Congress Should Advance Bipartisan, Market-Based Measures to Increase Transparency to Shine a Light on Brand Name Drug Companies’ Egregious Price Hikes and Launch Prices
Big Pharma companies are responsible for setting and increasing prices on the prescription drugs in their portfolio. Solutions that boost list price transparency can shine a light on the industry’s worst price-gouging offenders, help arm patients and policymakers with insight into Big Pharma’s pricing decisions and alert the public to looming price hikes.
Patients deserve open and honest drug pricing. This includes clear and transparent information about the true costs of treatment, how manufacturers set prices and the actual cost of bringing drugs to market, particularly for high-cost drugs. Improving pricing transparency will help put pressure on Big Pharma to lower the prices of their excessively costly drugs.
By failing to disclose how and why they raise prices, brand name drug makers are free to repeatedly hike prices without justification and without facing public scrutiny. In fact, a study late last year found Big Pharma hiked prices on seven of the most widely prescribed drugs in 2021 with no evidence the drugs had been improved – resulting in $805 million in increased costs to patients and health plans.
This underscores the need for lawmakers to act at the federal level to pass bipartisan, market-based solutions to boost transparency and hold brand name drug companies accountable for their egregious pricing practices. Currently, there are solutions being considered at the federal level that would make important progress in this regard, and several states have already implemented list price transparency measures that have had a positive impact.
EXAMPLE OF A BIPARTISAN, MARKET-BASED SOLUTION: FAIR DRUG PRICING ACT
The bipartisan The Fair Accountability and Innovative Research (FAIR) Drug Pricing Act, recently reintroduced in the U.S. Senate by Senators Tammy Baldwin (D-WI) and Mike Braun (R-IN), would require drug makers to provide documentation to the U.S. Department of Health and Human Services (HHS) one month before increasing prices by more than 10 percent in a 12-month period or 25 percent over a three-year span. Additionally, the bill would force manufacturers of drugs with list prices over the median family income in 2021, $70,784, to submit a transparency and justification report. This market-based solution is a positive example of bipartisan legislation that would help hold Big Pharma accountable and expose egregious pricing practices.
OVERVIEW OF STATE TRANSPARENCY MEASURES
List price transparency solutions advanced by several state legislatures have confirmed the effectiveness of such solutions. More than a dozen states have passed some form of legislation requiring brand name drug companies to report more information on their pricing practices — and the results are clear: transparency works. According to the National Academy for State Health Policy (NASHP), list price transparency solutions advanced in the states should “be seen not only as a steppingstone to future action, but often a necessary building block to sustain other efforts.”
In 2016, Vermont led the way as the first state to pass some form of prescription drug list price transparency legislation. Since then, more than a dozen other states have passed transparency laws to gain more insight into Big Pharma’s pricing on their products. According to NASHP, most of these “require reporting from manufacturers when they increase the wholesale acquisition cost (WAC) of a drug above a certain threshold or if they introduce a drug with a high launch price.” States that have passed prescription drug price transparency measures since Vermont include California, Connecticut, Minnesota, Nevada, New Hampshire, North Dakota, Oregon, Texas, Utah, Virginia, Washington and West Virginia.
HOLDING DOWN PRICE HIKES
States that have advanced list price transparency solutions have seen an impact on Big Pharma’s pricing practices and a downward pressure on price hikes above thresholds requiring justification and reporting requirements.
Vermont Saw A 79 Percent Decline in the Number of Drugs Reaching the State’s 15 Percent Increase Per Year Reporting Threshold. “Compared to 2016, there has been a 79 percent decline in the total number of drugs reaching the 15 percent increase per year threshold, and an 82 percent decline in the total number of drugs reaching the 50 percent increase per five-year threshold. This indicates that fewer manufacturers are excessively increasing their wholesale acquisition costs for drugs.” (“18 V.S.A. § 4635- Pricing Transparency Drug List-DVHA Methodology,” Vermont Department of Health Access, June 11, 2021)
In Program’s First Year, Oregon Saw A 70 Percent Decline In The Number of Drugs Facing Yearly Price Increases Above the State’s Reporting Threshold. “In 2019, the program received a total of 551 reports, of which the vast majority (515 or 93 percent) were for brand-name drugs. In 2020, the program received only 160 reports, a 70 percent decrease from 2019 and about two-thirds (90, or 66 percent) of which were for generic drugs.” (“Prescription Drug Price Transparency Results and Recommendations – 2020,” Oregon Department of Consumer and Business Services, November 2020)
California Experienced Fewer Filed Reports for Price Increases Above the State’s Reporting Threshold After Passing Transparency Legislation. “California’s wholesale acquisition cost increase report numbers have also declined, although at a considerably smaller rate than those found in Vermont and Oregon (about a 10 percent decline from 2019 to 2020). Without a deeper analysis of the launch pricing data, we are unable to determine if California also experienced a similar larger launch price hike found in Vermont and Oregon.” (“Prescription Drug Pricing and Cost Transparency in California,” California State Library, October 2022)
SHIFTING ATTENTION TO LAUNCH PRICES
List price transparency must also hold Big Pharma accountable for setting out-of-control launch prices on new products, especially as brand name drug companies have already tried to evade scrutiny and blowback for price hikes by setting increasingly egregious launch prices.
California Requires Manufacturers to Submit a Report If They Introduce a Drug With a Launch Price Above The Medicare Part D Specialty Drug Cost Threshold of $670 Per Month. “SB 17 requires pharmaceutical manufacturers to report to the state when they increase the wholesale acquisition cost, or published list price before any discounts or rebates, of a prescription drug above a certain threshold or if they introduce a drug with a launch price that exceeds a threshold of a specialty drug under Medicare Part D.” (“Prescription Drug Pricing and Cost Transparency in California,” California State Library, October 2022)
Oregon Requires Manufacturers’ Information If They Introduce “New Prescription Drugs Costing More Than $670 a Month.” “Pharmaceutical manufacturers are required to report information to the department on the following: New prescription drugs costing more than $670 a month upon introduction (or for a shorter course of treatment). This price is the threshold for Medicare Part D’s specialty tier, as set by the Centers for Medicare and Medicaid Services.” (“Prescription Drug Price Transparency Results and Recommendations – 2020,” Oregon Department of Consumer and Business Services, November 2020)
In Oregon, After Transparency Reporting Requirements Went Into Effect, Drug Makers Increased The Number of New Drugs Coming to Market at Higher Launch Prices By 15 Percent. “In 2019, the program received new drug reports for 272 national drug codes (NDCs), 168 generic (62 percent) and 104 name brand (38 percent). During the first three quarters of 2020, the program has received new drug reports for 310 NDCs, a 15 percent increase for a comparable time period.” (“Prescription Drug Price Transparency Results and Recommendations – 2020,” Oregon Department of Consumer and Business Services, November 2020)
In Oregon, While Many Generic Drugs Were Launched, “All of the Most Expensive Drugs Reported [Were] Brand Names.” “Most of the new, high-cost drugs reported to the program are generics, but all of the most expensive drugs reported are brand names. Cancer drugs were consistently the most expensive drugs in Oregon on both a list price and per-patient basis, and the highest-cost drug reported in 2020 was Tecartus, a cancer drug with a price of $373,000 for each dose.” (“Prescription Drug Price Transparency Results and Recommendations – 2020,” Oregon Department of Consumer and Business Services, November 2020)
Learn more about the FAIR Drug Pricing Act HERE.
Learn more about market-based solutions to hold Big Pharma accountable and lower prescription drug prices HERE.