In response to the intensifying outrage over the cost of medicines, a bipartisan group of lawmakers Thursday introduced a bill that would require drug makers to justify their pricing and provide a breakdown of their costs before raising prices on certain products by more than 10 percent.
Under the Fair Drug Pricing Act, which is cosponsored by Senator John McCain (R-Ariz.) and US Representative Jan Schakowsky (D-Ill.), drug makers would be required to notify the US Department of Health and Human Services and submit a justification report 30 days before they increase the price of certain drugs by more than 10 percent.
The reports will also require companies to provide manufacturing and R&D costs for those drugs, as well as net profits associated with the drugs, and marketing and advertising spending on the drugs. The lawmakers noted the bill will not prohibit drug makers from increasing prices, but is supposed to give taxpayers notice of price increases and “bring basic transparency to the market for prescription drugs.”
The lawmakers go on to explain that HHS will make the information from these reports — but not including any proprietary and confidential information —publicly available within 30 days in an “understandable online format.” And HHS will be required to submit an annual report to Congress summarizing the information and reports submitted by drug makers, they added.
The bill arrives amid a national debate over drug costs, an issue that has gained center stage thanks to a variety of revenue-raising maneuvers by companies. These tactics run the gamut — from buying old drugs and then jacking up prices, to regularly boosting prices on medicines by double-digit percentages, to setting ever-higher pricing floors for the newest medications for hard-to-treat diseases.
The issue has repeatedly cropped up over the last three years, but accelerated again this summer thanks to controversy over the cost of the EpiPen emergency allergy device sold by Mylan Pharmaceuticals. Next week, in fact, the company’s chief executive will testify before Congress to explain decade-long price hikes that have angered families across the country.
“Drug corporations are sticking it to American taxpayers with soaring prescription drug prices,” said Senator Tammy Baldwin (D-Wis.), one of the sponsors of the legislation, in a statement. The “reform will require transparency and accountability for drug corporations who are jacking up costs for families in need of affordable lifesaving treatments.”
The problem is resonating on a broad scale. Three-quarters of Americans believe prices for prescription drugs are unreasonable compared with other goods and services, according to a poll last winter by STAT and the Harvard T.H. Chan School of Public Health. And employers are concerned, as well. Nearly 9 out of 10 say that managing the cost of prescription drugs tops their list of concerns, according to a recent Willis Towers Watson survey.
The legislation being proposed today largely mimics bills that have been introduced recently in more than a dozen state legislatures. Like those efforts, the goal of the Fair Drug Pricing Act is to achieve transparency. Since the pharmaceutical mantra has been that prices keep increasing because underlying costs continue to rise, lawmakers are increasingly taking a “show me” attitude toward this explanation.
However, Vermont is the only state where one of these bills has become law, underscoring the success of the pharmaceutical industry has had lobbying against adoption. This raises questions about whether the Fair Drug Pricing Act can gain traction. Then again, prescription drug costs have become a talking point in the presidential campaign, and the bill is only the latest indication that there is bipartisan pressure to take action.
Earlier this month, for instance, Hillary Clinton released a plan that called for creating a panel of federal officials to determine if price increases for certain drugs are justified — and, if not, to take steps to punish the company and lower the price. Her plan would also authorize the emergency importation of similar treatments from foreign countries.
“This is a much simpler approach without creating an enormous federal apparatus that would be very difficult to legislate and administer,” said Ira Loss of Washington Analysis, who tracks the intersection between Wall Street and regulatory policy. “I doubt it would pass this year, but it might keep the issue part of the discussion during the election season and could certainly become part of the discussion next year.”
As for drug makers, a spokeswoman for the Pharmaceutical Research & Manufacturers of America, the industry trade group, wrote us that the bill “will not benefit patients” or provide information that they can use. “Instead it focuses on isolating research and development costs for the few medicines that make it to patients in a thinly veiled attempt to build a case for government price setting,” she argued.
Moreover, she maintained that drug makers already disclose “extensive information” about R&D costs, a “wealth of information on effectiveness and safety” before regulatory, clinical research that is published on public websites, and “aggregated information about negotiated and required rebates is included in company financial filings.” We should note, however, that drug companies do not disclose specific rebate or discount information.
This story was updated to include a comment from a spokeswoman for the pharmaceutical industry trade group.
Should include a clause that pharma must provide data on price of the product in five other countries where it is approved – that would probably make many proposed US price increases dead on arrival.
The system will be easy to game. For example let’s say a company spends $50,000,000 on market research for a new drug. All they have to do is reclassify the the expense as “research” and it falls to the R&D expense line. Most congressman are lawyers, not businessmen and women, and they lack the sophistication to understand or even know how to read a balance. So they will spend a few hundred million dollars of our tax money to hire the MBAs to do the actual interpretative work.
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