Language in a 300-page Minnesota House commerce and energy omnibus spending bill would create a new state board that could challenge large increases in prescription drug prices.
Under the bill, the seven-member board could conduct a cost review if it identified high introductory prices for new drugs or sizable price hikes for existing drugs. And if pricing were considered unjustified or unaffordable, the board could set caps on how much patients and health plans would have to pay.
The language in the House bill, introduced as HF 801, is one of two pricing bills that emerged from a drug pricing advisory task force convened in 2019 by Attorney General Keith Ellison. The first bill — requiring drug companies to post drug prices and cost increases with the state Department of Health — passed last May with large, bipartisan majorities.
But that bipartisanship might have ended last spring. The bill to create the Prescription Drug Affordability Board lacks GOP sponsorship in the DFL-controlled state House, and the issue wasn’t heard in any committee in the Republican-controlled Senate this year. A similar bill introduced last year was also never heard, though it was introduced in the state Senate by then-Sen. Scott Jensen, R-Chaska, who co-chaired the Ellison task force.
Being included in the House commerce and energy omnibus means it will be a topic of discussion when House and Senate commerce and energy committee members meet to work out differences between the two versions of the large spending bill. But the prime sponsor of the drug affordability board said Friday she isn’t optimistic that it will pass in 2021.
“This bill is a work in progress, I would say, and I think there is momentum as people learn more about this concept,” said Rep. Kelly Morrison, a DFLer from Deephaven who is also a medical doctor. “There are a lot of Minnesotans who struggle to afford the medicine they need and there’s growing interest in figuring out ways to address that, and this is one of the ways.”
Last year’s bill was framed as a way to highlight drug prices, especially the type of drug prices that get headlines. During hearings in the House this session, patients told personal stories of needing drugs that cost $50,000 a year or even $250,000 a year.
“Part of the idea with the drug-price transparency act was both to educate the public and put some pressure on the industry to bring itself more into reasonable pricing norms, and I think this board could have a similar impact,” Morrison said.
That pricing information will be required starting in October, and the state Department of Health is to report on drug pricing to the Legislature next year. The board legislation would direct the new board to consider that and other pricing information to make determinations about whether prices are reasonable and affordable.
Six states have adopted drug pricing boards, though none have started setting price limits. Other states are considering them and the legislation is one of the model bills being advocated by the National Academy for State Health Policy, a policy and advocacy nonprofit.
How it would work
Under the language in the commerce and energy omnibus bill, each of the four legislative caucus leaders would appoint one member to the Prescription Drug Affordability Board; Gov. Tim Walz would appoint three. The appointees would be required to have expertise in pharmacy economics or health care economics and would be unpaid, though the board would have an executive director and other paid staff.
There would also be a 12-member advisory board that would include consumers, health plan administrators, pharmacists and drug manufacturers.
The seven-member board would receive the pricing information required by the 2020 law once it takes full effect in October. If prices exceed limits in the proposed bill, or if the prices would lead to affordability challenges for the state health care system, the board could order a review.
Drug pricing is complex, often involving discounts and rebates by drug makers and distributors, and patient assistance programs also help cover some of the cost for low-income and uninsured patients.
After taking these factors into consideration, the board would have to determine if the pricing is unaffordable and set an upper payment limit for the drug. If the drugmaker doesn’t comply, the issue would be referred to the state attorney general to take action against the manufacturer.
Morrison said she didn’t know how many drugs might be impacted by the process but said it would only be those at the top of the cost range, not most drugs used by patients.
Pushback from Republicans, PhRMA
Yet while the bill says “upper payment limit,” Republicans in the Legislature hear “price controls.”
Senate Health and Human Services Committee Chair Michelle Benson said price caps will cause drug manufacturers to stop selling those drug in Minnesota. The Ham Lake Republican said Canada uses a similar system, and the country has far fewer drugs available in the formularies that say which drugs are available for insurance reimbursement.
“It’s just not something that Republicans are going to support, having a government board limit access to life-saving drugs,” Benson said.
Rep. Barbara Haley, R-Red Wing, said during a hearing on HF 801 that while she is concerned about high drug prices, she thinks price controls by a state would be vulnerable to constitutional challenges under the U.S. Constitution’s commerce clause, which reserves the regulation of interstate commerce to the federal government.
Haley also said drug pricing involves more than drugmakers. It includes distributors, pharmacy benefit managers, health plans and insurers. “Although the intent of the bill is noble,” Haley said, “I don’t think it would do anything to address the supply chain challenges. That’s something that needs to be taken on at the federal level.”
Peter Fjelstad, a lobbyist with the drug manufacturer trade group PhRMA, told lawmakers the bill would make some drugs unavailable to patients and impact the amount of research and development drug makers do. He mentioned the work big drug companies did to hasten the development of treatments and vaccines for COVID-19 as examples.
Fjelstad also cited the impact on pricing of how health plans and states purchase drugs, and said price increases in prescription drugs have slowed over the last three years to levels that are less than general inflation.
Benson cited the state pricing transparency bill as one of many ways that drug companies are feeling pressure to keep price increases lower.
“It shames them in the behavior that we can do anything we want in this market and the insurance companies will just pay for,” Benson said of drug makers. “More market transparency is having the desired effect.”
Morrison agreed that if prices are stable, it’s most likely a result of the public and political pressure brought against drug makers. And she said the companies are touting their role in the pandemic as a way of improving their standing with the public and policymakers.
“This is not an attack on PhRMA,” Morrison said. “The pharmaceutical industry does a lot of good things. But sometimes they also take advantage of their position. I certainly hope that doesn’t happen down the road with the vaccines or any other medications. Making huge profits off sick people is not a great look.”