Last week, a California Court of Appeal lifted an injunction that prevented the state from sharing drug manufacturers’ advance notice of drug price increases. The ruling was a win for states working to advance drug price transparency in the face of manufacturers’ sometimes overly-broad claims of trade secret protection for their prices.
Absent sufficient evidence from clinical trials that proves a variety of drugs are effective against COVID-19, many states are providing guidance to limit their use and have begun monitoring them for price increases and shortages. Building on experience from states’ drug price transparency laws, policymakers now have tools to track these drug costs and identify any price spikes that may occur.
Since 2017, nine states (CA, CT, ME, NV, NH, OR, TX, VT, and WA) have passed drug pricing transparency laws that require data from manufacturers related to drug price increases and high-priced new drug launches. Officials in Oregon are building on the capacities of their drug price transparency programs to track changes in the prices of drugs identified as potential treatments for COVID-19.
Because reporting directly from manufacturers is required only once a year, Oregon is using monthly reports from Medi-Span to monitor prices of these potential treatments in the interim. If price spikes do occur, manufacturers will have to submit justifications for those price increases under states’ transparency laws. The National Academy for State Health Policy (NASHP) will soon release additional policy resources for states enabling enforcement action if price gouging is detected.
The table below provides an overview of some of the drugs currently being evaluated as potential treatments for COVID-19. (For a full list of drugs with ongoing clinical trials for COVID-19 treatment, Transparimed, a non-profit that advocates for greater disclosure of clinical trial data, has created a COVID-19 clinical trials tracker.)
|Drugs Under Evaluation for the Treatment of COVID-19|
|Remdesivir||Gilead||Antiviral||Investigational drug not yet on the market.|
|Hydroxychloroquine3||Multiple||Antimalarial, also used to treat lupus and rheumatoid arthritis||32 cents/200 mg tablet|
|Chloroquine Phosphate3||Multiple||Antimalarial||$9.84/500 mg tablet|
Common brands: Zithromax Z-Pak, AzaSite, Zithromax TRI-PAK, Zmax, and Zithromax (Used in combination with hydroxychloroquine)
|Antibiotic||$0.66/250 mg tablet|
Brand: Kaletra (Typically used in combination with ritonavir)
|HIV protease inhibitor||$8.29/200/50 mg tablet (Kaletra)|
Brand: Norvir (Typically used in combination with lopinavir)
|HIV protease inhibitor|| $1.63/100 mg tablet
$8.35/100 mg tablet (Norvir)
(Antibody to the IL-6 receptor designed to reduce lung inflammation)
|Price not available on the National Average Drug Acquisition Cost database|
- Information found in the Drugs@FDA database –https://www.accessdata.fda.gov/scripts/cder/daf/index.cfm
- Prices found in the National Average Drug Acquisition Cost (NADAC) database on Medicaid.gov – https://data.medicaid.gov/Drug-Pricing-and-Payment/NADAC-National-Average-Drug-Acquisition-Cost-/a4y5-998d
- On March 28, 2020, the FDA issued an Emergency Use Authorization (EUA) to allow hydroxychloroquine sulfate and chloroquine phosphate products donated to the Strategic National Stockpile to be distributed and prescribed by doctors to hospitalized teen and adult patients with COVID-19, as appropriate, when a clinical trial is not available or feasible.
The research group 46Brooklyn has released a tool for monitoring price changes that may also be of interest to states. Their Abnormal Drug Price Increase Tracker (ADPIT) identifies generic drugs experiencing “abnormal” price increases, measured by the National Average Drug Acquisition Cost (NADAC) database. Due to the volatility of generic drug prices, it can be challenging to determine if a generic price increase is excessively high or in line with historical data. Some price increases may result from shortages. The ADPIT seeks to capture if an increase is “abnormal” by comparing it to the previous 52 weeks of NADAC data.
States are also monitoring for potential price increases or shortages of drugs that treat respiratory complications related to COVID-19, such as albuterol inhalers. For example, some state employee health plans (SEHPs) are also closely watching changing drug prices during the COVID-19 pandemic. Plan administrators are using historical claims data to identify the previous prices paid for certain antimalarial drugs that may be used for COVID-19. SEHPs hope to use this information to gauge where prices should be for a drug in case it is determined to be an appropriate treatment. They are also making adjustments to their formularies to minimize the impact of shortages, such as for inhalers.
For additional information on states’ drug pricing transparency programs, including their authorizing statutes and current transparency reports, explore NASHP’s Center for State Rx Drug Pricing.
This report summarizes what states are learning from reporting required by prescription drug price transparency laws, which include reports on data submitted by health insurers, manufacturers, and pharmacy benefit managers (PBMs). The review period includes reports published by states through August 2019. The National Academy for State Health Policy’s Center for State Rx Drug Pricing, with support from Arnold Ventures, commissioned this analysis from experts affiliated with Mathematica.
This report summarizes what states are learning from reporting required by prescription drug price transparency laws, including reports on data submitted by health insurers, manufacturers, and pharmacy benefit managers (PBMs). The review period includes reports published by states through August 2019.
Costliest Drugs across States
Five states — California, Nevada, Maine, Oregon and Vermont — have published reports identifying specific drugs that are high cost, for which costs are rising fastest, and/or that are most frequently prescribed. In Nevada, these drugs include only those related to the treatment of diabetes. California, Maine, Oregon, and Vermont reported up to 126 prescription drugs across therapeutic uses. These states reported many of the same drugs—including five drugs used for treatment of diabetes and four drugs used for treatment of psoriasis, psoriatic arthritis, or rheumatoid arthritis.
Impact on Premiums
California, Vermont, and Oregon have reported impacts of retail prescription drug costs on insurance premiums, averaging 13 percent in California (before accounting for manufacturer rebates, which averaged 10.1 percent of insurers’ retail drug costs) in 2017, 15.67 percent of premiums in Vermont in 2018 (before accounting for rebates), and up to 18 percent of premiums in Oregon (after accounting for rebates) in 2018.
Manufacturer and PBM Reporting
Requiring both manufacturers and PBMs to report allows states to track drug pricing along the supply chain. As of August 2019, only Nevada had publicly reported information about manufacturer and PBM costs, focused on essential diabetes drugs. Nevada’s report indicates that:
- Production costs accounted for 29 percent of manufacturers’ estimated average revenue in 2018 for essential diabetes drugs after rebates. Administrative costs and profit each accounted for 25 percent. On average, manufacturers earned $42 in profits for every $100 spent on production and administrative cost for these drugs.
- Financial assistance to consumers accounted for 14 percent of the manufacturers’ estimated total revenues after rebates, although most manufacturers reported offering no financial assistance.
- Most of the rebates that PBMs in Nevada negotiated nationally for essential diabetes drugs were on behalf of private insurers and self-insured employer plans. PBMs retained 6.6 percent of all rebates, whether negotiated on behalf of private third parties or Medicaid.
The information these states have made public suggests some early lessons:
- States share concerns about the affordability of many of the same drugs. There may be substantial value in sharing information across states with similar confidentiality protections while reducing the burden of redundant reporting to multiple states.
- Understanding pricing across the entire supply chain, from the manufacturer to the consumer, is critical. Reporting that uses consistent concepts and measures can foster mutual understanding of facts among policymakers and stakeholders in a complex system.
- The agency responsible for obtaining data must have the authority and resources to follow up when the data are not complete or credible, if drug transparency laws are to help states develop a fair approach to ensuring that prescription drugs are affordable.
This report summarizes what states are learning from reporting required by prescription drug price transparency laws, including data reported by health insurers, manufacturers, and pharmacy benefit managers (PBMs). Since 2017, nine states have enacted drug price transparency legislation that requires such reporting.
Five of these states — California, Nevada, Maine, Oregon, and Vermont — have published reports identifying specific drugs that are high cost (defined by total spending), for which costs are rising fastest (defined as year over year increase), and/or that are most frequently prescribed (so represent high consumer exposure). In Nevada, these drugs include only those related to treatment of diabetes. California, Maine, Oregon, and Vermont included prescription drugs across all therapeutic classes. In Section 1, we present the drugs of interest that these states reported and look, in particular, at the 30 drugs of interest reported by at least three of these states.
In Section 2, we describe the impact of drug prices on health insurance premiums, as reported by three states, California, Oregon, and Vermont. These states have published the dollar amounts and/or the percentage of premiums attributed to retail prescription drugs — in California and Vermont, before manufacturer and other rebates and price discounts to insurers; and in Oregon, after rebates and price discounts.
