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Oregon Lawmakers Seek To Curtail Soaring Pharmaceutical Prices

But they face drug industry opposition as they consider bills to make generic drugs more available, limit out-of-pocket insulin costs and set price limits on expensive drugs.
March 31, 2021

When Oregon lawmakers passed a bill in 2018 that required pharmaceutical companies to disclose prices of drugs, the drug industry fought it hard. 

This session, the Legislature is weighing pharmaceutical bills that go well beyond disclosures and transparency. Lawmakers want to directly control drug prices and squarely address the price of prescriptions that can add stress to families already weighed down with health and financial challenges. 

Lawmakers are considering bills to limit out-of-pocket costs for insulin and establish a board that would put price limits on expensive drugs. Cheaper drugs are in the mix too. There’s a bill to forbid legal agreements that delay the entry of generic drugs into the Oregon marketplace. Another bill would require pharmaceutical sales representatives to register with the state.

In their totality, the bills take aim at pharmaceutical costs, a significant element in ever-rising health care costs. Pharmaceutical spending in Oregon accounts for about 11% of overall health care costs in the state, according to the 2020 Oregon Prescription Drug Price Transparency report. The report estimates the Oregon Health Authority alone spent $1.2 billion on prescription drugs in 2013-2015 through its programs, including Medicaid and benefits for government employees and public school teachers through the Oregon Educators Benefit Board and Public Employees Benefit Board.

The bills have sparked heavy opposition from the pharmaceutical industry and strong support from advocates and health care providers. The wild card this session: COVID-19 put a spotlight on health care costs and inequities in the system. If anything, that will likely increase momentum for the proposals.

Here’s a look at the bills that would change Oregon’s pharmaceutical industry:

Prescription Drug Affordability Board 

Oregon may get a board charged with setting price ceilings on the most expensive drugs in the state. The proposed prescription drug affordability board, outlined in Senate Bill 844, would put a new system in place to review the prices of high-cost prescription drugs and set price limits after hearing information from manufacturers and consumers. 

Separate from the board, the bill would create a council of up to 23 members to provide input to the board. The council would have representatives from entities including consumer advocacy groups, hospitals, insurers, drug manufacturers and coordinated care organizations, which manage Oregon’s 1.2 million Medicaid members. 

The board would pick prescription drugs to review based on prices that wholesalers pay the manufacturers before distribution to providers and pharmacies. For example, a brand-name drug with a wholesale acquisition price of $3,000 or more for up to a year of treatment would qualify for a board review. 

Generic drugs with a wholesale cost of more than $100 for up to a 30-day supply would also get reviewed. 

The board would review pricing information from the Oregon Department of Consumer and Business Services and consider the average patient cost for the drug as well as information from the manufacturer about prices, managing the supply and market competition.

If the board determined the product were unaffordable for health systems or patients, it could set an upper payment limit. The limit would apply to all sales to insurers, pharmacy benefit managers and other entities that pay for or reimburse others for the cost of prescription drugs. However, the bill allows payers to opt out of the limit set by the state if they want to negotiate directly with the manufacturer and seek a better deal. 

The bill also prohibits health care providers from billing patients beyond the limit.

The bill also would allow the Oregon attorney general to take violators to court to get an injunction to stop overbilling. 

The bill has a wide range of supporters, including consumer advocacy groups and insurers, and detractors, including the pharmaceutical industry. 

PacificSource Community Solutions, the coordinated care organization insuring Medicaid members in central Oregon, the Columbia Gorge, and Marion, Polk and Lane counties, supports the legislation. 

“Currently, pharmaceutical companies are free to raise the cost of drugs at any time without notice,” Richard Blackwell, director of Oregon government relations for PacificSource, said in testimony to lawmakers. 

Blackwell noted that pharmaceutical companies are not regulated by the state’s sustainable health care cost growth cap plan. That program, established by Senate Bill 889 in 2019, aims to cap the increase in per-capita health care costs at 3.4% annually, cutting the current growth rate in half. The program covers health care providers and insurers.

