SENATE BILL REPORT

SB 5292

As of February 21, 2019

Title: An act relating to prescription drug cost transparency.

Brief Description: Concerning prescription drug cost transparency.

Sponsors: Senators Keiser, Cleveland, Randall, Hasegawa, Das, Saldaña, Wilson, C., Liias, Conway, Kuderer, Nguyen, Van De Wege and Wellman.

Brief History:

Committee Activity: Health & Long Term Care: 1/28/19, 2/08/19 [DPS-WM, DNP].

Ways & Means: 2/19/19.

Majority Report: That Substitute Senate Bill No. 5292 be substituted therefor, and the substitute bill do pass and be referred to Committee on Ways & Means.

Signed by Senators Cleveland, Chair; Randall, Vice Chair; Dhingra, Frockt, Keiser and Van De Wege.

Minority Report: Do not pass.

Signed by Senators O'Ban, Ranking Member; Becker.

Staff: Greg Attanasio (786-7410)

Staff: Sandy Stith (786-7710)

Background: Prescription Drug Purchasing Consortium. Pursuant to statute, the Health Care Authority (HCA) established a prescription drug purchasing consortium. State purchased health care programs must purchase prescription drugs through the consortium, and local governments, private entities, labor organizations, uninsured, and underinsured residents may voluntarily participate in the consortium. In 2006, Washington State and Oregon formed the Northwest Prescription Drug Consortium (Northwest Consortium) to expand their purchasing power. The Northwest Consortium offers access to retail pharmacy discounts, pharmacy benefit management services, rebate management services, and a prescription discount card for uninsured residents.

All-Payer Health Care Claims Database. Pursuant to statute, OFM established the all-payer claims database to support transparent public reporting of health care information. The database collects claims data from the Medicaid program, Public Employees' Benefits Board programs, all health carriers, third-party administrators, and Department of Labor and Industries programs. Claim files submitted to the database include pharmacy claims.

State Agency Work on Prescription Drug Costs. In 2016, the Department of Health (DOH) convened a taskforce to evaluate factors contributing to out-of-pocket costs for patients, including prescription drug cost trends. The same year, HCA and OFM prepared a report on prescription drug costs and potential purchasing strategies at the request of legislators. The report describes increases in state agency spending on prescription drugs in recent years, current cost drivers, strategies to slow the rate of prescription drug spending, and policy options.

Summary of Bill (First Substitute): Issuer Reporting. Beginning October 1, 2019, and yearly thereafter, issuers must provide OFM:

• Ÿthe 25 most frequently prescribed prescription drugs by health care providers in their network;

• the 25 costliest prescription drugs, and the issuer's total spending on each drug;

• the 25 prescription drugs with the largest year-over-year increase in spending, including the percentage increase; and

• a summary of the impact of prescription drug costs on health plan premiums.

Manufacturer Reporting to OFM. Beginning October 1, 2019, and yearly thereafter, manufacturers must provide OFM with the following data for each new drug costing $10,000 or more for a course of treatment or 30-day supply, and each existing drug costing at least $100 for a course of treatment or 30-day supply that has a price increase of at least 16 percent:

• a description of the factors considered when setting or increasing the price of the drug and an explanation of how the factors justify the increase;

• if the drug was produced by the manufacture during the previous five years, a history of price increases during that time;

• if the drug was acquired by the manufacturer in the previous five years (1) the price of the drug at the time of the acquisition; and (2) the company from which the drug was purchased, and the purchase price;

• the year the drug was introduced to the market and at what price;

• the patent expiration date, if the drug is under patent;

• whether the drug is a multiple source drug, an innovator multiple source drug, a noninnovator multiple source drug, or a single source drug;

• an itemized cost for the production and sale of each drug; and

• the total financial assistance given through programs, rebates, and coupons.

Manufacturer Reporting to Purchasers. Beginning October 1, 2019, a manufacturers must notify purchasers and OFM 60 days in advance of the introduction of a new drug costing $10,000 or more for a course of treatment or 30-day supply, or the price increase of an existing drug costing at least $40 for a course of treatment or 30-day supply that has a price increase of at least 16 percent. In the event of a price increase, the notice must include:

• the date of the increase, the current price, and the dollar amount of the increase; and

• a statement regarding whether a change or improvement necessitated the increase.

OFM must make this information public on its website.

OFM Report. OFM must compile the information collected from issuers and manufacturers and prepare an annual report for the Legislature demonstrating the overall impact of drug costs on health care premiums.

WSIPP Study. The Washington State Institute of Public Policy must conducted a study of statutes similar to this act enacted in other states to review evidence of how drug price transparency laws affect drug prices.

