As prescription drug price increases greatly outpace inflation and new specialty drugs priced in the millions of dollars enter the market, several states have led the way as early adopters of drug price transparency legislation and are taking the first steps to curb costs with the help of transparent drug pricing information.
A new National Academy for State Health Policy (NASHP) report, What Are We Learning from State Reporting on Drug Pricing?, offers a cross-state analysis of drug price transparency findings through August 2019, based on reports from California, Maine, Nevada, Oregon, and Vermont. States are:
- Learning which drugs cost the most – and are the best targets for focused strategies;
- Tracking the percentage of health premiums attributed to drug spending – and identifying opportunities to leverage reporting on drug spending, such as implementing spending caps; and
- Beginning to capture information on net price – and profit – along the supply chain to inform fair and balanced policy approaches to ensure affordability.
Honing in on the Costliest Drugs to Take Action Where It Matters Most
States with transparency laws are identifying the drugs creating the greatest affordability challenges for both payers and consumers. State transparency laws require gathering data from a variety of sources, including through required reporting by public and private health plans (California, Oregon, Vermont), or through all-payer claims databases (Maine), or proprietary databases (Nevada), in order to report lists of:
- The costliest drugs in the state based on price and utilization;
- The drugs with the highest year-over-year cost growth; and
- The most commonly prescribed drugs.
A cross-state analysis of these reports identified 30 drugs that appear in common across drugs reported in three of five states. Many of the drugs reported are used for the treatment of diabetes, including Humalog, Lantus Solar, Novolog, Januvia, Metformin, and Victoza. Multiple drugs for the treatment of arthritis were also identified across states: Stelara, Cosentyx, Enbrel, and Humira.
Identifying the classes of drugs – and specific drugs within those categories – that are creating the greatest affordability challenges can help states hone in on strategies to address drug costs. For example, states working to leverage their purchasing power across agencies are seeking this type of information to guide potential approaches such as bulk purchasing or establishing single preferred drug list. State officials from Nevada have credited their transparency law, initially limited to diabetes medications and since expanded to include asthma medications, with bringing payers to the table to leverage their purchasing power through Nevada’s Silver State Scripts program.
Illuminating the Link between Rising Drug and Insurance Premium Costs
Several states (California, Vermont, and Oregon) require commercial health plans subject to state regulation to submit information on the impact of prescription drug spending on premiums rates. Results shared publicly to date include a range of prescription drug spending accounting for, on average, 13 percent in California, 15.67 percent in Vermont, and up to 18 percent of premiums in Oregon. Tracking prescription drug spending, as part of rate review or other initiatives, represents an important leverage point for states to take action on drug spending. Doing so can enable, for example, monitoring and enforcement of prescription drug spending caps. Several states, including New York, Massachusetts, and Maine, have established caps for drug spending – New York and Massachusetts have the authority to negotiate supplemental rebates to meet their caps while Maine tasks its Drug Affordability Review Board with identifying strategies to meet its voluntary cap on drug spending for public plans.
Uncovering the Factors Driving Up Prices along the Drug Supply Chain
One of the questions at the heart of drug price transparency laws is: What factors are driving high price increases and high launch prices? The only way for a state to determine the actual causes of high drug prices – and the relative profit accrued by players in the supply chain – is by requiring reporting across the entire supply chain, including manufacturers, pharmacy benefit managers (PBMs), wholesalers, and health plans. In order to be meaningful, this information must shed light on the net cost of drugs – an otherwise closely guarded secret behind a black box of secret rebate negotiations between manufacturers and PBMs.
Some of the early adopter states, while laying the foundation for future transparency efforts, enacted laws with limitations in terms of their ability to shine a light on net prices or to uncover the interplay between players in the drug supply chain. California, for example, limits manufacturer reporting to information that is already in the public domain. While Nevada did require reporting of some information considered to be trade secrets, and required reporting by both manufacturers and PBMs, the lack of alignment in reporting requirements (e.g., state versus national level) makes it difficult to “follow the money” across the supply chain.
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 fair and effective state policy solutions. The Maine law, based on NASHP’s model legislation, requires reporting by entities across the entire drug supply chain, including manufacturers, PBMs, wholesalers, and health plans.
