Model Legislation and Contracts
NASHP has developed model legislation and resources for state officials working to rein in prescription drug costs. Select the model legislation you wish to review below. You will find additional briefing documents and bill text from states that have already passed the legislation. To request state-only materials, email jreck@oldsite.nashp.org.
International Reference Rates
Recognizing that drug costs in other countries are often many times lower than in the United States, this model act authorizes a state’s department of insurance to establish international reference rates – used by Canada and other countries – for the 250 most costly drugs in that state. The department determines the reference rates based on prices in Canada’s four largest provinces. The lowest price in those provinces will become the legal upper payment limit for those drugs for participating purchasers in the state.
Model Legislation: An Act to Reduce Prescription Drug Costs Using International Pricing, August 2020.
Q&A: An Act to Reduce Prescription Drug Costs Using International Pricing,August 2020.
NASHP’s Proposal for State-Based International Reference Pricing for Prescription Drugs, August 2020. This white paper by Rachel Sachs, JD, MPH, describes the international reference rate-setting proposal, considers key design choices, articulates and responds to potential legal challenges, and provides guidance on several potential implementation issues.
Blog: Why Pay More? NASHP’s New Model Law Uses International Drug Pricing to Lower Costs, August 2020.
State officials interested in this model legislation will be provided with a legislator’s guide and additional background materials. Contact Jennifer Reck to request this material, which is for state officials-only.
Unsupported Price Increases
This model act fines pharmaceutical manufacturers whose drug price increases are unsupported by new clinical evidence and uses that revenue to provide cost assistance to consumers. The model impacts the most frequently prescribed, high-cost drugs, and minimizes a state’s administrative burden by using existing data sources.
Model Legislation: An Act to Protect Consumers from Unsupported Price Increases on Prescription Drugs, July 2020.
NASHP Q&A: An Act to Protect Consumers from Unsupported Price Increases on Prescription Drugs, July 2020.
NASHP’s Proposal for Imposing Penalties on Excessive Price Increases for Prescription Drugs, June, 2020. This analysis by Michelle Mello, JD, PhD, and Stacie B. Dusetzina, PhD, provides a roadmap for states that want to design legislation to regulate excessive price increases, and offers recommendations for avoiding legal challenges. An accompanying chart, highlights how NASHP’s model legislation addresses recommendations from this analysis.
Blog: NASHP’s New Model Law Penalizes Drug Manufacturers for Unsupported Price Hikes, July 2020.
State officials interested in this model legislation will be provided with a legislator’s guide and additional background materials. Contact Jennifer Reck to request this material, which is for state officials-only.
Anti-Price-Gouging
This model legislation prohibits manufacturers from hiking prices for generic and off-patent drugs. Price increases that surpass a specific threshold identified in the law trigger action by a state’s attorney general. Manufacturers that price-gouge face fines and must stop charging the excessive price. NASHP’s model addresses the legal challenges that led to the demise of Maryland’s 2017 anti-price-gouging law.
Model Legislation: An Act to Prevent Excessive and Unconscionable Prices for Prescription Drugs, July 2020.
Q&A: A Model Act to Prevent Excessive and Unconscionable Prices for Prescription Drugs, July 2020
NASHP’s Proposal for Protecting Consumers from Prescription Drug-Price Gouging, June 2020. This white paper by Michelle Mello, JD, PhD, provides states with a roadmap to help navigate legal issues and offers recommendations to state legislators who are drafting anti-price-gouging legislation.
Blog: NASHP Launches Next Round of Model Acts to Lower Rx Costs – Preventing Generic Price-Gouging, July 2020. This blog explores how NASHP’s anti-price-gouging model act builds on information revealed by state drug pricing transparency programs and addresses excessive price increases.
Licensing Pharmaceutical Representatives
This model legislation gives states the authority to license pharmaceutical sales representatives to increase transparency surrounding their activities and influence and to require training on ethical standards. It also incorporates an approach, first enacted in Colorado, to require representatives to disclose the wholesale acquisition cost of the drugs they market and to share the names of generic options in the same therapeutic class when available.
