Earlier this year in the state of New Jersey, a state senator introduced Senate Bill 977, “Prohibits excessive charges for drugs developed by publicly funded research,” a bill aimed at doing just what the title prescribes. While the bill was introduced in the Senate on January 16, 2018, it wasn’t until recently, September 24, 2018, that the bill was released from the Senate Health, Human Services and Senior Citizens Committee by a vote of 4 yea, 1 nay, and 4 no votes.
In its current form, S977 would apply to medical technology that is approved by the FDA and that was developed – either partially or entirely, directly or indirectly – with federal or state funds. Any prescriptions or devices developed without public assistance would not fall under the purview of this legislation, nor would any products sold outside of New Jersey lines.
For drugs and products that fall within those parameters, it would be illegal for them to be sold, offered, or advertised for sale, at a unit price that is greater than the benchmark unit price established within the legislation, or that constitutes discriminatory pricing as set forth within the legislation.
According to the legislation, the benchmark unit price for a drug, biologic, or other health care technology shall be the lowest price charged to the countries in the Organization for Economic Co-Operation and Development for the same drug, biologic, or technology, that have the largest gross domestic product with a per capita income that is not less than half of the per capita income of the United States.
The legislation states that a cost-based reasonable pricing formula would constitute discriminatory pricing if the contract for sale of the product placed a limit on supply or used any other measure that also has the effect of providing a drug, biologic, or technology on terms or conditions that are less favorable than those provided to a foreign purchaser.
Amended legislation also allows the New Jersey Department of Health to draft regulations governing the process of how to use the GDP and per capita income figures. There is also a review being done by the New Jersey Office of Legislative Services to determine how the legislation would apply to products made in – or funded by – other states.
While it is still too soon to tell if the bill will pass (there is no companion bill in the General Assembly at this time), bill sponsor Singleton is open to changes and continues to meet with interested parties. It is recommended that prescription drug and device manufacturers contact Senator Singleton to explain how the industry collaborates with different agencies of the federal and state governments to research and develop new technologies that improve patient satisfaction and quality of life and how legislation such as this would disrupt innovation.
“AdvaMed and [the HealthCare Institute of New Jersey] HINJ both have strongly objected to this proposal and both have communicated their objections to the sponsor and committee members,” CEO of HINJ Dean J. Paranicas stated. Paranicas testified on behalf of the organization’s member companies at the September 24 hearing held by the Senate committee to convey the reasons behind those objections.