By Ed Silverman
Should drug makers be required to disclose their costs to justify rising prices?
This is what a growing number of state legislatures are considering. Over the past several weeks, lawmakers in a handful of states stretching from California to Massachusetts have introduced bills in a bid to force the pharmaceutical industry to conduct an economic striptease.
“We need to have some transparency,” says Tony DeLuca, a Democrat who chairs the Pennsylvania House Insurance Committee and who introduced one such bill earlier this week. “Some of the sticker prices are outrageous. I’m hoping it achieves lower health care costs.”
The bills are not wholly identical. Some would require drug makers to report profits and various operational costs for any medicine that has a price tag of more than $10,000 a year, while others seek this information for all medicines, regardless of price. A bill was also introduced in North Carolina.
The effort comes as a national debate intensifies over prices for prescription medicines. Over the past year, payers – both public and private – have remonstrated over the cost of new specialty drugs for hard-to-treat ailments and for older generic drugs that were supposed to offer low-cost alternatives.
A new poll by the Kaiser Family Foundation found that 76% of Americans overall – and across party lines – say their top health care priority is ensuring that high-cost drugs for chronic conditions, such as HIV, hepatitis, mental illness and cancer, are affordable.
The issue is placing drug makers on the defensive, even as they argue pricey new medicines – notably, those for combating hepatitis C and certain rare diseases – represent good value for illnesses that would, otherwise, cost more to treat in the long run.
These bills represent a new front, though, in trying to blunt escalating price tags. And the legislation is winning enthusiastic backing from business groups, consumers advocates and health insurers, which some legislators say have helped craft language.
“This is about starting a conversation,” says Charles Bacchi, chief executive at the California Association Plans, which worked with a California legislator on one bill. “We need real answers about why these drugs are priced so high. Yes, there are limits to what a state can do, but it’s a debate we need to have.”
To what extent these bills may succeed is uncertain, at best.
Drug makers, not surprisingly, are pushing back and recently helped defeat legislation in Oregon. Earlier this week, the pharmaceutical industry trade group testified against the bill in California, where a vote was postponed until next week in light of opposition, according to a legislative aide.
As far as drug makers are concerned, the bills are not only onerous, but make demands they maintain cannot be met. For instance, an industry trade group argues that providing development costs for some drugs may be impossible when research was simultaneously conducted on other medicines that failed. The bottom line, says the California Healthcare Institute, is that the bill would “stifle innovation.”
“The price charged for an individual drug is not a reflection of development costs,” says Ken Kaitin, director of the Tufts Center for the Study of Drug Development, which receives pharmaceutical industry backing. “Pricing strategies are based on therapeutic value, market size, usage, patent life, competition and other factors.”
Even if one or more bills were to become law, there is no certain path toward lowering prices. But the effort may resonate around the country, especially with the 2016 presidential campaign under way. “This may be a model that other governments may want to build upon,” says Jamie Love of Knowledge Ecology International, a non-profit group that tracks access to medicines issues.
“While it is too soon to know if this prescription transparency legislation will continue to expand this year,” says Richard Cauchi, the program director for health insurance, financing and pharmaceuticals at the National Conference of State Legislatures, “state legislators often do look at what their colleagues in other states are doing.”
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