In Section 3, we describe what Nevada is learning from the reporting required of manufacturers and PBMs. Currently, eight states have enacted laws requiring PBMs to report rebate amounts either for specific drugs or in the aggregate. These laws have taken effect in four states (Connecticut, Nevada, Texas, and Washington) as part of each state’s drug pricing transparency effort, but as of August 2019, only Nevada (for specified essential diabetes drugs) had made summary information public.
Reporting of High-Cost, High Cost-Growth, and Most Prescribed Drugs
California, Maine, Nevada, Oregon, and Vermont have reported drugs that account for high total cost or high cost growth, or because they are frequently prescribed, represent high consumer exposure. Maine derived its lists from analysis of the state’s all-payer claims database (APCD) system; California and Oregon relied on insurer reporting under special statutory authority; and Vermont relied on both insurer and Medicaid reporting. Nevada derived it list of drugs from analysis of a purchased database.
Table 1 lists the number of unique drug names reported in each state. California and Vermont reported the most extensive list of drugs: each reported on more than 120 unique drug names; Nevada, Maine, and Oregon each reported on approximately 50 unique drug names.
Table 1. Number of drugs listed in state public reports, by state
|Reporting state||Reference period||Number of unique drug names reported*|
*The number of unique drugs was developed by merging separate lists of drugs, if the state reported separate lists by reason for reporting and/or by insurer.
Source: Mathematica analysis of data reported in these reports: California Department of Managed Health Care (2018); Maine Health Data Organization (2018); Nevada Department of Health and Human Services (2018b); Oregon Department of Consumer and Business Services (2019); and State of Vermont Green Mountain Care Board (2019). See full references at the end of this report.
We matched drugs reported across these states by National Drug Code (NDC) and identified 128 unique NDCs that at least two states selected in common (shown in Appendix 1). The 30 drugs that at least three states selected in common are shown in Table 2.
These 30 drugs span multiple therapeutic classes, but several have similar therapeutic uses. Eight of the drugs are used for treatment of diabetes myelitis — including five drugs, Lantus Solostar, Novolog, Januvia, Metformin, and Victoza, which four of the five states reported in common.
At least three of the four states that did not focus only on essential diabetes drugs — California, Maine, Oregon, and Vermont — selected in common a number of additional drugs that clustered around treatment for asthma (Fluticasone Prop, Ventolin, Proair, and Symbicort); depression (Bupropion Hcl and Sertraline); hepatitis C (Harvoni and Epclusa); multiple sclerosis (Copaxone and Tecfidera); psoriasis, psoriatic arthritis, and/or rheumatoid arthritis (Stelara, Cosentyx, Enbrel, Humira Syringe, and Humira Pen); and a range of cardiovascular concerns (Eliquis, Xarelto, Hydrochlorothiazide, Atorvastatin).
Table 2. Drugs reported by three or more states, 2017-2018 (in alphabetic order of primary therapeutic use)
|NDC||Drug name||States||Therapeutic class||Primary therapeutic use||Reasons for reporting|
|00054327099||Fluticasone Prop||CA, ME, VT||Respiratory tract agents||Treatment of allergic and non-allergic nasal symptoms; long term management of asthma, COPD||Most frequently prescribed (CA, ME, VT)|
|00173068220||Ventolin||CA, ME, OR, VT||Autonomic drugs; respiratory tract agents||Treatment of asthma, acute bronchitis||Most costly (CA); highest cost increase (CA); most frequently prescribed (CA, ME, OR, VT)|
|59310057922||Proair||CA, ME, OR, VT||Beta-Adrenergic agents||Treatment of asthma, acute bronchitis||Most frequently prescribed (CA, ME, OR, VT)|
|00186037020||Symbicort||CA, ME, VT||Antiasthmatic and bronchodilator agents||Treatment of asthma, chronic obstructive pulmonary disease (COPD)||Most frequently prescribed (ME); most costly (ME, CA); highest price (VT)|
|00003089421||Eliquis||CA, ME, OR||Blood formation, coagulation, and thrombosis agents||Prevention of blood clots/stroke in people with atrial fibrillation.||Most frequently prescribed (ME); highest price increase (CA, ME); most costly (CA, ME)|
|50458057930||Xarelto||CA, ME, VT||Anticoagulants, coumarin type||Treatment/prevention of blood clots||Most costly (CA, ME); highest cost increase (CA, ME, VT)|
|50111078751||Azithromycin||CA, ME, OR||Antibacterials||Treatment of bronchitis; pneumonia, sexually transmitted diseases, and infections of the ears, lungs, sinuses, skin, throat, and reproductive organs.||Most frequently prescribed (CA, ME, VT)|
|45963014205||Bupropion Hcl||CA, VT, OR||Antidepressants||Treatment of depression||Most frequently prescribed (VT); most costly (CA); highest price increase (CA)|
|68180035302||Sertraline||CA, ME, OR, VT||Antidepressants||Treatment of depression, obsessive-compulsive disorder (OCD), posttraumatic stress disorder (PTSD), premenstrual dysphoric disorder (PMDD), social anxiety disorder, panic disorder||Most frequently prescribed (CA, ME, OR, VT)|
|00002771559||Basaglar (Kwikpen)||ME, NV, OR||Hormones and synthetic substitutes||Treatment of diabetes myelitis type 1 and 2||Highest price increase (ME, NV)|
|00002879959||Humalog (Kwikpen)||ME, NV, OR||Hormones and synthetic substitutes||Treatment of diabetes myelitis type 1||Most costly (CA, ME); highest price increase (CA, ME, NV); most frequently prescribed (CA)|
|00002751001||Humalog||CA, ME, NV, OR||Hormones and synthetic substitutes||Treatment of diabetes myelitis type 1||Most costly (CA, ME, OR); most frequently prescribed (CA); highest price increase (CA, ME, NV)|
|00088221905||Lantus Solostar||CA, ME, NV, VT||Hormones and synthetic substitutes||Treatment of diabetes myelitis type 1 and 2||Most costly (CA, ME); highest price (VT); Most commonly prescribed (ME, VT); highest cost increase (NV)|
|00169633910||Novolog||NV, ME, OR, VT||Hormones and synthetic substitutes||Treatment of diabetes myelitis type 1 and 2||Most costly (ME); highest price (OR, VT); highest cost increase (NV); most frequently prescribed (CA)|
|00006027731||Januvia||CA, ME, NV, VT||Blood glucose regulators||Treatment of diabetes myelitis type 2||Most costly (CA, ME); highest cost increase (CA, ME, VT); most commonly prescribed (CA)|
|Multiple NDCs||Metformin||CA, NV, OR, VT||Blood glucose regulators||Treatment of diabetes myelitis type 2||Most frequently prescribed (CA, OR); highest cost increase (NV, VT); most costly (CA)|
|00169406013||Victoza||CA. ME, NV, VT||Hormones and synthetic substitutes||Treatment of diabetes myelitis type 2||Most costly (CA, ME); highest cost increase (CA, NV); most frequently prescribed (CA); highest price (VT)|
|61958180101||Harvoni||CA, ME, VT||Anti-infective agents||Treatment of hepatitis C||Most costly (CA, ME); highest cost increase (CA); highest price (VT)|
|61958220101||Epclusa||CA, ME, OR, VT||Antivirals||Treatment of hepatitis C||Most costly (CA, ME); highest price (OR, VT); highest cost increase (CA)|
|16729018317||Hydrochlorothiazide||CA, ME, OR, VT||Diuretics||Treatment of high blood pressure, edema, kidney stones||Most frequently prescribed (CA, ME, OR, VT)|
|60505258009||Atorvastatin||CA, ME, OR, VT||Antihyperlipidemics||Treatment of high cholesterol and triglyceride levels||Most frequently prescribed (CA, ME, OR, VT); most costly (CA); highest cost increase (CA)|
|61958200201||Descovy||CA, ME, VT||Antivirals||Treatment of HIV-1||Most costly (CA); highest cost increase (CA, ME, VT); most frequently prescribed (CA)|
|68546032512||Copaxone||CA, ME, OR, VT||Miscellaneous therapeutic agents||Treatment of multiple sclerosis||Most costly (CA, ME); highest cost increase (CA); highest price (OR, VT)|
|64406000602||Tecfidera||CA, ME, OR, VT||Psychotherapeutic and neurological agents – misc.||Treatment of multiple sclerosis||Most costly (CA, ME, OR); highest cost increase (CA); highest price (VT)|
|57894006103||Stelara||CA, ME, VT||Immunological agents||Treatment of plaque psoriasis, psoriatic arthritis||Most costly (CA, ME); highest cost increase (CA, ME, VT); highest price (VT); most frequently prescribed (OR)|
|Multiple NDCs||Cosentyx||CA, ME, OR, VT||Immunological agents||Treatment of plaque psoriasis, psoriatic arthritis, ankylosing spondylitis||Highest price (VT); most costly (CA); highest cost increase (CA, ME, OR); most frequently prescribed (OR)|
|58406044504||Enbrel||CA, ME, OR, VT||Miscellaneous therapeutic agents||Treatment of plaque psoriasis, psoriatic arthritis, ankylosing spondylitis, juvenile idiopathic arthritis||Most costly (ME, CA); highest cost increase (CA, OR, VT); most frequently prescribed (CA, OR); highest cost (VT)|
|00074379902||Humira (Syringe)||CA, ME, OR, VT||Gastrointestinal drugs; miscellaneous therapeutic agents||Treatment of rheumatoid arthritis, plaque psoriasis, ankylosing spondylitis, Crohn’s disease, ulcerative colitis||Most costly (CA, ME, OR); highest price (VT); highest cost increase (CA, OR, VT); most frequently prescribed (CA)|
|00074433902||Humira (Pen)||CA, ME, OR, VT||Gastrointestinal drugs; miscellaneous therapeutic agents||Treatment of rheumatoid arthritis, plaque psoriasis, ankylosing spondylitis, Crohn’s disease, ulcerative colitis||Most costly (CA, ME, OR); highest price (VT); highest cost increase (CA, OR, VT); most frequently prescribed (CA)|
|69097081412||Gabapentin||CA, ME, OR, VT||Anticonvulsants||Treatment/prevention of seizures, pain||Most frequently prescribed (CA, ME, OR, VT); highest expenditure (CA)|
Source: Mathematica analysis of drug website data and data reported in: California Department of Managed Health Care (2018); Maine Health Data Organization (2018); Nevada Department of Health and Human Services (2018b); Oregon Department of Consumer and Business Services (2019); and State of Vermont Green Mountain Care Board (2019).