Model Legislation: A Model Act to License Pharmaceutical Representatives, July 2020.
Q&A: A Model Act to License Pharmaceutical Representatives, July 2020.
Kaiser Permanente Institute for Health Policy White Paper: Drug Policy 101: Pharmaceutical Marketing Tactics, January 2020. This brief describes the types of marketing tactics that pharmaceutical companies use and the adverse impacts those tactics can have on patients, clinicians, and the health care system.
Blog: New NASHP Model Act Licenses Pharmaceutical Sales Reps to Curb Drug Spending, July 2020. This blog explores the impact of pharmaceuticals sales representatives on drug marketing and sales and highlights the need for state action.
Transparency
NASHP developed two versions of a model drug cost transparency bill to enable states to take a comprehensive approach to unlock the black box of pharmacy pricing and increase consumer awareness.
Comprehensive Transparency Model Legislation: This bill includes language detailing the data components. Download the following reporting templates to capture the data required:
Manufacturer Report for New Drugs
Pharmacy Benefit Managers Report
Wholesale Drug Distributor Report
Enabling Transparency Model Legislation: This version of the transparency model legislation does not have the provisions that detail the data components.
Importation
NASHP’s drug importation model legislation creates a state wholesale importation program to purchase lower-cost drugs from Canada and make them available to state residents through an existing supply chain that includes local pharmacies.
Model Prescription Drug Importation Legislation – “An Act to Permit the Wholesale Importation of Prescription Drugs into (State)”
Wholesale Drug Importation Legislation Q&A
Easy-to-understand Infographics explaining how drug importation works
An overview explaining of NASHP’s Model Importation Legislation
Other resources:
- Vermont’s Wholesale Importation Program for Prescription Drugs Legislative Report, December 2018, NASHP and a team of consultants, including FDAImports.com, LLC, provided staff support to Vermont’s effort, which concluded that significant savings would result from importation. Based on just 17 high-volume, high-cost drugs identified for two of the state’s three major carriers the savings from Canadian importation would be between $1 and $5 million annually.
- NASHP Worksheet for Payers #1: Determining Top 35 Prescription Drugs by Payer “Spend,” January 2019. This worksheet helps states prioritize which prescriptions drugs are candidates for wholesale importation from Canada by prompting payers to identify their top-spend drugs based on cost times utilization.
- NASHP Worksheet for Payers #2: Savings for Payers from Canadian Importation, January 2019. This worksheet builds on the top-spend drug list and allows payers to determine potential savings from wholesale importation from Canada.
- Press Release: NASHP Applauds Vermont for Taking Next Step in Prescription Drug Importation, January 2019. NASHP released a press release after Vermont published its report on wholesale importation in December 2018.
Affordability Review
- Blog: An Act to Reduce the Costs of Prescription Drugs by Establishing a Prescription Drug Affordability Board, November 2022.
- Model Legislation: An Act to Reduce the Cost of Prescription Drugs by Establishing a Prescription Drug Affordability Board, August 2022.
- Q&A: An Act to Reduce the Cost of Prescription Drugs by Establishing a Prescription Drug Affordability Board, August 2022.
- NASHP’s Proposal for State-Based Prescription Drug Affordability Boards, August 2022. This white paper by Rachel Sachs, JD, MPH, discusses the Prescription Drug Affordability Board model, including legal challenges states may face in developing and implementing PDABs, suggesting opportunities for states to design their Boards to avoid legal concerns.
Pharmacy Benefit Manager
Model Legislation
NASHP’s Center for State Rx Drug Pricing has developed model legislation that allows states to define new standards for pharmacy benefit manager (PBM) business practices. This model bill addresses PBMs’ fiduciary responsibilities and bans PBM gag clauses that prevent pharmacists from sharing lower cost drug options with consumers.
