One of the most persistent issues that I hear about from my 7th Legislative District bosses concerns high and rising prescription drug prices. According to the Center for Medicare and Medicaid Services, our country spends nearly $1 billion a day on prescription medicine, with that number projected to increase over 6% per year on average over the next decade. Further, because the government pays more than 40% of all retail prescription drug costs, this level of increase will constrain and stress state and federal budgets. This has been fueled largely by new drugs entering the market and price hikes of existing prescription drugs. As we consumers call for better cures, we also must demand that access to those vital medicines do not force us into dire financial conditions.
No matter your political leanings, large majorities of the public support greater government action to lessen this financial burden. However, policymakers at all levels have to strike the balance between restraining the prices of prescription drugs without sending a chilling effect on the development of new drugs that have critical and substantial health benefits. And, while the federal government has been slow to address this issue, it has fallen to state government to lead the way. In my efforts to combat this ongoing healthcare crisis, it has led me to focus in on a few distinct areas: (1) providing greater transparency in drug pricing, (2) aggressively pushing back against price gouging, and (3) rewarding innovation that leads to price controls.
Improving transparency is an important ingredient in the effort to reduce escalating drug pricing. Legislative proposals in this area not only form the foundation for stronger reforms down the line, but they also shine light on those entities that take advantage of consumers who are at their most vulnerable. In this vein, I have sponsored the following proposals to increase transparency in drug pricing:
S2389, requires the New Jersey State Board of Pharmacy to establish a prescription drug pricing disclosure website. In order to make this information available for the website, the bill further requires certain pharmaceutical manufacturing companies to provide prescription drug price information to the board.
- S2627, requires that pharmaceutical wholesale distributors maintain a system to assess, identify, and report suspicious orders of drugs and a system to collect and store certain customer information required by the bill.
- S2630, provides for prescription drug disclosure requirements and measures to reduce costs for prescription drugs and biological products costs. Under the proposal, pharmacy benefits managers (PBMs) are required to disclose certain information about prescription drug and biological product pricing and generic substitutions to benefit plan purchasers. The bill requires PBMs to establish a toll-free telephone number through which consumers and pharmacists can quickly obtain information regarding coverage, pricing and prescription drug and biological product safety.
CURTAILING PRICE GOUGING
As said previously, consumers, businesses, and the government face sticker shock as prescription drug costs spiral out of control. Nothing seemingly has been able to slow down this rising concern. A 2016 poll by the Kaiser Family Foundation found that 77 percent of Americans surveyed said the cost of prescription drugs were “unconscionable.” The main take away from that study is that many of those surveyed thought that some pharmaceutical companies were just spiking the costs of their prescription drugs BECAUSE THEY CAN. Now, by no means is this meant as an indictment on all pharmaceutical companies but it’s been clear that some are taking advantage of market conditions to enhance their bottom line with no regard to the consumer. I have proposed the following initiatives to aggressively push back on this practice:
- S977, would prohibit any person from charging excessive prices for drugs developed by publicly funded research. Under the bill, if a drug, biologic, or other health care technology approved by the federal Food and Drug Administration was developed, partially or entirely, through research and development that is directly or indirectly supported by the federal or State government, it is unlawful for any person to sell, offer to sell, or advertise for sale the drug, biologic, or technology to any purchaser in this State at a unit price that is greater than a benchmark unit price or that constitutes discriminatory pricing.
- S1590, would prohibit manufacturers and wholesale distributors of prescription drugs and biological products from excessively increasing the price of certain prescription drugs and biological products without justification. Specifically, manufacturers and wholesale distributors may not engage in price gouging in the sale of an essential off-patent or generic drug or biological product. Price gouging is defined to mean an increase in the price of a drug or biological product that: (1) is excessive and not justified by the cost of producing the drug or biological product or expanding access to the drug or biological product to promote the public health; and (2) results in consumers having no alternative but to purchase the drug or biological product at an excessive price because of the importance of the drug or biological product to their health and insufficient marketplace competition.
Market-driven policies alone are not the silver bullet to fix this issue. These policies alone do not speak to or reduce the high cost of bringing new drugs to the market. In order to preserve the innovation incentives essential to bringing these potential life-altering medicines to market the benefits for developing them. However if pricing alone is the only pathway through which returns on investment can be realized, the ongoing prescription drug affordability issue will remain.
Shifting financial incentives from paying for greater volume to those that pay for higher value is a practice being employed in many risk-sharing arrangements for hospitals and physicians. Looking at this as a pilot program with pharmaceutical manufacturers would tie rebates and discounts for expensive drugs to the outcomes observed in the patients who receive them. Simply put, purchasers would pay more for a drug when it works and less when it doesn’t. Promoting and rewarding innovation is necessary to affecting affordability for consumers. I have developed the following proposal to do just that:
- S975, establishes a three-year Medicaid demonstration project to pay for certain drugs according to outcome-based system. Under the proposal, the Department of Human Services will establish a three-year demonstration project to employ outcome-based payment systems for a limited number of prescription drugs covered under the program. The department will enter into purchasing or rebate agreements with the manufacturers of at least three different prescription drugs, which will provide that the total reimbursement paid by the State for such drugs will be based in some part on observed outcomes of the drug’s use in patients.
- S2694, permits a managed care organization (MCO) that contracts with the Division of Medical Assistance and Health Services in the Department of Human Services to provide pharmacy services under a managed care plan to persons who are eligible for Medicaid to consider a comparison of cost-effectiveness data as a factor, in addition to such other factors as clinical efficacy and safety, when placing a prescription drug on a formulary, if the MCO chooses to operate a formulary. The goal of the proposal is to encourage MCOs who offer Medicaid managed care plans to consider cost-effectiveness as one factor of many in developing formularies as a means to help contain the cost of health care in a manner permissible under federal law.
We face the twin challenge of prescription drug prices growing at such a pace that is becoming unaffordable to our health care systems and consumers alike. While what I have presented isn’t an exhaustive list of actions we can take, sitting idly by as rising costs crowd out other priorities of our personal and governmental finances is not an option. That’s my take. What’s yours?