House Committee on Business and Labor
Montana House of Representatives
Helena, Montana  59620-0400

Dear Representative,

On March 24, you will have a hearing on H.B. 628, an act requiring reporting of pricing factors for certain prescription drugs and negotiating tools of pharmacy benefit managers (PBMs).  While the likely purpose of the bill is to provide transparency in prescription drug pricing that supposedly will lead to lower costs and more access, it will do neither.  If H.B. 628 is enacted into law, costs will increase and access will be restricted for patients, employers, and taxpayers.  On behalf of the 9,484 Council for Citizens Against Government Waste (CCAGW) members and supporters in Montana, we ask that you reject this ill-advised legislation.

The bill would require a pharmaceutical manufacturer that sells a prescription drug in the state of Montana, and whose wholesale acquisition cost (WAC) increases by more than triple the increase in the consumer price index for medical care commodities in the previous year, to provide to the Commissioner of Insurance information that contributed to the increased cost of the drug.  This information includes, but is not limited to, the factors that contributed to the price increase, the percentage of the increased cost attributable to each factor, and an explanation of the role each factor had in contributing to the cost of the drug.

The bill would also require any PBM that operates in Montana, and processes the aforementioned drugs, to provide pricing information to the Commissioner of Insurance.  This includes, but is not limited to, the amount of discounts, rebates, or price concessions the PBM negotiates with a manufacturer and an insurer and whether the PBM passes along any rebates, discounts, or price concessions to a pharmacy or consumer.  If the PBM does pass along the rebates, discounts, or price concessions, the bill would require the PBM to provide to what degree the discounts are reflected in what a pharmacy or consumer ultimately pays for a drug.

In turn, the Commissioner of Insurance will provide a report to the state legislature before December 1 of each even-numbered year based on the information that has been provided. The Commissioner of Insurance is also required to provide a preliminary summary of all information received to the Children, Families, Health, and Human Services Interim Committee by June 30 of each even-numbered year.

These reporting requirements are burdensome, useless fishing expeditions that will produce reams of data but do nothing to lower costs.  Instead, by meddling in the proprietary and sensitive negotiations that occur among PBMs, drug manufacturers, insurers, and pharmacies, prices will likely go up, not down.  Furthermore, pharmaceutical manufacturers and PBMs will spend more money to hire accountants and lawyers, while spending less on valuable research, developing a generic version of a branded drug, or serving their customers and patients.

The bill’s focus on WAC does not take into consideration the intense private-sector negotiations that occur among the PBMs, pharmaceutical companies, and pharmacies, which have been proven to lower drug costs.  It also ignores the value that pharmaceuticals bring to healthcare by keeping people out of the hospital and doctors’ offices, thus saving billions of dollars in other health expenditures, while enabling them to stay healthy and lead productive lives.  It ignores the benefit PBMs provide consumers, employers, labor unions, and taxpayers in saving billions of dollars in drug costs or helping patients with adherence and offering conveniences, such as mail order delivery.

And while the bill states that information provided by manufacturers and PBMs will remain confidential, the federal government and state governments have proven time and again they are incapable of honoring that commitment.

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 instead of the government meddling with drug price negotiations.  Since it takes 10 to 12 years to get a new drug through the Food and Drug Administration (FDA) approval process and costs about $2.6 billion to do so, the 21st Century Cures Act, 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, there is a backlog of more than 4,000 generic drug applications that is slowing the process of bringing more competition into the marketplace.  Members of the Montana Legislature should prod their U.S. representative 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 focuses like a laser on reducing the generic drug backlog.  That would be the most effective solution to any perceived, or imagined, problems with the price of pharmaceuticals.

Again, CCAGW urges you to oppose H.B. 628.

Tom Schatz
​President, CCAGW