NJ Spotlight

Booker, Sanders Call For Federal Bureau To Control Drug Prices

Independent organization would monitor price increases on existing products and establish list prices for new medications

NJ Spotlight — November 15, 2019

By Lilo H. Stainton

Sens. Cory Booker and Bernie Sanders, candidates for the Democratic presidential nomination, have joined forces on a measure designed to control the cost of prescription drugs. Under a proposal the senators plan to introduce today, the federal government would be given direct power to control prices and could dismantle patent protections for manufacturing companies that didn't cooperate — allowing for lower-cost generic options to be made.

Booker and Sanders (from New Jersey and Vermont, respectively) said their Prescription Drug Affordability and Access Act — which faces an uphill battle to become law — would create an independent organization, based on a Canadian model, that would monitor price increases on existing products and establish the list price for new medications.

According to materials Booker's office provided to NJ Spotlight in advance, the bill would require pharmaceutical companies to disclose what they spent on research and development, marketing, executive salaries and more to justify their proposed prices. Drug-makers would also need to identify the patient benefits and how any public funding, patents or other government actions directly benefited their work on the product, and the prices charged in 11 countries with market controls.

The measure creates the Bureau of Prescription Drug Affordability and Access to consider these filings and other factors, such as the impact the proposed price has on individuals and government programs like Medicare and Medicaid. It would also weigh the health outcomes of the medication under review against those achieved by alternative drugs or other therapies that may be less costly.

Total U.S. spending on prescription drugs is expected to top $600 billion in 2020, up from $380 billion in 2014, Kris Hathaway, vice president of state affairs for America's Health Insurance Plans, which represents insurance companies, explained at an NJ Spotlight roundtable on the topic last month.

AARP New Jersey has found that prescription prices rose 58% in the Garden State between 2012 and 2017, and nearly one in four residents now skips or rations doses to save money. New Jersey will invest $55 million this year in programs designed to help seniors and other vulnerable New Jerseyans pay for these treatments.

"In a country as wealthy as ours, it's downright shameful that people have to choose between taking their medicine or paying for other basic necessities," Booker said in a draft press release on today's announcement. "We need systemic change that will meaningfully address the exorbitant, rising cost of prescription drugs and put the focus back on patients, not profits."

Drug prices in other countries

Booker has sponsored a number of other measures designed to reduce prescription drug costs, including legislation introduced earlier this year, also with Sanders, that would peg the price of drugs in the U.S. to those of five other major industrialized nations. The current system provides "limited to no oversight" of pharmaceutical prices, Booker said.

A similar concept, championed by U.S. Rep. Frank Pallone (D-6th), would calibrate U.S. prices to those in a half-dozen other countries and allow private insurance companies to buy products at these government-approved rates. That measure has faced significant opposition from the pharmaceutical industry, which has called it a "job killer" — especially for states like New Jersey that depend heavily on drug company revenue.

Pharmaceutical companies generally agree changes are required to protect patients and ensure they can get the medication they need, but they favor measures that increase prescription drug supply-chain transparency and provide discounts to drugstore customers. While overall spending has increased, prescription drugs still make up roughly the same share — about 10% — of the nation's overall health care costs as they did in the 1960s, Kipp Snider, national vice president for state policy at PhRMA, an industry group, told roundtable participants.

The new Booker/Sanders bill is likely to face similar pushback from the drug industry and Republican leadership in the U.S. Senate. According to Booker's press release, Canada's Patented Medicine Prices Review Board — on which the proposal is modeled — enabled that country to save 236% over what it would have paid for patented medicines in the U.S. in 2017.

But a number of community, labor and patient organizations are backing the concept, according to Booker's team. Maura Collinsgru, health care program director for New Jersey Citizen Action and a longtime advocate for lower prices, said the measure would put appropriate checks on the pharmaceutical industry.

"Drugs don't work if people can't afford them," Collingsru said.

"Prescription drugs are one of the biggest drivers of health care costs in the United States," said Raymond Castro, health policy director at left-leaning New Jersey Policy Perspective. "This will benefit not only those who are stretched to the limit and struggling to pay for their prescription drugs, but anyone who pays a premium and all taxpayers who help pay for essential public health coverage."

The act would create the bureau within the federal Department of Health and Human Services. The president would appoint the director to a five-year term, confirmed by the U.S. Senate, and the bureau would operate under an annual budget of $50 million. The director would be tasked with creating a process to solicit patient input and establishing a Consumer Advisory Council to help guide the bureau's work.

Pricing deadlines

Drugmakers with products in the pipeline for federal Food and Drug Administration approval would need to submit the required materials to the bureau within six months of the act becoming law, including details on pricing proposals and any public funding, patents, waived fees or other government benefits they received while developing those drugs. For drugs approved after the law went into effect, manufacturers would have just over six weeks to provide pricing and other information.

For medications already on the market, the bill would require drugmakers to alert the bureau if they wanted to increase the price beyond the growth of the consumer price index; the office could also review the price of products that top $5 billion in global sales, a benchmark it can update over time.

In assessing the manufacturers' proposed prices, the measure requires the bureau to consider the number of patients who could benefit from the medication, the way price affects access to treatment, and the impact it would have on overall government spending. It can also look at the revenue the company is likely to generate at this price, what it charges other nations, and the "public health benefit" of the drug.

Under the bill, the agency would need to prioritize the reviews of more costly products or common classes of drugs, and would have to consider patient input in determining appropriate prices. Manufacturers could face heavy fines for not complying with parts of the process; once the board determined the price they could charge, they would have a month to comply.

Drugmakers that did not agree to adjust their prices accordingly could lose their patents or other government protections that give them exclusive rights to make that product — a situation that now enables them to charge higher prices. The measure would allow the bureau to sell the manufacturer's government-funded or government-protected research and trial data to other companies — and determine the "reasonable compensation" the original manufacturer should get in return. Any company that bought the information would need to agree to price the product at or below the bureau's recommendation.

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