Impact on Insurance Premiums
Three states — California, Oregon, and Vermont — have reported impacts of rising drug prices on insurance premiums. California reported that insurer payments for retail prescription drugs totaled $8.7 billion in 2017, accounting for 13.1 percent of health plan premiums that year. Specialty drugs accounted for a small minority of prescriptions (1.6 percent), but more than half (51.5 percent) of all insurer spending on retail prescription drugs.
Manufacturer rebates and consumer cost sharing lessened the impact of retail prescription drugs on premiums in California, compared to what it might otherwise have been. Manufacturer rebates to insurers equaled about 10.5 percent ($915 million) of the $8.7 billion insurers spent on retail prescription drugs. Among the 25 most frequently prescribed drugs (representing 42.8 percent of total spending on retail prescription drugs), health plan enrollees paid approximately 3 percent of the cost overall — ranging from 2.9 percent of the cost of specialty drugs to 56.6 percent of the cost of generics. Enrollees paid about 8.8 percent of the cost of the 25 most costly drugs (91.2 percent of total spending on retail prescription drugs) reported by insurers.
Vermont  reported that prescription drugs accounted for 15.67 percent of premium rates in 2018 (before accounting for manufacturer rebates and other price concessions). Expressed as a per member per month (PMPM) amount, that averaged $81.65 PMPM in 2018. Vermont also identified the three drugs contributing the most to premiums: Humira Pen, Harvoni, and Enbrel Sureclick. Specialty drugs as a category contributed most to premium increases, compared with generic or brand name drugs.
Oregon reported the impact of prescription drugs on premium rates PMPM in 2018 after accounting for manufacturer rebates or other price concessions to insurers. Insurers reported impacts that ranged from a low of 2.5 percent of premiums ($13 PMPM, or about $154 per member annually, for one insurer’s small-group plans) to 18 percent of premiums (about $85 PMPM, or more than or $1,000 per member annually, for two insurers’ small group plans, respectively. At the median, prescription drugs accounted for 11.9 percent of the premiums — nearly $53 PMPM in 2018, or about $635 annually.
Manufacturer and PBM Reporting
At present, five states — Nevada, Connecticut, Maine, Texas, and Washington — have enacted laws that require both manufacturers and PBMs to report annually. Manufacturers are required to report information on specified drugs. PBMs are required to report information about the rebates they have obtained from manufacturers — either in the aggregate (for all drugs) or for specified drugs. Requiring both manufacturers and PBMs to report offers the potential for states to track pricing along the supply chain for drugs of interest, if the state aligns the level of information that each must report.
The drug cost transparency reporting requirements in these states are shown in Table 3. Washington will require PBMs to report information for each covered drug—a provision that will enable the Washington Health Care Authority to track prices across the supply chain for each drug. Nevada requests PBM reporting on essential diabetes drugs (collectively), as specifically identified by the Nevada Department of Health and Human Services. Connecticut and Texas will require PBMs to report aggregate rebates obtained across all drugs from pharmaceutical manufacturers. In Maine, the Maine Health Data Organization will adopt rules specifying the data elements to be reported.
Table 3. States that require reporting by both manufacturers and PBMs*
|State||Manufacturers must report:**||PBMs must report:|
|Connecticut||· Total company level research and development costs for the most recent year||· The aggregate dollar amount for all rebates concerning drug formularies that PBM collected from pharmaceutical manufacturers, Including those that manufactured outpatient prescription drugs covered by the health carriers and are attributable to patient utilization of such drugs under the health care plan
· The aggregate dollar amount of all rebates excluding rebates received by health carriers
|Nevada||· Total administrative expenditures (including marketing and advertising costs)
· Profit earned and percentage of total profit attributable to the drug
· Total amount of financial assistance provided through patient assistance
· Cost associated with coupons
· Wholesale acquisition cost
· History of any increase over the 5 years including percentage increase, date of increase, and explanation
· Aggregate amount of all rebates provided to PBM’s
|· Total (aggregate) amount of rebates negotiated with manufacturers during the previous year
· Total amount of rebates retained by the PBM
· Total amount of rebates negotiated for purchases of drugs for use by Medicare and Medicaid recipients, and persons covered by third parties that are or are not governmental entities
|Texas||· Total company level research and development costs for the previous calendar year||· Aggregated rebates, fees, price concessions, and other payments from manufacturers
· Aggregated dollar amount of rebates, fees, price concessions from manufacturers that were (a) passed to insurers, (b) passed to enrollees at point of sale; and (c) retained by the PBM
|Washington||· Annual manufacturing costs
· Annual marketing and advertising costs
· Total research and development costs
· Total costs of clinical trials and regulation
· Total costs for acquisition of the drug
· Total financial assistance given by the manufacturer through assistance programs, rebates, and coupons
|· All discounts (total dollar amount and percentage discount) and all rebates received from manufacturers for each drug on the PBM’s formularies
· Total dollar amount of discounts and rebates that are retained by the PBM for each drug
· Actual total reimbursement amounts for each drug the PBM pays retail pharmacies after all fees
· Negotiated price health plan pays PBM for each drug
· Amount, terms, and conditions relating to copayments, reimbursement policies, etc.
· Disclosure of any ownership interest the PBM has in a pharmacy or health plan with which it conducts business
Sources: Connecticut HB 5384/Public Act 18-41(2018); Nevada Department of Health and Human Services (2018a); Texas HB 2536 (2019); and Washington HB 1224, Chapter 334 (2019).
* Maine also requires reporting from manufacturers and PBMs. The Maine Health Data Organization will adopt rules specifying the data elements to be reported.
** In addition to the items indicated, each state requires manufacturers to report reasons for price increases, if any.
As of August 2019, Nevada was the only state that had publicly reported information about manufacturer costs and the role of PBMs in the final cost of drugs to consumers that are privately insured or enrolled in Medicare or Medicare. Together with manufacturer reporting, reporting by PBMs offers a reasonably complete (if aggregated) picture of factors that contribute to essential diabetes drug costs in Nevada.
Nevada asks both manufacturers and PBMs to report pricing information for essential diabetes drugs in the aggregate and, in general, at the national level. Manufacturers report only one item specific to Nevada: rebates paid to PBMs for essential diabetes drugs in Nevada.
A summary of the information reported by manufacturers and PBMs, as shown in Nevada’s public report, is shown in Table 4. Because Nevada reported PBM-negotiated rebates for essential diabetes drugs ($1.9 billion) at the aggregate national level and manufacturer rebates only in Nevada and as the average aggregated across manufacturers, they cannot be compared. Such discrepancies make it impossible to track the supply chain for these drugs nationally or in Nevada. Nevertheless, some insights can be drawn within the information reported by manufacturers and PBMs, respectively.