In addition to establishing reporting requirements with the ability to produce meaningful, actionable data, states must also have the ability to enforce reporting their new requirements. Early efforts at collecting data from manufacturers have yielded imperfect compliance at best. California received data justifying price increase from only one-third of manufacturers required to report, and Nevada recently levied $17.4 million in fines on manufacturers for failure to report in that state. While non-reporters in Nevada face fines up to $5,000 a day, Maine’s new law increases that penalty to up to $30,000 a day.
Taking Action on What Transparency Reveals
As actionable information on net drug prices and profits across the supply chain becomes available, states will use the data to make informed, impactful policy decisions. Though state policymakers are challenged by a number of limits on their authority to regulate drug prices, and meaningful action at the federal level currently remains pending, states are advancing a number of policy options to address drug prices building on what transparency laws are revealing. One model is a state Drug Affordability Review Board (DARB) with the authority to review data on drugs deemed unaffordable, and if warranted, set an upper payment limit for that drug within the state. Transparency data is essential to DARBs and related efforts. Such approaches do not seek to prohibit profit along the supply chain, but to ensure that those profits are reasonably balanced with the need to preserve access to essential drugs by ensuring their affordability.
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://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://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.
As health plans prepare to submit rate filings, a new report from Oregon’s Division of Financial Regulation’s Prescription Drug Price Transparency Program illuminates just how much prescription drug prices impact insurance premiums.
To increase health care cost transparency, Oregon requires health insurance companies to report on the impact of prescription drug prices on insurance plan costs, calculated on a per member, per month basis (PMPM). Based on 2018 data, drug costs per PMPM ranged from a low of $12.81 PMPM to a high of $50.42 PMPM, representing 2.5 to 42 percent of premium rates, or a 14 percent average.
In addition to assessing drug costs’ impact on premiums, Oregon requires health plans to report on:
- The top 25 drugs responsible for the greatest increase in plan spending;
- The top 25 most costly prescription drugs; and
- The top 25 most frequently prescribed drugs.
The drugs appearing most frequently on these lists included agents to treat diabetes, HIV, hepatitis C, and autoimmune diseases. Topping the list of both most costly and contributing to the greatest increase in plan spending was Abbvie’s Humira, a biologic agent used to treat various autoimmune diseases, including rheumatoid arthritis and Crohn’s disease.
In January 2019, the National Academy for State Health Policy (NASHP) published a blog, New Tools Help States Document Rx Costs and Identify Potential Savings, about a similar state report published by Maine, which was based on an analysis of its all-payer claims database. Humira also topped Maine’s list of the top 25 costliest drugs. A report now being prepared by Mathematica for NASHP will compare similar “top 25” drug lists across states collecting this type of information, which includes Maine, Vermont, California, Nevada, and Oregon.
NASHP worked with these “early adopter” states to capture insights from their experience implementing transparency laws during the design of its model drug price transparency legislation. The model legislation includes:
- A common data set designed to align reporting across states and minimize reporting burden;
- Detailed reporting requirements across the entire supply chain; and
- Strong penalties for pharmaceutical companies that fail to report or submit insufficient reports.
Drug price transparency laws, such as Oregon’s, help states gain an accurate understanding of the factors driving pharmaceutical drug price increases and their high launch prices. The transparency also helps states gain a better understanding of precisely which drugs and types of drugs create the greatest affordability challenges for consumers and have the biggest impact on premiums.
Establishing this foundation opens up the door for states to take effective regulatory action for relief from high prices, including measures such as creating drug affordability review boards, which have the ability to set upper payment limits or spending targets on drugs, such as those established in Maryland and Maine this year. (View new state drug cost laws here.) State transparency laws are also advancing the national debate on drug pricing, highlighting the need for effective federal action.
Last week, Maine Gov. Janet Mills signed into law a comprehensive package of prescription drug cost control legislation that addresses pharmaceutical prices throughout the supply chain. The four new laws include:
- Stricter requirements on pharmacy benefit managers (PBMs);
- Updates to its drug transparency program to require more prescriptive data collection and enforcement mechanisms;
- Establishment of a drug affordability review board; and
- Support for the state to pursue a wholesale drug importation program.
By developing a comprehensive and integrated package of new laws, Maine is forging new ground in the fight against high drug prices.
