April 17, 2019

Montana State Senate
State Capitol
Helena, MT 59620-1706

Dear Senator,

The Senate Public Health, Welfare, and Safety Committee wisely tabled HB 710, a pharmaceutical “transparency” bill on Monday, April 8, 2019.  It would impose extraordinarily burdensome requirements on prescription drug manufacturers and stifle innovation, while doing nothing to lower prices.  It is our understanding there will likely be a motion to bring the legislation to the floor for a vote.  On behalf of the more than 9,600 members and supporters of the Council for Citizens Against Government Waste (CCAGW) in Montana, I urge you to oppose this wasteful 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.”

HB 710 requires a report to be filed yearly to the state auditor if a drug’s wholesale acquisition cost (WAC) increases by more than 10 percent and if the prescription drug costs $100 or more for a month’s supply or course of therapy of less than a month.  The report must include such information as 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 patient assistance program, administrative and manufacturing costs, advertising costs, patent litigation costs, ongoing safety and effectiveness costs, healthcare provider detailing costs, lobbying costs, and the profit obtained from the drug.

For new drugs that enter the market, the manufacturing must provide similar information to the state auditor within 30 days or less of the drug’s launch.

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

Researchers must still be paid for the thousands of compounds that never make it out of clinical trials because they are not safe or effective and those costs are incorporated into the cost of drugs that do reach the marketplace.

This legislation is nothing but a fishing expedition that will not 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, not to mention the tens of thousands of dollars it will cost the state to aggregate the material into comprehensible and useful information.

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.  The FDA must continue to adopt the tools and processes provided in the 21st Century Cures Act to speed up clinical trials and the drug approval process. 

Another way to lower prices would be for Montana 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, particularly for drugs that have no competition even though the patent has expired.  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 HB 710.

Sincerely,

Tom Schatz
President, CCAGW

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