The drug industry really, really doesn’t want you to know that it’s ripping you off with frequent and questionable price increases for prescription meds.
The Pharmaceutical Research and Manufacturers of America, the industry’s main lobbying group, filed a lawsuit the other day seeking to derail a California law that will require 60 days’ notice before drugmakers raise prices beyond a certain threshold. The law, SB 17, is set to take effect Jan. 1.
In their suit, which names Gov. Jerry Brown as a defendant, drug companies argue that the state is attempting to dictate national healthcare policy and is unfairly picking on a single industry when other businesses share responsibility for high prices.
James C. Stansel, PhRMA’s executive vice president and general counsel, said in a statement that the law “misses the mark with its myopic focus on manufacturers and provisions that are in clear violation of the Constitution.” A spokeswoman for the organization declined to elaborate.
I can’t speak to the constitutionality of the law. Among other claims, the industry’s lawsuit says SB 17 violates the 1st Amendment because it “compels speech,” requiring drug companies “to disseminate California's message that they alone are responsible for increases in the prices of prescription drugs.”
In business terms, I’d say drugmakers are throwing a hissy fit because they don’t like being told to behave more honestly.
“What does the pharmaceutical industry have against transparency?” asked Richard Scheffler, director of UC Berkeley’s Global Center for Health Economics and Policy Research.
He told me the lawsuit is likely a warning shot — a declaration that the industry will bury California in legal filings if the state even thinks about acting more aggressively, such as having public and private drug purchasers band together to collectively bargain with manufacturers.
“They see that coming,” Scheffler said. “They’re doing everything they can to stop it.”
SB 17 doesn’t go anywhere near that far. It says only that pharmaceutical companies have to notify the state and health insurers if they plan to raise the price of a medication by 16% or more over a two-year period. The companies also would have to explain why such a large increase is needed.
The law applies to drugs with a wholesale cost of at least $40 for a 30-day supply.
“Californians have a right to know why their medical costs are out of control, especially when pharmaceutical profits are soaring,” Brown said when he signed SB 17 into law in October. “This measure is a step at bringing transparency, truth, exposure to a very important part of our lives. That is the cost of prescription drugs.”
The law was backed by consumer and labor groups, hospitals and even health insurers.
The drug lobby reportedly spent nearly $17 million and hired dozens of lobbyists and consultants to kill it.
SB 17 isn’t some mean-spirited attempt to kick sand in the picnics of kindly drug companies. It grew out of public outrage resulting from over-the-top price hikes, such as the maker of EpiPens jacking up the price of its widely used injectors to nearly $500 from about $60 .
And don’t forget the AIDS drug Daraprim, which saw its price soar overnight to $750 from $13.50 a pill. Or the Hepatitis C treatment Sovaldi, which cost $1,000 a pill because, well, why not?
As Brown said at the bill signing: “There's a real evil when so many people are suffering so much from rising drug profits.”
Drugmakers are right when they say there are other players in the supply chain that contribute to price increases. But the merry-go-round starts with the manufacturers, and their frequently indefensible increases set the pace for the rest of the industry.
SB 17 doesn’t tell them they have to cut prices. It simply casts sunlight on deliberately opaque practices, introducing a modest measure of accountability.
The drug industry’s 35-page complaint has a distinct sky-is-falling ring to it, envisioning dire scenarios in which California’s reporting requirement causes prices to go haywire as healthcare players game the market and reduce competition.
“SB 17 will generate substantial harmful economic effects that extend unavoidably beyond California,” it warns, adding that the law “imposes burdens on interstate commerce that clearly exceed any legitimate local benefit.”
In reality, SB 17 will force drug companies to straighten up and fly right.
I wrote last week about a recent report from the National Academy of Sciences outlining steps the federal government could take to reduce drug prices.
The recommendations include allowing Medicare to negotiate with manufacturers — it’s prohibited by law from doing so — and requiring drug companies to be more open about pricing.
PhRMA, the trade group, dismissed the proposals as “misguided” and “a rehash of outdated ideas.”
“Instead,” it said, “we should focus on lowering costs for patients through market-based reforms ... and move toward a system that focuses on what is valuable to patients.”
SB 17 does that.