Table 4. Summary of data reported by manufacturers and PBMs in Nevada for essential diabetes drugs
|Average amount per manufacturer (simple averages)||Percent of estimated average manufacturer revenue after rebates|
|Manufacturer-reported data for essential diabetes drugs|
|Estimated total revenue after rebates (national)*||$204,353,658||100.0 percent|
|Production cost||$58,934,388||28.8 percent|
|Administrative expenses||$65,548,748||32.1 percent|
|Cost of consumer financial assistance||$27,890,892||13.6 percent|
|Total provided through any patient prescription assistance program||$12,874,326||6.3 percent|
|Consumer coupons and consumer copayment assistance programs||$14,036,828||6.9 percent|
|Manufacturer cost of redeeming coupons and use of consumer copayment assistance programs||$979,738||0.5 percent|
|Aggregate rebates to PBMs in Nevada||$3,039,646||1.5 percent|
|Total amount (all PBMs)||Percent of PBMs’ total negotiated rebates|
|PBM-reported data for essential diabetes drugs (Nevada only):|
|Total rebates negotiated with manufacturers||$1,922,857,158||100.0 percent|
|Total rebates negotiated for persons covered by|
|3rd party governmental entities, not Medicare or Medicaid||$597,759,023||31.1 percent|
|3rd parties that are not governmental entities (potentially including self-insured employer plans)||$1,293,449,196||67.3 percent|
|Total rebates retained by the PBM||$126,754,864||6.6 percent|
Source: S. Jones, et al. (2019), Tables 4, 5 and 6.
*Calculated as the sum of all shown manufacturer-reported amounts excluding aggregate rebates to PBMs in Nevada.
- Manufacturer cost, profit, and consumer assistance
In 2018, average manufacturer costs and profits for essential diabetes drugs, reported at the national level, totaled nearly $204.4 million (Figure 1). Drug production costs accounted for just 29 percent of the total ($58.9 million).
Figure 1. Reported profits and production and administrative costs for essential diabetes drugs (Nevada)
Source: S. Jones, et al. (2019), Tables 4 and 5.
Manufacturers’ administrative expenditures, which may include executive compensation, accounting and legal fees, marketing, advertising, and other administrative expenses as each manufacturer deems reasonable, accounted for $65.5 million. This amount exceeded their reported average production costs (although the Nevada report indicates multiple drug manufacturers reported $0 for total administrative expenditures, and likely included all their costs for manufacturing the drug in the drug production costs).
Manufacturers reported average profits (nearly $52.0 million) — equal to 25.4 percent of the sum of production cost, administrative cost, consumer assistance, and profit — or 41.8 percent of total production and administrative cost. That is, aggregated across reporting manufacturers, manufacturers of essential diabetes drugs earned $42 in profits for every $100 they spent on production and administrative cost.
Nationally, financial assistance to consumers accounted for an estimated 13.6 percent ($27.9 million) of manufacturers’ estimated average total revenues after rebates for essential diabetes drugs. This financial assistance included patient prescription programs, coupons, or copayment assistance programs. However, more than half of the reporting manufacturers indicated that they provided no financial assistance through patient prescription assistance programs (58 percent), and also provided no rebates to PBMs or pharmacies (55 percent). By inference, the average dollar amount of financial assistance among manufacturers that provided any financial assistance (presumably the larger manufacturers) was more than twice the average across all manufacturers (including those that provided none).
- PBM negotiated and retained rebates
PBMs reported negotiating more than $1.9 billion in rebates for essential diabetes drugs for Nevadans (Table 4). Nearly this entire amount was negotiated on behalf of private third parties—predominantly private insurers and self-insured employer plans ($1.3 billion) or other nongovernmental third parties ($598 million). PBMs reported retaining 6.6 percent of all rebates that they negotiated, whether on behalf of private third parties or Medicaid.
Differences in how Nevada’s public report summarized the data obtained from manufacturers and PBMs make it impossible to develop a picture of the supply chain from the information offered—although it seems likely that Nevada has the information necessary to do this. Nevada’s report demonstrates the crucial importance of requiring manufacturers and PBMs to report information at the same level of aggregation—at the state level or nationally (but not either/or), and for the same individual drugs or narrowly specified groups of drugs—in order to build a coherent picture of the factors that contribute to high consumer cost.
This report summarizes information that five states—California, Maine, Nevada, Oregon, and Vermont—have obtained from insurers, manufacturers, and/or PBMs to achieve greater drug price transparency. Each of these states is in a relatively early stage of obtaining and understanding their data. Nevertheless, the information they have made public suggests some early lessons for states interested in obtaining meaningful reporting for drug price transparency.
- States share concerns regarding the affordability of many of the same drugs. We identified 120 drugs that concern at least two of the five states—due to high cost, fast-rising cost, and/or the frequency with which the drug is prescribed. The large number of drugs that are of concern across states indicates that there might be substantial value in sharing information across states. State efforts such as Maryland’s recently enacted Drug Affordability Review Board might initially focus on many of these same drugs. States that are developing statutory authority to require manufacturer reporting for these drugs might consider explicitly authorizing data sharing with other states that have compatible confidentiality protections—or else explore other options available in current law or regulation to reduce manufacturers’ burden of redundant reporting to multiple states.
- There is substantial value in understanding pricing across the entire supply chain, from the manufacturer to the consumer, for drugs that drive increases in health insurance premiums and consumer costs. States that design reporting templates using consistent and compatible concepts and measures, and report those measures publicly, can foster mutual understanding of facts among policymakers and stakeholders in a complex system. However, if rebates and other information are reported collectively for all drugs, it frustrates the ability of policymakers to understand impacts on costs for specific drugs. PBM reporting by manufacturer/product code (if not by NDC) is critical to understanding the supply chain for the specific drugs of interest to the states. Nevada’s PBM reporting requirement — for a list of specified NDCs—demonstrates that PBMs are able to report on specific drugs, not only on their aggregate business.
- When requiring manufacturers, PBMs, or other entities to report drug price data, it is critical that the responsible agency be given the authority and resources necessary to follow up when reported data are not complete or credible. Especially in the first years of implementation, the reporting entities may be learning how to report, and they may be reluctant to invest in getting the data right. Accurate reporting is essential for drug transparency laws to help states develop a fair approach to ensuring that prescription drugs are affordable.
References and Appendix
Arkansas SB 520/Act No. 994, 2019. Available at: http://www.arkleg.state.ar.us/assembly/2019/2019R/Acts/Act994.pdf. Accessed August 1, 2019.
California Department of Managed Health Care. “Prescription Drug Cost Transparency Report (SB 17): Measurement Year 2017.” Sacramento, CA: Department of Managed Health Care, December 2018. Available at https://www.dmhc.ca.gov/Portals/0/Docs/DO/sb17.pdf. Accessed July 31, 2019.
California Office of Statewide Health Planning and Development. “Cost Transparency: Prescription Drugs (CTRx),” 2019. Available at https://oshpd.ca.gov/data-and-reports/cost-transparency/rx/. Accessed July 31, 2019.
State of Connecticut, Substitute House Bill No. 5384/Public Act No. 18-41. Available at https://www.cga.ct.gov/2018/ACT/pa/pdf/2018PA-00041-R00HB-05384-PA.pdf. Accessed July 31, 2019.
Iowa SF 563, 2019. Available at: https://www.legis.iowa.gov/legislation/BillBook?ga= 88&ba=SF percent20563. Accessed August 1, 2019.
Louisiana SB 283/Act No. 371, 2018. Available at: https://legiscan.com/LA/text/SB283/id/1799999/Louisiana-2018-SB283-Chaptered.pdf. Accessed August 1, 2019.
Maine Health Data Organization. “MHDO Prescription Drug Reports,” June 2018. Available at https://mhdo.maine.gov/tableau/prescriptionReports.cshtml. Accessed July 31, 2019.
Minnesota SF 278, 2019. Available at: https://www.revisor.mn.gov/bills/bill.php?b=senate&f=SF0278&ssn=0&y=2019. Accessed August 1, 2019.
Nevada Department of Health and Human Services, SB539 Reporting Timeline v08.10.2018, August 10, 2018a. Available at: http://dhhs.nv.gov/uploadedFiles/dhhsnvgov/content/HCPWD/SB539 percent20Drug percent20Transparency percent20Reporting percent20Timeline_v08.10.2018_website.pdf. Accessed July 31, 2019.
Nevada Department of Health and Human Services. “Essential Diabetes Drugs Price Increase Report.” Carson City, NV: Division of Public and Behavioral Health, Primary Care Office. September 2018. Available at http://dhhs.nv.gov/uploadedFiles/dhhsnvgov/content/HCPWD/09.11.2018 percent20Nevada percent20Essential percent20Diabetes percent20Drugs percent20Price percent20Increase percent20Report_Final.pdf. Accessed July 31. 2019.
