Vote NO on HB 2387 - Pharmaceutical - Oregon | Council For Citizens Against Government Waste

Vote NO on HB 2387 - Pharmaceutical - Oregon

State Action

Oregon House of Representatives

900 Court St, NE

Salem, Oregon  97301


Dear Representative,

The House Committee on Health Care will soon hold a hearing on HB 2387, which would require a pharmaceutical manufacturer to reimburse payers for the cost of a prescription drug that exceeds a specified threshold.  This bill would create destructive price controls and arduous transparency requirements that would cripple the private-sector drug pricing market in Oregon, drive up costs, and ultimately harm patients.  On behalf of the more than 32,044 supporters and members of the Council for Citizens Against Government Waste (CCAGW) in Oregon, I ask that you and your colleagues oppose this bill.

Among the harmful price control measures found in HB 2387, a manufacturer would have to reimburse insurers for the difference between the average wholesale price (AWP) of a prescription drug and the capped price of the same drug sold in an Organization for Economic Co-Operation and Development (OECD) member country.  The price “savings” will not benefit consumers since the payments go directly to insurance companies, which could spend the money any way they choose.  Since the AWP is a benchmark, not a final cost, the use of this “price” ignores the lower costs of drugs that are negotiated every day among pharmaceutical companies, pharmacy benefit managers, and pharmacists.  Even worse, the cost of drugs in OECD countries are subject to strict price controls and therefore irrelevant to prices in the U.S.

HB 2387 would impose extraordinarily complex and expensive compliance burdens on manufacturers.  They would have to provide 60 days’ advance notice if a drug’s price increase will exceed 3.4 percent over a 12-month period; reveal detailed budgetary and pricing data, much of it proprietary, such as the cost of ongoing safety and effectiveness research; profit-margin targets; marketing costs; and the anticipated 10-year return on investment to justify a drug’s cost.  If the bill is enacted into law, manufacturers will be forced to hire accountants and lawyers, while spending less on valuable research or developing a generic drug.

Generic drug companies operate on very small profit margins and represent approximately 88 percent of all prescriptions in the U.S.  Their products behave more like commodities; their prices fluctuate rapidly in a highly competitive marketplace.  It would be extremely arduous and costly, if not impossible, for them to produce the reams of data required under HB 2387.  Indeed, drug companies will likely be forced to raise their prices to cover the cost of producing the information and paying potential penalties.  In other words, HB 2387 in and of itself could cause the price of drugs to increase, rather than decrease.

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 prices.  It takes 10 to 12 years to get a new drug through the Food and Drug Administration (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 will be considering reauthorization of the Generic Drug User Fee Amendments (GDUFA II) in 2017.  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.

Therefore, rather than approving HB 2387, members of the Oregon Legislature should instead prod their 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 perceived, or imagined, problems with the price of pharmaceuticals.

On behalf of Oregon consumers and taxpayers, I urge you to oppose HB 2387.


Tom Schatz

President, CCAGW


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