April 9, 2019

Senate Judiciary and Public Safety Finance
and Policy Committee
Minnesota Senate Building
95 University Avenue, West
Saint Paul, MN 55155

Dear Senator,

The Senate Judiciary and Public Safety Finance and Policy Committee will soon hear SF 1098, a drug “transparency” bill. The legislation would impose extraordinarily burdensome requirements on prescription drug manufacturers and stifle innovation, while doing nothing to lower prices.  On behalf of the 35,644 members and supporters of the Council for Citizens Against Government Waste (CCAGW) in Minnesota, I urge you to oppose this wasteful and 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 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.”

SF 1098 requires a report to be filed with the commissioner of health within 60 days for every prescription drug that costs more than $100 or greater for one month of therapy or for a course of treatment lasting less than a month and has a price increase of 10 percent or more within the previous 12-month period. The report must include information like the drug’s wholesale acquisition cost for the last five years with net increase; 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; advertising costs; amount 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 name drug entering the marketplace if its list price is $500 or more for a 30-day supply or if it is a new generic drug that is priced at $200 for a 30-day supply. Also, if a drug is acquired for which the price increases by more than $100 from the price before the acquisition and after the acquisition, the purchasing manufacturer must report information such as name of the company the drug was purchased from, the year the drug was introduced and the price at introduction, and the price of the drug for the previous five years.

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.

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 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.

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,

Tom Schatz
President, CCAGW

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