Comprehensive PBM Regulation – LD 1504
Maine’s new law regulating PBMs essentially replaces opaque PBM business practices by imposing more transparent, clearly defined fiduciary relationships that include state enforcement and oversight through the health insurance carriers with whom PBMs contract.
As other states have done, the law requires PBMs to obtain a license from the Superintendent of the Bureau of Insurance. Licensure is a critical component of effective PBM regulation because it allows the state to know how many and what entities are operating as PBMs in the state. This also gives the state power to suspend or revoke a license should the PBM break the law or engage in fraudulent activity.
Maine’s new law also includes provisions that haven’t been enacted by any other state. Under the law, if health insurance carriers use PBMs to manage their prescription drug benefits, the carrier is responsible for monitoring all activities performed by its contracted PBM. By tasking carriers with PBM monitoring responsibilities, Maine is leveraging its Bureau of Insurance to enforce these provisions of the law. The law also stipulates that PBMs have a fiduciary duty to their insurance carriers when managing their prescription drug benefits and as such, carriers are empowered to hold PBMs accountable for their financial dealings.
Monitoring PBM financial practices can be challenging. For example, PBMs often use maximum allowable cost (MAC) lists that document the maximum amount a plan will pay for generics and brand-name drugs that have generic alternatives. It is standard industry practice for PBMs to use prices from one MAC list to pay a pharmacy for dispensing a drug to a consumer and then use a different MAC list’s price to bill the carrier. Using multiple MAC lists allows PBMs to practice “spread pricing” — they reimburse pharmacies using a low price from one MAC list while charging the health carrier a higher price from a different MAC list and keeping the difference. To combat this practice, Maine now mandates the use of a single MAC list that must be identified by the PBM so prices are transparent to all parties, including pharmacies and the carrier. Additionally, using a single MAC list provides more clarity to all parties about how MAC pricing is determined and updated and how PBMs select products for inclusion on a MAC list.
To lower costs for consumers, the law requires carriers to use the prescription drug rebates that PBMs negotiate to either lower health plan premiums or to reduce out-of-pocket costs for consumers when they purchase prescription drugs. Without the ability to retain a portion of the rebate, PBMs will now be paid for managing the prescription benefit directly by the carrier. Maine’s law includes provisions that explicitly classify PBM expenses as administrative costs for purposes of calculating a health plan’s anticipated loss ratio. The classification of PBM expenses as administrative rather than as a health benefit encourages carriers to monitor these costs carefully and keep them low. Under federal law, health carriers’ administrative costs are limited to 20 percent of the total amount of premiums collected from consumers.
This law requires carriers to take on a more active role in PBM oversight, provides enforcement authority within the Bureau of Insurance, and requires a fundamental change in PBM business practices to reduce prescription drug costs for consumers.
Drug Affordability Review Board and Pharmaceutical Spending Targets – LD 1449
With this new law, Maine joins the ranks of states working to leverage the purchasing clout of state purchasers. Similar to a law recently passed in Maryland, the Maine law establishes a Drug Affordability Review Board (DARB), charged with setting prescription drug spending targets for public entities including state, municipal, state university, and community college employees and teachers. Each group currently operates its own health plan. The five-member DARB, with advice from a 12-member advisory council representing public payers, will set drug spending targets and monitor how effectively public payers meet them. The law spells out a number of strategies the board can consider to help public purchasers meet their expenditure goals, including collaborating with other states and consortia to purchase drugs in bulk, restructuring formularies for public payers, procuring common expert services for public payers, and securing deeper rebates. Of particular interest, the law also allows the board to consider expanding the purchasing pool for prescription drugs and allowing carriers who cover small businesses and individuals to buy into a public payer drug benefit plan. The first report on drug spending targets is due in 2021.
While the DARB cannot compel a public purchaser to meet its target, it must report whether public purchasers have met their cost targets annually to the state Legislature, which is responsible for approving their budgets. The first report on drug spending targets is due in 2021.
Revamped Drug Transparency Requirements – LD 1162
Using NASHP’s recently released prescription drug transparency model legislation 2.0, Maine revamped its drug pricing transparency program. The law requires drug manufacturers to report to the Maine Health Data Organization (MDHO) — the state’s all-payer claims data program — when they increase the wholesale acquisition cost (WAC) of brand-name and generic drugs by certain thresholds. The law establishing the DARB, noted above, makes reference to using this data base in setting state drug spending targets.
