On Friday, June 3, 2016, Vermont Governor Peter Shumlin signed into law a bill that aims to require greater transparency on behalf of drug manufacturers when they increase the prices of prescription medicine.
The law, S.216, will require state health care regulators to develop an annual list of fifteen drugs for which “significant health care dollars” are spent and where the wholesale acquisition costs (i.e., list prices) rose by fifty percent or more over the previous five-year period, or for which the list prices rose by fifteen percent or more over a twelve-month period. The Green Mountain Care Board of Vermont will work with the Department of Vermont Health Access to develop that list.
Select manufacturers will then need to disclose “all the factors that have contributed to a price increase” and justify the price increase to the Attorney General’s office, which could take companies to civil court if they decline to provide the requested information. Each violation also carries a $10,000 penalty.
The law also requires Vermont’s Medicaid program to use the 340B drug pricing formula to save money on prescription drugs, and require health insurance companies to provide information for consumers on what they may need to pay for their prescriptions.
In addition, the bill requires health insurance companies through the state’s Health Connect program to set up interactive websites for patients so they can find out how much their prescription drugs cost before going to get the prescription filled at the pharmacy.
In a statement issued by Governor Shumlin’s office, he noted that “This bill is about accountability. The reality is that we have pharmaceutical companies raising prices on lifesaving drugs five thousand percent. When asked about those outrageous increases, CEOs are literally laughing in front of Congress. That needs to change.”
What Governor Shumlin does not seem to recognize is that Martin Shkreli, presumably the aforementioned CEO, does not represent the pharmaceutical industry on the whole. Unfortnately there are going to be a few organizations that game the system, and painting all pharma execs in the same light at Shkreli does everyone a disservice.
Many of the drugs that the bill targets actually save health care costs by enabling patients to avoid more expensive procedures. It is possible that by revealing competitor pricing, or the perception that such information could be revealed in the aggregate in the Green Mountain Care Board’s report, could lead to disincentivizing deeper discounts and rebates.
At an April Vermont House Health Care Committee meeting, PhRMA submitted written testimony, noting that the information on pricing may not actually be relevant because companies do not sell drugs to doctors and pharmacies and in many cases, manufacturers are actually “not privy to the final price paid in Vermont.” The testimony also noted that forcing companies to disclose prices may “chill the incentive” for drug makers to give discounts to those groups.
PhRMA recommends that legislators in other states who are contemplating similar legislation instead focus “on giving patients and families what they actually need: predicable and accessible information about the out-of-pocket costs they will face and enforceable, common-sense rules that prevent discrimination and remove barriers to receiving care.”