Minnesota - Oppose Burdensome Transparency Requirements | Council For Citizens Against Government Waste

Minnesota - Oppose Burdensome Transparency Requirements

March 25, 2019

Minnesota Senate
Minnesota Senate Building
95 University Avenue, West
Saint Paul, MN 55155

Dear Senator,

The Committee on Health and Human Services Finance and Policy will hear SF 1098, a drug “transparency” bill on Tuesday, March 26, 2019, which would impose extraordinarily burdensome requirements on prescription drug manufacturers and stifle innovation, while doing nothing to lower prices.  On behalf of the 35,625 members of the Council for Citizens Against Government Waste (CCAGW) in Minnesota, I urge you to oppose this destructive legislation.

The Federal Trade Commission (FTC) has acknowledged that disclosure of pricing information could undermine beneficial market forces within the industry, leading to higher prices – not lower ones.  A July 2, 2015 FTC policy paper stated, “But transparency is not universally good.

When it goes too far, it can actually harm competition and consumers.  Some types of information are not particularly useful to consumers but are of great interest to competitors.  We are especially concerned when information disclosures allow competitors to figure out what their rivals are charging, which dampens each competitor’s incentive to offer a low price or increases the likelihood that they can coordinate on higher prices.”

SF 1098 requires a report to be filed 60 days in advance to the commissioner of health for every prescription drug that costs more than $40 for a course of therapy and has an expected price increase of more than 10 percent for a twelve-month period or more than 16 percent in a 24-month period.  The report must include such information as the drug’s wholesale acquisition cost (WAC) for the last five years, the price of the drug at its initial launch, the factors that contributed to the price increase, the direct costs incurred by the manufacturer associated with the drug, the costs associated with the research and development of the drug, costs of any financial assistance given, administrative costs, and the profit obtained from the drug.

A manufacturer will have similar reporting requirements for a new brand drug entering the marketplace if its list price is $500 or more for a 30-day supply or if it is a generic drug that is priced at $200 for a 30-day supply.

The WAC is essentially a list price and does not account for rebates, discounts, and other price concessions given for pharmaceutical distribution.

The reams of data that will be collected, much of it proprietary, would not accurately reflect the cost paid by consumers, would be of little value, and will not lower drug costs.  For example, it could be difficult to calculate the cost to develop a particular drug.  Often, a drug is shelved because it is not effective for the indication pursued.  However, it may be researched later for another indication that is successful.  Furthermore, many drugs never make it out of clinical trials because they are not safe or effective, yet the researchers must still be paid.

This legislation is nothing but a fishing expedition that will do nothing to lower costs.  If anything, this bill will raise drug costs because of the extra accountants, lawyers, and auditor who will be needed to produce the data in a timely manner to avoid civil penalties.

The price of prescription drugs generates much media attention and controversy, and it is understandable that legislators, government officials, and consumers are expressing their concern.  But, the best approach to lowering drug prices is an environment that fosters competition and innovation.  It takes 10 to 12 years to get a new drug through the Food and Drug Administration (FDA) approval process, which costs an average of $2.6 billion.

Another way to lower prices would be for Minnesota legislators to ask their U.S. congressional delegation to continue to hold the FDA’s feet to the fire to make sure the backlog of generic drugs awaiting approval can be cleared.  This would be a far more effective way to help bring down the price of prescription drugs than passing this harmful and counterproductive bill. 

Again, I urge you to oppose SF 1098.

Sincerely,

Thomas A. Schatz

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