[Ip-health] Politico: Cuomo enters national debate with proposal to cap drug prices

Andrew S. Goldman andrew.goldman at keionline.org
Wed Jan 20 12:53:05 PST 2016


By DAN GOLDBERG 5:36 a.m. | Jan. 20, 2016

Gov. Andrew Cuomo is seeking effectively to cap the price of certain
pharmaceuticals and require unprecedented transparency from manufacturers.

The governor's new budget proposals, which are opposed by pharmaceutical
companies, inject the governor and New York State into a national debate
over rising drug prices, which have become a focus of the presidential
campaign and a congressional inquiry.

Cuomo's plan, should it be approved by the state Legislature, would allow
the state's health commissioner to develop a list of prescription drugs
"for which there is a significant public interest in ensuring rational
pricing by drug manufacturers."

The manufacturers of the drugs on the list would then be required to
provide a minimum rebate to Medicaid, which would be set by the state
following an actuarial study.

Further, the governor is proposing that manufacturers provide a host of
information to the state explaining how they arrive at the price of their

"He is really trying to get at transparency of drug pricing, which is not
just a state issue but a national issue, and it is truly entering sacred
ground that no one has been able to crack the code on," said Assemblyman
John McDonald, a Democrat who owns a pharmacy in Cohoes. "In a way, the
gauntlet is being laid down on pharma."

The state would require pharmaceutical companies to disclose the cost of
developing, manufacturing, producing and distributing the drug. Cuomo wants
to know the research and development costs of the drug, including payments
to predecessor entities conducting research and development. The governor
wants companies to disclose the total cost of all marketing and advertising
costs that are directed to consumers and prescribers in New York.

Cuomo also wants the pharmaceutical companies to divulge the prices charged
to other purchasers in New York, including pharmacies, pharmacy chains,
pharmacy wholesalers or other direct purchasers; the average rebates and
discounts provided per payer type; the average profit margin of each drug
over the prior five-year period and the projected profit margin anticipated
for such drug.

Priscilla VanderVeer, a spokeswoman for the Pharmaceutical Research and
Manufacturers of America, which represents biopharmaceutical researchers
and biotechnology companies, said her members have "significant concerns
with the bill."

"Not only will implementing price controls have a very negative impact on
innovation and send a signal that risk taking will not be rewarded, but
also the so-called 'transparency' information called for in the proposals
would be virtually impossible to achieve because it does not include the
cost of failures inherent in the search for new treatments and cures," she
said in an email. "The disclosure requirements also do not account for the
tremendous value that these medicines bring to the broader health care
system in the form of fewer complications, hospitalizations and emergency
room visits, as well as healthier, more productive patients."

The Cuomo administration did not respond to requests for comment explaining
how they would come up with their list of drugs or determine their price

Cuomo and other politicians may not need the legislation to succeed in
order to meet their ultimate goal.

An article in the Rand Journal of Economics found that drug companies tend
to reduce prices in response to political pressure. While past performance
is not always indicative of future results, Austin Frakt, a health
economist who blogs for the New York Times, wrote "there may be early signs
of industry sensitivity to political pressure on prices," and pointed to
the plummeting stocks of certain pharmaceutical companies.

The issue of rising costs has taken on national prominence.

Democrats Bernie Sanders and Hillary Clinton have pledged to tackle rising
prescription drug prices. Republican Marco Rubio has said "pure
profiteering” and high prices threaten to “bankrupt our system.”

In New York, trade groups representing the hospitals and insurers have
bemoaned the rising cost of drugs, saying these costs are passed on to
consumers, which is why health care costs are rising.

VanderVeer said retail spending on medicines accounts for approximately 10
percent of all health care costs, and only 4.7 percent of Medicaid spending
in New York State, but that hasn't slowed the torrent of criticism, which
peaked late last year when Martin Shkreli, the so-called "pharma-bro" and
Wu-Tang Clan lover, raised the price of Daraprim more than 5,000 percent.

Shkreli, who was arrested last month in his Manhattan apartment on
unrelated fraud charges, became a symbol of pharmaceutical greed, one the
PhRMA has taken great pains to distance the industry from.

Despite their efforts, Shkreli's abrasive antics coupled with reports of
rising prices from well-established companies such as Pfizer have led
politicians across the country to examine price controls.

"The costs are driving the market into a tizzy," McDonald said. "It has
definitely put pharma in a defensive mode."

Many of the nation's largest companies and their lobbyists have pushed
back, arguing expensive drugs are the price we pay for innovation, that no
one really pays retail price for these drugs and that the lifesaving effect
of the drug is worth whatever the companies are charging.

Still, the pharmaceutical industry is facing a tough fight as hospitals,
insurers and state Medicaid directors are all demanding relief, and the
public is pushing its representatives to do something to reign in what are
perceived to be exorbitant prices.

A recent Kaiser Health Foundation poll found the affordability of
prescription drugs continues to be at the top of the public’s priority list
for the president and Congress.

"It requires a federal solution," McDonald said, "but the federal
government has taken no action and therefore you can't blame the states for
being frustrated."

Andrew S. Goldman
Counsel, Policy and Legal Affairs
Knowledge Ecology International
andrew.goldman at keionline.org // www.twitter.com/ASG_KEI
tel.: +1.202.332.2670

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