On January 27, 2021, Massachusetts Governor Baker issued his governor’s budget for fiscal year 2022. Budget legislation includes a measure to increase the price of drugs previously proposed by the Baker Administration on multiple occasions. According to the legislation, drug manufacturers “that establish[] an inflated price [meaning WAC] Such a drug, paid directly or in collaboration with a related party, will incur a per-unit penalty for all units of the drug ultimately dispensed or administered in the Commonwealth. “
Whether a drug price is too high depends on the “reference price” of the drug. The “reference price” of a drug is the drug’s WAC as of late January 1, 2021, or the date the drug is first marketed. The price of the drug is considered “excessive” if it exceeds the sum of (1) the reference price of the drug, adjusted for an increase or decrease in the CPI-U for Boston, and (2) an additional 2%. of the reference price (compounded annually) for each period of 12 months that has passed since the date on which the reference price was determined.
The law provides a per unit penalty equal to 80% of the amount by which the drug price exceeds this benchmark (defined as “excessive price increase”) set at the beginning of the calendar quarter. For example, if the reference price of a drug is $ 100 per unit on January 1, 2021, and the manufacturer increases that price to $ 110 per unit on April 1, 2022, the penalty is 80% of $ 8 per unit (i.e., $ 110 minus $ 102 ) or $ 6.40.
Legislation would require manufacturers subject to the penalty to file a return that contains certain information, including the company’s total sales that were penalized in the immediately preceding calendar quarter, as well as all units of excessively priced drugs made during the quarter for distribution in Massachusetts. Information disclosed in a return to the Commissioner of Revenue is confidential (with the exception of certain enumerated disclosures to the Department of Public Health) and is not a public record.
The legislation would take effect when it entered into force. The governor’s budget now goes to the Massachusetts legislature.