Nevada - Veto SB 265 | Council For Citizens Against Government Waste

Nevada - Veto SB 265

State Action

May 26, 2017

The Honorable Brian Sandoval
101 North Carson Street
Carson City, Nevada  89701

Dear Governor Sandoval,

The Nevada State Legislature has considered and passed SB 265, a bill which imposes arduous transparency and reporting requirements of diabetes pharmaceuticals that would cripple the private-sector drug pricing market in your state, drive up costs, and ultimately harm patients.  On behalf of the 13,448 supporters and members of the Council for Citizens Against Government Waste (CCAGW) in Nevada, I ask that you veto this bill.

While the price control measures were removed from SB 265 during the legislative process, the bill continues to impose extraordinarily complex and expensive price “transparency” burdens on manufacturers about pharmaceutical costs.  The bill would require manufacturers to produce information on a variety of outlays associated with a drug, such as the cost of producing the drug; manufacturing and administrative expenditures; marketing and advertising expenses; costs associated with patient financial assistance programs; costs associated with coupons provided directly to consumers and programs to pay for copayments; the current wholesale acquisition cost (WAC) and the five-year history of the WAC for a drug; the aggregate amount of all rebates that the manufacturer has provided to pharmacy benefit managers (PBMs); the profit the manufacturer has earned from the drug and the percentage of the manufacturer’s total profit attributed to the drug; plus any additional information the Nevada Department of Health and Human Services may request in order to analyze the cost of prescription diabetes drugs.

Much of the information requested is proprietary and its exposure would threaten innovation and stifle competition.  It is difficult to quantify exactly what a manufacturer spends to create a particular drug as pharmaceutical companies spend tens of millions of dollars testing different compounds, many of which end up being discarded or shelved because they do not work, or are unsafe.  Researchers still need to be paid even if a compound they are working on never makes it to human clinical trials.  Other compounds may be ultimately successful, but not for the originally intended indication and sometimes years later.

It should also be noted that the WAC does not represent the price that a consumer pays.  That cost is determined by the intense negotiations that occur among pharmaceutical manufacturers, PBMs, insurers, wholesalers, and pharmacists.  The transparency requirements required in this bill could greatly disrupt those sensitive negotiations.

I recommend you read a July 2, 2015, Federal Trade Commission commentary, “Price Transparency or TMI,” by Office of Policy Planning authors Tara Isa Koslov and Elizabeth Jex.  They wrote, “[i]s more information about prices always a good thing for consumers and competition?  Too much transparency can harm competition in any market, including in health care markets.”  The article noted that while more information can be useful for consumers to make choices among available options, it “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.”

The bill also requires a manufacturer to notify a third-party payer 90 days in advance before increasing a WAC of a diabetes drug and places burdensome regulations on pharmaceutical sales representatives that will drive up costs and interfere with their ability to educate providers on the proper use of the drugs they are disseminating.

None of these transparency requirements will lower drug costs.  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 costs.  It takes 10 to 12 years for a new drug to move through the FDA approval process and costs about $2.6 billion to do so.  The 21st Century Cures Act (P.L. 114-255), 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, Congress is currently considering reauthorization of the Generic Drug User Fee Amendments (GDUFA II).  One of the law’s primary goals is to speed up the availability of generic drugs to consumers.  Currently, with a backlog of more than 4,000 generic drug applications, the FDA has a lot of work to do.

It would be better to urge Nevada’s U.S. Representatives 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 ensure that GDUFA II will force the FDA to focus like a laser beam on reducing the generic drug backlog.  That would be the most effective solution to any concerns with the price of pharmaceuticals.

The May 25, 2017 Las Vegas Review Journal editorial got it right when it stated, “During a hearing this week on [SB 265], Assembly Republicans questioned whether it would reduce prices or help diabetics.  Their skepticism is well founded.  It would likely accomplish neither.”

On behalf of Nevada consumers and taxpayers, I urge you to veto SB 265.

Sincerely,

Thomas Schatz
President, Council for Cititzens Against Government Waste

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