Oregon - Oppose HB 4005 | Council For Citizens Against Government Waste

Oregon - Oppose HB 4005

State Action

February 26, 2018

Oregon State Senate
900 Court Street, NE
Salem, OR 97301

Dear Senator,

On behalf of the 32,344 members of the Council for Citizens Against Government Waste (CCAGW) in Oregon, I urge you to oppose HB 4005, the Prescription Drug Price Transparency Act.  This bill will do nothing to reduce the cost of medicine, but it will impose extraordinarily complex and expensive compliance burdens on pharmaceutical manufacturers and stifle innovation.

For example, the bill requires a manufacturer to notify the Department of Consumer and Business Services 60 days in advance if a drug’s wholesale acquisition cost (WAC) will increase by 10 percent or more.  But, the WAC is essentially a list price and does not represent what patients ultimately pay after rebates, discounts, or other price concessions.  This notification could create the potential for shortages through hoarding, as some distributors would stockpile drugs to take advantage of the situation, which will further drive up costs.  Furthermore, generic drug companies operate on very small profit margins and represent approximately 85 percent of all prescriptions in the U.S.  Their products behave more like commodities as prices fluctuate rapidly in a highly competitive marketplace.  It would be extremely arduous and costly, if not impossible, for them to produce the data required under HB 4005.

The bill requires manufacturers to report highly sensitive and proprietary data such as a manufacturer’s profit attributable to a drug and the costs incurred to market, distribute, and manufacture the drug.  Reporting research and development costs for a particular drug would be difficult to discern because many pharmaceuticals are investigated for a few years, put aside, and then researched again, while other drugs fail in clinical trials but their scientists must still be paid.

A July 2015 Federal Trade Commission (FTC) article, “Price Transparency or TMI,” points out that too much transparency can harm competition in any market, including healthcare markets.  The information is of little use to consumers or politicians but can be very beneficial to competitors.  The FTC was particularly 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 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.  Fortunately, Congress has taken steps to speed up clinical trials and the approval process, though more remains to be done.

One way to lower prices would be for Oregon 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 unnecessary and counterproductive bill.

On behalf of Oregon taxpayers, please oppose HB 4005.

Sincerely, 

Thomas Schatz

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