May 6, 2019

House and Senate Conference Committee
Omnibus Health and Human Services Finance Division Bill
Minnesota Legislature
95 University Avenue, West
Saint Paul, MN  55155

Dear Conferee,

You are considering House and Senate pharmaceutical transparency language in the Omnibus Health and Human Services Finance Division bill.  On behalf of the 35,499 members and supporters for the Council for Citizens Against Government Waste (CCAGW) in Minnesota, I ask that you oppose adding either the House or Senate transparency provisions in the omnibus legislation.

The Federal Trade Commission (FTC) has acknowledged that disclosure of pricing information could undermine beneficial market forces within the healthcare industry, leading to higher rather than lower prices.  A July 2, 2015 FTC policy paper, “Price Transparency or TMI,” 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.”

Both the Senate and House language pricing trigger is dependent on the wholesale acquisition cost, which 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, and those costs are covered in approved drugs.  If anything, this bill will raise drug costs because of the extra accountants, lawyers, and auditors 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.

Minnesota legislators should 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 and that the provisions of the 21st Century Cures Act that streamline and speed up the clinical trial and approval processes are being implemented.  This would be a far more effective way to help bring down the price of prescription drugs than passing either the Senate’s or the House’s harmful and counterproductive transparency language. 

Sincerely,

Tom Schatz
President, CCAGW

Click for PDF