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Prescription: Washington

A Drug Pricing “Transparency” Bill With Strong Bipartisan Support But Would It Accomplish Much?

Stephen Barlas

The first piece of prescription-drug pricing legislation emerged from a unanimous vote on the House Ways & Means Committee in April. That means the Prescription Drug Sunshine, Transparency, Accountability and Reporting (STAR) Act is well on its way to passage in Congress, either on its own or in any larger health care bill the House and Senate are likely to pass. The STAR Act (H.R. 2113) combines a couple of separate bills that members of the committee acknowledged would do nothing in and of themselves to reduce drug prices. But although all the Democrats and Republicans voted for the bill’s passage, a number of them described it, with some defensiveness, as a “first step” toward reducing drug prices.

One key provision requires manufacturers who increase a drug price either by 10% or $10,000 over one year or by 25% or $25,000 over three years to explain the reasons for the increase. The disclosure requirement is open-ended; there are no specific factors that must be touched upon. A second provision mandates an explanation when a new drug is launched with a price exceeding $26,000, which is the average income of Medicare beneficiaries. The secretary of the Department of Health and Human Services (HHS) would post these explanations on its website. This requirement would take effect in 2021.

At least one Democrat, Representative Lloyd Doggett (D-TX), was withering in his criticism of the price-increase disclosure provision, which he noted would do nothing to reduce prescription drug prices or Medicare’s drug costs, and cited a Congressional Budget Office analysis of the bill to add credibility to his statement. With regard to the disclosure provisions, Doggett argued that nothing requires a company to cite any specific reasons enumerated in the bill as causing a price increase. He noted that a rival bill (S. 474) proposed by Senator Ron Wyden (D-OR) is much more specific regarding disclosures that companies have to make. However, during the Ways & Means vote on H.R. 2113, Representative Richard Neal (D-MA), committee chairman, noted that Wyden had sent over a note backing the House bill. The Wyden bill would require manufacturers to disclose such things as the cost of research and development, materials and manufacturing, and patent acquisition; revenue and profits; and other information.

Referring to the provision in the STAR Act, Doggett said, “This bill tinkers around the edges with watered down transparency provisions. It permits those engaged in price gouging to disclose what they want to disclose and to hide what they wish.”

Neal tried to assert the bill’s bona fides by listing a number of major health care associations who support the bill, including the National Community Pharmacists Association, the Federation of American Hospitals, and Families USA. But Doggett read out the last sentence from a letter sent by Families USA, which said, “This bill won’t meaningfully reduce the burden felt by millions of Americans.”

A different section of the STAR Act requires the HHS secretary to post on the department’s website disclosures that reveal the number of drug or device samples that each manufacturer gave away. The concern here is that manufacturers are using free samples to build demand for expensive drugs. Representative Brad Wenstrup (R-OH) was highly skeptical of this provision. “I’d like to know how we benefit from this,” he said. “Getting numbers doesn’t tell us much.”

There is also a provision on hospital drug shortages. All that does is require the HHS secretary to report to Congress with an analysis on drug shortages. But the reasons for shortages are already well known and have been debated for years.

Another provision requires HHS to make public the information on rebates that pharmacy benefit managers already provide to HHS. Criticizing that provision, J. C. Scott, president and chief executive officer of the Pharmaceutical Care Management Association, said, “We remain concerned that the current version of the legislation requiring additional reporting on negotiated rates may inadvertently provide drug makers and drugstores access to competitive information, such as negotiated rebates, discounts, or price concessions.”

The last provision requires drug manufacturers to submit to the HHS the average sales price for drugs that are reimbursed under the Medicare Part B program, when expensive biological and oncology drugs are infused or injected in a physician’s office or an outpatient hospital clinic.

Tom Wilbur, a spokesman for the Pharmaceutial Research and Manufacturers of America (PhRMA), says, “PhRMA supports efforts to improve transparency throughout the health care sector that focus on ensuring patients are better able to make well-informed decisions about their care. We appreciate the hard work of the Ways & Means Committee and will continue to seek ways to improve upon the bill.”

There are a number of drug-price “remedy” bills floating around Congress, although none with the bipartisan certifications of the STAR Act. One thing they appear to have in common is members of Congress describing them as a “first step.” No one, however, is calling any bill a “significant” or “strong” first step. And for good reason.

Author bio: 
Mr. Barlas is a freelance writer in Washington, D.C., who covers issues inside the Beltway. Send comments and ideas for topics to