Life Science Compliance Update

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May 15, 2017

Drug Pricing Legislation Heats Up

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Over the last two years, bipartisan Congressional interest in addressing prescription drug prices has been piqued. The interest is likely a result of a series of high profile and controversial decisions made by pharmaceutical companies such as Valeant, Turing, and Mylan to embrace massive spikes in the pricing of certain of their prescription drugs. Not surprisingly, the issue has also risen to the top of public concerns; 77 percent of Americans now say the cost of prescription drugs is unreasonable, according to a recent poll from the Kaiser Family Foundation. Last year, at a bipartisan Senate Aging Committee hearing, Senator Claire McCaskill summed up the Committee’s belief when she noted that there is a “new breed” of company, run by “people who are not traditional pharmaceutical executives, in which investors play an outsized role, and where the goal is to acquire drugs for rare diseases with no generic competition in order to manipulate the price.” It’s this new breed of company that has given the entire pharmaceutical industry a bad name.

During the campaign, and continuing since his inauguration, President Donald Trump has sent mixed messages on drug pricing. During his candidacy, Mr. Trump released a seven-point health care plan that called for reimportation of prescription drugs to help lower high drug costs in the United States. However, President Trump was more amiable when he met with a group of pharmaceutical company executives at the White House shortly after his inauguration to discuss initiatives aimed at lowering drug prices and common industry concerns. The President also called for reducing regulations to allow for faster approvals of new drugs and to incentivize drug companies to bring jobs back to the United States. The Pharmaceutical Research and Manufacturers of America (PhRMA) described the White House meeting as positive and productive. Attending executives appeared eager to find common ground, and several companies have since responded to Trump’s call to bring manufacturing jobs back to the United States.

With prescription drug pricing and transparency legislation a potential point of disagreement between a traditionally pro-industry Republican-led Congress and the White House, a unique political dynamic exists that could portend some bipartisan movement in Congress on drug pricing issues. While GOP leadership and the stalwarts atop key committees of jurisdiction are largely opposed to most of the reforms highlighted in this report, the moderate and populist wings of Republican party could be supportive of certain measures that are attractive to many Democrats to rein in prescription drug costs. This was evident in early 2017, when ten Republican Senators supported a symbolic amendment vote in favor of the importation of prescription drugs from Canada (though the vote ultimately failed 46-52).

In addition to Congress, state legislatures are also drafting legislation to control drug costs. Just between January and March 2017, legislation was introduced in at least half of the state legislatures to either (1) limit drug prices or (2) impose new pricing transparency requirements on manufacturers. If any of these initiatives pass and prove to be effective, they could provide a template for other states and work to create a network of state-based resistance to high drug pricing. For example, a bill introduced in Maryland would require companies to disclose their R&D, manufacturing, and other costs, and would grant the state attorney general the authority to prosecute companies that price gouge on drugs considered to be "essential generics," i.e., Daraprim and Epipen.

New York's Governor has also introduced legislation supporting value-based determinations (including R&D costing) for high-priced specialty drugs, along with provisions targeting the anti-competitive practices of pharmacy benefit managers.

Several other states have introduced legislation to address price transparency, drug importation, direct-to-consumer advertising, and more.

As President Trump looks to impose his policy agenda through Congress, and states undertake their own initiatives, it will be interesting to see where we go from here. While some of the proposals are more likely to gain traction in Congress than others, they represent some of the most likely policy ideas that lawmakers may consider in the foreseeable future.

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