Public Health Committee

JOINT FAVORABLE REPORT

Bill No.:

SB-442

Title:

AN ACT CLARIFYING THE RIGHT TO ENFORCE ANTITRUST LAWS.

Vote Date:

3/27/2017

Vote Action:

Joint Favorable

PH Date:

3/7/2017

File No.:

SPONSORS OF BILL:

Public Health Committee

REASONS FOR BILL:

This bill specifies that in any antitrust actions against sellers or distributers of pharmaceutical drugs or medical devices, the defendant:

1. may not assert a defense that the company did not deal directly with the person on whose behalf the case was brought and

2. to avoid duplicative liability, may prove, as a partial or complete defense, that any or part of an alleged overcharge was passed on by someone else in the manufacturing chain.

RESPONSE FROM ADMINISTRATION/AGENCY:

George Jepsen, Attorney General, State of Connecticut:

Attorney General Jepsen submitted testimony expressing concern that SB 442, which would amend the General Statutes “to make predatory pricing of pharmaceuticals an unfair trade practice,” would be difficult to implement and enforce.

Identifying particular prices as “predatory” would be difficult because no federal or Connecticut law regulates prescription drug prices. When drug pricing is opaque and different consumers and health plans pay different prices for the same prescription drugs, regulating these drugs in an arbitrary manner could have unintended consequences, including drug shortages causes by manufacturers who exit the Connecticut market out of fear or uncertainty about what conduct they might be subject to civil liability.

The Attorney General argues that the only proven way to put downward pressure on drug prices is competition from generic drugs. Branded drug manufacturers, however, have aggressively proclaimed patent infringement and other questionable legal claims to prevent competition from generic drug companies. Additionally, an investigation by the Attorney General's Office revealed that some generic drug companies have participated in illegal price-fixing schemes which suppresses competition from other generic drug firms.

The Attorney General is asking the Public Health Committee to pass legislation allowing the Attorney General's Office to assert claims for damages on behalf of Connecticut consumers who are “indirect purchasers” of drugs, medicines and medical devices against manufacturers who violate the state's antitrust laws.

Senator Len Fasano:

Senator Fasano submitted testimony in support of SB 442, stating that the legislation is necessary when pharmaceutical costs account for 10% of total health care spending. Spending on prescription drugs increases 20% between 2013 and 2015, including egregious examples like the cost of EpiPens rising from $57 to over $500 and the price of cancer and AIDS medication Daraprim rising from $13,50 to $750 in one year.

The structure of the pharmaceutical market, which operates on a system of patents and subsidies that support research, innovation and the development of drugs, makes knowing the true price of a particular drug nearly impossible and artificially stifles competition and fosters monopolies. Robust anti-trust laws are needed to remedy these market abuses not only to protect consumers harmed by anticompetitive market behavior but also other pharmaceutical manufacturers who are put at a competitive disadvantage by these practices. While passing SB 442 may have unintended consequences, Connecticut should join the majority of states that have amended their anti-trust laws to allow the state and consumers, as indirect purchasers, to bring anti-trust actions against drug manufacturers who engage in price fixing and other anti-competitive practices. This clarification is necessary in the pharmaceutical market where consumers are almost never direct purchasers but typically buy through pharmacies, pharmacy benefit managers and other middle men. Price fixing and other illegal schemes inflate the price of drugs, ultimately passing the cost onto the consumer.

Senator Martin Looney:

Senator Looney supports SB 442 to increase the ability of the Attorney General to regulate abusive pricing of pharmaceuticals. This authority would be augmented through the passage of an “Illinois Brick Repealer,” which would make predatory pricing a Connecticut Unfair Trade Practice Act (CUPTA) violation and grant standing to indirect purchasers of pharmaceuticals in anti-trust cases.

NATURE AND SOURCES OF SUPPORT:

Jill Zorn, Senior Policy Officer, Universal Health Care Foundation of Connecticut:

The Universal Health Care Foundation of Connecticut submitted testimony in support of SB 442 stating that prescription drug prices for both new specialty medications and generic drugs are rising at a trend where consumers are paying many times over for the drug they consume. This is because the high price of drugs is reflective of the following: 1) taxpayer dollars contribute to pharmaceutical research and development; 2) patents awarded by the federal government to new drugs allow for a legally protected monopoly with no pricing oversight; 3) Medicare, Medicaid and health insurance premiums pay for prescription drugs which could lead to higher prices; and 4) consumers pay again for their drugs at the pharmacy with co-pays, deductibles, and co-insurance.

Drug companies, permitted to charge whatever price the market dictates, are granted brand name exclusivity and are almost totally exempt from regulatory oversight, reducing the power of competition to keep prices down. SB 442 will hold drug companies accountable to the public and prevent predatory pricing.

AARP Connecticut:

AARP Connecticut supports the bill citing the fact that the average older American has an average annual medication cost of $26,000, which exceeds the median income for Medicare beneficiaries ($24,150). In addition, the Government Accountability Office recently reported that over 300 generic drugs have had price increases of more than 100% between 2010 and 2015. When three-fourths of Americans over the age of 50 take a prescription drugs on a regular basis for chronic conditions, high drug prices affects them for the rest of their lives.