Jones, S., P. Thompson, J. Tucker, H. Mitchell, T. McKnight, H. Wallace, and K. Devine. “Drug Transparency Report 2019 Essential Diabetes Drugs” Carson City, NV: Nevada Department of Health and Human Services, Division of Public and Behavioral Health, May 2019. Available at http://dhhs.nv.gov/uploadedFiles/dhhsnvgov/content/HCPWD/DHHS percent202019 percent20Drug percent20Transparency percent20Report percent205-31-2019(1).pdf. Accessed July 31, 2019.
Oregon Department of Consumer and Business Services. “Insurer Reports on Prescription Drugs Drug Price Transparency Program,” 2019. Available at https://dfr.oregon.gov/drugtransparency/data/Documents/insurer-reports-rx-drugs-2019.pdf. Accessed October 16, 2019.
Texas HB 2536, 86th Legislature, 2019-2020. Available at: https://legiscan.com/TX/text/HB2536/id/2027782/Texas-2019-HB2536-Enrolled.html. Accessed July 31, 2019.
Office of the Vermont Attorney General. “Prescription Drug Cost Transparency-Manufacturer and Health Insurer Annual Reporting” (undated). https://ago.vermont.gov/drug-price-transparency-manufacturer-and-health-insurer-annual-reporting/. Accessed July 31, 2019.
State of Vermont Green Mountain Care Board. “Impact of Prescription Drug Costs on Health Insurance Premiums.” Montpelier, VT: State of Vermont Green Mountain Care Board, January 2019. Available at https://legislature.vermont.gov/assets/Legislative-Reports/Act-193-Report-Impact-of-Prescription-Drug-Costs-on-Health-Insurance-Premiums.pdf. Accessed July 31, 2019.
Washington HB 1224/Chapter 334, 2019. Available at: http://lawfilesext.leg.wa.gov/biennium/2019-20/Pdf/Bills/House percent20Passed percent20Legislature/1224-S2.PL.pdf
Appendix 1: Drugs reported by two or more states: California, Maine, Nevada, Oregon, and Vermont
|00173069600||Advair (Diskus)||CA, ME||Respiratory Tract Agents|
|Multiple NDCs||Amlodipine Besylate||CA, OR||Antihypertensives|
|Multiple NDCs||Amoxicillin||CA, OR||Antibacterials|
|60505258009||Atorvastatin||CA, ME, OR, VT,||Antihyperlipidemics|
|60505257909||Atorvastatin||CA, OR, VT,||Antihyperlipidemics|
|50111078751||Azithromycin||CA, ME, OR||Antibacterials|
|00002771559||Basaglar (Kwikpen)||ME, NV, OR||Hormones and Synthetic Substitutes|
|00173085910||Breo Ellipta||CA, ME||Respiratory Tract Agents|
|45963014205||Bupropion Hcl||CA, OR, VT,||Antidepressants|
|10370010150||Bupropion Hcl||CA, OR, VT,||Antidepressants|
|00069046903||Chantix||CA, VT||Antidotes, Deterrents, and Toxicological Agents|
|00069047103||Chantix||CA, VT||Antidotes, Deterrents, and Toxicological Agents|
|68546032512||Copaxone||CA, ME, OR, VT,||Miscellaneous Therapeutic Agents; Miscellaneous Therapeutic Agents (Platelet-Aggregation Inhibitors)|
|Cosentyx||CA, ME, OR, VT,||Immunological Agents|
|61958200201||Descovy||CA, ME, VT||Antivirals|
|00024591401||Dupixent||ME, OR||Immunological Agents|
|00003089421||Eliquis||CA, ME, OR||Blood Formation, Coagulation, and Thrombosis Agents|
|58406044504||Enbrel||CA, ,ME, ,OR, VT||Miscellaneous Therapeutic Agents; Miscellaneous Therapeutic Agents (Platelet-Aggregation Inhibitors)|
|61958220101||Epclusa||CA, ME, OR, VT,||Antivirals|
|Multiple NDCs||Fluoxetine||CA, OR||Antidepressants|
|00054327099||Fluticasone Prop||CA, ME, VT||Respiratory Tract Agents|
|60505082901||Fluticasone Prop||CA, VT||Respiratory Tract Agents|
|69097081412||Gabapentin||CA, ME, OR, VT,||Anticonvulsants|
|00078060715||Gilenya||CA, VT||Immunological Agents|
|68084011201||Glipizide ER||CA, NV||Blood Glucose Regulators|
|68084029521||Glipizide ER||CA, NV||Blood Glucose Regulators|
|68084011101||Glipizide ER||CA, NV||Blood Glucose Regulators|
|61958180101||Harvoni||CA, ME, VT||Anti-infective Agents|
|00002879959||Humalog (Kwikpen)||ME, NV, OR||Hormones and Synthetic Substitutes|
|00002751001||Humalog||CA, ME, OR||Hormones and Synthetic Substitutes|
|00074433902||Humira (Pen)||CA, ME, OR, VT,||Gastrointestinal Drugs; Miscellaneous Therapeutic Agents; Miscellaneous Therapeutic Agents (Platelet-Aggregation Inhibitors)|
|00074379902||Humira (Syringe)||CA, ME, OR, VT,||Gastrointestinal Drugs; Miscellaneous Therapeutic Agents; Miscellaneous Therapeutic Agents (Platelet-Aggregation Inhibitors)|
|00002880559||Humulin N||CA, NV||Blood Glucose Regulators|
|00002831501||Humulin N||CA, NV||Blood Glucose Regulators|
|00002831517||Humulin N||CA, NV||Blood Glucose Regulators|
|00002821501||Humulin R||CA, NV||Blood Glucose Regulators|
|00002821517||Humulin R||CA, NV||Blood Glucose Regulators|
|00002882427||Humulin R U-500 KwikPen||CA, NV||Blood Glucose Regulators|
|00002850101||Humulin R U-500||CA, NV||Blood Glucose Regulators|
|16729018317||Hydrochlorothiazide||CA, ME, OR, VT,||Diuretics|
|00406012301||Hydrocodone/Acetaminophen||ME, OR, VT,||Analgesics – Opioid|
|50458014030||Invokana||CA, NV||Blood Glucose Regulators|
|50458014090||Invokana||CA, NV||Blood Glucose Regulators|
|50458014130||Invokana||CA, NV||Blood Glucose Regulators|
|50458014190||Invokana||CA, NV||Blood Glucose Regulators|
|00006057761||Janumet||CA, NV||Blood Glucose Regulators|
|00006057762||Janumet||CA, NV||Blood Glucose Regulators|
|00006057782||Janumet||CA, NV||Blood Glucose Regulators|
|00006057561||Janumet||CA, NV||Blood Glucose Regulators|
|00006057562||Janumet||CA, NV||Blood Glucose Regulators|
|00006057582||Janumet||CA, NV||Blood Glucose Regulators|
|00006027731||Januvia||CA, ME, NV, VT||Blood Glucose Regulators|
|00006011254||Januvia||CA, NV||Blood Glucose Regulators|
|00006027733||Januvia||CA, NV||Blood Glucose Regulators|
|00006027754||Januvia||CA, NV||Blood Glucose Regulators|
|00006027782||Januvia||CA, NV||Blood Glucose Regulators|
|00006022128||Januvia||CA, NV||Blood Glucose Regulators|
|00006022131||Januvia||CA, NV||Blood Glucose Regulators|
|00006022154||Januvia||CA, NV||Blood Glucose Regulators|
|00006011228||Januvia||CA, NV||Blood Glucose Regulators|
|00006011231||Januvia||CA, NV||Blood Glucose Regulators|
|00006027702||Januvia||CA, NV||Blood Glucose Regulators|
|00006027728||Januvia||CA, NV||Blood Glucose Regulators|
|00597015230||Jardiance||CA, NV||Blood Glucose Regulators|
|00597015237||Jardiance||CA, NV||Blood Glucose Regulators|
|00597015290||Jardiance||CA, NV||Blood Glucose Regulators|
|00597015330||Jardiance||CA, NV||Blood Glucose Regulators|
|00597015337||Jardiance||CA, NV||Blood Glucose Regulators|
|00597015390||Jardiance||CA, NV||Blood Glucose Regulators|
|00088222033||Lantus||ME, NV||Hormones and Synthetic Substitutes|
|00088221905||Lantus Solostar||CA, ME, NV, VT||Hormones and Synthetic Substitutes|
|00169643810||Levemir||ME, NV||Hormones and Synthetic Substitutes|
|00378180310||Levothyroxine Sodium||,CA, OR, VT||Hormonal Agents – Thyroid|
|00185060501||Lisinopril||CA, ,OR, VT||Antihypertensives|
|68180098103||Lisinopril||CA, ME, OR||Antihypertensives|
|65862020390||Losartan Potassium||CA, ,OR, VT||Antihypertensives|
|00071101668||Lyrica||CA, VT||Neuropathic Pain|
|60687014301||Metformin HCL||CA, NV||Blood Glucose Regulators|
|49483062350||Metformin Hcl Er||CA, VT||Blood Glucose Regulators|
|62037083101||Metoprolol Succinate Er||CA, ,OR, VT||Beta Blockers|
|Multiple NDCs||Montelukast Sodium||CA, OR||Respiratory Tract Agents, Asthma|
|55513019001||Neulasta||OR, VT||Blood products and modifiers (Anti-infective for chemotherapy)|
|00169633910||Novolog||ME, NV, OR, VT,||Hormones and Synthetic Substitutes|
|00052027303||Nuvaring||CA, VT||Contraceptives, Intravaginal, Systemic|
|61958210101||Odefsey||CA, OR||Antivirals (HIV Treatment)|
