Adding Teeth to Transparency: States Take Stronger Steps Against Drug Price Hikes
Three states have proposed legislation, based on National Academy for State Health Policy’s model law, that penalizes drug manufacturers for hiking prescription drug prices without new clinical evidence to justify the increase.
More than a dozen states have enacted drug price transparency legislation to better understand the extent of and drivers behind prescription drug price hikes. Now two of those states, Washington and Maine,* along with Hawaii, have proposed legislation to take the next step: penalizing manufacturers for hiking prices on their products without new clinical evidence to support a price increase.
The legislation is based on a NASHP model bill that is designed to be easy to administer and a low-cost approach. The model bill enables states to utilize an annual report published by the Institute for Economic and Clinical Review (ICER) that identifies a small number of expensive drugs with large unsupported price increases. ICER’s January 2021 report, for example, revealed that US spending on unsupported price increases for just seven drugs led to increased spending of $1.2 billion in 2019.
The model bill penalizes manufacturers for 80 percent of their drug sales from unsupported price increases in a state – representing millions in potential revenue that can be used to help reduce prescription drug costs for consumers. NASHP can work with states to estimate potential revenue from this legislation.
ICER is an independent organization that conducts methodologically rigorous research into the clinical and economic value of prescription drugs. A growing number of states is looking to ICER’s annual analysis of unsupported price increases because it is thorough and transparent. The report reflects research that would be difficult for states to replicate on their own without a large investment of time and resources.
ICER actively engages drug manufacturers in its unsupported price increase report by giving them opportunities to correct the data ICER uses in its analysis and to present alternative explanations that might justify the price increases under investigation. In some cases, engagement with manufacturers has led to removal of a drug that had been identified as having an unsupported price increase from ICER’s list. While some stakeholders have expressed concern with ICER’s use of quality adjusted life years (QALYs) in its separate analyses determining the value of specific drugs, ICER’s unsupported price increase report does not use or reference QALYs in any form.
ICER’s January 2021 report on unsupported price increases identified well-known, frequently used, and high-cost drugs, such as Humira, which is used to treat autoimmune diseases. Another drug, Enbrel, also used to treat autoimmune diseases, was reviewed by ICER after being nominated by states with drug price transparency laws. States tracking drug price increases knew that Enbrel was a problem – and ICER’s exhaustive review of the clinical evidence on Enbrel confirmed that Enbrel’s price increase was not supported by new clinical evidence. Enbrel’s unsupported price increase contributed to more than $400 million in increased spending across the United States last year.
While drug price transparency laws help states detect and report on price increases, NASHP’s Unsupported Price Increase model bill enables states go further to more aggressively discourage price increases and to recoup spending lost to manufacturers that raise their prices – not because their products are in any way improved – but because they can.
NASHP has developed a template for determining potential revenue from penalizing manufacturers for unsupported price increases and can work with states that want to estimate potential total revenue from implementing unsupported drug price penalties in their states. Please contact Jennifer Reck for more information.
*Maine lawmakers have pre-filed this bill, meaning it has been proposed but has not yet been published as a legislative document by the Maine’s Revisor of Statutes.
NASHP’s Top Five Reads of 2019
Each year, NASHP publishes more than 100 reports and resources to give state leaders the information they need to craft effective legislation and health policies. Below are our most-read resources of 2019.
- Rx Legislative Tracker: This resource with its map interface gives you the status of every state’s legislation to curb prescription drug costs since 2015, and it’s updated weekly.
- Is it Safe and Cost-Effective to Import Drugs from Canada? NASHP created model legislation for states to use to implement wholesale drug importation from Canada. This infographic explains why it’s safe.
- A Snapshot of State Proposals to Implement Medicaid Work Requirements This resource provides descriptions of states’ proposals to implement Medicaid work requirements nationwide.
- A Glossary of All Terms Pharma If you want to tackle drug costs, you need to know the pharmaceutical industry’s lingo. This glossary helps demystify pharma’s verbiage.
- State Community Health Worker (CHW) Models States are funding, training, and certifying CHWs to help coordinate care, promote access to community services, and address social determinants of health. This resource shows what individual states are doing.
NASHP Updates Model Drug Price Transparency Legislation, Featuring a Common Data Set for Cross-State Comparisons and Stronger Enforcement
Maine state Sen. Eloise Vitelli presents legislation, based on NASHP’s new drug cost transparency model legislation, to the joint Committee on Health Coverage, Insurance and Financial Services.
