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Drug Price Transparency Bill Shelved in California, Push Continues

Drugmakers won skirmishes in California and Oregon last month, but the fight against high prices for specialty drugs appears to be spreading to other states, as well as the national theater.

A bill in the California Legislature asking pharmaceutical manufacturers to explain their prices was shelved last month in the face of stiff opposition. Thought to be the first legislative attempt of its kind in the country, AB 463 — by Assembly member David Chiu (D-San Francisco) — is back on the drawing board after it became clear Chiu wouldn’t get the 10-vote minimum needed to get the bill out of the Assembly Committee on Health. Chiu plans to bring a revised version back to the Legislature in January.

A similar bill stalled in the Oregon Legislature this session.

Other drug pricing transparency bills are reportedly in the works in Pennsylvania, North Carolina and Massachusetts. And on the national front, President Obama has proposed that Medicare be allowed to negotiate prices with drugmakers, a practice expressly forbidden by current law.

In a New York Times editorial this week, the paper urges policymakers to do something about “runaway drug prices,” citing several examples of high-priced specialty drugs, such as $311,000 for a year’s supply of a drug to treat cystic fibrosis.

Pointing to industry opposition to the California bill, the editorial says “The companies complain that some of these costs are hard to quantify and that compiling the data would be burdensome. But surely the public would benefit from increased transparency that might deter the worst abuses.”

PhRMA Opposition Swift, Strong

Chiu’s bill, known as the Prescription Drug Pricing Transparency Act, would have required drugmakers to report profits and production expenses for any drug or course of treatment costing $10,000 or more. It would have asked drugmakers to divulge costs and revenue related to several steps of the drug making and selling process, including research and regulatory costs, marketing, advertising and profits.

In a letter opposing Chiu’s bill, officials at the trade group Pharmaceutical Research and Manufacturers of America, pointed out: “No other state requires such documentation. [FDA] does not ask for these numbers. Medicare and Medicaid, two of the nation’s largest drug purchasers do not seek such sensitive information. We see no compelling reason for the state of California — where much of the world’s biotechnology research and development takes place — to impose these new reporting requirements on the pharmaceutical industry.”

Priscilla VanderVeer, a PhRMA spokesperson, said her organization welcomed Chiu’s decision to hold the bill until next year.

“We’re glad that the Legislature is taking more time to review it and that some of our concerns were heard,” VanderVeer said. “We really feel that this legislation would not give an accurate or correct portrayal of the cost of providing new treatments.”

PhRMA officials said some of the data required in Chiu’s bill would be impossible to deliver and some would be proprietary.

“The bill deals only with FDA-approved drugs, but only about one in 10 drugs actually make it to market,” VanderVeer said. “How do you account for the 90% that don’t make it?”

VanderVeer said the legislation did not take into account the significant value that drugs bring to the overall cost of health care.

“These medicines bring important value for keeping people healthy, keeping them out of hospitals and other institutions and reducing the need for acute care. All these things are factors in this kind of equation and they should be accounted for,” VanderVeer said.

‘Crucial Conversation’

Chiu’s bill — as well as other state legislation and Obama’s call for giving Medicare new clout in negotiating drug prices — come on the heels of congressional investigations, lawsuits and wrangling over state budget expenditures for drugs such as Sovaldi, a hepatitis C treatment that costs about $1,000 per pill or about $84,000 for a full course of treatment.

Other high-priced drugs are coming on the market for treating cancer, heart disease, multiple sclerosis, HIV/AIDS and other diseases.

“I look forward to continuing this crucial conversation and taking the bill up again in January,” Chiu said. “The need for action will become even clearer each week, as skyrocketing specialty drug prices continue to limit the availability of lifesaving medication for people who are seriously ill and bust budgets for businesses and government alike.”

Chiu is hoping to line up support from a wide array of organizations to offset well-heeled opposition.

“This bill is bringing together a broad coalition of unlikely allies, including labor unions, business groups, consumer advocates and health plans — all of whom will continue to work together in the months ahead to lift the veil on drug costs,” Chiu said.

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