EFFECT OF CHANGES MADE BY HEALTH & LONG TERM CARE COMMITTEE (First Substitute):

• Changes the covered drug definition from drugs costing $40 per one month supply to drugs costing $100 per one month supply and requires WSIPP to study the effect of drug price transparency laws on drug prices.

Appropriation: None.

Fiscal Note: Available.

Creates Committee/Commission/Task Force that includes Legislative members: No.

Effective Date: Ninety days after adjournment of session in which bill is passed.

Staff Summary of Public Testimony on Original Bill (Health & Long Term Care): The committee recommended a different version of the bill than what was heard. PRO: Manufacturers set the initial price of drugs and the requirements in the bill are a good starting point for understanding increases in prices. The experience in California after passing a similar bill has been positive and this should be the model for Washington.

CON: Any bill should require all parts of the supply chain to submit data and should have protections against releasing trade secrets. The thresholds that trigger manufacturer reporting requirements are too low and will likely only capture generic drugs. Further burdens on manufacturers will cause a slowdown in construction, which will hurt union jobs.

Persons Testifying (Health & Long Term Care): PRO: Senator Karen Keiser, Prime Sponsor; Meg Jones, Association of Washington Healthcare Plans; Jennifer Crowder, Washington CAN; Joelle Craft, Washington CAN; Sybill Hyppolite, citizen; Brenda Weist, Teamsters Local 117; Amber Ulvenes, Kaiser Permanente; Mel Sorensen, America's Health Insurance Plans. CON: Brian Warren, Biotechnology Innovation Organization; Lee Newgent, PILMA; Brett Michelin, Association of Accessible Medicine; Eric Lohnes, Pharmaceutical Research and Manufacturers of America.

Persons Signed In To Testify But Not Testifying (Health & Long Term Care): No one.

Staff Summary of Public Testimony on First Substitute (Ways & Means): PRO: We provide care and coverage to over 800,000 people in Washington. High prescription drug costs challenge affordability in healthcare. Doctors and pharmacists work together to leverage better prices, but those price increases for drugs are real. These drug price increase impact premium costs. The vast majority of increases are in the cost per drug. Drug companies have full control over the starting price of drugs and therefore the discount is just a discount off a high list price. This is a great first step to address rising drug costs. Patients need drugs they can afford. Twenty-five percent of people report difficulty affording medications. One out of eight people say they have rationed doses because of increased costs. And, 80 percent of Americans support policy that would make drug companies make public how they set prices. Last month a study was released showing last year brand name drugs increased by over 9 percent per year. For injectable brand name drugs, those increased by over 15 percent per year. The main takeaway was that the lead indicator was that the main price increases were of drugs that were already on the market. High list prices matter. They are the basis for negotiating discounts and rates all along the supply chain. We think it is appropriate to focus this on manufacturers because they set the list prices. It is important to focus on this because prescription drug costs now are greater than inpatient hospital spending.

CON: Our primary concern is the report required in the bill will not share all of the relevant information. Our chief criticism with the bill are that there are seven different portions of the supply chain where transparency does not exist that are not manufacturers. None of this is accounted for in this bill. Prescription drugs are the only place in healthcare where prices decline over time. Drugs go from brand to generic and over time, prices decline by 80 percent. A recent consumer report showed, when checking with pharmacies, the national average for the five most common generic drugs varied by a factor of 20. In a single city, the cost of a 30-day supply of a single generic drug varied by a factor of 10 to 17, depending on the drug. The information gathered under this bill would not tell us why those prices varied. We are opposed based on an unintended consequence we believe this bill will create. When a version of a generic comes on the market, competition ensues and prices go down, similar to commodities. This bill requires 60-day advance notice of a price increase, or we pay a fine. Because of our volatile nature, this creates a perverse nature to build in some increases to accommodate this volatility in our supply chain. When you look at which version of the bill to move out of committee, we suggest you look to Section 8 and the reference a Connecticut law. We suggest that you look at Connecticut as a model. This will help you track the entire supply chain.

Persons Testifying (Ways & Means): PRO: Senator Karen Keiser, Prime Sponsor; Mel Sorensen, America's Health Insurance Plans; Sybill Hyppolite, Service Employees International Union Healthcare 1199NW; Courtney Smith, Kaiser Permanente. CON: Jeff Gombosky, Pharmaceutical Research and Manufacturers of America; Bill Clarke, Biotechnology Innovation Organization; Abby Moore, Association of Accessible Medicine.

Persons Signed In To Testify But Not Testifying (Ways & Means): No one.