State laws trying to force drug price transparency come up short, study says

Drug prices
Even as states work to pass laws to force more transparency into drug pricing, new research finds the regulations are largely ineffective. (Getty/Tero Vesalainen)

Transparency in drug pricing sounds like a great idea, but a new study from the University of Southern California (USC) found almost none of the laws passed in an attempt to force transparency will do much good.

In fact, fewer than 5% of the drug pricing laws passed by states in the past few years would result in new information about drug pricing, according to the study by Neeraj Sood and Martha Ryan at USC’s Shaeffer Center for Health Policy & Economics, published in JAMA.

The problem is, the laws don’t go far enough in shedding light on the current opaque drug supply chain, Sood said. That is, while some of the laws require list price or some transaction pricing data, none require true transaction information at the drug level and none require it from every participant in the drug chain. The study identified pharma manufacturers, insurers, pharmacy benefit managers (PBMs), wholesalers and pharmacies as the five participants.

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“These laws are really not truly making the system more transparent. They’re really not helping us tell whose story is right—are the pharma companies right or are the wholesalers right or are the PBMs right? Look, it’s good that there’s some activity going on, but we haven’t solved the problem even with all these laws,” he said.

Sood and Ryan reviewed 166 drug pricing laws passed between 2015 and 2018 and found that 35 bills in 22 states included transparency mandates. Only seven of the laws were deemed informative, such as Maine’s law requiring drugmakers to report net prices and Oregon and Nevada laws forcing pharma to report profits.

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Of the less-effective laws, one key problem was compelling list-price disclosures. As Sood pointed out, not only is that information already readily available, list price is pretty disconnected from the real price patients pay, and it doesn’t reveal who’s making the profits and where.

That's an opinion shared by drugmakers, who in recent years have pointed the finger at PBMs and accused them of pocketing the discounts drug companies offer on their products. With the drug-pricing debate sparking ire from the public, many drugmakers have made a point to demonstrate that their net prices are actually falling.

Federal regulations that cover all states would be one way to address the disparate transparency, Sood said. However, those kinds of efforts to date have languished in committee on Capitol Hill or been rebuffed by lawmakers. Even the drug list price regulation for TV ads mandated by the Department of Health and Human Services (HHS) earlier this year has been shut down, blocked by a lawsuit and federal court ruling that the HHS did not have the authority to issue it. HHS is currently appealing that ruling.

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