Pharmacy bill would hurt Pa. patients
Pennsylvania’s senators should pass legislation that actually would help their constituents
When a piece of legislation has the word “transparency” in its title, we like to think it will open a secretive practice to public scrutiny and improve our lives.
On the surface, a proposed Pharmaceutical Transparency Commission in state Senate Bill 637 sounds as though it fits that category. In reality, it would threaten the lives of patients in need of cures and treatments and the jobs of those in life sciences who discover and manufacture them.
It’s a shame that the process for considering legislation touted as bringing patients greater drug information and lower costs has ignored the patient voice. In fact, the Senate Banking and Insurance Committee omitted all patient advocacy groups from the testimony list for a hearing it held on the bill lastmonth.
That’s probably because there’s nothing good for patients in SB 637.
It focuses only on drug manufacturers, establishes reporting requirements that run afoul of federal law and lets insurers and pharmacy benefit managers (PBMs) retain money at the expense of patients in need.
In my years with the Community Liver Alliance, we’ve worked to ensure that patients with liver diseases have access to treatments that can improve their lives. That certainly can be expensive. Industry statistics show that it takes 10 years and $2.6 billion to bring one new drug from lab to market. But that doesn’t justify how bad actors in the industry indiscriminately raise drug prices.
Still, the prescription drug marketplace often does make drugs accessible to patients. Drugmakers set a list price, but a study this year by the Berkeley Research Group found that more than a third of the list price of a brand prescription medicine is rebated to PBMs, health plans and the government or retained by other stakeholders in the pharmaceutical supply chain. Quite frequently, as soon as one new drug is for sale, a competitor drug emerges and drives down prices. Soon enough, that’s followed by much cheaper generics, which account for 90 percent of all medicines received by patients.
There’s no question this system can stand to be improved, but SB 637 is not the way to do it. First, it focuses only on prescription drug manufacturers and largely ignores all of the players that impact a drug’s pricing and availability — insurers, PBMs, wholesalers and Medicare. Anything less than a holistic approach is sure to worsen the system.
More disturbing are the bill’s reporting requirements. It would require life-sciences companies to report — for each drug — production and manufacturing costs, research and development costs, clinical and regulatory costs, and the specific drug’s total profit. However, federal antitrust laws prohibit disclosure of information that would impact pricing and competitiveness. So it’s illegal for companies to meet these proposed requirements.
Pharmaceutical companies already report extensive information on costs, sales and R&D expenditures. This bill ignores the decade-long journey a new drug faces to make it into our medicine cabinets. And only 12 percent of drugs in clinical trials result in an approved medicine anyway. Accounting for these discovery costs couldbe nearly impossible.
Perhaps worse, the bill would allow an insurer or PBM to refuse topay for a drug if a company does not produce this information — which, remember, it cannot provide under federal law.
PBMs — obscure but influential middlemen — would make out fairly well under this legislation. PBMs process prescriptions for insurers and large employers that support their own plans, determine which drugs are covered and negotiate with manufacturers and pharmacies. They maximize profits through a littleknown tactic called “clawbacks.” With clawbacks, a patient pays a pharmacy a co-payment, perhaps $10, agreed to by the PBM and the insurers who contract with them. The pharmacist gets reimbursed for the price of the drug, say $2, and possibly a small profit. Then the PBM “claws back” the remainder. Most patients never realize there’s a lower cash price.
It’s difficult to see how this legislation would help a patient with liver disease or any other ailment receive medication or lower prescription drug costs. It would, however, allow insurers and PBMs to hold on to as much money as possible at the expense of patients.
Pharmacies are stuck because many plans require them to collect payment when prescriptions are filled and prohibit them from waiving or reducing the price. Plus, pharmacists are required to sign agreements that prohibit them from telling their customers about the clawbacks.
If policymakers are interested in exploring meaningful policies to rein in out-of-pocket costs for patients, I would suggest supporting the policies and principles in Senate Bill 913 sponsored by Sen. Kim Ward of Westmoreland County. This legislation actually would help patients with out-ofpocket costs by requiring insurance companies to pass along manufacturer rebates to patients, allowing pharmacists to provide prescription drug information that would enable patients to get the best prices for medicines, and implementing an All Payer Claims Database to collect information and data on costs paid by health care payers.
The life-sciences industry is a tremendous economic engine for Pennsylvania that offers not just products but hope and health. That would all be threatened by SB 637. Patient advocacy groups recommend transparency and thoroughness in the legislative process before we have a new level of bureaucracy making it difficult for patients to survive.