Transparency will help

Two lawmakers chip away at drug price mystery

Vermont garnered attention in 2016 when it enacted a law requiring its attorney general to compile a list each year of the medications skyrocketing in price at considerable expense to the state. The law also required drugmakers to explain the price increases.

That’s the kind of transparency, the kind of conversation, needed in other states. Pennsylvania would take steps in that direction by passing legislation sponsored by Reps. Judy Ward, RBlair,and Doyle Heffley, R-Carbon.

Ms. Ward’s bill would keep pharmacy benefit managers, the intermediaries between health care plans and pharmacies, from imposing gag rules prohibiting pharmacists from alerting customers to the cash price of a prescription. She’s concerned that insurance copays sometimes are higher than the cash prices and that consumers, unaware of such vagaries and accustomed to using insurance, end up payingmore than they should.

Mr. Heffley’s legislation is intended to shed light on the financial details of pharmacy services provided under Medicaid. It stems from independent pharmacies’ complaints that pharmacy benefit managers keep cutting their reimbursement rates under Medicaid while telling them how much they can charge consumers for medications. He fears that insufficient reimbursements will drive some independent pharmacies out of business, making services less accessible to consumers in parts of the state.

His bill would require managed care organizations providing services under Medicaid to disclose at the state’s request their payment arrangements with pharmacy benefit managers. It would require pharmacy benefit managers to provide similar information about their payment arrangements with pharmacies. The bill is silent about what the state would do with that information, but knowledge conceivably could be parlayed into political pressure, laws or policies ensuring fairness to pharmaciesand consumers.

The focus on pharmacy benefit managers, who do such work as process claims, develop formularies and determine pharmacy reimbursements, is well placed. But other parties inthe supply chain need scrutiny, too.

Vermont’s law focuses on increases in the prices charged to wholesalers, but drugmakers have argued that a better picture of price changes would come from analyzing the role of other parties — not only pharmacy benefit managers but wholesalers, hospitals and retailers — who may negotiate discounts to lower their costs or tack on chargesof their own.

“The manufacturers also commented that discounts and rebates are rarely passed on to patients, so that net prices received by the manufacturers may differ from the final cost to payers and patients. When stakeholders in the supply chain apply additional charges, they increase drug prices above the discounted amount charged by the manufacturer,” Vermont Attorney General T.J. Donovan noted in a Feb.23 report to legislators.

The bills by Ms. Ward and Mr. Heffley would start Pennsylvania on the road to establishing transparency in prescription sales, while saving consumers money and ensuring independent pharmacies are fairly compensated for their work. But additional legislation is needed to flesh out the picture, which ideally would show how manufacturers, wholesalers, retailers and other parties also affect the prices taxpayers and consumers pay. As health care costs continue to increase, transparency becomes more important as a prospective brake on the industry’s rapacity.