To: The Honorable Jennifer Benson, Chair, The Honorable Cindy Friedman, Chair
and Members of the Joint Committee on Health Care Financing
From: Deirdre Cummings, Legislative Director, MASSPIRG
DT: April 11, 2019
Testimony in support of An Act to ensure prescription drug cost transparency and affordability (H. 1133/S. 706)
Dear Chairs Benson and Friedman and members of the committee:
My name is Deirdre Cummings and I am the legislative director for MASSPIRG, a non-partisan, non-profit, member supported consumer advocacy organization. I am here today to testify in favor of An Act to ensure prescription drug cost transparency and affordability (H. 1133/S. 706) that will reduce the skyrocketing costs of prescription drugs, make pharmaceutical costs and pricing more transparent, and as a result reduce costs of health care.
Rising prescription drug prices are leading to higher healthcare costs for Massachusetts residents. It’s not only the patients who rely on prescription drugs who pay more at the pharmacy counter—we all shoulder the burden through higher insurance premiums, higher costs for Massachusetts businesses, and higher costs for taxpayers and the state budget.
The Health Policy Commission’s (HPC) 2018 Cost Trends report showed that MA drug spending increased over 4% last year, while total spending across the health care system went up by just 1.6%. In addition, drug spending in MassHealth has doubled from $1.1 billion to $2.2 billion over the past five years, twice the growth rate of other MassHealth spending.
Nationwide between 2006 and 2014, prices for drugs rose by an average of 57 percent, and prices for drugs with no generic substitutes rose by 142 percent. Excessive drug prices are the single largest category of health care overspending in the United States compared with Europe, well beyond high administrative costs. On average, individuals in other high-income countries spend 56 percent of what Americans spend on the exact same drug.
Currently, there is little to no transparency when it comes to the actual costs required to produce a drug, and no mechanism or oversight to ensure that drugs are truly affordable for those who need them. As a result, pharmaceutical companies may set arbitrary and opaque prices for drugs, and too many people in Massachusetts cannot access these drugs due to high costs.
The market-place for prescription drugs is broken.
Nearly 1 in 4 Americans struggle to afford their prescription drugs. One reason is no one really knows how much their medicine should cost. We all know that milk or bread should cost a few dollars -- and it’ll cost about the same at nearly every grocery store. But not so for critical medicines that improve the quality of our lives.
Last month MASSPIRG released a new report, The Real Price of Medications, and found that prices varied by nearly 900% across the country for the exact same medicines. And of course, the people paying hundreds or thousands of dollars less each year got the same health benefit from those drugs as those who paid more.
The report included a survey of 250 pharmacies in 33 communities across 11 states to find out the retail prices for 12 common medications used for heart failure, hypertension, asthma and depression. After analyzing the data, we found staggering price variations and trends. All of which demonstrate a broken market place when it comes to pricing of prescription drugs.
- Prescription drug prices are disconnected from clear factors; the median (typical) prices for the surveyed drugs varied an average by 892 percent from the cheapest available price. In Massachusetts for example, we found Lantus Solostar Insulin ranged from $150 to $609.
- Brand name drugs did not adjust to competition from generic drugs, even years after they entered the market. For instance, the median cost for the branded drug Lipitor, used to lower cholesterol, was $520/month while its generic, Atorvastatin, was $113/month, despite the generic being on the market 2011. A difference of $4,884 a year.
- Large chain pharmacies tend to have higher prices than their small chain or independent counterparts, despite having more leverage in the marketplace. Eight of the 12 drugs in the survey had higher median prices at large chains -- up to 840 percent higher, than at their smaller/independent pharmacies. (chain was 12 or more in state)
A comprehensive solution:
MASSPIRG supports the passage of An Act to ensure prescription drug cost transparency and affordability (H. 1133/S. 706), filed by Senator Jason Lewis and Representative Christine Barber which provides the most comprehensive framework to address prescription drug costs, including: 1) transparency aimed at both drug manufacturers and PBMs, 2) an upper payment limit to address costs and ensure affordability, 3) pharmacy benefit manager (PBM) oversight and accountability, 4) MassHealth tools to negotiate additional rebates, and 5) academic detailing to ensure evidence-based prescribing. We believe all of these components are necessary to work together to address the challenge at hand.
Prescription drug price transparency: Pharmaceutical pricing is a complex and opaque system of middlemen and rebates that prevents consumers and policymakers from knowing the true drug prices being charged and the reasons behind price increases. Price transparency is a key first step to unlock the black box of pharmacy pricing, increase consumer awareness, and understand when additional oversight and accountability may be needed for certain drugs.
This legislation requires drug manufacturers to report to the Center for Health Information and Analysis (CHIA) pricing information, such as research and development costs, annual changes in wholesale acquisition costs, marketing and advertising costs, and the disparities between drug costs in MA vs. in other countries. Manufacturers must also provide advanced notice to CHIA of certain price increases, including the factors it considered in deciding to raise the price, and advanced notice of pipeline drugs and other new drugs hitting the market. Further, PBMs must submit data to CHIA on factors such as rebates and fees received from manufacturers and the amounts retained. With this information, CHIA must conduct an annual study of the impact of pharmaceutical manufacturing pricing factors and methodologies and the PBM business model on drug costs.
