Bipartisan Bill Will Be Reintroduced to Force Pharma to Justify Price Hikes

A bipartisan group of lawmakers will re-introduce a bill on Tuesday that would require drug makers to justify their pricing and provide a breakdown of their expenses before raising prices on some medicines.

Under the Fair Drug Pricing Act, companies will have to notify the US Department of Health and Human Services and submit a report 30 days before they increase the price of certain drugs that cost at least $100 by more than 10 percent in one year, or 25 percent over three years. The bill is being co-sponsored by Senator Tammy Baldwin (D-Wis.), Senator John McCain (R-Ariz.), and US Representative Jan Schakowsky (D-Ill.)

As with the bill introduced last fall, the reports will also require drug makers to provide manufacturing, R&D, and marketing costs, as well as net profits associated with the drugs. The legislation will not prohibit companies from increasing prices, but the bill is supposed to give taxpayers notice of price increases and “bring basic transparency to the market for prescription drugs.

A key difference from the earlier effort, however, is added language that stipulates drug makers must report any price hike on certain medicines by more than 10 percent — or 25 percent over three years. This was done to ensure the HHS is made aware of price increases that hover just under that 10 percent threshold and quickly add up over a three-year period.

Why? Last fall, just as the initial bill was introduced, Allergan chief executive Brent Saunders committed to capping price hikes to single digits, in most situations. However, several drug makers then raised their prices between 9 percent and 10 percent in a seemingly sneaky way to avoid added scrutiny and criticism. Earlier this month, for example, Eli Lilly boosted the list price of its Effient blood thinner by 9.9 percent.

Otherwise, the revised bill will, like its predecessor, also require HHS to make the pricing data from the reports publicly available within 30 days in an “understandable online format.” And HHS will have to give Congress an annual report that summarizes the information and reports submitted by the drug makers.

The bill arrives amid ongoing national angst over prescription drug costs, an issue that has placed drug makers on the defensive. Sixty-percent of Americans want the federal government to take action, according to a Kaiser Family Foundation poll. But there is notable bipartisan support —64 percent of Democrats, 60 percent of Republicans and 58 percent of independents — want something done.

Anger over affordability has fanned out across the country thanks to a variety of revenue-raising maneuvers by drug makers. In some cases, companies have bought old drugs and jacked up the prices to sky-high levels, others regularly boost medicines at rates that outstrip inflation and some drug makers set ever-higher pricing floors for the newest medications for hard-to-treat diseases.

In response, a growing number of lawmakers — both federal and state — have introduced varying types of bills to address the issue. In March, for instance, two dozen Democrats proposed a sweeping bill to allow Medicare to negotiate prices, remove tax breaks drug makers receive for ad expenses, crack down on deals that delay generics, and allow Americans to import medicines from Canada, among other things.

Through it all, President Trump has criticized drug makers for “getting away with murder,” although his administration has not yet offered a plan. Last week, White House budget director suggested the administration may look at forcing companies to pay the same type of rebates to Medicare as they do to Medicaid, but it appears the notion is still in the talking stage.

The Fair Drug Pricing Act, meanwhile, mimics bills that have been introduced in more than a dozen state legislatures. Like those efforts, the goal is to achieve transparency. As we noted previously, the pharmaceutical industry has consistently maintained that prices keep increasing because underlying costs continue to rise, causing lawmakers to take a “show me” attitude toward this rationale.

“We can work to improve transparency around drug pricing so we can better understand how much drug corporations spend to develop and manufacture their drugs and how much they make in profits from those drugs,” Schakowsky and nearly three dozen other lawmakers wrote in a letter Monday to Trump and listed several steps that could be taken to lower drug costs.

So far, though, Vermont is the only government where one of these bills has become law, underscoring the success of the pharmaceutical industry has had lobbying against the approach. Moreover, the Vermont law has its limits — confidential data will not be publicly released and the state has no power to do anything about prices, other than issue $10,000 fines to companies that fail to comply.

We asked the Pharmaceutical Research & Manufacturers of America for comment and will pass along any reply. Last year, the industry trade group argued the bill will not “benefit patients” or provide useful information and called it a “thinly veiled attempt to build a case for government price setting.”

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