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Md. drug transparency legislation is needed to keep costs down

Last week, lawmakers in Annapolis debated the merits of two proposed bills aimed at promoting the affordability of prescription drugs. HB666/SB437 will require manufacturers to disclose the cost breakdown of drugs with a $2,500 or more annual price tag, including declaring how much is spent on marketing and promotion. HB631/SB415 aims to prevent price gouging — or unconscionable and unjustifiable increases in drug pricing. The sensational examples of EpiPen's price surge from $50 to $600 and Turing Pharmaceuticals 5,000 percent price hike of Daraprim serve as scathing examples to justify the latter bill. The long-range goal of this legislation, as championed by Baltimore City Health Commissioner Leana Wen, among others, is to encourage greater public pressure on the pharmaceutical industry to lower costs of life-saving medications.

As a citizen witness to the proceedings, a public health researcher and, more importantly a community pharmacist, I wish to bring to the fore a few crucial arguments in support of this legislation that bear emphasis. The pharmaceutical industry has historically pushed back against any financial transparency measures by arguing that prices are de facto justified due to the increasing costs and risks associated with the research and development (R&D) of drugs. The industry points to the hundreds of millions, in fact billions, of dollars in sunk costs associated with their abysmal failure rate of 99 percent — that is 99 out of 100 drugs that undergo massive industry R&D investment reportedly never make it to market. Not surprisingly, this theme was maintained in opposition to the bills by a representative from the industry trade group and one of the most powerful lobby shops in D.C., the Pharmaceutical Research and Manufacturers of America (PhRMA).

The biggest problem with this position is that it's based on estimates provided by the pharmaceutical industry itself — numbers that are neither verified nor verifiable because of the persistent financial opacity of the industry. The estimates also ignore the fact that many of these 99 "failures" are not novel and their development relies principally on R&D investments already accounted for by similar therapies. In addition, what is central to this defense is the premise that the costs associated with drug development are borne only by the industry. In fact, the U.S. taxpayer funds more than one-third of R&D undertaken either by the industry alone or in partnership with other research institutions and academia. Furthermore, public health programs such as Medicare and Medicaid are primary payers for pharmaceutical products consumed by the U.S. public. As funders of pharmaceutical product development and consumption, doesn't the public have the right to know where their money is being spent? Isn't this transparency central and requisite to accountable and responsible government spending?

To be sure, the pharmaceutical industry is not the only party responsible for skyrocketing drug costs. The flow of goods and financial transactions in the pharmaceutical supply chain is complex and composed of several players, including pharmacies, wholesalers, distributors, health insurance plans and the pharmacy benefit managers (PBMs) embedded within them. All of these stakeholders play a role in determining the ultimate cost to the consumer. In particular, the role of PBMs in determining drug costs should be more carefully interrogated. As their name implies, PBMs are responsible for managing drug formularies and drug utilization of beneficiaries, and containing drug costs for the insurance company. They negotiate substantial drug rebates with the pharmaceutical industry based on beneficiary drug utilization. Yet these cost savings are not transferred onto the patient and are in fact used to bolster profit margins. We should thus be careful not to apportion blame squarely at the door of the pharmaceutical industry, when there are other partners with skin in the game.

As a pharmacist at the front-lines of pharmaceutical provision, I am too often confronted with patients who are puzzled and angered by the exorbitant and ever-increasing cost of drugs. A quarter of Americans report finding it difficult to afford their medications. But there are many more patients, invisible to a health system that underserves them, who simply never make it to the physician or the pharmacy at all because of the costs associated with their care. As the Maryland House considers these measures, it's important to remember that the bills being put forth are a crucial first step — a legislative floor not ceiling — for building a movement to ensure transparency and accountability in government spending and most importantly to ensuring the most vulnerable among us are guaranteed access to life-saving medications.

Danya Qato (dqato@rx.umaryland.edu) is an assistant professor at the University of Maryland School of Pharmacy. 

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