But that state law doesn’t cap price hikes from pharmaceutical companies.

“Drug companies use all this to their advantage, forcing insurers and other purchasers to accept price increases,” Blackwell said. “As a result, insured members and employer group plans pick up the tab for these cost increases through increased premiums and copays.”

The top five most expensive prescription drugs ranged from $23,000 to $43,000 per prescription, according to Oregon’s 2020 prescription drug transparency report. The priciest drugs typically are for relatively rare illnesses that are severe or fatal and hard to treat.

Oregon State Public Interest Research Group, a consumer advocacy group, urged lawmakers to consider the high cost of prescriptions. 

“Prescription drugs can be life-changing for those that need them,” said Maribeth Guarino, health care advocate for OSPIRG. 

But PhRMA, the Pharmaceutical Research and Manufacturers of America, said the bill could lead to shortages for patients if providers or pharmacies cannot find prescription drugs at the government-set prices. The bill doesn’t require pharmaceutical companies to sell the drugs at or below the price ceiling.

PhRMA listed other concerns, saying the bill requires manufacturers to disclose sensitive information and discourages innovation.

PhRMA also encouraged lawmakers to look at the entire chain that a prescription drug product travels before it’s in the patient’s hands, saying the bill “ singles out the biopharmaceutical industry and ignores the variety of stakeholders involved in determining what consumers ultimately pay for a medicine.” That group includes insurance company pharmacy benefit managers, wholesalers and the government, the group said.

“The important role that these entities play in determining drug coverage and patient out-of-pocket costs is overlooked by the requirements of this legislation,” PhRMA wrote in a letter to lawmakers. “For example, PBMs and payers — which dictate the terms of coverage for medicines and the amount a patient ultimately pays — negotiate substantial rebates and discounts (from manufacturers), but do not share these savings with patients.”

The bill is in the Senate Health Care Committee and could get a vote as soon as Monday. 

Maryland and Maine have passed similar legislation in 2019. Since then, more than a dozen other states have considered laws to establish boards that set price limits.

‘Pay To Delay’

State lawmakers may retool how generic drugs enter the market. Senate Bill 764 is an attempt to end the deals in which brand-name manufacturers reach deals for generic drug makers to postpone releasing new generics into the market. The bill would ban that practice, called “pay to delay.” 

Consumer advocates say the measure would help consumers get access to affordable, generic prescriptions. Price differences are wide. For generic drugs, the most expensive prescriptions ranged from $1,200 to $2,800, a fraction of the cost of expensive brand-name drugs. The prescriptions can cover a range of complex health conditions such as viral infections, cancer and others.

“SB 764 does nothing more than prevent brand name manufacturers from establishing a monopoly on life-saving medications by paying other companies to stay out of the market,” said Charlie Fisher, director of OSPIRG.

But the pharmaceutical industry says the bill would damage the process in which generic drug makers enter into agreements with brand-name companies, who hold patents on their exclusive products. Those patents prohibit rival generic products from being manufactured for a set number of years.

If a generic drug maker wants its product to enter the market before a patent expires, the generic maker sues the name-brand competitor. In those cases, settlements determine when a generic drug is released. 

These settlements are a valuable tool to bring generic drugs to market sooner, said Brett Michelin, senior director of state government affairs at the Association for Accessible Medicines, which represents generic drug companies. 

Michelin said the bill wrongly makes the presumption that every single settlement is problematic. 

“It’s a presumption that every single settlement is anti-competitive,” he said in an interview. “That’s the largest problem with the bill.”

The Federal Trade Commission reviews the settlement agreements between generic and brand-name drug companies for fairness.

Under the bill, Oregon courts could determine if a generic manufacturer had accepted payment in order to delay making and selling a drug, and if this had an anticompetitive effect. The attorney general could seek substantial financial penalties on the generic manufacturer.

That would add a layer of state-level complexity to a process that already unfolds on the federal level, Michelin said.

