Drug Price Transparency Laws
The United States healthcare system is designed to be complicated, confusing and, until recently, confidential. The major supply chain segments in the US healthcare system (health insurance carriers, pharmacy benefit managers, and pharmaceutical manufacturers) have been free from pricing regulation, resulting in the insulin price crisis and rising healthcare costs.
Drug transparency laws have the potential to shed light on the closed door dealings of the healthcare system, increasing price regulation and accountability measures. In 2016, Vermont passed one of the first comprehensive drug transparency laws that targeted all three players in the US healthcare system. Vermont, along with several other states, have implemented varying scopes of drug transparency laws. While some of these laws only impact one of the healthcare players, some have the potential to not only create more transparency in all 3 major healthcare systems, but also penalize the different players for denying to report or unjustly increasing medication costs. There are efforts and conversations addressing drug transparency at the national level, though the rest of this article will focus on state by state legislation.
With so much variation between states, it is important to uncover which state laws actually make an impact. A study done by Martha S. Ryan, BS and Neeraj Sood PhD found that out of the 22 states included in their study, only 6 states had implemented laws that were determined to be informative. These informative laws required Pharmacy Benefit Managers (PBMs) and/or Pharmaceutical Manufacturers to report net prices or profits from specific drugs, some of these laws also required the relative PBMs or Manufacturers to explain increases in drug costs.
A study done by Martha S. Ryan, BS and Neeraj Sood PhD found that out of the 22 states included in their study, only 6 states had implemented laws that were determined to be informative.
“Most states with transparency laws targeted PBMs (15 states) or insurers (11 states); 2 states passed laws that targeted pharmacies, and no states passed laws that targeted wholesalers (Table 2). Only Nevada and Vermont passed laws that targeted 3 distinct supply chain segments (ie, manufacturer, insurer, and PBM); no state passed laws that targeted more than 3 supply chain segments. Importantly, no state passed laws that together revealed true transaction prices or profits across all supply chain segments.” (Ryan MS, Sood N)
Most states have non-informative Drug Transparency laws, which means they make minimal impact. One state that has passed a successful Drug Transparency Program is Nevada, which passed and implemented SB 536 in 2017 in addition to creating a public health campaign to help describe the “complex supply and finance chain for prescription drugs,” specifically for diabetes prescription drugs. This unique drug transparency law specifically targeted diabetes supplies and was recently amended to include Asthma medication.
Although this drug transparency law is deemed one of the most informative, Beth Slamowitz PharmD, Navada’s Senior Policy Advisor on Pharmacy, said that they still have a long way to go before these laws can be used to impact the price of drugs. Slamowtiz said that they focused on diabetes as a “way to win” since the insulin price crisis has gained so much attention in recent years. After the bill was passed into law, it was immediately hit by a lawsuit from lobbyist groups at BIO and PhRMA around what was defined in the bill as “trade secrets”. Trade secrets are legal secrets that are so loosely defined, almost anything could be deemed a trade secret. BIO and PhRMA eventually dropped the lawsuit, but only after they were allowed to define what is technically a trade secret, in the scope of this bill, and how this information would be reported.
One state that has passed a successful Drug Transparency Program is Nevada, which passed and implemented SB 536 in 2017. After the bill was passed into law, it was immediately hit by a lawsuit from lobbyist groups at BIO and PhRMA around what was defined in the bill as “trade secrets”.
While this bill has a great start, it is clear that there is a lot of room for improvement. Slamowitz described Nevada’s lessons learned below:
Legislators need to hold control over how to define trade secrets. After the lawsuit in Nevada, Slamowitz explained that PhRMA was allowed to define what had to be reported and how it was reported. Slamowitz describes that all the information “collected from PhRMA was aggregated, so they [the Nevada Department of Health and Human Services] didn’t know exactly where it came from.”
Recognize BIO and PhRMA lobbying power and be prepared to fight back. PhRMA has an armory of lobbyists and lawyers whose main focus is to ensure business is not interrupted. How do we combat corporate lawyers with unpaid advocates? Communicate the past challenges with your championing representatives and caution them toward PhRMA involvement.
Write the bill alongside subject-matter experts such as Pharmacists, Pharmacy Benefit Manager experts and patients who will be affected. At the inception of the Nevada bill, only data analysts were at the drawing board, which led to lack of understanding. Since the US healthcare system is so nuanced and complicated, this narrowed focus ended up hindering the passing bill. Slomowitz strongly believed that having a team of pharmacists, pharmacy benefit manager experts and other healthcare professionals could have changed the trajectory of this bill.
Include fines to enforce reporting and provide state funding. Fines might not force companies to change their business model, but they will provide resources to educate the public about rising Diabetes costs or general Diabetes education. Slamowitz described how these fines helped fund diabetes education that might have been cut due to COVID budgetary constrictions.
Prioritize funding streams to manage data. Slamowitz urges states to prioritize funding into data management. All this information will become useless if it is challenging to share and report back to the consumers.
States coming together to share drug pricing data and create action plans. Slamowitz feels confident that with the coordination of states, Drug Transparency laws could be effective at holding the major healthcare players accountable and creating lasting healthcare change: “My hope is one that we better define who needs to report, so we can get better compliance and better data. I hope there is better national coordination, so states could share data. If states can figure out all of their data and be a collective voice, real drug reform is possible.”
Are Drug Transparency laws the only solution to rising insulin costs in the United States? No, but they are an important piece of the puzzle. By learning exactly where money is going, we can better decide how to regulate and monitor rises in healthcare costs.
Further Reading
State Drug Pricing Transparency Laws Increasing
State Drug Price Transparency Laws
LEGISLATIVE GUIDE FOR INSULIN FOR ALL – Page 10, 11
From a Manufacturer’s perspective: State Legislation on Prescription Drug Price Transparency