State Drug Price Transparency Laws – Avoiding Penalties and Navigating the Current Climate

Avoiding Penalties and Navigating the Current Climate

In response to concerns about the increase in pharmaceutical drug pricing, many States are taking legislative action to increase price transparency and also to curb further increases. Because no federal legislation exists to control these price increases, States are taking their own action. Many States passed new legislation or regulations limiting drug costs, and many others are in the process of doing the same. Goals of the pricing laws include obtaining data on how the markets work, which players set prices, monitoring steep price increases, and also ostensibly controlling price increases if the seller knows its prices will be publicized.

As a result of the recent escalation in legislative activity surrounding drug price laws, drug companies are suddenly faced with complex and constantly-evolving regulations, which vary widely amongst the States.

The goal of these laws is to improve drug price transparency. But without an overarching federal law, inconsistencies and variations among state laws are making it extremely difficult for drug companies to navigate the drug distribution system, at the national level. Understanding and adhering to all of the differing state laws and regulations is extremely difficult, resulting in an increase in penalties for drug companies that fail to follow the rules. Many of the States require complex spreadsheets, disclosure of confidential information, analysis of historical data, and the failure to provide any or all of this information may lead to crippling penalties.

Other States have gone so far to put caps on drug pricing, limit any drug price increases, and increase the rebates or allowances paid back to States. Such drug price controls may run afoul with many different federal or Constitutional laws.

States Require Manufacturers to Comply with Their Laws

In addition to the inconsistencies in drug price transparency laws amongst the States, there are also questions of applicability and to whom the laws apply. For example, certain states require manufacturers to comply with their laws, which can lead to a complicated dilemma; drugs often arrive in a State through a wholesaler, out of the manufacturer’s control. That is, suppose a drug manufacturer manufactures the drug product out-of-state, but downstream companies distribute the product into the state. Is the manufacturer responsible for state law compliance even though it did nothing to market the product in-state?

Furthermore, drug pricing is valuable for trade secret information. As such, it is important for drug companies, manufacturers and wholesalers alike to understand their roles and obligations to comply with state laws.

Benefits and Detriments of Compliance

Most Americans would agree that curbing further increases in pharmaceutical pricing is a good thing; costs for some drugs have gotten out of control. But increased reporting obligations, inconsistencies in state legislation, and the compliance requirements of certain states are placing a serious operational and administrative burden on drug companies. And further, the penalties can be crippling.

With several States requiring that pricing information be published on public websites, drug companies are facing multiple challenges related to market competition, public relations, and the risk of the public misinterpreting published information. Also, competitors and buyers can use the same information, thereby altering the traditional bargaining power.

Meanwhile, challenges to the State law legislation, regulation, or calculations take time. A company may need to exhaust administrative remedies first. A company may be barred from participating in local programs until resolution. Also, the penalty may continue to accrue.

How Upadhye Tang LLP Can Help

At Upadhye Tang LLP, we understand the challenges that these new regulations are imposing on drug companies, and we can help you determine how to adhere to the regulations and protect your interests while remaining compliant. We help branded companies with unraveling the rules and regulations in order to ensure compliance. For generic companies, there are other challenges that may be raised because the marketing of generic drug products is different from branded products. We will defend your rights if you have recently found yourself under enforcement of new legislation, negotiating to mitigate damage, and litigating unconstitutional laws. Contact Shashank Upadhye of Upadhye Tang LLP today at (312) 598-2610 or by email to to learn more about how we can help.


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