Drug Prices: Is There a Need for Transparency?

Abstract

*Director, Drug Information Group and Prior Authorization Services, Clinical Associate Professor, Department of Pharmacy Practice, University of Illinois at Chicago College of Pharmacy, Chicago, Illinois In recent years, the rapid and significant upward trend in prescription drug prices has become a focus of national debate involving multiple actors including pharmaceutical manufacturers, insurers, health care providers, patients, and legislators. This is particularly true for “specialty” medications that are used to treat complex, chronic conditions (cancer, hepatitis C, HIV) and often require special handling and administration. In August 2015, the Kaiser Health Tracking Poll confirmed that the American public is broadly supportive of a number of actions aimed at keeping drug costs under control.1 These include allowing the federal government to negotiate with pharmaceutical manufacturers with regard to drug pricing for patients on Medicare (83%), limiting the amount companies can charge for high-cost medications for potentially chronic conditions such as hepatitis and cancer (76%), allowing patients to import cheaper medications from Canada (72%), and requiring manufacturers to disclose information to the public on how drug prices are set (86%). This last proposed action is the basis behind “prescription drug cost transparency” legislation recently introduced in various states including California, Massachusetts, New York, North Carolina, Oregon, Pennsylvania, and Texas.2-4 Some of these proposed state bills would require manufacturers of drug products with a wholesale acquisition cost of greater than or equal to $10,000 annually, or per course of treatment, to disclose specific information related to drug costs.5,6 Others would require cost information for any medication regardless of price.2 This information could include costs related to conducting clinical trials, marketing and advertising, manufacturing, regulation, research, and development and costs related to acquiring a medication, including patents and licensing. Additionally, some states would require pharmaceutical manufacturers to disclose the cumulative annual history of average wholesale price and wholesale acquisition cost increases for the drug, the total profit attributable to the drug, and the costs associated with providing financial assistance programs to patients. By far the boldest proposal is within a Massachusetts state bill that would allow the state’s Health Policy Commission to set caps on some medications.7 Unsurprisingly, pharmaceutical manufacturers and their leading trade group, the Pharmaceutical Research and Manufacturers of America (PhRMA), view these bills in a negative light. Industry argues that compiling and reporting all of the required information is onerous and complicated; that the price charged for an individual medication is not really a reflection of development costs or other costs that would be required to be reported; that some of the information that states would like to collect is proprietary, confidential, or sensitive in nature; and that these bills inappropriately and negatively focus on one aspect of increasing health care costs.2,5,7 Some industry representatives view these new bills as being political in nature since other players in the health care arena including insurers, hospitals, and health systems have a history of increasing costs to patients exorbitantly without explanation or justification. In summary, the cost of prescription drugs, especially specialty medications, has been increasing dramatically in recent years. This has led to widespread interest in how the price of these medications is determined by pharmaceutical manufacturers and the introduction of prescription drug cost transparency legislation in various states. This new legislation would require pharmaceutical manufacturers to report cost information for high-cost medications to the state in an effort to understand and justify pharmaceutical pricing and may even set price caps on some medications. Critics of this legislation state that passage and implementation would result in onerous and complicated requirements for drug manufacturers and that this type of legislation is merely political in nature given that drugs are not the only drivers of increased health care costs in the United States.