In the wake of California’s drug transparency law, an analysis by state health officials on pricing trends found that drug companies raised the whole acquisition cost dramatically for many drugs.
Drug pricing transparency has long been an area of focus for consumers and policymakers, with numerous studies highlighting the inequity in drug spending across various disease states as well as a recent substantial rise in out-of-pocket costs. Even the FDA has implemented policy steps to improve drug cost transparency for generic drug applicants.
Yet, a new report from California’s Office of Statewide Health Planning and Development (OSHPD) reveals just how sharp the uptick in prescription drug pricing has actually been. The report shows that drug companies have raised the whole acquisition cost (WAC), or the list price for wholesalers without discounts or rebates, by a median of 25.8% from 2017 through the first quarter of 2019. In its initial report, the state focused its analysis on drug-pricing trends for approximately 1000 products.
“Even with the spotlight and public anger focused on prescription drug prices, this report shows that the pharmaceutical companies continue to raise prices, often without good or any justifications,” said Anthony Wright, executive director of Health Access, California’s Health Consumer Advocacy Coalition in an interview with Pharmacy Times.
Generic drugs saw the largest median increase of 37.6% during that time, while prescription drugs with a WAC of less than $10,000 had the smallest median increase at 23.3%. However, the OSHPD noted that more than 93% of the submitted reports showed a median percent increase roughly equal to the 3-year median for all reported drugs.
Specialty drugs increased slightly in price; however, due to their large WAC, their price is more substantial than others. One such example is Samarium Sm 153 lexidronam (Quadramet), a single intravenous injection indicated for patients with prostate, breast, or lung cancers that have spread to the bone, which had a cost increase of 10% and had a new listed price of $15,217.
The report further showed that generic drug prices increased dramatically. For example, the cost of a generic liquid version of Prozac rose from $9 to $69 in just the first quarter of 2019, an increase of 667%. Guanfacine, a generic medication for attention deficit hyperactivity disorder (ADHD), on the market since 2010, rose more than 200% in the first quarter of 2019 to $87 for 100, 2-milligram pills, according to a report by Kaiser Health News.
Signed by Governor Jerry Brown in October 2017, California’s transparency law, known as SB-17, requires manufacturers that have raised the price of a drug by at least 16% within the first quarter to report their price increases to prescription drug purchasers on a quarterly basis. Companies that met these standards were required to provide pricing data for the previous 5 years.
The initial bill highlighted that a “high-priced trend” in drug pricing is a “costly burden” for patients, states programs, employers, and other payers.
“The public and policymakers need greater insight that will allow us to identify strategies to ensure prices do not threaten access to life-saving treatments,” the bill analysis stated.
However, there has been recent criticism that the law has too narrow a scope when viewing the larger picture of drug transparency and unfairly points the finger at manufacturers without taking into account the impact of pharmacy benefit managers (PBMs) and other groups.
“You’re looking at a list price that, unfortunately, patients are being forced to pay, but the government and private health plans are not paying,” Priscilla VanderVeer , spokeswoman for the trade association Pharmaceutical Research and Manufacturers of America (PhRMA), said in an interview with Capital Public Radio. PhRMA recently filed a complaint for declaratory and injunctive relief against SB-17, stating that it violates the 1st amendment.
Drugmakers counter that the cost is high to produce pharmaceuticals and that more of those costs should fall on the government and health plans instead of consumers. Yet, while the California law requires that drugmakers state why they are raising prices, the reported price does not take into account insurer or PBM intervention. This means that the report may not take into consideration that the price consumers pay may actually be more than the listed cost.
“If transparency legislation only looks at one part of the pharmaceutical supply chain, without getting into the various middlemen like insurers and pharmacy benefit managers that ultimately determine what patients have to pay at the pharmacy counter, it won’t help patients access or afford their medicines,” VanderVeer said in an interview with Kaiser Health News.
California state Sen. Richard Pan (D-Sacramento), a pediatrician who chairs the Senate health committee, agrees to an extent. “Transparency also has value,” he said in an interview with Kaiser Health News. However, policymakers need more data on how much insurers and consumers are spending on prescription drugs.
Wright agreed and said that drug price transparency should be a federal priority.
“State laws to provide transparency and advance notice for drug price increases are an important tool, but more reforms are needed, especially at the federal level. We need Congress to take bigger and bolder steps to lower drug prices now so patients can get the medications they need,” Wright said.