Pharmacy Benefit Manager Model Legislation A: This model legislation enables states to directly regulate PBMs, and gives states flexibility to identify which agency should oversee PBMs.
Pharmacy Benefit Manager Model Legislation B: This PBM model legislation allows states to regulate PBMs through their state insurance departments. It is modeled after Maine’s Bill 1504, approved in 2019.
Montana Explores a New Approach to Regulating Pharmacy Benefit Managers: This blog highlights Montana’s approach to address PBM business practices by leveraging its insurance department’s regulatory authority over insurance carriers.
Pharmacy Benefit Manager Questions and Answers: Commonly asked questions and answers about PBMs’ role in the drug supply chain and NASHP’s model legislation.
How Legislation Helps States Shed Light on Pharmacy Benefit Manager Operations: This blog explores how states can use this model legislation to license PBMs, ban gag clauses that prevent pharmacists from sharing lower-price drug options with consumers, and require more transparency into exactly who profits from rebates.
Chart Comparing Pharmacy Benefit Manager laws in 21 states. States took varied approaches to regulating PBMs in 2018. This chart details each state’s approach and how their laws compare with NASHP’s PBM Model Legislation A.
Model Contract
States, as major purchasers of drugs for their employee health plans, can control prescription drug costs by negotiating more favorable contract terms with PBMs. Achieving advantageous contract terms with a PBM during the procurement process may supplement or provide an alternative to direct regulation of PBMs for states that do not wish to pursue legislation.
Model Pharmacy Benefit Manager Contract Terms, February 2020. These model contract terms enables states to restrict PBM compensation to an administrative-fee-only model, eliminate spread-pricing, require 100 percent pass-through of rebates, and provides robust transparency for greater monitoring and enforcement.
Blog: Model Pharmacy Benefit Manager Contract Terms Help States Achieve Prescription Drug Savings, January, 2020. This blog explores how states, as major drug purchasers, can leverage their buying power by demanding favorable contract terms with PBMs using NASHP’s model PBM contract terms.
State Purchasing Pool Buy-in
This model legislation allows small businesses and individuals to buy into a state employee prescription drug benefit purchasing pool. It authorizes non-state public employers, self-insured private employers, and insurance carriers who cover small groups or individuals to purchase drugs for their beneficiaries under the purchasing authority of the state. By adding more lives to a purchasing pool, purchasers can negotiate better prices for public employees and others who join the purchasing pool.
Model Legislation to Allow Buy-in into State Purchasing Pools for Prescription Drugs, January 2020.
Q&A: Prescription Drug State Purchasing Pools and Buy-in, January 2020.
NASHP Proposal for a State Purchasing Pool for Prescription Drugs, October 2019. This white paper provides a roadmap to help states navigate legal issues and implement a state purchasing pool.
Model Pharmacy Benefit Manager Contract Terms Help States Achieve Prescription Drug Savings, January 2020. This blog explains how establishing favorable PBM contract terms can be a state’s first step toward leveraging additional savings through a second strategy – implementing a state purchasing pool for prescription drugs.
Medicare Reference Rates
The landmark Inflation Reduction Act (IRA) allows Medicare, for the first time, to negotiate the price of certain high-cost drugs. NASHP’s model bill enables states to extend the benefits of federal negotiations to state-regulated markets by using the negotiated Medicare rates as reference rates to set upper payment limits for state and private purchasers — and to use the savings that are achieved to help consumers.
Model Legislation: An Act to Reduce Prescription Drug Costs Using Reference-Based Pricing, November 2022.
Blog: New NASHP Model Legislation Supports State Efforts to Lower Drug Costs by Leveraging Medicare Negotiations, November 2022.
Q&A: A Model Act to Reduce Prescription Drug Costs Using Reference-Based Pricing, November 2022.
NASHP’s Center for State Rx Drug Pricing develops model legislation and contracts to help states control rising prescription drug costs, and features the bills on its website. State officials interested in these model bills should contact Jennifer Reck for more information.
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