Senate Health Care Committee

P.O. Box 40466

Olympia, Washington  98504-0466 

Dear Senator, 

The Washington House of Representatives passed HB 1541 on March 6, by a vote of 52 to 46.  This bill purportedly will address prescription drug cost transparency.  Instead, if this legislation should become law, it would create arduous transparency requirements for pharmaceutical manufacturers that would likely drive up drug costs, not lower them, and ultimately harm patients.  On behalf of the 49,024 supporters and members of the Council for Citizens Against Government Waste (CCAGW) in Washington, I ask that you and your colleagues oppose this bill. 

HB 1541 would impose expensive compliance burdens on drug manufacturers.  They would have to provide 60 days’ advance notice to the Office of Financial Management if a drug’s list price to wholesalers or direct purchasers in the United States will exceed 10 percent or $10,000, whichever is less, over a 12-month period, and if the price will exceed 25 percent or $25,000, whichever is less, over a 36-month period. 

The legislation does not take into account the fact that a drug’s list price is generally not what an insurer, pharmacy benefit manager, or druggist pays, due to intense negotiations that occur in order to provide the best value to a patient.  Thus, the bill’s transparency requirements are based on a false premise.  In addition, manufacturers are required to provide information, some of which is proprietary, such as the financial support given via assistance programs, rebates, and coupons; the length of time the drug has been on the market; pricing history over a five-year period; and any economic justification for a drug’s price increase. 

Generic drug companies operate on very small profit margins and represent approximately 88 percent of all prescriptions in the U.S.  Their products behave more like commodities as their prices fluctuate rapidly in a highly competitive marketplace.  It would be extremely arduous and costly, if not impossible, for them to produce the data required under HB 1541. 

Indeed, drug manufacturers will be forced to hire additional accountants and lawyers, while spending less on valuable research or developing a generic drug, to comply with the bill’s mandates.  A likely result could be that drug prices will increase to cover the cost of producing the information and paying the potential penalty of $1,000 per day for not complying within the limited time frame.  In other words, HB 1541 in and of itself could cause the price of drugs to increase, rather than decrease, because of the government’s interference in the private-sector drug pricing market in Washington.

The bill also requires that issuers must submit a summary analysis on prescription drug costs as compared to other healthcare costs, disaggregated by the state Medicaid program (which utilizes price controls), public employee benefits board programs, and the individual, small group, and large group markets.  Data released in 2015 by the Center for Disease Control revealed that prescription drugs constituted only 9.8 percent of all health expenditures, while hospitalization was at 32.1 percent and physician and clinical services were at 19.9 percent in 2014.  This data does not include the value of pharmaceuticals in the healthcare sector from keeping people out of hospitals and doctors’ offices. 

It is understandable that legislators, government officials, and consumers are concerned about high drug prices, but an environment that fosters competition is the better approach to lowering prices.  It takes 10 to 12 years and costs about $2.6 billion to develop a new drug, conduct clinical trials, and get through the Food and Drug Administration (FDA) approval process.  The 21st Century Cures Act (P.L. 114-255), which was signed into law on December 13, 2016, provides new methodology, such as biomarkers and real-world evidence, to speed up clinical trials and the approval process. 

In addition, Congress will be considering reauthorization of the Generic Drug User Fee Amendments (GDUFA II) in 2017.  One of the law’s primary goals is to expedite the availability of generic drugs to consumers.  Currently, with more than 4,000 pending generic drug applications, the FDA has a lot of work to do. 

Therefore, rather than approving HB 1541, members of the Washington Legislature should instead prod their U.S. representatives and senators to hold the FDA’s feet to the fire to make sure the agency quickly adopts the new methods found in the 21st Century Cures Act and to ensure that GDUFA II will force the FDA to focus like a laser beam on reducing the generic drug backlog.  That would be the most effective solution to any perceived, or imagined, problems with the price of pharmaceuticals. 

On behalf of Washington consumers and taxpayers, CCAGW urges you to oppose HB 1541.

Sincerely, 

Tom Schatz

President, CCAGW