This law also authorizes the MDHO to require pricing component data for specific prescription drugs from manufacturers, wholesale drug distributors, and PBMs and compels those entities to share that data. This bill also has more stringent enforcement mechanisms. If these entities fail to report the requested data, the state has the authority to audit data and can require a reporting entity to submit a corrective action plan for reporting deficiencies.
The NASHP transparency 2.0 model encourages states to adopt a common data set, which will reduce reporter burden and yield standardized, actionable data. The Maine bill goes beyond other states’ transparency bills because it requires reporting from each entity in the supply chain about past and projected costs and revenues at the individual drug level. A more robust set of data from the entire supply chain will help the state identify which players contribute most to drug price increases.
Wholesale Prescription Drug Importation Program – LD 1272
Maine is the fourth state to pass a law seeking implementation of a wholesale importation program, along with Vermont, Florida, and Colorado. Maine’s Department of Health and Human Services must submit a request for approval from the federal government no later than May 1, 2020. This bill is unique in that the program design must consider whether the program can be developed on a multistate basis through collaboration with other states.
Maine has taken a big step to hold the entire supply chain accountable for the rising cost of prescription drugs. Lawmakers have demonstrated their commitment to holding all parties in the prescription drug supply chain accountable for rising drug costs. These four bills will work in conjunction with each other to achieve fair dealings from PBMs, standardize transparency reporting requirements, set pharmaceutical spending targets for public payers, and develop a plan for the importation of prescription drugs from Canada.
For more information about what states are doing to address drug costs, explore NASHP’s legislative tracker and read about newly-enacted laws.
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.
Just how much are states spending on prescription drugs? And, which drugs account for their greatest expense? As state policymakers grapple with solutions to the problem of rising drug costs, officials are performing research to provide critical evidence and tools needed to inform policy. Two recent state efforts to document their prescription drug costs may provide a roadmap for other states.
In Vermont, a new law approved in 2018 required its Agency for Human Services to research and report back a plan to the state legislature to evaluate and implement wholesale importation of high-cost drugs from Canada. The recently-released report found that significant savings would result from importation. Based on just 17 drugs identified for two of the state’s three major carriers, compared to Canadian prices the savings would range from $1 to $5 million annually.
The National Academy for State Health Policy (NASHP) was pleased to work with the state on the study and developed a new tool and worksheets states can use to identify the drugs that account for the highest “spend” (factoring in cost and volume) for payers in the state and compare their prices to those charged in Canada for the same drug.
Seven states have enacted transparency laws to provide detailed information about high-cost drugs. California led the way and recently the Maine Health Data Organization (MHDO) used its all-payer claims database to respond to a legislative mandate to collect information and report on:
- The 25 most frequently prescribed drugs in the state;
- The 25 costliest drugs, determined by the total amount spent on those drugs in the state; and
- The 25 drugs with the highest year-over-year cost increases as determined by the total amount spent on those drugs in the state.
MHDO has issued its report and made the data available to the public in the form of a dashboard that allows users to toggle between payer types (commercial, Medicaid, Medicare Advantage, and all-payers) and brand-name or generic drugs.
These are just two examples of the value of researching and evaluating drug costs, and they provide strategies and tools other states can adopt to identify high-cost drugs — a critical first step to inform policy choices.
A successful citizens referendum to expand Medicaid stalled in the state Legislature and moved to the courts this week.
Over the past five years, the Maine Legislature has passed several bills to expand the state’s Medicaid program – MaineCare – under the provisions of the Affordable Care Act to cover a greater number of low-income residents. Every year, Maine Governor Paul LePage vetoed the legislation, and the Legislature was unable to muster enough votes to override his veto.
In November 2017, Maine voters approved Medicaid expansion in a referendum with 59 percent of the vote. Under Maine’s constitution, the governor cannot veto a referendum passed by citizens’ initiative, and the referendum became law in early January of this year.
The expansion law lays out a series of actions Maine’s Department of Health and Human Services must take to implement the expansion of coverage to people earning up to 138 percent of the federal poverty level. Specifically, the law directs the department to submit a state plan amendment (SPA) to the Centers for Medicare & Medicaid Services (CMS) no later than 90 days following the effective date of the law, which was April 3, 2018. It also directs the state to adopt any necessary rules required to make certain that people who are eligible for coverage under the expansion are enrolled by July 2, 2019.