The bill faces a vote in the Senate Health Care Committee.

Insulin Cost Caps 

House Bill 2623 would cap costs for insulin used to treat people with diabetes, an illness that affects hundreds of thousands of Oregonians. The bill would limit insurers from charging patients more than $75 a month in out-of-pocket costs for insulin, or $225 for a three-month period. 

Rep. Sheri Schouten, D-Beaverton and the bill sponsor, said diabetics are forced to make tough choices as they try to balance the cost of the medicine, which regulates their blood sugar, with other living expenses. A vial of insulin can cost $200 a month or more, even with some insurance plans, Schouten said, adding “for many, $75 is still a heavy lift.”

Insulin is critical to keep long-term complications of diabetes in check, including problems with the heart and kidneys. Without insulin, avoidable problems crop up. 

“This can lead to expensive and unnecessary hospitalizations,” Schouten said in a recent hearing.

More than 435,000 adult Oregonians were diagnosed with diabetes as of 2018, according to state data. Another 100,000 people in the state likely have diabetes but don’t know it.

Salem Health Hospitals & Clinics urged lawmakers to support the legislation.

“When insulin prices become unaffordable, individuals and their families suffer, and are forced to make impossible choices,” Dr. Ralph Yates, chief medical officer of Salem Health, wrote to lawmakers. “Efforts to prevent diabetes and properly support those living with diabetes are essential to the health and well-being of our community.”

At least 15 states have passed insulin price caps, including Washington state, where Gov. Jay Inslee signed a bill in 2020 capping insulin copayments at $100 for a 30-day supply. That law also requires the Washington Health Care Authority to monitor the wholesale price of insulin sold in that state, according to the American Diabetes Association.

A similar bill in Oregon passed out of the House Health Care Committee and lower chamber in the 2020 session, but died with most other bills during the Republican-led walkout to kill an unrelated carbon tax bill. 

Pharmaceutical sales representatives 

Senate Bill 763 would require pharmaceutical sales representatives who sell products to health care providers to register with the Oregon Department of Consumer and Business Services. 

Supporters want the bill as a tool to regulate the system that markets prescription drugs. A review of medical marketing in the United States from 1997 to 2016 found that the industry spent $20.3 billion in marketing in 2016. Of that, its largest share, about $18.5 billion, went towards marketing directed at health care professionals and on free samples. 

Kaiser Permanente and consumer advocates support the bill.

“The pharmaceutical industry devotes substantial resources to marketing because it is an effective tool for selling more drugs,” Dr. Sean Jones of Kaiser Permanente wrote in submitted testimony. “But marketing goals can conflict with what’s best for patients. … Indeed, the goal of pharmaceutical marketing is to increase revenue on the drug, which can create incentives to divert from the evidence to drive-up sales or promote higher price drugs when more affordable, equally effective options are available.”

Jones said Kaiser Permanente limits the access of sales representatives to Kaiser’s clinicians and facilities, focusing instead on education from in-house physicians and pharmacists who are familiar with the products. 

However, PhRMA opposes the bill, saying it duplicates requirements that exist in federal law and give the public even more information. For example, the Physician Payments Sunshine Act, part of the Affordable Care Act, requires prescription drug manufacturers to annually report payments to physicians and teaching hospitals, the group said in its statement to lawmakers. That requirement includes other disclosures, including meals and travel that physicians receive from pharmaceutical companies. That can include items like food and drink during training events. Those payments are on a searchable public website.

“SB 763 is unnecessary, as pharmaceutical representatives and marketing practices are broadly regulated by the federal government in a number of ways,” PhRMA wrote lawmakers.

The trade group added that its ethics code on interaction with health care providers only allows items of $100 or less that aid the education of health care providers and their patients.

Federal anti-kickback laws also prohibit quid pro quo deals between pharmaceutical companies and providers, the group said.

You can reach Ben Botkin at [email protected] or via Twitter @BenBotkin1.