Massachusetts’ 2017-2018 Legislative Session: Busy & Productive for the Life Sciences
The legislative session in Massachusetts ended at midnight on July 31st. Looking back, what happened during the last 18 months was immensely impactful on the life sciences industry both for what was passed into law, and for what wasn’t:
- The next phase of the state’s life sciences initiative was passed into law committing $623 million over the next five years to the growth of our industry across the state
- Numerous proposed reforms to MassHealth’s prescription drug program did not pass
- A proposal to require drug price transparency from manufacturers was not passed
- A pathway for virtual manufacturers was passed into law
- Major changes were made to our state’s non-compete law
MassBio, working on behalf of its member organizations and alongside industry allies, is proud of the outcomes on the various major initiatives that we’ve advocated on. We believe this work has helped set the stage for our industry to thrive for years and decades to come. Below is an overview of the major issues we’ve been advocating on over the last 18 months.
Medicaid Prescription Drug Reforms
Outcome: No changes made to Massachusetts Medicaid program related to prescription drugs
In September 2017, the Baker’s Administration filed a 1115 waiver request with CMS proposing a number of changes to the state’s Medicaid program (MassHealth) with the goal of reducing costs to the state. One of the most significant proposed changes was to allow MassHealth to limit which prescription drugs would be available to MassHealth patients by establishing a closed formulary similar to what commercial payers use. If approved, the waiver would allow MassHealth to exclude certain drugs from the formulary if the drug had no clinical efficacy or the state was unable to gain further rebates or discounts directly from the manufacturer. Massachusetts was the first state to ever propose closing the Medicaid formulary.
This June, the Center for Medicare & Medicaid Services (CMS) formally rejected the waiver request, in a major victory for patients and the industry. After CMS’ decision was released, we wrote a blog with further details.
Yet, numerous further proposals to reform MassHealth’s prescription drug program continued throughout 2018 as part of the legislative process. In January, as part of the Governor’s Fiscal Year 2019 budget proposal, he included two outside sections that sought to give MassHealth additional powers to reduce prescription drug spending. Then, in May, the Senate released their version of the FY19 budget and included a different approach to restricting prescription drug spending in MassHealth – one that looked a lot like what New York was doing. Outside Section 185 of Senate 2530 would have permitted the Massachusetts Secretary of Health and Human Services to establish a “pharmaceutical spending target” in MassHealth of at least 20% (6% for FY 2019). Outside Section 80 would have further authorized the Secretary to extract directly from individual manufacturers supplemental rebates utilizing guaranteed net prices based on either a drugs’ “public health value . . . as determined by an independent third party designated by the Secretary,” or “any other appropriate measure of value.” Manufacturers that did not agree to such supplemental rebates would have been subject to a variety of penalties, including drug price transparency disclosures that contain no protections against the submission of proprietary and confidential information other than a public records law exemption, and even monetary fines.
Neither of these proposals was passed into law before the end of session.
Life Science Initiative 2.0 Signed Into Law (Chapter 112 of the Acts of 2018)
Outcome: Passed into law, effective immediately
This June, Governor Charlie Baker signed into law the next phase of the state’s life sciences initiative. The bill provides $623 million over the next five year to continue the state’s investment in the growth of the life sciences. The bill focuses on facilitating job growth through capital grants that advance education, workforce development, and early-stage company growth, advanced bio-manufacturing, and scientific innovation. The fund will continue to be managed by the Massachusetts Life Sciences Center (MLSC).
After the bill was passed, we wrote about it more detail on our blog.
Health Care Reform Legislation
Outcome: Died in Conference
Last fall, the Senate took up a major health care reform bill that proposed numerous changes to the state’s health care ecosystem. Included in this bill was language to apply strict levels of drug price transparency to pharmaceutical manufacturers. MassBio and our allies were strongly opposed to the approach that would have imposed unnecessarily burdensome regulations on the industry requiring, among other things, the disclosure of “any available data” regarding pricing, including product specific reporting on numerous categories of information that would not only be difficult (and in some cases impossible) to calculate and disclose, but in many cases would also be confidential and proprietary.
Then in June, the House released their version of the bill which also included drug price transparency language. However, this time they included compromise language that MassBio and our allies could support. The House language would have required manufacturers increasing drug prices by at least 25% in a calendar year for a prescription drug that accounts for a significant share of state spending to justify that increase, as well as provide additional data as may be required by the Center for Health Information and Analysis (CHIA). MassBio was also supportive of House provisions that would have included a broad subset of pharmaceutical manufacturers among the witnesses required to appear before the Health Policy Commission at its annual Cost Trends hearings. Similar language was offered by the Senate, however it did not contain protections against requested disclosures by witnesses of confidential and proprietary information.
Yet, after lengthy debate, the Conference Committee appointed to reconcile the numerous differences in the House and Senate health care bills was not able to reach a compromise before the end of the session, and as a result, the Legislature did not pass a health care bill. We expect this issue to come up again next session.
Co-Pay Assistance Sunset Extension
Outcome: Adopted in the House but not in the Senate. Technically still alive, can be taken up during informal session that runs through January 1, 2019.
As part of the annual budget debate, the House included language that would extend the sunset through June 30, 2021 of the law allowing for co-pay assistant programs and discounts to patients for prescription drugs for which no therapeutically equivalent generic alternative exists, as well as biologics. Currently, this exemption expires as of June 30, 2019.
This language was passed in the final budget, but ultimately Gov. Baker sent an amendment to the section reducing the extension only through 2020 and requiring the Health Policy Commission to undertake a study to review the available data and examine the effect of drug couponing on pharmaceutical spending and consumer access to prescription drugs in Massachusetts.
Pathway Established for Virtual Manufacturers
(Section 43 of Chapter 47 of the Acts of 2017)
As part of the FY2018 state budget, language was included that would establishing a registration pathway at DPH for virtual biopharmaceutical manufacturers (VMs), which are drug manufacturers based in the Commonwealth that do not physically manufacture the drug products that they legally own and distribute. Without the ability to obtain such registrations from DPH, VMs based in the Commonwealth can face challenges distributing their products in other states across the country that require home state drug manufacturer registration. Section 43 now authorizes DPH to issue such registrations to VMs based in Massachusetts. VMs will now be able to present these registrations to obtain distribution licenses, and sell their product, in other states that require such documentation.
Outside Section 43 requires the Department of Public Health (DPH) to promulgate regulations to administer this new and important registration pathway, 105 CMR 700.000, Implementation of MGL c 94C. Regulations have not yet been finalized.
Economic Development Bill
Outcome: Passed into law.
Section 21 – Non-Compete Agreements
Provisions relative to non-compete agreements allow for non-compete agreements if: the restricted period is limited to one year in most cases and two years in certain situations; the agreement is no broader than necessary; and the agreement contains a "garden leave" clause that would allow employees to collect a salary while they are prohibited from working elsewhere of up to 50 percent of the workers' highest annual pay during the last two years of employment.