Superintendent Harris Announces the Conclusion of the First Investigation by DFS' Office of Pharmacy Benefits

Department of Financial Services’ Office of Pharmacy Benefits concludes its first investigation under new authority to investigate significant spikes in drug prices

Investigation uncovered errors in the reporting of drug prices led to a false impression of a drug spike, confirmed no consumers were harmed, and secures commitments to greater internal controls from the subject of the investigation

Superintendent Harris announced today that the New York State Department of Financial Services’ Office of Pharmacy Benefits (OPB) has completed its investigation into the apparent price spike in the cost of a budesonide product produced by Cipla USA, Inc., a pharmaceutical manufacturer. 

Cipla has entered into an agreement with OPB to put in place new internal controls governing the reporting of drug prices and will report on the implementation and maintenance of those new controls in one year.  OPB’s investigation confirmed that no consumers were impacted by the apparent price increase but uncovered errors in reporting of drug pricing that if left unaddressed had the potential to cause serious issues in the future. 

“With the conclusion of this investigation the Office of Pharmacy Benefits has demonstrated the importance of its mission,” said Superintendent Harris. “I am proud of the good work done in this case and look forward to future investigations from the OPB.  I remain committed to bringing transparency to drug pricing which represents a critical component of health insurance premiums.  New Yorkers deserve to know whether drug pricing is based on value and market conditions or purely on speculation and greed.” 

The closeout agreement with Cipla follows OPB’s earlier announcement of several investigations under Section 111 of the Insurance Law into anomalously large spikes in the prices of six drugs that occurred during the COVID-19 pandemic.  One of these drugs was Budesonide 0.5 mg/2 mL inhalation (60 mL), a generic formulation produced by Cipla USA Inc. which appeared to have increased in price by over 1350% in the midst of the first wave of COVID-19 cases in the U.S. and on the heels of an announcement of international clinical trials for the use of budesonide to treat COVID-19 patients. 

OPB’s investigation revealed that what appeared to be a 1350% increase in the price of the drug, was, in fact, the result of clerical errors in reporting the price of a new product to various drug compendia, the entities in which manufacturers report prices for the drugs they produce. Though Cipla was aware of the clerical error and had attempted to correct the information with the compendia, the OPB investigation discovered that the apparent spike remained reported on two compendia databases throughout 2020.

As part of this Agreement, Cipla has corrected the remaining errors and has created and implemented a new internal control policy that includes transfer of responsibility for drug price submissions to a Contract and Pricing Committee, requiring prior review and approval by the Chief Commercial Officer for all submissions, and semiannual internal audits for pricing information. Cipla has also agreed to designate a compliance officer for internal controls related to drug pricing and affirm the policy is in place. 

DFS appreciates that Cipla has been cooperative with OPB’s investigations and has readily provided thorough responses and taken swift action to develop internal control policies to ensure mistakes like this do not happen in the future.

This agreement marks the first settlement by New York State under its prescription drug price investigatory authority which was enacted in April 2020 pursuant to legislation passed as part of the Executive Budget.  The law authorizes DFS to investigate significant spikes in prescription drug prices and to require drug manufacturers, or whomever is responsible for the price increase, to show a reasonable justification for sudden increases. The OPB will continue to monitor the market and complaints from the public.  Members of the public are encouraged to report a price spike they have experienced on the special reporting form which has been created on DFS’ website under “Report a Drug Spike.”  Questions may be submitted to Eamon Rock, Director of the Office of Pharmacy Benefits at [email protected].

Please read a copy of the agreement on the DFS website

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