High drug prices also affect all Americans in some way. High prices are passed along to everyone with health coverage in the form of higher premiums, deductibles and other forms of cost sharing. In addition, high drug prices increase the costs of programs like Medicare and Medicaid. Higher prescription drug costs are not sustainable for patients, employers or taxpayers.

Tom Swan, Executive Director, Connecticut Citizen Action Group:

The Connecticut Citizen Action Group (CCAG) supports SB 442 in response to pharmaceutical drug costs growing faster than any other part of the health care system, ultimately harming patients. CCAG also supports the efforts by Attorney General Jepsen to expose generic drug makers as acting unethically by charging exorbitant prices to patients.

Dr. Lynn Rapsilber, Chair, Coalition of Advanced Practice Nurses:

The Coalition of Advanced Practice Nurses supports the bill stating that high prescription drug prices force consumers to be at the mercy of picking an insurance plan based on the medication they may consume and hope they choose wisely.

Peter Maybarduk, Access to Medicines Director, Public Citizen:

Public Citizens supports the bill in response to the fact that Americans pay the highest pharmaceutical prices in the world ($457 billion in 2015) and sometimes go without treatment because the medicine they need is unaffordable. Free from competition and any substantial limits on price, drug companies can charge as much as consumers can pay. As a result, families suffer from bankruptcy, high insurance premiums and preventable suffering and death.

Ted Lee, Senior Fellow, Global Health Justice Practicum:

Mr. Lee submitted testimony in support of the bill, stating that significant price increase in generic and brand name pharmaceuticals are threatening the long-term stability of the health care system, draining state budgets and harming patients in Connecticut.

Legislation prohibiting predatory pricing of prescription drugs is necessary to improve patient access to important drugs and help reduce health care spending in Connecticut.

Connecticut State Medical Society:

The Connecticut State Medical Society supports SB 442 and its intention to bring transparency to drug pricing and prohibit unwarranted increases of prescription drugs. While national headlines focus on drug price hikes on HIV medication and EpiPens, many common, everyday medications have also been affected by price increases including antibiotics, asthma and acne medications.

Ellen Andrews, PhD, Executive Director, Connecticut Health Policy Project:

The Connecticut Health Policy Project supports the bill citing that the US spent $858 per capita on drugs compared to $400 average for 19 other industrialized nations. Pharmaceutical companies are granted monopolies and exclusive markets for their products but face no regulations on pricing.

The following organizations and individuals support SB 442 as a means to address the rising costs of pharmaceutical drugs:

The Connecticut Society of Eye Physicians

ENT Society

Connecticut Urology Society

Dr. Stephen Smith

Eamon Duffy, medical student, Yale School of Medicine

Dr. Kasia Lipska, Yale School of Medicine

Dr. King Luo, Harvard Medical School

NATURE AND SOURCES OF OPPOSITION:

The Pharmaceutical Research and Manufacturers of America (PhRMA):

PhRMA opposes SB 442 stating that price controls and arbitrary caps on drug prices will not help patients and could threaten access to needed prescription medications and the innovation of future treatments. Medicine is not the primary driver of health care costs; in fact, medicines lead to fewer physician visits, hospitalizations, surgeries and other preventable procedures which translate to lower heath care costs. Other stakeholders responsible for the rise of health care costs that the bill does not address are insurers, pharmacy benefit managers, wholesalers and government entities like Medicaid.

Medicine is the only part of the health care system where costs decrease over time because of competition brand name drugs face from generics, which represent nearly 90% of all medicine dispensed in the US. However health insurance and plan administration costs are still rising at more than twice the rate of drug spending. In 2013, Americans spent more than $200 billion to support insurance administrative costs. Because the number of plans with medicine deductibles has doubled in recent years, a patient today pays 20% or more out-of-pocket for their medicine.

Efforts to jeopardize the patent rewards drug manufacturers receive for the substantial risks they take to bring a new drug to market – a recent study notes that it costs more than $2.6 billion to research and develop a new drug – will discourage investment in drug companies and could risk patient access to new medicines and cures.

Paul R. Pescatello, Senior Counsel and Executive Director, Connecticut Bioscience Growth Council:

The Bioscience Growth Council opposes SB 442 stating that consumers and patients would be better served if the bill took a broader approach that addressed the cost of overall healthcare. Prescription drugs comprise 10 to 15% of overall healthcare spending, a relatively small share. To decrease healthcare spending, the value and efficiency of healthcare delivery must be assessed.

Another reason to oppose the bill's drug regulations is that medicines, contrary to belief, add value and lower overall healthcare costs. Cutting-edge medicines are labeled “expensive” but in fact are bargains compared to the disease management costs, hospitalizations, outpatient and in-homer nursing care they replace. These successful drugs are the result of research and development which takes 12 years and $2.6 billion to go from research through clinical trials and FDA approval to pharmacy shelves. If pharmaceutical companies are to continue to make big investments in research and development, they must be confident they can recoup the costs of unsuccessful drugs they attempt to develop.

The small number of medicines whose prices have risen dramatically have all been “off-patent,” meaning other manufacturers can make generic or biosimilar copies, Unfortunately, the FDA takes three years to process generic drug production applications, preventing the market from working more efficiently and allowing more generic competitors to enter. Thus, egregious price increases are also the result of misguided federal regulation.

Reported by: Andres J. Feijoo

Date: 4/6/2017