Life Science Compliance Update

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March 27, 2018

Oregon: Transparency’s Latest Frontier

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On March 13, 2018, Oregon Governor Kate Brown signed a bill that requires drugmakers to report research and development and marketing costs, along with profits and more, for drugs that get price hikes of more than 10%. Companies will also be required to report whether generics are available.

The Oregon bill (HB 4005) is the most recent state-level drug pricing transparency law that attempts to control the cost of prescription drugs and is quite similar to the California legislation that is the subject of a legal challenge. However, HB 4005 goes a step further than that California legislation and seems to require manufacturers to disclose confidential and competitively sensitive information.

Under this law, manufacturers must report to the Oregon Department of Consumer and Business Services the research and development costs, advertising and marketing costs, profits for the drug, and whether generic drug alternatives are available, as well as what the drug costs in other countries for any drug with price increases of 10% or more. The first reports are due July 1, 2019 and would reflect any price increases that meet the target in the current calendar year.

In addition, beginning on March 15, 2019, if a manufacturer introduces a new drug for sale in the U.S. at a price that exceeds the threshold for specialty drugs set in the Medicare Part D program ($670 in 2018), within 30 days of introducing the new drug for sale, the manufacturer must report:

  • A description of the marketing used in the introduction of the new prescription drug;
  • The methodology used to establish the price of the new prescription drug;
  • Whether the FDA granted the new prescription drug a breakthrough therapy designation or a priority review;
  • The date and price of acquisition if the new prescription drug was not developed by the manufacturer;
  • The manufacturer’s estimate of the average number of patients who will be prescribed the new prescription drug each month; and
  • The research and development costs associated with the new prescription drug that were paid using public funds.

The bill further requires the State Department of Consumer and Business Services to post a list of the drugs that have had high price increases, hold annual public meetings about prescription drug prices, and make recommendations to the state legislature about further actions to lower prescription drug prices.

In addition, HB 4005 requires insurance companies to report the 25 most expensive prescription drugs in their plans as a apportion of total annual spending, the 25 most frequently prescribed drugs, the 25 drugs that have caused the greatest increase in total plan spend from year to year, and how those costs affect premiums. 

Industry Response

In response to the passage of the bill, Pharmaceutical Research and Manufacturers of America (PhRMA) released a statement that stated the bill “won’t help patients because they don’t address the real reason people are paying more for their medicine out-of-pocket at the pharmacy counter.” The statement further goes on to note,

HB 4005 promises to provide “transparency” for patients, but fails to deliver real answers or cost savings. That’s because what patients pay for an individual drug is determined by middlemen in our system, including pharmacy benefit managers (PBMs) and insurers, not the drug’s manufacturer. Through robust, competitive negotiations, middlemen receive rebates that can save 30-50% off a drug’s list price. In fact, these negotiations have been so successful in recent years that rebates doubled between 2013-2015.

Jim Greenwood, President and CEO of the Biotechnology Innovation Organization (BIO) issued a statement concerned about the effect of the legislation,

Unfortunately, the bill Governor Brown has signed will have a chilling effect on an innovative industry and do nothing to empower patients or lower their prescription drug costs. The bill doesn’t shine any light on insurers and other middlemen who ultimately determine how much people pay for prescription drugs. The bill also doesn’t address the discriminatory practices of insurance companies that force individuals with rare and even life-threatening diseases to pay more for the medicines they need. Instead of providing real transparency, state policymakers have adopted a misleading scheme that will fail to provide patients the lower drug costs they were promised.

Denise McCarty, Executive Director of the Oregon Bioscience Association released the following statement,

Unfortunately, this legislation will negatively impact not only workers and researchers but also patients in need of life-saving medications. It will not impact drug prices or provide meaningful information to those struggling at the pharmacy counter with high out-of-pocket medication costs. Instead of helping patients, the bill will hurt some patients by creating an unfair stigma around medical conditions that are more costly to treat. HB 4005 may preclude solutions that would support biomedical innovation in our state, recruit biotech companies and help patients afford the medicines they need.  

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