State Efforts to Make Prescriptions Affordable January 25,

State Efforts to Make Prescriptions Affordable January 25, 2019 Dedicated to creating a nation where the best health and health care are equally accessible and affordable to all

Transparency and Price Gouging Justin Mendoza State Partnerships Manager, Families USA @justindmendoza FamiliesUSA.org

Agenda Introductions Background on High Drug Prices State Options Examples from Connecticut Examples from Illinois Group Activity Discussion

Consumers Bear the Cost One in four people who take prescription drugs have difficulty affording them One in eight report that they or a family member have cut pills in half or skipped doses due to high drug costs Health plans attribute 22 percent of premium costs to prescription drugs Data: America’s Health Insurance Plans, Where Does Your Premium Dollar Go? (AHIP Center for Policy and Research, March 2, 2017).

Current Climate Prescription drug spending is a concern for both political parties. 62 percent of Americans think there is not as much regulation as there should be when it comes to limiting the price of prescriptions. 86 percent of Americans support requiring drug companies to release information to the public on how they set drug prices. 78 percent of Americans say that drug companies making too much profit is a “major reason” why people’s health care costs have been rising. Sources: Kaiser Family Foundation & Drug Price Polling factsheet, Public Citizen

Venues for Reform Federal State Can achieve a broader scope, fewer limitations in what policies can achieve Can provide relief and protection to people across the the entire country at once May achieve enactment faster than at federal level Can set a positive example for the federal government and urge them to take broader actions by enacting state policy

State Mechanisms for Addressing Rx Prices Transparency Pharmacy Benefit Managers Anti-Price Gouging Review Boards

All Payer Rate Setting

Rate Setting Goal: Set a state-wide reimbursement rate, harnessing negotiation power to bring down overall costs.

Rate Setting Drug Price negotiation? Kind of – sets an upper limit or “payment rate” for payers in a state, down to consumer level. Doesn’t stop payers from negotiating concessions. Who sets the rate? A drug cost review commission/board An advisory board Based on common rate setting practices that already exist, just with more market power

Price Gouging

Price Gouging Legislation Goal: Prevent drastic price increases for prescription drugs.

Price Gouging Legislation The most recent Brand Name Drugs - limitations Price controls were shot down in BIO V District of Colombia, Patents pre-empt states’ ability to regulate price. Maryland - pending Passed an anti-price gouging bill in 2017 which grants the Attorney General authority to hold pharmaceuticals accountable for “unconscionable” price increases in generic, off-patent drugs. Was challenged in court for violating the Dormant commerce clause, which bars a state from regulating the price of goods in another state. Attorney general has appealed to Supreme Court.

Price Gouging Legislation Next Steps Wait for potential supreme court challenge to proceed: It’s possible the Maryland bill could be re-instated and states would be granted free reign to pursue similar legislation. Pass an alternative approach: A tax on profits earned on a price beyond inflation (similar to Medicaid Drug Rebate Program) Medicaid currently requires manufacturers to compare an inflationadjusted price for a medicine and the current price, and then award the program a rebate based on the difference. Expanding that same metric, states could impose a tax on excess profits above inflation. With careful design, this could avoid the legal pitfalls that the Maryland Law is facing.

Price Gouging Legislation Exampolis Price Tax/Rebate Tax/Rebate { { 115.00 100.00 100.00 2014 102.20 2015 Inflation-Adjusted Price Sources 105.00 104.45 2016 Average Price Charged 15

Transparency

Transparency Goal: Make high introductory drug prices and price increases understandable to payers, policy makers, and ultimately the public.

Transparency State Examples California (SB-17, 2017) Oregon (HB 40005, 2018) What drugs? Cost more than 40 for 30-days supply Price increase of 16% over two years Specialty drugs What Drugs? Cost 100 or more Price increase of 10% in one year Specialty Drugs What’s reported? 60-day advance notice Publicly available data on research costs, marketing, acquisition costs, marketing plan, launch prices (for specialty drugs) Challenges? Is publicly available information enough? Sources: CA SB-17, Legi-scan & Oregon Legislative Information System What’s reported? Production costs Marketing costs Research Costs Clinical efficacy/rationale for increase Challenges? First reporting July 2019 (after next legislative session) Determining what is and isn’t a trade secret (for exclusion)

Transparency Priorities and Options for Consumers Advance Notice: CO legislation in 2018 included 90-days advance notice What drug price? Wholesale Acquired Cost the list price Rebate sizes and information on the negotiations with PBMs and other parties can be helpful Net Price and what these things mean for consumers’ out of pocket and premium costs

Transparency Considerations How do folks hear about it? Current laws include a website posting by agencies (OR, CA) or manufacturer (VT) Summary of benefits could include price increase notifications Prescribers or pharmacists could give out information For which drugs is reporting required? Thresholds range from all those drugs over 40 per 30-day supply – to top 15 most costly for the state. To reach the maximum number of consumers, as low a threshold as possible on which drugs count. Considerations include the monthly price, the overall financial or health impact of a drug, the size of the price increase, and the introductory prices. Who gets what data?

Pharmacy Benefit Managers

Pharmacy Benefit Managers Goal: Ensuring PBMs are not driving up prices in their role as “middlemen” between pharma companies and health plans/ pharmacies

Pharmacy Benefit Managers Gag Rules Banning Gag rules is still important Patient Right to Know Drug Prices Act – Federal law that prohibits PBMs and insurers from restricting a pharmacy’s ability to provide an enrollee information on a drug’s price depending on whether it is purchased with the plan or without. Does not require that pharmacists disclose prices. Does not count costs for out-of-plan purchases towards out-of-pocket caps or deductibles. CA AB 315, AB 2863: Bars gag clauses. Requires disclosure from pharmacists if there’s a difference between the cost-share amount and the retail price of a drug. Requires any sale to count as the cost-share and toward OOP caps.

Pharmacy Benefit Managers PBM Registration Registration alone is not our end-goal. Can include transparency and reporting about: Rebates given for pharmaceuticals purchased. Revenue share taken by PBM as a part of negotiated rebates. Price used to calculate cost shares for consumers. Can create a fiduciary duty for PBMs, so they are legally obliged to serve consumers/payers.

State Efforts to Make Prescriptions Affordable Jill Zorn, MBA Senior Policy Officer, Universal Health Care Foundation of Connecticut FamiliesUSA.org

State Efforts to Make Prescriptions Affordable Rep. Will Guzzardi Illinois State Representative, 39th District FamiliesUSA.org

Group Activity

Group Activity For the next 15 minutes, you’ve joined a brand new team. Group up (into small groups) 1. Introduce yourself and organization. 2. If you’re working on a drug pricing issue, tell the group about it. Identify barriers to achieving your reform: 3. Political 4. Budget 5. Public Opinion 6. Financial Resources Photo via http://www.goodfreephotos.com/ 28

State Mechanisms for Addressing Rx Prices Transparency Pharmacy Benefit Managers Anti-Price Gouging Rate Setting

Group Activity Identifying questions/discussion Out of the identified barriers – which do we know the least about? Were there pieces of Will, Jill, or Justin’s presentations that could speak to any of the barriers or issues you’ve identified in your group – and would more context help? Do you have questions about the policy or about the opposition that might need to be addressed here? Sources 30

Contact [email protected] Dedicated to creating a nation where the best health and health care are equally accessible and affordable to all www.familiesusa.org @FamiliesUSA FamiliesUSA.org