State takes aim at prescription drug prices

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A bill signed by Gov. Phil Scott will require more drug-pricing transparency. U.S. Air Force photo

While the possibility of importing prescriptions from Canada grabbed headlines this spring, Vermont officials have been working on other measures designed to drive down drug costs.

Gov. Phil Scott has signed S.92, which features two different approaches to the state’s prescription problem: It requires more detailed financial reporting from insurers and drug companies; and it promotes lower-priced alternatives to expensive speciality drugs called biologicals.

The statute – now labeled Act 193 – also calls for a group representing state government, pharmacies, hospitals and health care providers to “investigate and analyze” prescription pricing.

The goal, officials say, is to “identify opportunities for savings for Vermont consumers and other payers, and for increasing prescription drug price transparency at all levels of the supply chain.”

Escalating prescription drug prices are a concern at both the state and federal level, and there seems to be no end in sight despite multiple policy proposals.

The state’s largest insurer, Blue Cross and Blue Shield of Vermont, says its specialty drug costs jumped 21.2 percent in 2017 – a trend driven largely by manufacturers’ price hikes. The insurer has said prescription prices are one factor behind its proposed rate hikes for next year.

This year, the Legislature passed – and the governor signed – a bill that lays the groundwork for importing some prescription drugs from Canada in order to create “significant” savings. But that statute offers no immediate relief and is dependent on approval from the federal government, which some say is a “long shot.”

In comparison with the Canadian import issue, Act 193 didn’t garner much attention during the 2018 legislative session. But some say it could have significant impact.

The statute builds on drug-cost transparency mandates in Act 165, which was passed in 2016. At the time, legislators wrote that, “in order to contain prescription drug costs, it is essential to understand the drivers of those costs, as transparency is typically the first step toward cost containment.”

Phil Scott
Gov. Phil Scott. Photo by Elizabeth Hewitt/VTDigger

Act 193 takes several additional steps in that direction by expanding the amount and type of drug-pricing information that the state collects and reports each year. For example:

• Insurers, when filing their rate proposals with state regulators, also must disclose details about the impact of prescription drugs on premiums.

• Insurers also must provide the Green Mountain Care Board with lists of the 25 most frequently prescribed drugs; the 25 most costly drugs; and the 25 drugs with the biggest annual price increases.

The care board then will produce a “consumer-friendly report that demonstrates the overall impact of drug costs on health insurance premiums.”

• Both the Department of Vermont Health Access and major commercial insurers must create annual lists of 10 prescription drugs for which their costs have climbed significantly – either by 50 percent or more over five years or by 15 percent or more in the past year.

The state already had been collecting such data, but the addition of private insurers is new. And Nancy Hogue, the department’s pharmacy services director, said a shift in the way drug costs are calculated under Act 193 “should provide a more accurate measure of the impact of cost increases on the state.”

• The state Attorney General’s Office will work from the lists provided by the department and insurers to identify 15 drugs “on which the greatest amount of money was spent across all payers” in the past year. The attorney general then will require drug companies to justify those increases and explain “each factor that specifically caused the net cost increase.”

• Information about high-cost drugs will be released publicly via the attorney general and Green Mountain Care Board. There also will be an annual report to the Legislature.

The attorney general’s office already is producing that report for drugs purchased by the state. But under Act 193, the office will have more data to work with given the involvement of private insurers.

• Drug companies must notify the state attorney general if they are introducing a new, high-cost prescription drug. The companies will have to provide information about marketing and pricing plans as well as estimated demand.

• The statute bans so-called “gag rules” that may prohibit pharmacists from disclosing pricing information and offering lower-cost drugs. That’s also a tenet of President Donald Trump’s prescription drug plan; the president has called such rules “a total rip-off.”

Rep. Lori Houghton, D-Essex. Courtesy photo

Taken together, the new requirements in Act 193 are supposed to shed more light on a notoriously complex and opaque system. When introducing the legislation to the House in April, Rep. Lori Houghton, D-Essex, said drug costs are “about as transparent as a pool of mud.”

“Today, we have limited information about how drug prices affect insurance premium increases or what factors increase the price of a drug,” Houghton said at the time.

Another aspect of Act 193 is more obscure, but it has potential for providing greater long-term savings.

The statute tackles the issue of biologicals, which are a type of drug generally derived from a living organism. Vaccines are one example, as are drugs like Humira, used to treat inflammatory conditions like arthritis and Crohn’s disease, and Neulasta, which fights infection in cancer patients undergoing chemotherapy.

Biologicals are considered specialty drugs, and they are not cheap. In a recent press release, federal Food and Drug Administration Commissioner Scott Gottlieb said biologicals “represent some of the most clinically important, but also costliest products that patients use to promote their health.”

So Act 193 says Vermont pharmacists, when receiving a prescription for a biological, must choose “the lowest-priced interchangeable biological product” unless the prescriber or purchaser objects. An “interchangeable biological” is akin to the generic equivalent of a brand-name drug.

The statute also orders insurers to apply the same cost-sharing requirements to interchangeable biologicals as they apply to generic drugs.

There’s a lot of money at stake in making the switch to lower-cost biologicals, also known as “biosimilars”: Blue Cross and Blue Shield of Vermont estimates that it could save $7 million to $14 million per year.

The trouble is, the FDA has not yet allowed any lower-priced biologicals to be considered “interchangeable” with their higher-priced counterparts. Hogue said federal regulators consider 11 drugs to be “biosimilar,” but she said “interchangeability is a higher burden of approval a manufacturer must pursue with the FDA.”

Sara Teachout, a spokesperson for Blue Cross and Blue Shield, said there’s hope that the FDA will grant some interchangeable designations over the next several years. The biologicals language in Act 193, she said, means Vermont “will be in a good place when that happens.”

Overall, Teachout said the insurer backed the provisions of Act 193. “We’re supportive of anything that would lower drug prices,” she said.

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