|55111015810||Omeprazole||ME, ,OR, VT||Gastrointestinal Drugs|
|53885024510||Onetouch Ultra Test Strip||CA, VT||Blood Sugar Diagnostics|
|Non-matching NDCs||Orkambi||ME, VT||Respiratory Agents – Misc.|
|59310057922||Proair||CA, ME, OR, VT,||Beta-Adrenergic Agents|
|00023530105||Restasis (Multidose)||CA, ME||Eye, Ear, Nose, and Throat (EENT) Preparations|
|59572041028||Revlimid||CA, ME, OR||Antineoplastics|
|59572041000||Revlimid||CA, ME, OR||Antineoplastics|
|68180035302||Sertraline||CA, ME, OR, VT,||Antidepressants|
|69097083502||Sertraline||CA, VT, OR||Antidepressants|
|65862001305||Sertraline||CA, VT, OR||Antidepressants|
|Non-matching NDCs||Spiriva (Respimat/Handihaler)||ME, VT||Autonomic Drugs; Respiratory Tract Agents|
|12496120803||Suboxone||ME, VT||Central Nervous System Agents; Miscellaneous Therapeutic Agents; Miscellaneous Therapeutic Agents (Platelet-Aggregation Inhibitors)|
|52268001201||Suprep Bowel Prep Kit||CA, OR||Gastrointestinal Agents (Colonoscopy prep)|
|57894006103||Stelara||CA, ME, OR, VT,||Immunological Agents|
|00186037020||Symbicort||CA, ME, VT||Antiasthmatic And Bronchodilator Agents|
|64406000602||Tecfidera||CA, ME, OR, VT,||Psychotherapeutic And Neurological Agents – Misc.|
|49702022813||Tivicay||CA, VT||Antivirals, Hiv-Spec, Non-Peptidic Protease Inhib|
|00597014030||Tradjenta||CA, NV||Blood Glucose Regulators|
|00597014061||Tradjenta||CA, NV||Blood Glucose Regulators|
|00597014090||Tradjenta||CA, NV||Blood Glucose Regulators|
|50111043301||Trazodone||ME, OR, VT,||Antidepressants|
|00169255013||Tresiba (Flextouch)||ME, NV||Hormones and Synthetic Substitutes|
|49702023113||Triumeq||CA, OR, VT,||Antivirals|
|Non-matching NDCs||Trulicity||ME, NV||Hormones and Synthetic Substitutes|
|61958070101||Truvada||CA, OR||HIV Treatment|
|61958070301||Truvada||CA, OR||HIV Treatment|
|00173068220||Ventolin||CA, ME, OR, VT,||Autonomic Drugs; Respiratory Tract Agents|
|00169406013||Victoza (3-Pak)||ME, NV, VT||Hormones and Synthetic Substitutes|
|50458057930||Xarelto||CA, ME, VT||Anticoagulants,Coumarin Type|
|54092060601||Xiidra||CA, VT||Opthalmic Agents|
|Non-matching NDCs||Metformin||CA, NV, OR, VT,||Blood Glucose Regulators|
Source: Mathematica analysis of data reported in: California Department of Managed Health Care (2018); Maine Health Data Organization (2018); Nevada Department of Health and Human Services (2018b); Oregon Department of Consumer and Business Services (2019); and State of Vermont Green Mountain Care Board (2019).
 These states are California, Connecticut, Maine, New Hampshire, Nevada, Oregon, Washington, Texas, and Vermont. See: National Academy for State Health Policy Center for State Rx Pricing, Newly Enacted Laws at https://www.nashp.org/new-laws/, accessed August 8, 2019.
 See: California Office of Statewide Health Planning and Development (2018), Nevada Department of Health and Human Services (2018b), Maine Health Data Organization (2018), and State of Vermont Green Mountain Care Board (2019).
 See: California Department of Managed Health Care (December 2019).
 See: Vermont Green Mountain Care Board (January 2019).
 See: Oregon Department of Consumer and Business Services (2019).
 Washington defines a covered drug as one that “is currently on the market, is manufactured by a covered manufacturer, and has a wholesale acquisition cost of more than one hundred dollars for a course of treatment lasting less than one month or a thirty-day supply, and … the manufacturer increases the wholesale acquisition cost at least …  percent, including the proposed increase and the cumulative increase over one calendar year prior to the date of the proposed increase [or]  percent, including the proposed increase and the cumulative increase over three calendar years prior to the date of the proposed increase.” See: Washington HB 1224/Chapter 334 (2019), Section 2.
 A number of other states recently passed (but have not yet enacted) legislation that would require PBM reporting. Such states include Arkansas, Iowa, Louisiana, and Minnesota. These states variously would require PBM reporting of total rebates (all states); rebates retained by the PBM (Minnesota—like Nevada, Texas, and Washington); rebates the PBM did (or did not) pass through to insurers (Arkansas, Iowa, Louisiana, and Minnesota—like Connecticut and Texas); rebates passed through to enrollees at point of sale (Arkansas—like Texas); the amount paid for pharmacy services (Arkansas—like Washington); administrative fees received by the PBM (Iowa and Louisiana); and the highest, lowest, and mean aggregate retained rebate percentage (Iowa, Louisiana, and Minnesota). See: Arkansas SB 520/Act No. 994 (2019); Iowa SF 563 (2019), Louisiana SB 283/Act No. 371 (2018); and Minnesota SF 278/Session Law Chapter 39 (2019).
 Nevada’s report notes that the variation among manufacturers (and potentially among drugs produced by the same manufacturer) is significant: a simple unweighted average per manufacturer, then calculated across manufacturers, produced an average profit of 152 percent of the sum of production and administrative cost—that is, for every dollar spent on combined production and administrative costs, the manufacturers earned, on average, $1.52 in profit. The report states that larger manufacturers (with lower profit rates) tend to reduce the aggregate profit ratio, as calculated in Figure 1.
 Built on the National Academy for State Health Policy’s model legislation, Maryland’s Prescription Drug Affordability Board is an independent body with the authority to review high-cost prescription drugs and identify fair, appropriate rates for Marylanders to pay.
 To obtain consistent information from all reporting entities, NASHP’s model legislation and reporting templates call for reporting at the NDC level, and they align national and state-level reporting to support a coherent picture of pricing along the supply chain for each drug. See: https://www.nashp.org/policy/prescription-drug-pricing/model-legislation/#toggle-id-1, accessed August 9, 2019.
Acknowledgements: The National Academy for State Healthy Policy’s Center for State Rx Drug Pricing, with support from Arnold Ventures, commissioned this analysis from experts affiliated with Mathematica Policy Research.
The same drugs that appear on state transparency reports identifying costly drugs also appear in an independent research institute’s report on drugs whose rapidly rising prices were not supported by new clinical evidence on the drugs’ safety or efficacy.
The Institute for Clinical and Economic Review (ICER), an independent research organization that objectively evaluates prescription drugs and other health care services, released its first annual report on unsupported drug price increases in October. All of the drugs ICER identified with unfounded price hikes also appear on states’ lists of their costliest drugs and/or lists of drugs causing the highest cost growth in states. According to ICER, unsupported price increases have cost the nation $5.1 billion over the last two years.
California, Maine, Oregon, and Vermont have reported data from public and private payers regarding their drug spending as required by state transparency laws. These reports include “top 25” lists of drugs that account for:
- The highest total costs (based on price and utilization), and
- The highest growth in costs over the past year.
Many of the same drugs made appearances in “top 25” lists across states (see Table 1).
