Three states have proposed legislation, based on National Academy for State Health Policy’s model law, that penalizes drug manufacturers for hiking prescription drug prices without new clinical evidence to justify the increase.
The legislation is based on a NASHP model bill that is designed to be easy to administer and a low-cost approach. The model bill enables states to utilize an annual report published by the Institute for Economic and Clinical Review (ICER) that identifies a small number of expensive drugs with large unsupported price increases. ICER’s January 2021 report, for example, revealed that US spending on unsupported price increases for just seven drugs led to increased spending of $1.2 billion in 2019.
The model bill penalizes manufacturers for 80 percent of their drug sales from unsupported price increases in a state – representing millions in potential revenue that can be used to help reduce prescription drug costs for consumers. NASHP can work with states to estimate potential revenue from this legislation.
ICER is an independent organization that conducts methodologically rigorous research into the clinical and economic value of prescription drugs. A growing number of states is looking to ICER’s annual analysis of unsupported price increases because it is thorough and transparent. The report reflects research that would be difficult for states to replicate on their own without a large investment of time and resources.
ICER actively engages drug manufacturers in its unsupported price increase report by giving them opportunities to correct the data ICER uses in its analysis and to present alternative explanations that might justify the price increases under investigation. In some cases, engagement with manufacturers has led to removal of a drug that had been identified as having an unsupported price increase from ICER’s list. While some stakeholders have expressed concern with ICER’s use of quality adjusted life years (QALYs) in its separate analyses determining the value of specific drugs, ICER’s unsupported price increase report does not use or reference QALYs in any form.
ICER’s January 2021 report on unsupported price increases identified well-known, frequently used, and high-cost drugs, such as Humira, which is used to treat autoimmune diseases. Another drug, Enbrel, also used to treat autoimmune diseases, was reviewed by ICER after being nominated by states with drug price transparency laws. States tracking drug price increases knew that Enbrel was a problem – and ICER’s exhaustive review of the clinical evidence on Enbrel confirmed that Enbrel’s price increase was not supported by new clinical evidence. Enbrel’s unsupported price increase contributed to more than $400 million in increased spending across the United States last year.
While drug price transparency laws help states detect and report on price increases, NASHP’s Unsupported Price Increase model bill enables states go further to more aggressively discourage price increases and to recoup spending lost to manufacturers that raise their prices – not because their products are in any way improved – but because they can.
NASHP has developed a template for determining potential revenue from penalizing manufacturers for unsupported price increases and can work with states that want to estimate potential total revenue from implementing unsupported drug price penalties in their states. Please contact Jennifer Reck for more information.
*Maine lawmakers have pre-filed this bill, meaning it has been proposed but has not yet been published as a legislative document by the Maine’s Revisor of Statutes.