State Calls for Increased Transparency of Pharmaceutical Industry

Legislation would require manufacturers to disclose costs associated with certain drugs.

Earlier this month, the Pennsylvania House Insurance Committee held a public hearing regarding the bill HB 161, which would increase transparency among pharmaceutical companies. The bill was introduced by Pennsylvania state Assemblyman Tony DeLuca (D-Allegheny), who is the Democratic chairman of the committee.

The bill would amend The Insurance Company Law of 1921, and increase pricing transparency for prescription drugs that meet certain requirements.

According to the bill, the revised law would apply to prescription drugs with a wholesale price of $5000 or more per year or per course of treatment. Increased transparency would also be required for drugs with a wholesale price that has increased 25% or more within 1 year.

If a manufacturer is selling a drug that meets the aforementioned criteria, they must file with the Insurance Department, otherwise public and private insurers will not be able to provide coverage for the particular drug.

In the submission, the manufacturers must include costs for producing the drug, including costs associated with research and development, clinical trials, regulatory costs, materials, manufacturing, and acquisition, according to the bill. They must also provide costs funded by other entities—including predecessors or government grants—that were used for research and development.

Marketing and advertising costs would also be disclosed, which includes coupons/discounts, promotions, and payments or contributions to providers that are not connected to the manufacturers.

When the bill was introduced, DeLuca said that the pharmaceutical industry “has a direct and significant impact on the public and it continues to operate with little to no transparency,” according to a press release.

DeLuca justified the bill by mentioning recent prescription drug pricing scandals, such as EpiPen, which increased in price more than 500% over 10 years. Although the drug’s manufacturer launched a generic version of the product, rapidly increasing drug prices are of concern to Americans.

“Rising prescription drug prices are a major reason premiums in the individual health insurance market rose significantly last year. In the individual market pharmaceutical drugs rose from 13.6% of per enrollee health care claims in 2014 to 21.4% in 2015, a 57% increase,” Teresa Miller, Pennsylvania insurance commissioner, told the committee. “Per enrollee pharmaceutical costs for plans sold to our small employers and their employees rose 33% over the same period. In order to make health insurance more affordable, we need to make the care health insurance pays for more affordable, and prescription drug prices are a huge part of that.”

The newly introduced bill is a reintroduction of a previous bill that has 19 bipartisan co-sponsored, according to the press release.

The bill is likely a response to a huge spike in specialty drug spending. Since these drugs tend to be costly, compared with traditional drugs, controlling prices is important. Supporters of this bill believe that increasing manufacturer transparency will be a successful method to achieve lower drug costs, and in turn, decreased premiums.

“The Insurance Department has no direct regulatory authority over prescription drug costs,” Commissioner Miller told the committee. “We do have some authority to ensure drugs consumers need are covered and covered fairly, but there is currently no mechanism to look at the issue of cost. This legislation would be an important first step in that direction.”

Although a majority of dealings with the pharmaceutical industry has to go through the federal level, the state’s Insurance Department has worked to increase transparency by including having insurance review information on its website, and holding hearings where the public can discuss insurance rates and billings.

Miller believes that transparency is the first step to bettering the healthcare system, and understanding cost drivers behind increasing insurance premiums, such as rising prescription drug costs, can make insurance more affordable, according to the press release.

"I am looking forward to an open debate on this bill in the committee," DeLuca concluded, "And I hope to see it advance to the full House in the near future."