Table 1: Drugs appearing on “top 25” lists in three or more reporting states.
|Condition||Highest Total Cost or Highest Cost Growth Drugs Across States|
|Diabetes||Lantus Solar, Novolog, Januvia, Metformin, Victoza|
|Arthritis||Stelara, Cosentyx, Enbrel, Humira (Syringe and Pen)|
|Hepatitis C||Harvoni, Epclusa|
|Multiple Sclerosis||Copaxone, Tecfidera|
The National Academy for State Health Policy (NASHP) compared the high-cost drugs reported by these states with ICER’s report on drugs with unsupported price increases. The table below lists drugs that are posing affordability challenges across states and that also appeared on ICER’s “unsupported price increase” report.
Table 2: Drugs with unsupported price increases that are creating affordability challenges for states.
|Drugs with Unsupported Price Increases*||Condition||Among Top 25
Highest Total Cost Drugs in:
|Among Top 25
Highest Total Cost Growth Drugs in:
|Humira||Arthritis||California, Maine, Oregon, Vermont,||California, Oregon, Vermont|
|Truvada||HIV||California, Oregon||California, Oregon|
|Neulasta||Low white blood cell count||Oregon, Vermont||Oregon|
|Tecfidera||Multiple sclerosis||California, Maine, Oregon, Vermont||Oregon|
*Identified by ICER.
The ICER report raises an important question, if new clinical evidence on safety and efficacy isn’t behind rising drug prices, then what is? A new wave of tougher state transparency measures, including a 2019 Maine law, An Act To Further Expand Drug Price Transparency,
will have the ability to shine a light on net drug prices – and profits – in order to guide effective state policy responses. The new Maine law requires reporting from entities across the entire drug supply chain, including manufacturers, pharmacy benefit managers, wholesalers, and health plans.
ICER will publish its Unsupported Price Increase Report every October, offering states the opportunity to rely on an evidence-based method for evaluating information reporting from drug manufacturers.
In addition to addressing the challenges created by drug price increases, states are also facing the launch of new drugs with record-high prices. The nonprofit organization 46brooklyn, which works to improve the accessibility and usability of US drug pricing data, recently published a report, Drug Price Increases Have Slowed, but New Analysis Shows Launch Prices Pushing Costs into Orbit, that highlights this trend as well as the market dysfunction that occurs when the introduction of generic drug competition fails to create downward pressure on prices. A 44-state coalition is currently pursing legal action against manufacturers for generic price fixing.
Every state in the nation has proposed bills to limit pharmaceutical drug prices and the pace of that legislative work increases each year. The usual responses from pharmaceutical manufacturers and their allies is to threaten to reduce their investments in new drug research and development and challenge the new state laws in federal court. In their appeals, they often argue that the new state laws limit the industry’s free speech, breach patent protections, reveal trade secrets, and extend beyond state boundaries, which they claim violates the federal Dormant Commerce Clause.
As state legislators prepare for their 2020 sessions amid growing interest in addressing prescription drug prices, the National Academy for State Health Policy (NASHP) commissioned the University of California’s Hastings School of Law to develop a legal brief to help state lawmakers avoid some of the industry’s legal landmines.
The legal brief, Navigating Legal Challenges to State Efforts to Control Drug Prices: Pharmacy Benefit Manager Regulation, Anti-Price-Gouging Laws, and Price Transparency, focuses particularly on bills most commonly introduced in states – pharmacy benefit management (PBM) oversight and pricing transparency – and provides insights into anti-price-gouging proposals.
The authors, who are health policy experts and attorneys, note that laws that require PBMs to be licensed or registered with states or require pharmacy audits have historically avoided legal challenges. But today, legal challenges are increasing as states seek more accountability and propose or enact laws to prohibit spread pricing, regulate use of certain pricing lists, or require fiduciary responsibility. And, as always with state reform efforts, the Employee Retirement Income Security Act (ERISA) rears its head if laws “relate to” self-funded plans regulated by federal law. In the brief, authors Katie Gudiksen, Sammy Chang, and Jaime King suggest strategies states can consider to strengthen legislative language against legal challenge.
To date, pharmaceutical groups have challenged transparency laws in two states – Nevada and California.
- Nevada reached a settlement by limiting and defining what information could be publically disclosed and what would be held confidential.
- While California moves to implement its law, state officials are awaiting judgment on a lawsuit filed by the industry pending in US District Court in the Eastern District of California.
Industry challenges to transparency laws include alleged violations to trade secret, interstate commerce, and free speech laws. Meanwhile, states are working to thread the needle between consumers’ right to know and protecting industry information.
This new NASHP legal brief is designed to help policymakers navigate the complexity of these laws and help inform their legislative drafting. NASHP’s Center for State Rx Drug Pricing continues to support states as policymakers develop and implement policies to lower drug costs.
NASHP looks forward to its continuing collaboration with colleagues at the University of California’s Hastings College of Law as we advance this important work.
NASHP’s Center for State Rx Drug Pricing, with support from Arnold Ventures, commissioned the analysis from experts affiliated with The Source on Healthcare Price & Competition at the University of California’s Hastings College of Law.
As drug price transparency measures proliferate across states, the National Academy of State Health Policy (NASHP) has released revised model transparency legislation featuring a common data set to reduce reporter burden and yield standardized, actionable data that will be comparable across states. The data — to be reported by manufacturers, pharmacy benefit managers (PBMs), wholesalers, and insurers — will help state policymakers understand what is driving high drug prices through a comprehensive look across the entire drug supply chain.
This 2.0 version of NASHP’s model transparency bill also contains stronger penalties for failure to report. States will have the ability to audit any data submitted, and require a reporting entity to submit a corrective action plan for reporting deficiencies. If reporting entities do not provide the required data or if the data they provided is inadequate, the model bill allows states to invoke subpoena authority.
NASHP developed the model bill and common data set in collaboration with a work group of states currently implementing or considering transparency laws and Mathematica Policy Research. Last week, Maine State Sen. Eloise Vitelli introduced legislation based on NASHP’s updated model transparency legislation. The model bill is available in a streamlined formed as enabling legislation, as well in a longer, comprehensive version that includes in-depth information detailing the reporting requirements of the minimum data set. Additional information about the legislation, including reporting thresholds and data elements that must be reported, are available in this Q&A document. In coming weeks, NASHP will also publish customized reporting templates for manufacturers, PBMs, wholesalers, and insurers.
While NASHP’s model transparency bill builds off existing transparency measures, the common data set requires the collection of additional information not otherwise publically available, including specific information about past and projected costs and revenues at the individual drug level. Some of this information may be considered proprietary, and the model bill includes language to protect it while still requiring an annual report and public hearing to share and explore findings – although in a manner that does not reveal information specific to any one reporting entity. This reporting will provide states with more information to determine what drives high prices – and how to take effective action to address them.
States interested in this model legislation will have access to NASHP’s technical assistance. Please contact Jennifer Reck for more information.
The Centers for Medicare & Medicaid Services (CMS) took an important first step toward increasing the transparency of hospital finances when it required hospitals to post their charge information, effective January 2019. But, these charges are not prices paid — they are typically the starting point against which commercial payers negotiate discounts.
States with all-payer claims databases (APCDs) have an important tool that allows them to go a step further – they can analyze the differential between “charges” and “prices paid.” This is an increasingly important distinction, particularly as 90 percent of hospital marketplaces are highly concentrated. Research shows that such concentration diminishes the capacity of health plans to negotiate rates and has increased hospital costs from 20 to 40 percent without gaining improvements in efficiency or quality .
New Hampshire Comprehensive Health Care Information System’s APCD releases data that allows the comparison of the difference between what is charged by hospitals and what health plans and consumers pay. The statewide report of charges and allowed amounts for common hospital services in New Hampshire, available at the NH HealthCost website, shows how charges compare to allowed amounts. Analysis of this data, shown in the table, illustrates that the actual amount paid for a service can vary greatly from what is charged, sometimes by more than 100 percent.
|Service Category||Median Price Charged||Median Price
Allowed or Paid
|Percentage Difference between Median Price Charged and Amount Paid|
|Biopsy skin lesion||$ 189.00||$ 69.12||-173%|
|Total hip arthroplasty||$ 37,195.00||$ 20,193.17||– 84%|
|Total knee arthroplasty||$ 14,543.50||$ 5,824.55||-150%|
|Nasal endoscopy dx||$ 1,119.16||$ 437.85||-156%|
|Diagnostic colonoscopy||$ 2,553.00||$ 1,800.61||-42%|
|Fetal non-stress test||$ 369.00||$ 261.34||-41%|
|Low back disk surgery||$ 10,615.75||$ 6,559.99||-62%|
|CT head/brain w/o dye||$ 2,030.56||$ 685.86||-196%|
|Chest x-ray||$ 366.00||$ 146.95||-149%|
|X-ray exam of knee 3||$ 399.00||$ 189.53||-111%|
|MRI joint of lower extremity||$ 2,598.00||$ 1,392.21||-87%|
|Comprehensive metabolic panel||$ 86.92||$ 56.15||-55%|
|Lipid panel||$ 106.00||$ 68.44||-55%|
|Glucose blood test||$ 43.00||$ 12.44||-246%|
|Eye exam new patient||$ 264.65||$ 140.25||-89%|
|Speech/hearing therapy||$ 313.45||$ 157.70||-99%|
|Comprehensive hearing test||$ 235.00||$ 188.85||-24%|
|Cardiovascular stress test||$ 1,154.00||$ 662.88||-74%|
|Office/outpatient visit new||$ 288.50||$ 188.27||-53%|
|Emergency dept. visit||$ 2,300.00||$ 1,374.67||-67%|
Importantly, the charges and prices paid vary by procedure, hospital, and payer and the data that shows these price differences is available through APCDs. NH HealthCost and similar websites in Maine, Colorado, Massachusetts, and Washington all are valuable resources to enhance transparency by identifying the price for services and the variation of those prices within each state.
