The Nevada Department of Health and Human Services is threatening to levy roughly $20 million in fines on more than two dozen drug manufacturers that have yet to submit cost and profit reports to the state as required by a 2017 law aimed at better understanding the rising costs of treating diabetes.
In letters sent to the companies this week, the department reiterated that all manufacturers of what it determines to be drugs essential to the treatment of diabetes are required to submit annual reports to the state under Nevada law, and that companies can be assessed a fine of up to $5,000 a day for noncompliance. With 143 days since the manufacturer reports were due on April 1, each company that has yet to submit a report is facing a fine of up to $715,000.
Under the 2017 diabetes drug transparency law, the annual reports are required to include production costs, administrative expenditures, profits, financial assistance, coupons, and other information in an effort to better understand why the disease is so costly to treat. Roughly 13 percent of adults suffer from diabetes in Nevada, with direct and indirect diabetes-related medical expenses totaling $2.7 billion a year in the state.
Manufacturers are also required to provide to the state additional information for drugs determined to have experienced a significant price increase, including a list of each factor that contributed to the increase and the percentage of the total increase attributable to each factor.
The department is giving the 25 companies it says have yet to comply with the law 10 business days to either explain why the Nevada law is not applicable to them or provide a plan with a specific timeline for how the company will come into compliance with the law in 30 days. (The department says a 26th company also has yet to comply with the law, but that it is still trying to locate an address to send a letter.)
The companies sent the letters include: Accord Healthcare, Alvogen, Amneal Pharmaceuticals, Apotex, Ascend Laboratories, Bionpharma, Carlsbad Tech, Citron Pharma, Daiichi Sankyo, Epic Pharma, Glenmark Pharma, Ingenus Pharmaceuticals, International Laboratories, Macleods Pharmaceuticals, Method Pharmaceuticals, Nostrum Laboratories, Par Pharmaceuticals, Perrigo Company, Rising Pharma, Solco Healthcare, Strides Pharma, Time-Cap Labs, Torrent Pharma, TruPharma, and Virtus Pharmaceuticals.
Three of those companies told The Nevada Independent on Wednesday that they have already complied with the law or believe they aren’t subject to it.
A spokeswoman for Daiichi Sankyo said in an email that the company submitted its required report on Jan. 9. However, it is unclear whether the report submitted was the first annual report required by manufacturers in 2018 — which had its deadline extended to Jan. 15 — or the second report that was due April 1. The company said it plans to follow up with the state.
Another company, Amneal Pharmaceuticals, said in an email that it is aware of the requirement and believes it complied in a timely manner; a third company, Bionpharma, said that it has notified the state twice that it does not manufacture the essential diabetes drug in question and was incorrectly identified on the state’s list.
In an email Thursday morning, Ascend Laboratories said that it had not received any communication from the state of Nevada but that it would look into the issue and take immediate steps to ensure the company is in compliance. The other companies did immediately respond to a request for comment by The Nevada Independent.
Two other companies, Aurobindo Pharma Limited and Lupin Pharmaceuticals, have already been granted extensions by the state as they work toward compliance. A third, the U.K. drug behemoth GlaxoSmithKline, came into compliance in mid-July.
State officials said that they made an effort before the reports were due in April to notify as many companies and they could readily find contact information for about the reporting requirements via phone or email.
“Our decision was, we’re not getting a response, we’ve not had the submissions, others were able to comply, so it seems reasonable to notice them,” said Richard Whitley, director of the Department of Health and Human Services. “There is no sort of ‘gotcha’ here. It was all laid out, and we are simply enforcing the law.”
Whitley said that if companies fail to respond to the letters and move toward compliance, the department will be required to consult with the attorney general’s office to take the appropriate next steps.
State Sen. Yvanna Cancela, who sponsored the 2017 legislation, said in a statement that it is “outrageous that diabetes drug manufacturers could willfully ignore Nevada law.”
“We passed legislation to create drug pricing transparency because patients deserve to understand why the prices of their medications increases,” she said. “When one in four diabetes patients ration their insulin because of price, the real question is what are these manufacturers hiding?”
In June, the department released its second annual report on diabetes based in part on the manufacturer information submitted by April 1. The report, which is required to aggregate the data received as to not single out any specific drug manufacturer, found that companies made an average of $1.52 in profit for every $1 they spent on the manufacture and administration of diabetes drugs in 2018.
It also included a breakdown of the justifications manufacturers gave for increasing the price of their drugs, including research and development (26 percent), the drug having more competitive value (12 percent), changes in marketplace dynamics (11 percent), rebates (11 percent) and investment in manufacturing (8 percent). Four percent of the justifications stated that companies increased drug prices to generate profit to maximize value for investors or to avoid not generating a profit at all.
Earlier this year, lawmakers approved and Gov. Steve Sisolak signed into law a bill that will impose the same reporting requirements on asthma drugs. State officials said that they don’t plan to adopt new regulations related to the asthma transparency law and will follow the existing framework and timeline established under the diabetes drug transparency law.
Read a sample of one of the letters below:
Editors’ note: The Nevada Independent has filed a lawsuit against the state of Nevada for violating Nevada public records statutes by not disclosing information related to the 2017 diabetes drug transparency law.
Updated 8-22-19 at 8:20 a.m. to include a response from Ascend Laboratories.