Health care costs are on the minds of many Californians, who see their insurance premiums and out of pocket expenses rising.
Unfortunately, as state legislators consider good-faith efforts to address the issue, one measure – Senate Bill 1010, which goes before the Assembly Health Committee on Tuesday – not only fails to protect affordability and access, it threatens to make matters worse.
Proponents of SB 1010 say the purpose of the bill is to lower costs driven by drug prices. They point to the mythical “$1,000 pill” and specialty drugs as the problem and say it’s time to bring drug pricing out of the shadows.
In a way, they are right. Unfortunately, they are looking under the wrong streetlight.
Here’s the secret proponents, including health insurance companies, don’t want you to know: For all the criticism of drug makers, most price increases have been offset by discounts, rebates and other payments by drug companies to pharmacy benefit managers and insurance companies. An April report by the IMS Institute for Healthcare Informatics shows that in 2015, drug price increases were offset by 77 percent to 81 percent.
Let’s be clear, these are dollars that pharmacy benefit managers and insurers keep instead of passing on to patients in lower prices or premiums. When given the choice of a lower price or a higher price with a rebate check, pharmacy benefit managers and insurers often choose the latter. The same report also shows that they continue to increase patients’ out-of- pocket costs. In fact, the insurance company Anthem has sued Express Scripts, a major pharmacy benefits manager, over sharing of these rebates.
While some legislators promote legislation that will give lawyers and accountants more work to do at the expense of research into new miracle medicines, health insurers and pharmacy benefit managers are laughing all the way to the bank.
To make matters worse, SB 1010’s “advance notice” provisions would, however unintentionally, aid the prescription medicine “gray market” of shady wholesalers and distributors. A 2012 report by Congress found that the gray market took advantage of the national drug shortage to “charge exorbitant prices for drugs used to treat cancer and other life-threatening conditions.”
Also, patient health and safety can be put at risk. A 2009 FDA investigation determined that improper handling by gray marketers had caused diabetes medicines to lose their potency. There have also been reports of vendors selling adulterated or diluted medicines.
Quite simply, while rising health care costs are a concern for many Californians, drug prices aren’t the problem and SB 1010 is the wrong prescription.
Despite its promises of reform, SB 1010 will do nothing to promote patient access and affordability. It ignores insurer and pharmacy benefit manager practices that bolster their bottom lines and shift costs to patients. And it actually threatens to result in cost increases and stockpiling that put at risk the most vulnerable Californians.
The Legislature should reject SB 1010 and address the real problems.
Sara Radcliffe is president and CEO of the California Life Sciences Association, a nonprofit public policy organization that represents pharmaceutical and biotechnology companies and research institutions. She can be contacted at sradcliffe@CALifeSciences.org.