Members of the state Senate are seeking to control the cost of pharmaceuticals that have been developed with the help of any public funding. They propose to do this by pegging drug prices in New Jersey to those charged in other industrial countries.
The measure, introduced by Sen. Troy Singleton (D-Burlington) takes a page from legislation introduced in the U.S Senate last year by former presidential candidate and U.S. Sen. Bernie Sanders (I-VT), to use the lowest prices that drug companies charge countries of similar economic circumstances as the benchmark for drug costs in America. Singleton’s measure passed the state Senate Health and Human Services Committee last week.
While the Sanders bill — which would have impacted pharmacy costs nationwide — failed to advance, Singleton is seeking to use a similar mechanism to reduce the impact on New Jersey consumers. A review by the New Jersey Office of Legislative Services is pending to determine how the legislation would apply to products made in, or funded by, other states.
Singleton’s bill would regulate all drugs, biologic formulations, and healthcare technology that are approved by the federal Food and Drug Administration and developed, entirely or partially, with research and development that was directly or indirectly supported by federal or state governments.
“No one should have to live in fear that they will go bankrupt if they get sick,” said Singleton, who has championed measures to increase the transparency of pharmaceutical pricing in general. “This proposal recognizes the public investment that taxpayers put into the development of prescription drugs, and reins in the excessive pricing that too often forces people to go without their medication because it’s unaffordable.”
Pharmaceutical industry doesn’t like it
But representatives of the pharmaceutical industry testified that the measure — which they said essentially created price controls — would put a damper on the state’s economy and curb biotech innovation, changes that could harm consumers more than they help.
The cost of this innovation is significant and depends on public funding for success, according to BioNJ, the trade association for life sciences research; in fact, the 3,200 life-sciences organizations in New Jersey depend heavily on this funding for early research. For each novel therapy approved it requires an investment of at least $2 billion on average and a decade of work, the group said.
“Price controls, whether applied to drugs or other goods, historically do not work and have unintended negative consequences such as leading ultimately and ironically to higher prices and restricted access,” said BioNJ president and CEO Debbie Hart.
Recent polls have shown as many as three in four voters consider prescription costs to be too high and even more — 78 percent — place much of the blame on the desire of drug companies to make a profit, according to a Kaiser Family Foundation poll conducted in early September. The KFF survey also showed that the topic of drug prices is a major issue in the upcoming mid-term elections.
Big issue between Menendez and Hugin
The issue has certainly come front and center in New Jersey, thanks to the heated battle between U.S. Sen. Robert Menendez (D-NJ) and Republican challenger Bob Hugin, who recently retired as head of Celgene, which sells Revlimid, a common chemotherapy drug that has risen significantly in cost in past years.
Menendez has championed several efforts to curb these price hikes, including the Know the Lowest Price Act, which would increase the transparency of drug pricing; the measure passed both houses of Congress and awaits the signature of President Donald Trump, who also pledged to tackle these cost hikes during his campaign.
Prescription drug costs have become an increasing burden nationwide on individuals, health insurance companies and taxpayers, who pay a large share of healthcare costs for public workers. These costs are now growing at 6.3 percent annually — faster than inflation — according to West Health, a nonprofit research organization advocating for reform. They account for $1 in every $6 spent on Medicare.
New Jersey was spending nearly $2 billion annually to cover the cost of medicines for public workers in state, local and school governments, but has managed to curb these costs significantly through the use of a new pharmacy-benefit management system launched last year. Officials expect the change can save as much as $350 million a year. (Hart, with BioNJ, said pharmacy managers and insurance companies are the real forces shaping prescription prices.)
A report from staff for Democratic members of the U.S. House Committee on Oversight and Government Reform, published in May, showed that 16 of the 20 best-selling medicines rose “significantly” in price between December 2016 and March 2018. In addition, 12 of the 20 most expensive drugs covered by Medicare went up in price.
Double-digit price increases for NJ-based drugmakers
In addition, the Democrats’ research showed that eight of the nine most popular products made by the nation’s three largest drugmakers, Pfizer, Merck and Johnson & Johnson — all New Jersey based — increased during that time, seven of them by double digits. These included Pfizer’s Lyrica, which rose 29.2 percent; Merck’s Januvia, which increased 18.1 percent; Xarelto, made in Belgium by Janssen, a J&J company, went up 16.5 percent.
To limit these price hikes, Singleton’s bill (S-977) would make it unlawful to sell or advertise the sale of FDA-approved medicines and products developed with public funds at a price above the new benchmark.
The benchmark would correlate to the lowest price the drugmaker charges certain other industrialized countries that are part of the Organization for Economic Co-Operation and Development, an international coalition of 36 nations in Europe, Asia and South America, most of which have some form of nationalized healthcare.
Just as with the Sanders proposal, the Singleton bill pegs the costs to those paid by OECD member countries with the largest gross domestic product and a per-capita income not less than half of that of the United States. (This designation would eliminate member nations like Chile, Mexico and Latvia from the benchmarking formula.)
While the bill, first introduced in January, does not specify exactly how these figures would be used to establish New Jersey’s price parameters, the legislation was amended to require the state Department of Health to draft regulations governing the process. The DOH can also waive the price controls for any specific drug if it is deemed to be in the public interest.
Another amendment made clear that news media and other publishers would not be liable for publicizing prices that may be unlawful under the act. Singleton’s legislation now heads to the Senate Budget Committee for further review; currently there is no Assembly companion to the measure.