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New Law Shines Light On Prescription Drug Pricing

— January 4, 2017

In an era where prescription drug manufacturers seem to be raising prices on life-saving medicines left and right, citizens across the U.S. are looking towards our leaders to help get the costs under control. Fortunately, one state seems to be willing to take the lead on those efforts.

Last June, Vermont legislators enacted a new law designed to “shine a light on the murky world of prescription-drug pricing by requiring manufacturers to justify big increases.” It’s the first law of its kind, and actually requires state officials to identify up to 15 drugs each year that report price increases of “15% in the prior year, or 50% over the prior five years.” From there, the state attorney general’s office has to obtain an explanation from the drug companies and issue an annual report based on the findings. The law also wants state officials to determine the programs, such as Medicaid, where significant amounts of money are being spent.

The goal of this law is to improve pricing transparency and hold prescription drug manufacturers accountable for their actions if they choose to enact hefty price increases on their medications. Since Vermont enacted their law, other states like California have begun considering pricing laws of their own, and some lawmakers have even proposed legislation that would require “drug makers to justify to the federal government any drug-price increases of more than 10%.”

However, the Vermont law has it’s drawbacks. For example, in instances where the report uncovers excessive prices, the law does not grant the state the authority to cap or roll back prices. In fact, the only thing the state will be authorized to do is to “levy a $10,000 fine to companies that don’t provide information about their price increases.”

The law also has a confidentiality provision that doesn’t require written explanations from drug companies to be made public. Also, as the first report that was recently issued revealed, the transparency that the law set out to improve might be slow to come. In response to the lack of explanations from companies in the recent report, state Rep. Anne Donahue admitted that “some of the information is probably more synthesized and summarized than what we might have envisioned, and in that sense is perhaps a little less helpful than we might have hoped.”

The recent report, which identified 10 drug companies, included the following:

  • Mylan NV’s EpiPen Allergy Treatment
  • Sanofi SA’s Lantus Insulin
  • AbbVie Inc.’s Rheumatoid-Arthritis Treatment, Humira
Pricing Power; Image Courtesy of The Wall Street Journal,
Pricing Power; Image Courtesy of The Wall Street Journal,

So why the apparent lack of cooperation from drug manufacturers? Well, the industry itself has long lobbied against pricing proposals like the one enacted by Vermont. On top of that, many in the pharmaceutical industry claim that laws like the Vermont law “ignores cost savings that medicines can provide to the health system, and focuses too much on list prices.”

Clearly, there is still a lot of work to be done to improve pricing transparency and cooperation between state legislators and drug companies to keep drug prices from unnecessarily increasing. Until then, citizens can only hope that their medications remain affordable.


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