In the most recent legislative session, Maine lawmakers reviewed the Medicaid expansion referendum language and debated how much should be appropriated to fund the expansion. Two weeks ago, the legislature adjourned without addressing or funding the expansion.
Governor LePage contends he cannot implement the expansion until it is funded. The law does not link implementation of the expansion to CMS approval of Maine’s SPA, nor does it require the identification of specific funding to underwrite any costs associated with the expansion. It simply compels the state to implement the law in the stated timeline.
To date, the Maine has not filed the SPA required by the language of the law and this week a group of advocates and individuals who would be eligible for Medicaid coverage under the expansion filed a lawsuit in state court to compel the state to file the SPA.
The lawsuit is the first salvo in what promises to be the judicial phase of the protracted struggle over Medicaid expansion in Maine. Frustrated advocates in a number of other states, where expansion has not yet been adopted, are considering mounting a referendum campaign similar to Maine’s. Advocates in Utah and Idaho have collected enough signatures to put an expansion referendum on the ballot, and advocates continue to collect signatures in Nebraska and Montana.
The Centers for Medicare & Medicaid Services (CMS) recently released its third annual evaluation of the State Innovation Model (SIM) Round One Test States, which analyzes the ability of states to use policy and regulatory levers to drive statewide health care transformation. The evaluation, completed by a team of researchers from RTI International, the Urban Institute, and the National Academy for State Health Policy, arrives at a pivotal time. Many states are eager for information about their peers’ experiences transforming delivery systems to reward value over volume and be more consumer-centered.
- Expanding value-based payments: In Year 3, SIM Round One Test States successfully expanded value-based payments through reforms such as accountable care organizations (ACOs), behavioral health homes, and patient-centered medical homes (PCMHs). Despite efforts to expand value-based payment models to private insurers, these reforms have, for the most part, been focused on Medicaid rather than multi-payer reforms.
- Engaging commercial payers: Where multi-payer participation has been achieved (Arkansas and Vermont), regulatory and purchasing power (i.e. contract requirements) were effective levers. For example, in Arkansas, insurance regulations require all Qualified Health Plans certified to sell through the health insurance Marketplace to enroll their members in PCMHs and to make per member per month payments to PCMHs. Legislation was another important lever enabling multi-payer reforms by creating conditions under which commercial payers may be more likely to adopt value-based payment models. For example, Vermont’s Green Mountain Care Board used legislative authority to set standards for ACOs. Relying on the voluntary participation of commercial payers has had less success in expanding value-based payment from Medicaid to commercial payers.
- Engaging providers: Multiple states have designed their payment reforms to allow for provider choice and flexibility in order to encourage participation. Maine, Minnesota, and Vermont allow providers to select the type of risk and/or the timing of the risk they take on when joining ACOs. This means a choice between one- or two-sided risk. One-sided risk is the opportunity to share in the reward of savings and two-sided risk includes both options of reward and the potential for financial penalties. States are also attempting to be responsive to providers’ feedback to their models. In Maine, for example, behavioral health home provider reimbursement rates were increased in response to provider concerns, and in Minnesota the model for attributing Medicaid beneficiaries to ACOs was changed to improve the model’s accuracy. Finally, in their third year, two SIM Round One Test took steps to convene and engage medical and nonmedical service providers, for example, through regional collaboratives in Vermont and through Accountable Communities for Health in Minnesota.
- Building data analytic capacity and infrastructure: One notable area of focus for SIM Round One Test States is the development of in-state capacity for the data analytics and exchange necessary to drive and support value-based payment reform. These efforts are often foundational in order to enable payment reforms to succeed. This work includes a range of activity including generating reports on cost and quality measures, working with providers to interpret and act upon reports, connecting providers to health information exchanges, and developing notification systems to alert providers about their patients’ use of emergency rooms.
While 2016 was too early to assess the impact of SIM Round One on expenditures and utilization of services in test states, taken as a whole, these efforts are part of a national movement toward value-based payments and shed light on how states can effectively achieve these reforms. For more detailed information, read the complete third annual valuation.