In response to the growing strain that medicines are placing on state budgets, a California committee Tuesday is expected to vote on a bill that would require drug makers to reveal their costs. The goal is to force the pharmaceutical industry to provide some transparency into the overall pricing process.
Known as the Pharmaceutical Cost Transparency Act, the bill seeks a plethora of information about any drug that has a price tag of more than $10,000 a year. This includes costs for clinical trials; ingredients; research and development; and production and marketing. And if a medicine had been acquired from another company, those same expenses incurred by the previous owner would also have to be reported.
These various costs would have to be reported to the California Office of Statewide Health Planning and Development, which would then compile an annual report that would be submitted to the state legislature and released publicly. However, the information submitted by drug makers would be audited by an independent third party and certain data would be kept confidential.
“Prescription drug prices are rising at an alarming rate. But there is little information about the rationale behind the explosive growth of high-priced specialty drugs,” the California Association of Health Plans, which is lobbying aggressively for passage, said in a statement supporting the bill. “We need to peel back the onion on how drugs are priced in order to have an effective dialogue and bring costs down.”
This is not the first time this bill has gone before the state legislature. The same legislation was introduced nearly a year ago with support from dozens of insurers, consumer groups, and business groups, which continue to back the bill. But the legislation stalled twice following opposition from the pharmaceutical industry, which is again lobbying to defeat the measure. In response, a few changes were made to appease drug makers.
For instance, a drug maker would be able to include money spent to develop medicines that ultimately failed. Certain proprietary information would be protected. And drug companies would not have to report cost information dating back more than five years from when they first filed an investigation drug application, or IND, with the Food and Drug Administration. An IND is required before testing begins.
Nonetheless, industry opposition remains.
“The bill creates needless bureaucratic obstacles that could prevent patient access to necessary treatments. Under this proposal, medical research, investment and innovation would be stifled by procedural red tape,” the California Life Sciences Association said in a statement. The organization represents about 750 companies in the state.
“Continued development of new medicines is an essential part of the solution to improving healthcare for all, transforming patient care, and lowering overall healthcare costs. More government bureaucracy is not the answer,” the trade group continued. “This bill is simply a relabeled version of the measure that failed to get a vote in committee after two hearings last year.”
We asked the Pharmaceutical Research and Manufacturers of America, the national industry trade group, for comment and will update you accordingly.
[UPDATE: A PhRMA spokeswoman sent us this: “We continue to have significant concerns with the bill and we oppose it. The main reasons include the costs of developing one drug cannot be separated out … And there is no clear indication of how collecting and publishing this information will help actually help patients.”
She added that “the legislation continues not to account for the value that medicines bring to the health care system.” The trade group also complained that the bill singles out drug makers but does not address the role played by others in pricing, such as insurers and pharmacy benefit managers.]
Whether the measure can succeed is uncertain, but drug makers are concerned that passage would embolden other states to take similar action. In fact, a few states last year did introduce comparable bills — Oregon, North Carolina and Massachusetts — but those efforts never progressed.
For the California bill to proceed, it must survive the vote in the Assembly Health Committee and then another vote next week in the Appropriations Committee. From there, the legislation must be approved by an Assembly floor vote before being sent to the state Senate. Since the bill was introduced during the current two-year legislative session, it must pass the entire legislature by the end of the summer or die.