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May 18, 2015

New York Introduces Pharmaceutical Cost Transparency Bill

NYC

New York is the latest state to introduce a “pharmaceutical cost transparency act,” following five others—California, Oregon, Massachusetts, North Carolina, and Pennsylvania. Like the bills before it, New York would require pharmaceutical manufacturers to submit a report to the state outlining the total costs of the production of certain expensive drugs, with the information to be published on a public website.

Much has been written in just the last few weeks about various state initiatives to require drug manufacturers to detail the costs spent on high-priced products. A New York Times article entitled Runaway Drug Prices, and an LA Times piece were just a number of recent examples, written primarily in support of these laws.  In fact, the introduction to the NY bill specifically references the New York Times article as justification for drug cost transparency. 

New York’s Pharmaceutical Cost Transparency Act of 2015

New York Senate Bill 5338 is sponsored by state senator Ruben Diaz (D) and introduced May 13. The bill states that each manufacturer of a prescription drug, made available in New York, that has a wholesale acquisition cost of $10,000 or more annually or per course of treatment would have to file a report that includes:

The total costs of the production of the drug, including:         

  • (1) The total research and development costs paid by the manufacturer, and separately, the total research and development costs paid by any predecessor in the development of the drug.
  • (2) The total costs of clinical trials and other regulatory costs paid by the manufacturer, and separately, the costs paid by any predecessor in the development of the drug.
  • (3) The total costs for materials, manufacturing, and administration attributable of the drug.
  • (4) The total costs paid by any entity other than the manufacturer of predecessor for research and development, including any amount from federal, state, or other governmental programs or any form of subsidies, grants, or other support.
  • (5) Any other costs to acquire the drug, including costs for the purchase of patents, licensing or acquisition of any corporate entity owning any rights to the drug while in development, or all of these.
  • (6) The total marketing and advertising costs for the promotion of the drug directly to consumers, including, but not limited to, costs associated with direct to consumer coupons and amount redeemed, total marketing and advertising costs for promotion of the drug directly or indirectly to prescribers, and any other advertising for the drug.

The report also must contain:

  • A cumulative annual history of average wholesale price and wholesale acquisition cost increases for the drug (expressed as percentages), including the months each increase in each category, average wholesale price, and average wholesale acquisition cost took effect.
  • The total profit attributable to the drug as represented in total dollars and represented as a percentage of the total company profits that were derived from the sale of the drug.
  • The total amount of financial assistance the manufacturer has provided through patient prescription assistance programs, if available.

New York would require all the various pricing information be itemized and documented by the manufacturer, and audited by a fully independent third-party auditor prior to filing May 1 of each year.  

Thanks to Nico Fiorentino, JD, Sr. Advisor, Research & Compliance, G&M Health, LLC for his help on the article. 

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New York's bill is almost identical to other state's drug cost disclosure bills, with the exception of Massachusetts's, which allows the state to impose pricing caps on certain drugs. Other states require a cost report--to be posted publicly--presumably in the hopes that companies would be implicitly, rather than explicitly, forced to lower their prices. 

While California' A.B. 463 and Oregon's H.B. 3486 have both been rejected this year, drug cost transparency bills continue to proliferate despite these early failures. California Assemblyman David Chiu, who introduced his state's bill, plans to reintroduce it next year. New York's bill is the latest addition to a growing list of states: 

California     Oregon      Massachusetts     North Carolina     Pennsylvania 

 

John J. Castellani, the president and chief executive of PhRMA, responded to the recent LA Times piece in favor of California's cost reporting legislation, noting "legitimate concerns," with California's A.B. 463. "The legislation's requirements would result in an inaccurate and misleading portrayal of the cost of developing new treatments while failing to provide patients with any additional information about their out-of-pocket costs for medicines," Castellani states.

Specifically, the bill "only focuses on the medicines that make it to market, while completely ignoring the 90% that fail during testing, a costly yet vital part of discovering new treatments." Furthermore, Castellani adds that "the legislation does not take into account the tremendous value these medicines provide to patients, California's healthcare system and the state's economy."

"Real transparency legislation would instead focus on giving patients greater information about the costs insurers impose to see a doctor or to get a prescription — information that is severely lacking in the current insurance marketplace," he adds. 

New York has a history of introducing bills aimed at pharmaceutical prices for a number of years now, though they've yet to have much traction. It will be important to follow their drug cost transparency act, however, as this follows a trend that seems to be only growing nationwide. 

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Are we applying the same cost transparency to food, fuel, smartphones, etc. If not- why not?

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