On March 11, the Oregon House of Representatives introduced House Bill 3486, which would require pharmaceutical manufacturers to file an annual report with the Oregon Health Authority on costs in the previous year associated with prescription drugs that cost $10,000 or more per year or per course of treatment. This bill is similar to California’s recently introduced “Pharmaceutical Cost Transparency Act of 2015,” and seems to represent a trend up the west coast. During this past week, Oregon’s House Committee on Health Care held a public meeting on HB 3486. Industry groups PhRMA and BIO urged the committee members that such a proposal would end up being harmful to patients, especially those living in Oregon. Insurance companies spoke in support of the bill as a way to reduce drug costs.
HB 3486 Requirements
If a prescription drug has an annual wholesale acquisition cost of $10,000 or more, or has a wholesale acquisition cost of $10,000 or more per course of treatment, and the manufacturer distributes the drug for sale in Oregon, the manufacturer must file an annual report with the Oregon Health Authority on costs associated with the prescription drug for the previous year. The annual report would have to include an itemized account of the following:
- (a) Costs paid by the manufacturer for researching and developing the prescription drug;
- (b) Costs paid by any predecessor manufacturer for researching and developing the prescription drug;
- (c) Costs paid by the manufacturer and any predecessor manufacturer for researching and developing the prescription drug with moneys made available to the manufacturer or predecessor manufacturer through a federal, state or other governmental program or through a subsidy, grant or other form of monetary support;
- (d) Costs paid by the manufacturer for clinical trials for the prescription drug;
- (e) Costs paid by any predecessor manufacturer for clinical trials for the prescription drug;
- (f) Costs paid by the manufacturer for manufacturing and distributing the prescription drug;
- (g) Costs paid by the manufacturer for acquiring the prescription drug, including costs paid by the manufacturer for purchasing patents for or licensing the prescription drug or costs paid by the manufacturer for acquiring property rights to the prescription drug;
- (h) Costs paid by the manufacturer for marketing and advertising the prescription drug to consumers of the prescription drug, including any costs associated with offering and redeeming coupons; and
- (i) Costs paid by the manufacturer for marketing and advertising the prescription drug to prescribers of the prescription drug.
In addition, manufacturers would have to report the total profits attributed to the drug and any financial assistance provided to patients through patient prescription assistance programs. The bill would require manufacturers to submit this report by May 1, 2017.
On Monday, the House Committee on Health Care heard public comments on this bill. These comments were continued and wrapped up yesterday.
PhRMA and BIO urged the Committee that HB 3486 will ultimately not only harm patients, but could take valuable business away from the state of Oregon. Representatives from the trade group, however, had to deal with some push-back from Committee Chair, Rep. Mitch Greenlick, who co-sponsored the bill. Despite the push-back, members of the committee, Greenlick included, understand some important issues remain in the bill.
Jim Gardner of PhRMA noted that venture capital interest in the pharmaceutical sector should be a chief concern for Oregon. Gardner echoed previous testimony from the CEO of a small pharmaceutical manufacturer focused on cancer immunotherapy, who testified "unambiguously and explicitly" that he would cease selling his product in Oregon due to the "punitive legislation in the bill."
Gardner noted that many miraculous cures are emerging, but the upfront cost is high for health insurers accustomed to paying for cheaper generic drugs. Eventually insurance companies greatly benefit when patients avoid expensive hospital visits, but due to "beneficiary churn" (when someone moves from one insurance company to another, as they may often do), the insurance company that pays for the cure may not see the downstream benefits. However, the government certainly benefits in the long run.
The Oregon BioScience Association also spoke to the administrative burden this bill would cause, noting that the proposed legislation would force therapeutic drug companies to "incur needless reporting costs, disclose proprietary information (potentially including trade secrets), and erect even more administrative hurdles for the emerging biotechnology cluster in Oregon." Other stakeholders also mentioned the bill's potential to require manufacturers to divulge proprietary information because, while public companies do have to report aggregate costs in their SEC filings, privately-held companies do not. Furthermore, public companies do not break the costs down into the detailed buckets required by the bill.
They also stressed that looking at annual cost of a drug is short-sighted:
Oregon Bio believes pharmaceuticals should be judged based on the medical efficacy and the long-term cost savings generated from significantly improved patient outcomes. As written, HB 3486 unfairly focuses only on the costs associated with a single drug for a limited span of time. In reality, pharmaceutical companies often maintain a portfolio of research and development initiatives. As a result, HB 3486 not only fails to provide a realistic estimate of the total costs associated with delivering innovative drugs to Oregon patients, it also diverts scarce industry resources to conform to this new tier of state regulation.
The Biotechnology Industry Association debated whether this drug transparency initiative even fulfilled its chief purpose: transparency:
The requirements proposed in HB 3486...[do] not provide adequate context for the complex issue of pricing, which is based not just on manufacturers’ costs, but also on market forces and an assessment of value that cannot simply be reduced to a line on a balance sheet. Moreover, these proposed “transparency” requirements cannot capture fully, and may even interfere with, the market-based environment in which pricing decisions are made, including negotiations between manufacturers and payers that impact how a therapy is covered and reimbursed by a given insurance plan.
These issues raised by industry were well taken by members of the Health Care Committee. Representative Knute Buehler had some pointed questions for supporters of the bill. Specifically, he indicated that HB 3486 takes market forces out of the equation. He voiced his belief that competition will not only be best for innovation, but also acts as a market-based price check on expensive medication.
Furthermore, Buehler asked, "if this bill passed, why would any manufacturer of a miracle drug provide it in the state of Oregon?" Representative Jim Weidner echoed this sentiment as he cautioned the committee in moving forward on HB 3486. "Oregon is a small player," he noted. He did not want the initiative to hurt patients in Oregon by causing manufacturers to withdraw from the state altogether.
As the meeting concluded, Committee Chair Mitch Greenlick noted that he would be putting a work group together to deal with specialty drugs pricing, taking into consideration the comments received.
We will continue to monitor drug transparency legislation and provide updates accordingly.
For the recorded video of comments click here.
For a list of comment in support of and in opposition to HB 3486, click here.
Thanks to Nico Fiorentino, JD, Sr. Advisor, Research & Compliance, G&M Health, LLC for alerting us to the Oregon bill.