What Connecticut Can Learn From Oregon’s Prescription Drug Transparency Bill

pharma.jpgIn the state-by-state war against high drug prices, Oregon is the latest state setting an example for Connecticut.

Oregon’s bill, HB 4005, was signed into law in mid-March by Governor Kate Brown.  It is a prime example of state legislation that pushes for greater transparency and accountability from pharmaceutical corporations in an effort to address the rising cost of prescription drugs.

Price Increases

HB 4005 requires pharmaceutical manufacturers to report information to the state on any drug with a cost of $100 or more for one month’s supply that had a price increase of 10 percent or more over the previous year. Reporting requirements include:

  • Factors that contributed to the price increase
  • Research and development costs paid for by public funds
  • Manufacturing, marketing and distribution costs
  • Profit attributable to the drug
  • The introductory price and the yearly increases for the previous five years

Launch Prices

In an effort to address the high cost of new specialty drugs, the bill also requires manufacturers to report on the launch prices of new medications that are introduced at a price above $670 per month.  Reporting criteria include:

  • The methodology used to establish the price of the new prescription drug;
  • If the new prescription drug was not developed by the manufacturer, the date of and the price paid for acquisition of the new prescription drug by the manufacturer;
  • An estimate of the average number of patients who will be prescribed the new prescription drug each month;
  • The research and development costs associated with the new prescription drug that were paid for using public funds.

Pharmaceutical companies that fail to comply with the new reporting requirements may face up to $10,000 a day in civil penalties.

Reporting by Health Insurers

The bill also has reporting requirements for insurers asking them to specifically explain the impact that the costs of prescription drugs have on premiums and requesting the following information in annual rate filings:

  • The 25 most frequently prescribed drugs
  • The 25 most costly drugs as a portion of annual spending
  • The 25 drugs that have caused the greatest increase in total plan spending from one year to the next

Mindful that high drug prices have multiple causes, the also bill establishes a drug pricing task force to look at other possible measures, “ …to create transparency for drug prices across the entire supply chain.”

Support and Opposition

Oregon’s passage of HB 4005 is a testament to bipartisan commitment to address prescription drug prices. The bill passed in the House by a 46-14 vote and in the Senate by a 25-4 vote. The chief legislative champion of the bill, Rep. Rob Nosse, points to the importance of having a conservative Republican Senator announce his support for the bill.  This senator, “…has struggled all his life with diabetes and has experienced this problem first-hand.  He is normally a very strong free-market kind of person, but he knows from experience that something is wrong with the so-called free-market when it comes to drug prices.”

A broad-based coalition of stakeholders and advocates also supported the bill, including insurers, hospitals, physicians, labor unions and consumer groups like AARP and the Oregon State Public Interest Research Group (OSPIRG).

The biggest opposition to the Oregon bill came from the pharmaceutical industry. Leading up to the legislative session, industry-affiliated groups bought a series of full page ads in Oregon newspapers, and attempted to stir up a citizen letter-writing campaign to target key lawmakers in the state.  Industry claimed that a transparency bill could “reduce the supply of certain drugs…or… frustrate future drug research.”  But these arguments lacked credibility and “never took hold in Oregon”.

Connecticut Legislative Update

In Connecticut, HB 5384, An Act Concerning Prescription Drug Costs, made it out of the Insurance and Real Estate Committee by a bipartisan vote of 16-5.

When compared to Oregon’s bill, it is clear that Connecticut’s legislation must be improved, particularly when it comes to invoking stricter reporting requirements for drug companies. For instance, HB 5384 only requires drug makers to justify their price increases when they exceed 25 percent a year. This price threshold is much higher than Oregon’s 10 percent threshold. In addition, Oregon’s bill asks for much more information from manufacturers when price increases exceed the threshold. Without stronger reporting requirements, Connecticut will not collect the information necessary to begin to have an impact on rising prescription drug prices.

It’s time for Connecticut lawmakers to hold drug companies more accountable by demanding stronger drug pricing transparency legislation.

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