Working together, CMS and state APCDs can provide important data to fuel conversations about hospital charges and payments, and the policy issues that the data raises.
The Affordable Care Act’s amendment to section 2718(e) of the Public Health Service Act requires each hospital operating within the United States to make public a list of standard charges for items and service provided by the hospital including for diagnostic-related groups. CMS published proposed rules for FY 2015 reminding hospitals of their obligation to comply, and again for FY 2019, ultimately finalizing the rules to improve the public accessibility of charge information in a machine-readable format effective January 2019. https://s3.amazonaws.com/public-inspection.federalregister.gov/2018-16766.pdf.
Josephine Porter is director of the University of New Hampshire’s Institute for Health Policy and Price and co-chairs the All-Payer Claims Database Council (APCD Council).
Trish Riley is executive director of the National Academy for State Health Policy.
Amara Azubuike and Sandra Wolitzky are assistant attorneys general in the Massachusetts Office of the Attorney General.
A new report released in October 2018 by Massachusetts Attorney General Maura Healey finds that complicated and varied methods used to determine health care payment rates contribute to administrative cost increases and make it difficult for market participants to identify high-quality health care options.
The report identifies factors that have significant implications for the health care marketplace in Massachusetts. First, commercial health care fee-for-service payments are determined using complex and varied methods with little consistency across payers, providers, or insurance products. The report finds that hospital outpatient payment methods are particularly complex, and in many cases this complexity makes it difficult, according to the report, to “predict which hospitals are competitively priced or are likely to be a good value within any particular payer” or “assess value across payers without detailed case-specific information.” Risk contracts — where providers are rewarded if they spend below a negotiated budget to care for a population, or penalized if they spend more — are similarly complex and vary from insurer to insurer. This adds another layer of complexity on top of the fee-for-service framework that underlies alternative payment methods. This varied payment system generates administrative costs that do not appear to add value to patient care. Complexity also serves as an obstacle to price transparency for consumers, employers, policymakers and providers.
The report offers the following recommendations to address these key findings:
- Reduce complexity and explore increased standardization, where appropriate, of the methods for determining fee-for-service payments and the key terms that govern risk contracts.
- Establish real-time, service-level price transparency for employers, consumers, policymakers and providers. A simpler approach to health care payment practices would allow for new transparency initiatives that would enable purchasers and providers to compare options for specific services.
- Further study the administrative costs associated with current approaches to health care payment practices that significantly vary between insurers, insurance products, and providers.
This is the eighth cost trends report issued by the Massachusetts Attorney General’s Office. These reports aim to increase transparency around the forces and conditions that affect health care spending. Prior cost trends reports from the office have focused on inefficiencies in the distribution of health care dollars, including provider price variation unexplained by differences in quality, complexity of services, and other common measures of consumer value. Prior reports have also documented higher per capita spending on commercially insured people in more affluent communities compared to less affluent ones, despite the higher sickness burden found in less affluent communities “Health care costs are one of the highest expenses for Massachusetts families,” Attorney General Healey explained. “This report shows that there is more we can do to reduce administrative costs and make health care price comparisons easier for patients, employers and health care professionals.”
Earlier this year, Illinois state Rep. Will Guzzardi proposed an aggressive, anti-price-gouging bill that banned manufacturers from excessively hiking the costs of generic drugs sold to Illinois residents for his first foray into prescription cost control legislation. Guzzardi’s bill was one of a dozen anti-price gouging measures introduced in state legislature this year.
The bill easily passed the Illinois House, but it stalled in the Senate after a federal appeals court ruled that Maryland’s first-in-the-nation, anti-price-gouging law was unconstitutional. Like many state lawmakers working to craft innovative solutions to rein in drug costs, Guzzardi, a two-term legislator representing the Northwest Side of Chicago, is already prepping for Round 2 in the next legislative season.
Why did you choose anti-price-gouging legislation, which is a political heavyweight compared to transparency or regulating pharmacy benefit managers, for your first foray into curbing drug costs?
We had heard about Maryland’s law, which implemented anti-price-gouging safeguards, and we were interested in it. We also thought it had newsworthiness and timeliness to it because Martin Shkreli [former Turing Pharmaceutical CEO who raised one generic drug’s price 5,000 percent after buying the company] had been in the news as well as the price-gouging on EpiPens. We had also been talking about the need to keep drugs such as Narcan, used to counter-act opioid overdoses, affordable in the future. So, we reached out to Maryland state officials to explore their anti-price-gouging bill.
How was your bill different than Maryland’s?
I believe Maryland’s bill applied to drugs sold in Maryland. We added language that specified that our bill would only apply to drugs sold to Illinois residents. The distinction comes in the language in House Amendment 1, which inserts the words “that is ultimately sold in Illinois” into the definition of what drugs are covered. This language creates a nexus in Illinois, which we believe gives us a stronger case for the legality of regulation.
Who opposed the legislation?
Only the generic drug manufacturer’s association opposed it. They made red herring arguments, that the problem was not generics but brand-name drugs and that the state would lose jobs. While we’re happy to see lower-priced generics, there are still egregious cases where generic prices are hiked without manufacturers adding any value in terms of product development. Ultimately, it became a philosophical question for Republicans in the House and Senate, who viewed the legislation as Soviet-style price controls. They argued that a free market naturally guarantees the cheapest prices. But with generics, more than 50 percent of them have fewer than three manufacturers and a large number of generic manufacturers are monopolies or operate in a quasi-monopoly environments, which allows a huge opportunity for price increases and taking advantage of consumers. And, government regulates prices in all types of monopolies, including public utilities. It’s not unheard of for a state government to step in and prevent monopolies from extorting people.
Democrats were the majority party in both the House and Senate, why didn’t it pass?
It passed 65-38, mostly along party lines, in the House. Then we had a couple of things happen. The generic manufacturers’ association lobbyist had much more access and influence in the state senate, where there are fewer members. Specifically, he had very close relationships with several senators.
And then, there was the unfortunate timing of the Maryland court decision in April, just when the Senate was going to vote on it. Senators worried they would be voting on something that would end up in court.
The federal court panel in the Maryland decision ruled against the bill in ways that are indefensible. They said the Dormant Commerce Clause prevented regulation of upstream (out-of-state) transactions, but there are all kinds of regulations made at a state level that affect products sold by out-of-state manufacturers, such as state food labeling requirements or product safety and quality requirements. A lot of things we think of as normal state legislation would be considered unconstitutional under that view.
What are your plans for drug cost control legislation in the next session? [Guzzardi, a Democrat, faces no Republican opponent in the November election.]
I and my colleagues are looking into this now. This was my first year looking into prescription costs and I’ve discovered an appetite for it. I am learning that there is plenty of room for states to engage in this area, such as an insulin-for-all programs, or pharmacy benefit manager oversight laws or drug cost transparency mandates. We also need to see if it’s better to introduce several bills at once that tackle drug costs using different strategies or whether it’s better to focus on one approach. We’re also waiting to see what the federal court decides in the Maryland case, to see if we revive the anti-price-gouging bill.
I also intend to work on building a nonpartisan coalition to support this, involving AARP and other organizations. I truly believe there is a lot of pent-up demand for this.
Is outrage over drug prices gaining enough traction in Illinois that the legislation could succeed next session?
My district is a very diverse community. It’s roughly half white and half Latino, and it’s largely working-class. I think it’s hard for people to break out who the individual players are in the drug supply chain and what their responsibilities are, but they do know that drug prices are so high that they’re splitting pills, not filling prescriptions, and skipping doses. They may not know whom to blame, but they know they’re being taken advantage of.