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Eight bottles of insulin sitting on a table on Tuesday, Nov. 3, 2015. (Alan Levine/Courtesy under Creative Commons)

Despite the high theater that has surrounded Nevada’s first-in-the-nation insulin pricing transparency law — from a politically powerful union flying diabetes patients up to the Legislature to tell their personal stories to an impromptu hearing in back of the Assembly chambers where throngs of pharmaceutical lobbyists made a last-ditch stand against the bill — a workshop over a set of draft regulations to refine it lasted only seven minutes.

But the Thursday meeting’s surprising brevity belied the pharmaceutical industry’s significant concern with the draft regulations as written. Industry representatives, in letters to the Department of Health and Human Services over the past two days, argued that the draft regulations impose too much of a burden on manufacturers to go to court to protect pricing information and financial data required to be disclosed to the state from public disclosure, though they didn’t shut the door entirely on reaching some sort of compromise that would render the lawsuit unnecessary.

“While PhRMA commends the Department for recognizing the constitutional problems that would arise if it fails to safeguard trade secrets, we remain concerned that the proposed regulations do not establish a process that adequately ensures the protection required,” Joanne Chan, assistant general counsel for PhRMA, the pharmaceutical industry trade association, wrote in a letter on Wednesday.

PhRMA’s concerns are also echoed in letters from the Biotechnology Innovation Organization, the trade association representing the biotech industry, and Pfizer.

And then there are those who think the regulations go too far. The department received five nearly identical letters from diabetes patients arguing that the regulations do too much to shelter the drug pricing information from the public’s view in direct conflict to the bill’s original intent — the same contention the Culinary Health Fund, which helped shepherd the bill through the Legislature, has made in their various filings attempting to intervene as a defendant in the lawsuit.

“These companies are going to extreme lengths to prevent transparency, by suing the Nevada Attorney General and now attempting to subvert the intent of Nevada’s legislature to bring diabetes drug pricing transparency to patients,” the letters state.

The regulations are, in part, an effort by the department to leave the central issue of whether certain pricing information and financial data manufacturers of insulin and other essential diabetes drugs are required to provide the state are trade secrets up to the courts. The issue of whether the information required to be disclosed by the bill — including costs of manufacturing the drug, profits earned, rebates and discounts handed out and, under certain circumstances, explanations for price increases — are trade secrets is at the heart of the ongoing lawsuit over the law’s constitutionality.

The regulations spell out a process for manufacturers to flag certain data elements as confidential if they believe they meet the definition of a trade secret under federal law. Then, if the department receives a request to release that information through a public records request, department officials would notify the manufacturer of the request and allow them 30-days to take action in court under federal trade secret law to halt the release of the information before the department does so.

But PhRMA argues that having to go to court every time someone files a public records request for information that the manufacturer believes to be confidential would be time-consuming and expensive. They also note that the Culinary Health Fund has already expressed an interest in procuring that information, essentially making litigation inevitable.

“Such an unchecked, repetitive, legal process could have the unnecessary effect of adding to the costs of bringing diabetes medicines to market and thus exacerbate the concern PhRMA has raised in the litigation that (the bill’s) publication of competitively sensitive price and cost information may lead to unintended effects that prevent drug prices from falling as quickly as they would without the Act,” Chan wrote in the letter.

Instead, PhRMA suggests that the department should base its review process of whether to disclose the information off of the federal Freedom of Information Act or Nevada’s Public Records Act, which leaves it up to government entities to decide whether the information is confidential or a trade secret and should be exempted from disclosure. Under such a model, the department would be responsible for deciding whether the information is a trade secret, and either the requestor of the information or the manufacturer would be able to take the matter to court to either compel or prohibit disclosure if they object to the department’s reasoning.

PhRMA argues that “nearly all” of the information required to be disclosed by the law “constitutes a trade secret under well-established law from jurisdictions throughout the country.” So, if the department is the arbiter of what counts as a trade secret, it would only need to make such a determination once, the issue would go to court, and the matter would be settled, setting a precedent for all future requests for disclosure.

They also object to some of the nuances of the trade secret protection procedure as spelled out in regulations, including arguing that a requirement that manufacturers to support their requests for confidentiality with a detailed description about why the information counts as a trade secret “appears to serve no purpose under the regulations as drafted” but that if it is kept in, it should be revised to make it clear that the description itself not include trade secret information. They also request that the 30-day notice period be extended to 60 days to give manufacturers time to file their legal challenges.

But PhRMA also argues that the regulations don’t go far enough in a couple of areas.

They have asked the department to be more specific about the information required to be disclosed by law, saying “costs,” “profits” and “administrative expenditures” are too general of terms and could result in an “apples-to-oranges compilation” of data points between different companies that report the data differently. Because the information may be laborious to obtain, PhRMA urged the department to “define, as precisely as possible and as quickly as possible” the exact data required to be disclosed.

And although the draft regulations make clear that the annual report on diabetes drug pricing required to be published by the department will only include aggregated information to describe general trends, PhRMA has asked that the department make clear in regulation that the report will not include information that is manufacturer-specific or could be “reverse-engineered” to figure out which company it came from.

Pharmacy benefit managers, the middlemen in the drug pricing process, are also subject to similar transparency requirements as drug manufacturers in the bill but had only two narrow concerns about the proposed regulations. The Pharmaceutical Care Management Association, which represents the so-called PBMs, noted that the disclosure of certain information related to Medicare is preempted by state law and should be removed and highlighted a simple typo in the regulations, but expressed no concerns over the trade secret protections outlined in the regulations.

“PCMA appreciates the Department’s acknowledgement that certain proprietary price information is protected by the Defend Trade Secrets Act and appreciates that the Department has outlined a process to address those protections as the issues arise,” April Alexander, PCMA’s assistant vice president for state affairs, wrote in a letter.

The diabetes patients, meanwhile, didn’t lay out any specific recommendations in the form of letters, only urging the department to reconsider the regulations “alongside the law’s intent: transparency for patients and payors.”

In the wake of the Thursday workshop, the department can take any or all of the suggestions into account when it submits the draft regulation to Legislative Counsel for drafting the proposed regulation. But the clock is ticking: Manufacturers of essential diabetes drugs are required to make their first report to the state by April 1.

After the regulation is drafted, a hearing for public comment will be scheduled 30 days out, at which time further adjustments can be made. The final regulation must be approved by the Legislative Commission before it takes effect.

The lawsuit hasn’t moved ahead any faster. U.S. District Court Judge James Mahan denied the pharmaceutical industry’s initial request to stall implementation of the law, but hasn’t yet issued a final judgment on whether the law should stand. A hearing date for final judgment has yet to be scheduled.

  Comments on SB539 Draft Regulations by Megan Messerly on Scribd

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