) on January 20, 2021. It was carried over to the 2022 regular session on December 10, 2021.
  • Oklahoma introduced legislation based on NASHP’s model (SB 734) on February 1, 2021. It passed Senate Appropriations on March 1, 2021.
  • North Carolina introduced legislation based on NASHP’s model (HB 643) on April 21, 2021. It was referred to the House Committee on Rules, Calendar, and Operations on April 26, 2021.
  • Rhode Island introduced legislation based on NASHP’s model (HB 7877) on March 4, 2022. The House Committee on Health and Human Services recommended the measure be held for further study on March 29, 2022.

While certain provisions were removed from the final legislation in Maine, stakeholders should closely monitor the implementation of this new law and other state legislative efforts. As we have seen in recent times, state legislators have been successful in incrementally passing drug pricing legislation against drug manufacturers, and Maine’s new legislation reflects an incremental step in a broader legislative agenda.

Zubair Q Britania

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