Drug pricing explained, but still secret

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MONTPELIER — The Vermont attorney general’s office says drug companies have complied with a state law requiring them to explain extreme jumps in drug costs, but the full information is not available to the public because of a public records exemption.

The law, signed by Gov. Peter Shumlin earlier this year, requires some drug makers to explain their pricing structure to the attorney general’s office if the wholesale acquisition price increases by more than 50 percent in the previous five years or more than 15 percent in the last year.

It calls for the AG’s office to identify up to 15 prescription drugs each year that meet the criteria.

According to Assistant Attorney General Jill Abrams, who authored the report due to the Legislature under the law, the information shared by drug manufacturers was given on a confidential basis. Only their office is privy to the information.

Abrams’ report to lawmakers is intended to summarize her findings on how the drug manufacturers arrive at their prices in general terms. She wrote in the report that the Green Mountain Care Board and the Department of Vermont Health Access identified 10 drugs made by different manufacturers.

Eight of them, including EpiPen by Mylan, are branded drugs while two are generic.

According to the report, the manufacturers identified several factors they consider when setting drug prices. Each manufacturer relies on each factor to varying degrees.

The factors most commonly mentioned by the drug makers include the effectiveness of the drug compared with others in its class; the size of the patient population that will utilize the drug; the investments they’ve made in research and development of the drug; the cost of creating and maintaining facilities to manufacture the drug; the cost of ingredients; competition for the type of drug; and the percentage of sales in commercial and government markets.

“I think it would be fair to say that they all consider that list of factors that’s in the report,” Abrams told the Vermont Press Bureau.

Abrams said she could not discuss whether the information she gathered from drug manufacturers would provide useful information to the public.

“That’s sort of one of those things I don’t know how to answer without revealing things that contains information the manufacturers provided,” she said.

Similarly, Abrams said she could not offer an opinion on whether drug manufacturers set their prices in a fair way for consumers.

“I’m not sure that I have the expertise with or without the information,” she said. “Pricing is pretty complicated stuff.”

Burlington Rep. Chris Pearson, who was elected to the Senate last month, was a strong proponent of the legislation, which he said was intended to spur Congress into requiring a more transparent price structure for pharmaceuticals because states “have virtually no power when it comes to direct ability to make prescription drugs more affordable.”

“And yet, it’s a huge burden on our state budget and one out of five Vermonters can’t afford the prescriptions their doctor writes,” he said.

Vermont was among a dozen or so states to pursue such legislation, but was the only state where it was signed into law, Pearson said. That’s because drug manufacturers have invested heavily in congressional campaigns “to make sure states have no ability to bargain directly with the industry,” according to Pearson.

States were told such legislation was “unworkable” and that the industry would never comply, Pearson said.

“In fact, the industry complied and we sparked a conversation within the industry about how to better handle this going forward,” he said.

“Going from ‘No way in Hell’ to ‘You’ll be sued’ to ‘Here’s the information,’ I think, is a pretty good step forward in a tiny state like Vermont.”

Pearson acknowledged he and his fellow lawmakers will not be able to review the information collected by the attorney general’s office. But the legislation could prompt Congress to act in a more aggressive way with drug makers, he said.

“We have learned some things, like the pricing structure … is so convoluted that it’s my hope we can work with the attorney general’s office to find some better measures to ask for and maybe more meaningful questions to ask for Round Two,” Pearson said. “I think a number of us are really interested in these topics and are buoyed by our success.”

U.S. Rep. Peter Welch, Vermont’s lone member of the U.S. House, asked Vermont lawmakers to consider such a law.

“The cost of prescription drugs is killing us. The drugs that pharmaceutical companies make are good — they alleviate pain and they extend life, but the cost is killing us,” Welch said Thursday. “Much of the justifications for these cost increases are bogus or nonexistent.”

Welch, a Democrat, said the Vermont law is modeled after legislation he has proposed in Congress, but has found no traction. The Vermont law is now “putting some pressure on the pharmaceutical companies to be more restrained.”

“They raise the prices because they can, not necessarily because of market forces,” Welch said.

Welch said he hopes more states will follow Vermont’s lead and demand more information from drug companies. That could spur action in Congress, he said.

Welch said he wants to work with his Republican colleagues on the issue based on common ground.

“They do like a market-based approach and they think that you can’t have a market if there isn’t transparency,” he said.

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