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Two Bills Shine Light on Skyrocketing Drug Prices

Senate Bill 17, a prescription drug reform law, is headed to Governor Jerry Brown’s desk. But its authors are not taking a victory lap just yet. “We assume [the governor] will sign it, but you know anything can happen,” says state Senator Ed Hernandez.




Last week Capital & Main spoke with the authors of Senate Bill 17, comprehensive legislation establishing transparency for prescription drug prices, a day after the bill crossed the final hurdle in the California state Senate. It’s now on its way to Governor Jerry Brown’s desk. But Sen. Ed Hernandez (D-West Covina) and Assemblyman David Chiu (D-San Francisco) told Capital & Main that they weren’t taking a victory lap just yet.

“We assume [the governor] will sign it, but you know anything can happen,” Hernandez said.

U.S. spending on prescription drugs hit a record $450 billion in 2016, according to one health-care research group.

SB 17 requires pharmaceutical companies to notify health insurers and government health plans at least 60 days before any prescription drug price hike would exceed 16 percent over a two-year period. It compels drug makers to provide a rationale for price increases, including documentation of any improvement in “clinical efficacy” over other drugs. Supporters of SB 17 say that transparency alone won’t stop drug price spikes, but it’s an important first step.

In addition, the bill requires health insurers to annually report the 25 most frequently prescribed drugs, the 25 most costly drugs, the 25 drugs with the highest year-over-year increase in total annual spending and the proportion of premiums spent on prescription drugs. Chiu and Hernandez have said these mandates would give the public and health insurers a clearer sense of which drugs are driving up the cost of health care. Vermont, Maryland, Nevada have similar laws, but SB 17 is considered more comprehensive, partly because it covers generic and brand drugs.

The authors’ tempered enthusiasm about SB 17’s passage springs from years of heavy lifting and many setbacks. The legislation was fiercely opposed by the pharmaceutical industry, which up until its passage was taking out full-page newspaper ads denouncing it.

“Big Pharma knows that California can be a blueprint for drug price transparency for the rest of the nation,” Hernandez said. He also urged the U.S. Congress to act on pricing transparency. “If lawmakers in DC want to get something done [in] a bipartisan way, this is the issue.”

It was not just legislative muscle but growing public anger that shifted the political winds, Chiu said, citing an April poll conducted by the Kaiser Family Foundation, in which 86 percent of respondents said drug companies should be required to disclose how prices are set.

“Drug prices have been skyrocketing,” Chiu said. “Recently we’ve had stories of $1,000 for an EpiPen, and Martin Shkreli raising the price of a lifesaving drug 5,000 percent. The public is clearly frustrated.”

U.S. spending on prescription drugs hit a record $450 billion in 2016 – or $323 billion after discounts from manufacturers to insurance companies – according to a recent report by the health-care research group QuintilesIMS.

With the public strongly behind transparency, the bill attracted a broad and eclectic coalition, including labor groups, Republican legislators, the California Hospital Association and several chambers of commerce.

However, Pharmaceutical Research and Manufacturers of America deputy vice president for public affairs Priscilla VanderVeer lamented SB 17’s passage, claiming in a statement that it was “unfortunate that lawmakers chose to score political points instead of addressing patients’ concerns with access and affordability to medicine.”

The California Life Sciences Association was also opposed to SB 17. Its president and CEO, Sara Radcliffe, said in a prepared statement that the bill would “tell us nothing of the actual costs resulting from discounts, rebates and other price concessions that pharmacy benefit managers (PBMs) and insurers extract from manufacturers, it will create an incomplete and misleading picture of drug costs in California.”

Trish Riley, executive director of the National Academy for State Health Policy, dismissed that concern, telling Capital & Main that SB 17 was a “strong first step, but not the last step, toward getting pricing information that consumers deserve.”

A companion bill to rein in pharmaceutical company practices is also on its way to the governor. Assembly Bill 265, authored by Assemblyman Jim Wood (D-Healdsburg), prohibits the use of coupons for medications when cheaper drug options are available.

Riley said that consumers benefit from these coupons, but “[the coupons] are time-limited, and then the patients have started a higher-priced drug that they ultimately won’t be able to afford when the coupon expires.”

Anthony Wright, executive director of Health Access California, a nonprofit advocacy group, said in an interview that, in addition to being a first step toward drug price control, the passage of both bills shows that the industry is not invincible.

“For too long, common sense ideas to rein in drug prices haven’t been introduced,” Wright said. “People thought, ‘We can’t win, so what’s the point?’ SB 17 and AB 265 offer a counter-narrative that Big Pharma can be beat.”

Copyright Capital & Main

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