House unanimously passes bill to shine light on drug industry
The state House of Representatives unanimously approved a comprehensive bill that aims to shed light on the murky prescription drug industry, which state officials say is a necessary first step to lowering expensive drug costs.
The House voted 149 to 0, with one lawmaker absent. The bill now goes to the Senate.
“There is no denying that the cost of drugs is increasing. It’s something we hear anecdotally. It’s something we’ve seen data on. But few people have answers … as to why that’s actually happening,” Rep. Sean Scanlon, D-Guilford, House chair of the Insurance and Real Estate Committee, said during the debate. “Our goal in this bill is quite simple: It’s to try to get some more information that is not currently available to the general public so that we can really understand what is driving these costs and then ultimately, from that understanding, hopefully be able to work together in a bipartisan way to reduce the cost of prescription drugs.”
This bill, which goes into effect on Jan. 1 , 2020, requires many industry players to disclose a wide range of information to the state. This includes drug companies, health insurers, and lesser-known entities called pharmacy benefit managers, known as PBMs, which manage drug benefits for insurers.
- Drug companies will have justify increases when a drug’s price jumps more than 20 percent in one year or 50 percent over three years to the new Office of Health Strategy (OHS).
- Drug companies also will have to report information about drugs going through the U.S. Food and Drug Administration’s approval pipeline, such as the estimated year that the drug will enter the market.
- Insurance companies, when filing rate requests for their health plans each spring, will have to tell the state Insurance Department the 25 drugs with the highest cost to the plan; the 25 drugs with the greatest year-over-year price increases; the 25 drugs most frequently prescribed; the premium growth that is attributable to prescription drugs; and more.
- PBMs, which negotiate with drug companies for rebates on prescriptions, will have to report to the insurance department how much they collect in rebates and how much of that they keep. The department will then aggregate that data and find a way to publicly disseminate it, while still protecting proprietary information, such as companies’ names and specific drugs that receive rebates.
- Insurers will be required to report to the Insurance Department whether they use the rebates to offset premiums, which they typically do, or pass the money down to residents at the pharmacy counter. The information would be published annually by the insurance department.
In return for the rebates that PBMs receive from manufacturers, the companies’ drugs are included on the insurers’ formularies, the lists of drugs the insurance companies will cover.
The rebates generally are offered on drugs where there is competition and not on generic drugs, where price inflation has been less. PBMs keep some of the rebate money and pass the rest directly to the insurers, which typically use the revenue to offset the cost of premiums for customers.
The finger-pointing over drug prices has begun to focus more on PBMs because these companies don’t always disclose the full rebate they get from the drug companies, leading to claims that PBMs could be passing on more savings to patients.
The Pharmaceutical Care Management Association, which represents PBMs, issued a statement reiterating their concerns with the bill, even with the new proprietary protections.
“While PBMs support policies that empower payers and consumers to make informed health care purchasing decisions, we oppose so-called ‘transparency’ proposals that would give drugmakers access to competitive information that would empower them to charge higher prices,” the statement said.
Rep. Rob Sampson, R-Wolcott, ranking member on the insurance committee, said at the beginning of the debate that he supported the bill but had concerns.
“Health care is a difficult thing obviously, much like utilities, these are things that people need to have affordable access to,” Sampson said.
“What saves the bill,” Sampson said, is that the information that the drug companies are required to report to the state already is public information given to the federal government.
“Really for me that’s what saves the bill from going too far,” he said.
The Connecticut Association of Health Plans released a statement on Thursday that said: “While we still find some elements of the bill concerning, we appreciate that issues we raised were acknowledged and hope to work with the legislature in the future to address the unit costs of drugs, which we believe to be among the biggest price drivers in the market.” The unit cost of drugs refers to the manufacturers’ prices.
The bill would cost the state about $275,000 in fiscal year 2020 for additional staff in the state Insurance Department and Office of Health Strategy, as well as consulting services for that year. In following years, it would cost about $300,000 for the staffers, according to the legislature’s Office of Fiscal Analysis.
Connecticut officials aren’t the only ones seeking answers from the drug industry. Prescription drug affordability has drawn intense scrutiny the past few years as retail drug spending has risen at the fastest pace in more than a decade — growing 12.4 percent in 2014 and 9 percent in 2015 before slowing to an estimated 5 percent increase in 2016, according to a Congressional Research Service report.
Rules on rebates altered
The approved bill differs from the proposal that was voted out of the legislature’s insurance committee. Most notably it doesn’t include a requirement that the majority of rebates from drug companies be passed down to consumers when they buy drugs at pharmacies.
“I wish this bill could have done more, but to accomplish this in a short session when bills like this don’t pass in regular sessions is a big win for consumers, and I intend to keep going on this issue next year,” Scanlon said.
The provision for direct rebates to consumers was challenged by the insurance department and Connecticut Association of Health Plans, which argued it would cause premiums to increase.
Caitlin Carroll, spokeswoman for PhRMA, which represents the pharmaceutical industry, said the organization was disappointed that the final version didn’t include the direct-to-consumer rebates.
“Making sure that patients who share the cost of their prescription medicines also share the savings is one of the most important things we can do to provide relief for patients facing higher out-of-pocket costs at the pharmacy counter,” Carroll said.
Comptroller Kevin Lembo, who was one of the key proponents of the bill, also said he was disappointed, though he said passage still was an “extraordinary victory for Connecticut patients.
“From here, the fight must continue to ensure that patients are not paying outrageous prices at the counter, while powerful corporations thrive on big discounts without sharing financial relief,” Lembo said.
“Some states have taken the next step,” he said. “And the next step is to examine the possibility of drug review boards…”
A drug review board was one of the top recommendations of a February report released by the governor’s Health Care Cabinet that examined drug costs.
According to the report, the drug review board would investigate drug pricing decisions by manufacturers and whether they are justified by market norms and clinical value. If deemed unjustified, the state attorney general could be asked to pursue an unfair trade practice violation against a manufacturer.
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