As drug price transparency measures proliferate across states, the National Academy of State Health Policy (NASHP) has released revised model transparency legislation featuring a common data set to reduce reporter burden and yield standardized, actionable data that will be comparable across states. The data — to be reported by manufacturers, pharmacy benefit managers (PBMs), wholesalers, and insurers — will help state policymakers understand what is driving high drug prices through a comprehensive look across the entire drug supply chain.
This 2.0 version of NASHP’s model transparency bill also contains stronger penalties for failure to report. States will have the ability to audit any data submitted, and require a reporting entity to submit a corrective action plan for reporting deficiencies. If reporting entities do not provide the required data or if the data they provided is inadequate, the model bill allows states to invoke subpoena authority.
NASHP developed the model bill and common data set in collaboration with a work group of states currently implementing or considering transparency laws and Mathematica Policy Research. Last week, Maine State Sen. Eloise Vitelli introduced legislation based on NASHP’s updated model transparency legislation. The model bill is available in a streamlined formed as enabling legislation, as well in a longer, comprehensive version that includes in-depth information detailing the reporting requirements of the minimum data set. Additional information about the legislation, including reporting thresholds and data elements that must be reported, are available in this Q&A document. In coming weeks, NASHP will also publish customized reporting templates for manufacturers, PBMs, wholesalers, and insurers.
While NASHP’s model transparency bill builds off existing transparency measures, the common data set requires the collection of additional information not otherwise publically available, including specific information about past and projected costs and revenues at the individual drug level. Some of this information may be considered proprietary, and the model bill includes language to protect it while still requiring an annual report and public hearing to share and explore findings – although in a manner that does not reveal information specific to any one reporting entity. This reporting will provide states with more information to determine what drives high prices – and how to take effective action to address them.
States interested in this model legislation will have access to NASHP’s technical assistance. Please contact Jennifer Reck for more information.
As State Legislatures Convene, Lawmakers Quickly Submit Bills to Curb Prescription Prices
One week into the 2019 legislative season, lawmakers from 11 states have already submitted 30 bills to address the rising cost of prescription drugs.
The bills submitted to date seek to implement wholesale drug importation programs, increase pharmaceutical pricing transparency, and regulate pharmacy benefit managers (PBMs), along with other drug cost containment initiatives.
Last year, nine states introduced legislation to either study or implement wholesale drug importation, and Vermont became the first state to pass an importation bill. This year, Colorado has reintroduced a bill that would require its Department of Health Care Policy to design a wholesale importation program, and Missouri also reintroduced a bill to study importation.
Requiring transparency into dramatic price hikes to understand better prescription drug pricing is also expected to remain an area of interest for state lawmakers. In 2018, five states enacted laws that require pharmaceutical manufacturers, PBMs, and health plans to share information behind prescription drug costs and their increases. A newly proposed bill in Texas would require greater pricing transparency for essential diabetes medications, following in the footsteps of Nevada, which passed a similar measure in 2017.
One of the most popular, bipartisan drug pricing legislation passed during the last session was regulation of PBMs. More than 90 PBM bills were introduced last year with 20 states enacting 31 of them. In October, following the legislative precedent taken by dozens of states, Congress passed legislation to prevent gag clauses in PBM contracts to allow pharmacists to share pricing information with consumers. While the prohibition on gag clauses now applies throughout the country, states continue to explore innovative ways to contain costs within the drug supply chain.
During the new 2019 season, eight states have filed 16 bills focusing on PBMs. In Montana, legislation would regulate the way health insurers contract with PBMs to prevent spread pricing — a payment model that allows PBMs to profit by charging insurance plan sponsors more for a prescription than the PBM pays the dispensing pharmacy. The lack of transparency in the spread-pricing model makes it difficult for states to identify how much spread pricing contributes to their overall drug costs. Montana’s proposed legislation is designed to lower health plan premiums for consumers.
With 46 states convening their 2019 legislative sessions and 13 states already introducing bills to curb rising prescription drug costs, clearly this a top priority for many state lawmakers. This is not surprising, in 2018 state lawmakers filed more than 170 prescription drug cost containment bills, with 45 enacted.
Drug prices were frequently mentioned by state and national candidates during the 2018 midterm elections. As national attention on drug prices expands, states will continue to explore solutions to curb the rising cost of pharmaceuticals. The National Academy for State Health Policy (NASHP) will continue to track state’s prescription drug cost bills as they are introduced, enacted, and implemented. To learn more about each state’s drug cost containment bills, explore NASHP’s Legislative Tracker.
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