CHIA can also refer a drug to the HPC for further review if CHIA determines that a drug meets the following criteria: (1) the drug cost or cost increase is unreasonable or excessive, which could (a) lead an entity to exceed the health care cost growth benchmark, or (b) create significant affordability challenges for the state or consumers; or (2) if the drug cost meets certain cost or cost increase criteria, which is defined in the legislation differently for brand name drugs, biologics and generics. Finally, the legislation mandates that drug manufacturers and PBMs testify at the HPC annual Cost Trends Hearing, including on factors of underlying prescription drug costs and price increases.
Other transparency laws have passed in a number of states in the past two years, including CA, OR, and VT. This legislation reflects the strongest provisions of other states’ laws, while allowing CHIA to draw on data available from other states to reduce administrative burdens.
Authorize the state to set maximum prices for unreasonably high-priced drugs: In the current system for prescription drug pricing, different purchasers pay different net costs or prices for the very same drug, and hidden back-end rebates do not necessarily benefit the consumer at the point of service. Furthermore, there is no mechanism or oversight to ensure that drugs are truly affordable for those who need them. While increased transparency for prescription drug pricing is an important first step, it not enough.
This legislation authorizes CHIA to gather data on the most expensive drugs and inform the HPC if a drug’s price or price increase is excessive, as outlined above. The HPC would then conduct an affordability review for those drugs referred from CHIA, which would include conducting a public hearing, and would take into account both the affordability for consumers and costs to the health care system. Following that analysis, the HPC would be allowed to establish an upper payment limit (UPL) for certain excessively priced prescription drugs, which would apply throughout the state health care system – from distributors to doctors, pharmacies, hospitals, insurers, and consumers. If the HPC determines that a drug should be subject to an UPL, health plans would be required to use the established UPL for the prescription drug in developing the benefit design for such drug, including, if applicable, any cost-sharing amounts. This means that a consumer’s out-of-pocket costs would reflect the reduced payment pursuant to the UPL.
Restrain the abuses of pharmacy benefit managers (PBMs): The PBM business model is based on a gaping conflict of interest. PBMs earn revenue from rebates they negotiate with drug manufacturers, some of which is passed on to health plans, and some of which is retained as profit. For PBMs, the higher the drug price, the higher the rebate, and so increased drug prices generate more net revenue for the PBM. As a result, health plans, pharmacies, and consumers all end up paying higher prices.
The legislation seeks to control PBM abuses, by requiring state licensure and oversight by the Division of Insurance and requiring PBMs to operate with a fiduciary duty to their health plan clients. It also builds on the federal law prohibition of “gag clauses” to affirmatively require pharmacists to inform consumers if purchasing a prescription at the retail price without insurance would be cheaper than the cost-sharing amount when using insurance. In addition, it requires PBMs to submit data to CHIA on factors such as rebates and fees received from manufacturers and the amounts retained, as described above.
Provide tools to strengthen MassHealth’s ability to negotiate for lower drug prices: Prescription drug costs are the fastest growing component of MassHealth’s spending, far exceeding spending growth on hospital care and other services. High drug costs threaten MassHealth’s sustainability, and addressing these costs is critical to protecting against any potential cuts to the program’s benefits or eligibility in the future.
The proposal authorizes MassHealth to negotiate supplemental rebates with drug manufacturers. If direct negotiations are unsuccessful, MassHealth can establish a target value for a given high-cost drug through a public process and will seek a supplemental rebate from the manufacturer consistent with that value. If those steps are unsuccessful and a drug meets certain cost thresholds, MassHealth may refer high-cost drug manufacturers to the HPC. The HPC would be authorized to require manufacturers to submit disclosures and testify at public hearings to justify their prices. If the HPC deems the manufacturer’s price for a particular drug to be unreasonable or excessive, it may refer the matter to the Attorney General’s Office for potential violations of the consumer protection laws.
Educate doctors on drug effectiveness and costs: Health care providers are confronted with an overwhelming amount of new clinical research, making it difficult to stay current about which treatments are most effective and have the best patient outcomes. At the same time, the pharmaceutical industry spends billions on marketing directly to doctors to promote their products. This influence results in higher costs for patients and the Commonwealth, as pharmaceutical representatives typically promote their newest, most expensive brand-name drugs, regardless of whether or not they offer improved outcomes.
This legislation supports a permanent authorization for the HPC to implement an “academic detailing” program, which is an evidence-based prescriber education program on the therapeutic and cost-effective utilization of prescription drugs. This program sends trained educators to meet with doctors and provide them with objective research findings on which prescription drugs are best for particular diagnoses and individual patient situations. The program both improves doctors’ clinical decision making and can help to control costs, allowing doctors to make decisions based on balanced research data rather than biased promotional information.
I hope you will pass the bill swiftly; we cannot afford delay.