New drug price transparency bill aimed at pharma ‘price gouging’

Drug manufacturers would have to justify price increases above 10 percent, along with disclosing research and development costs, under new legislation which the sponsors admitted is only the first step in reforming the pharmaceutical industry.

Speaking at Lurie Children’s Hospital in Chicago, U.S. Sen. Dick Durbin, D-Illinois, and U.S. Rep. Jan Schakowsky, D-Illinois, blamed “out of control” drug prices for hampering efforts to move towards value-based care.

“The overnight spikes that hospitals and doctors are left holding the bag because of the decisions made by pharmaceutical companies,” Durbin said. “What has pharma done? They’ve dramatically increased drug costs year after year—not just new drugs as a result of painful and expensive research—but drugs that have been on the market for years, if not decades.”

Durbin cited the increase in the HIV/AIDS drug Daraprim from $13.50 per pill to $750 as one example. Under the legislation, the pharmaceutical company would have to provide 30 days’ notice for that kind of hike, along with a report which explains the price increase and includes the development and marketing costs and the net profit attributable to the drug.

Having to publicly report those costs is part of the reason similar drug price transparency bills have been staunchly opposed by pharmaceutical lobbyists.

“Disclosing that information is revealing very commercially sensitive information to a large population, which could frankly undermine competition and yield unintended consequences,” said Priscilla VanderVeer, deputy vice president of state communications at the Pharmaceutical Research and Manufacturers of America (PhRMA).

PhRMA and others have been successful at blocking similar efforts in state legislatures, even when the standards are looser than what Durbin and Schakowsky propose. In California, for example, the threshold for justification was raised from a 10 percent increase to a 25 percent hike, leading the sponsor to pull the bill.

While Durbin and Schakowsky acknowledge going up against the pharmaceutical lobby is no easy task, they believe public opinion is turning against the industry. Lawmakers have taken notice and have held contentious hearings involving Mylan’s increases for EpiPens, not shying away from criticizing the company even though its CEO, Heather Bresch, is the daughter of a U.S. Senator.

Schakowsky thinks it’s a sign the industry’s lobbying strength has weakened.

“For too long, the drug corporations have gotten everything they’ve wanted,” Schakowsky said. “They created a Medicare drug plan that prohibits price negotiation. There’s no transparency of drug prices and drug corporations have huge monopolies. Enough is enough.”

Schakowsky said more changes are needed, including allowing price negotiation in Medicare and limiting the length of patents on pharmaceuticals. The current bill requires drug companies report the price hikes, but doesn’t provide any way to prevent such massive increases.

“Transparency is a must,” Durbin said to HealthExec. “Is it enough? Probably not, but it moves us in the right direction.”

Hospitals and physicians may welcome any change to stem the growth in drug costs. Marcelo Malakooti, MD, a critical care physician at Lurie Children's Hospital, said he’s supporting the bill because he’s seen prices skyrocket when a new indication for an existing drug is discovered, or sometimes, for no reason at all.

“One decision we recently made was whether or not to continue to stock a medication that we use for lead poisoning, which can be a life-threatening problem for a child,” Malakooti said. “Treatment time is absolutely critical when a patient arrives with elevated blood levels (of lead). The drug cost increased from $500 to $27,000.”

Beyond the costs of the drug themselves, Marcello said hospitals have to expend “an enormously large amount” of time and resources to find less costly alternatives for treating patients, forcing physicians to “constantly change our practice” because of unpredictable price increases.