Texas - Oppose HB 2536 | Council For Citizens Against Government Waste

Texas - Oppose HB 2536

State Action

May 15, 2019

Senate Business and Commerce Committee
Sam Houston Building
201 E 14th Street
Austin, Texas  78711

Dear Senator,

It is our understanding you will soon be considering HB 2536, a drug pricing transparency bill.  This legislation would impose wasteful and unnecessary mandates on pharmaceutical manufacturers, pharmacy benefit managers (PBMs), and health benefit plans that would do nothing to lower the cost of drugs and would hurt the patients who need them the most.  The data disclosures of this legislation, much of it proprietary, would be reported to the executive commissioner at the Texas Health and Human Services agency, where it would be necessary to translate it into understandable information, so it can be posted on a website.  This will require additional state funding and resources.  On behalf of the 148,587 members of the Council for Citizens Against Government Waste (CCAGW) in Texas, I urge you to oppose HB 2536.

As reported in a July 2, 2015 Federal Trade Commission report, “Price Transparency or TMI,” forced disclosure of sensitive and proprietary information can undermine natural market forces and hinder the competition that results in innovation and lower costs.  The authors state, “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 2536 would require pharmaceutical manufacturers to report to the executive commissioner all drugs with a wholesale acquisition cost (WAC) of $100 for a 30-day supply not later than the 15th day of each calendar year.  Not later than 30 days after the effective date of an increase of 40 percent or more of the WAC of a drug for the preceding five years, or 10 percent or more of the WAC of a drug for the preceding year, a pharmaceutical manufacturer must report to the executive commissioner reams of information, such as all the factors that caused the price increase in the WAC for a particular drug, the percentage of the total increase in the WAC that is attributed to each factor, and an explanation of the role each factor played in the increase of the WAC.

There are many factors that determine the price of a drug and teasing out specifics is extremely complicated, making it difficult to comply with the requirements of HB 2536.  For example, prices could change due to shortages of certain ingredients, market demand, changes in regulations and laws, financial changes due to a fluctuating stock market, and all research must be paid for, such as for those compounds in the early development stage and those compounds that were eventually found not to be safe and effective.

The WAC is not an accurate measure of the true cost of a medicine.  Pharmaceutical companies, PBMs, insurers, and pharmacists engage in robust negotiations that lead to lower drug costs for their customers.  Instituting transparency requirements such as those advocated in HB 2536 would interfere with these negotiations, cost the stakeholders large sums of money to gather and report the information in a timely basis, and would drive up costs, not lower them.

CCAGW understands your concerns with healthcare costs and drug prices, but this transparency legislation will not lower drug costs, more competition will.  We encourage you instead to contact your U.S. congressional delegation, ask them to hold the Food and Drug Administration’s feet to the fire to make sure the backlog of generic drugs awaiting approval can be cleared and provisions provided in the 21st Century Cures Act that streamline and speed up the clinical trial and approval processes of innovative drugs are implemented.

Enacting HB 2536 would represent serious governmental overreach and would not lower the cost of medicines.  Ultimately, it would hurt patients who depend on them.  I urge you to oppose this legislation.


Tom Schatz
President, CCAGW

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