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.
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.
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.
Last week, Nevada fined 21 pharmaceutical companies $17.4 million for failing to submit a report explaining recent, significant price hikes to essential diabetes drugs, as required by the state’s drug cost transparency law.
Faced with drug price increases far outpacing rates of inflation, states across the country are enacting transparency laws designed to shed light on what’s driving drug price hikes. Nevada’s 2017 transparency law is unique among these laws in its specific focus on public health. Initially, the law required manufacturers to report only on essential diabetes medications, with an additional requirement mandating reporting on asthma medication prices scheduled to go into effect next year.
The law gives Nevada the authority to levy fines of $5,000 a day for failure to report by the April 1 deadline. After warning letters to non-reporting companies generated a sizable uptick in reporting, last week the state sent notice of fines totaling $17.4 million to 21 non-compliant companies. The companies have 30 days to pay the fines or request a dispute resolution meeting with the state within 10 days. Companies have cited a range of reasons for their failure to comply with the transparency law, ranging from a lack of awareness of the new law to personnel transitions.
Other states’ transparency laws also include fines for failure to report information explaining high drug prices, ranging from fines of $1,000 a day in California, Vermont, and Washington State, to a high of $30,000 a day in Maine. Nevada may or may not receive the entire amount assessed in its proposed fines, pending outcomes of resolution meetings with manufacturers. If necessary, the state’s attorney general may seek a court order requiring payment.
While $17.4 million is a notable amount to cash-strapped states, that number pales in comparison to the estimated $2.7 billion that diabetes costs Nevada each year. The state reports that 12.6 percent of its adult population has diabetes, and this group incurs 2.3-times the medical expenses than those without diabetes.
Ensuring compliance with a law that has the potential to help the state monitor the extent, impact, and causes of price increases for essential diabetes medication remains a focus for Nevada’s Department of Health and Human Services drug transparency program.
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.