STAT: California legislator reintroduces a bill for transparency in drug pricing

March 15, 2017

By Ed Silverman

A California legislator is taking another stab at gaining transparency into drug pricing by introducing a bill that would require drug makers to notify state officials about planned price increases and to also justify price hikes. At the same time, the legislation would also require health plans to provide detailed information about drug costs and the portion of premiums attributed to this expense.

“Millions of Californians have health insurance, but affordability remains a critical issue,” state Senator Edward Hernandez in a statement to announce the bill. “The favorite tactic of drug companies is to help consumers with their co-payments, but all this does is shield consumers from the true cost of the drug while driving up insurance premiums for everyone.

“While other sectors of the healthcare system have safeguards and transparency requirements in place with regards to cost drivers, the pharmaceutical industry has no such mechanisms in place, leading to unsustainable increases in the cost of prescription drugs.”

The bill is part of a legislative groundswell trying to tackle rising prescription drug costs by state and federal lawmakers as poll after poll shows Americans want government to take action. In Congress, bills have been introduced recently that would spur development of lower-cost generic drugs or allow Americans to import drugs from foreign pharmacies, notably those in Canada.

President Donald Trump has accused drug makers of “getting away with murder” and expressed interest in lowering drug prices. And there were reports suggesting he may back the notion of allowing Medicare to negotiate drug prices after a closed-door meeting with two Congressmen. Nonetheless, his administration has yet to provide any concrete proposals.

Meanwhile, state legislators have been more aggressive.

In fact, this marks the second attempt by Hernandez. Last August, however, he pulled his first so-called transparency bill when last-minute amendments were added during an assembly committee hearing. That followed lobbying by the pharmaceutical industry. He then introduced a watered-down version in December, but is now returning with a revised approach.

The newest legislation states that drug makers must notify any public or private payer, as well as the Office of Statewide Health Planning and Development, 90 days before the list price of a medicine rises by a specific threshold.

A legislative aide explained the threshold would be $600 because the bill uses specialty drug pricing under Medicare as a benchmark. A company would have to report price hikes if the list price for its drug is under that benchmark and the cumulative increase is more than 25 percent over three years. If the list price is under the threshold, a company would have to report price hikes if the cumulative is increase is more than 10 percent over three calendar years.

In his previous bills, drug makers would have been required to report any move to increase the price of a drug by more than 10 percent during any 12-month period, and also justify increases for medicines with list prices of more than $10,000 within 30 days of making such a move. The change reflects a desire to benchmark price hikes to something that does not appear arbitrary, a legislative source explained.

To what extent this revised version gains any traction is unclear.

For one thing, an earlier legislative attempt in California to force drug makers to disclose and explain price hikes also failed. Besides the Hernandez bill that was pulled last year, a similar measure introduced two years ago by state Assemblyman David Chiu, who appeared with Hernandez today at a press conference, also went nowhere.

Bills in more than a dozen other states also sputtered in the face of industry opposition. Only Vermont has passed a law, but so far, it has had a limited effect, according to a state legislator who was involved in designing the plan. The state has no power to do anything about prices, other than issue $10,000 fines to companies that fail to comply, and confidential data is not publicly released.

Meanwhile, the Pharmaceutical Research & Manufactures of America, the industry trade group, sent us a statement saying that, “rather than creating a new bureaucratic system that creates layers of red tape, Californians would be well served if we focus on market-based solutions that better align payment with the value to the patient. Just as a one-size-fits all doesn’t work in caring for patients, neither should we use that strategy in pricing medical care.

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