Feature

Drug price transparency laws gain ground


 

Connecticut is the latest state to enact a so-called drug price transparency law that imposes reporting requirements on drug makers, health insurers, and pharmacy benefit managers (PBMs).

The new requirements, signed into law by Connecticut Governor Dannel Malloy (D) on May 31, call on drug manufacturers to provide information about significant drug cost increases, including the factors that triggered the price hike and information about the drug’s development costs and capital expenditures. As part of the law, PBMs must report the volume of formulary rebates received from drug makers, including the portion provided to health insurers.

Connecticut’s law is the first to require that health insurers submit data about the most frequently prescribed and highest-cost drugs, as well as information about the impact of drug costs on the plan and its members.

Connecticut Comptroller Kevin Lembo called the law “groundbreaking” and said enactment of the measure is a victory for patients who pay outrageous prices while corporations are “enriched by big discounts.

Kevin Lembo, Connecticut Comptroller

Kevin Lembo

“The extreme wealth exchange between corporate giants from pharmaceutical manufacturers to pharmacy benefit managers to insurance companies, will no longer happen in the dark,” Mr. Lembo said in a statement. “This legislative victory is a groundbreaking step, but the fight for fairness has only just begun as we continue the fight for relief at the pharmacy counter.”

Priscilla VanderVeer, a spokeswoman for Pharmaceutical Research and Manufacturers of America (PhRMA), said Connecticut’s law has some positive features, but does not go far enough in ensuring savings are passed along to patients.

“While we are glad that this legislation will require middlemen to report what portion of rebates are being passed on to consumers, we are disappointed that the final version of the legislation does not include provisions that would ensure steep rebates given to middlemen are passed on to consumers,” Ms. VanderVeer said in an interview. “Making sure that patients who share the cost of their prescription medicines also share the savings is one of the most important things we can do to provide relief for patients facing higher out-of-pocket costs at the pharmacy counter. We are committed to working with Connecticut lawmakers and other health care stakeholders to craft a solution that will provide patients with the solutions that matter the most to them.”

Priscilla VanderVeer of PhRMA

Priscilla VanderVeer

At least seven other states have passed similar laws that aim to expose questionable medication pricing and compel drug makers to provide the reasoning behind their cost decisions. Between 2016 and 2018, drug price transparency laws were enacted in California, Louisiana, Nevada, New York, Oregon, Maryland, and Vermont. Maine meanwhile, has enacted legislation that requires the development of a plan to collect data from manufacturers.

The majority of drug price transparency laws require drug makers to report and justify dramatic drug price increases to the state. Maryland however, went a step further by allowing the state attorney general to take legal action against drug makers that price gouge and to obtain restitution for state health programs and patients. In April, a federal appeals court struck down Maryland’s law as unconstitutional, ruling that the measure violates the federal commerce clause because it attempts to regulate price transactions. The law remains in limbo while the legal challenge continues.

The recent drug price transparency laws are necessary first steps to enable states to better understand and anticipate price increases, said Jennifer Reck, project director for the National Academy for State Health Policy.

“Faced with unsustainable prescription drug price increases, states are passing laws to create greater transparency and accountability around pricing,” Ms. Reck said in an interview.

Jennifer Reck of the National Academy for State Health Policy

Jennifer Reck

However, with the exception of Maryland’s measure, the laws are limited because they do not empower states to take action when companies dramatically increase drug prices, she said. It’s also unclear what impact the greater transparency requirements will have on the marketplace, she added.

Gerard F. Anderson, PhD, a health policy and management professor at Johns Hopkins University in Baltimore, agreed that the drug price transparency laws are a good start. But a second component is needed so that states can take effective action, he said in an interview.

“Price transparency, alone, doesn’t do anything,” he said. “What you need to do is couple price transparency with some kind of other activity that would allow you to actually lower the price.”

Some of those other activities include prohibiting rebates by PBMs, rate setting, or establishing a maximum amount that patients should pay for certain drugs, he suggested.

Some states are already exploring policies that go beyond transparency to allow states to take action against overpricing of medications, Ms. Reck noted. New Jersey and Minnesota, for example, have introduced rate-setting bills that would create cost commissions with the authority to establish payment rates for drugs determined to be unjustifiably priced.

To truly lower drug costs for patients, state laws must be comprehensive and address the various rungs of the pharmaceutical supply chain, Ms. VanderVeer said. PhRMA supported Louisiana’s recent drug price transparency law, but has opposed laws in Vermont, California, and Nevada.

“If it is transparency legislation and other policies that actually help patients afford their medicines and make sure that they are getting access to the same discounts and rebates their insurers and PMBs are getting, then yes, we support it,” Ms. VanderVeer said in an interview. “Unfortunately, a lot of the so-called ‘transparency’ bills that have passed over the last few years do no such thing. All they do is look at one part of the supply chain – the inventors and manufacturers of the medicines – and completely leave out those in the middle and have no provisions in them that will help patients access or afford their medicines.”

Connecticut’s law goes into effect in January 2020.

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