Testimony: Recommendations on prescription drug prices program

3 weeks ago

Key Takeaways

The Prescription Drug Price Disclosure Program succeeds in amassing prescription drug prices in an easily accessible format and has the potential to leverage existing federal filings to improve price transparency information.
Compliance rates with the qualitative requirements of the statute are poor.
Clarity regarding the two reports and the data required of each of them can be improved.

Background and Data

The Legislature created Chapter 441 of the Health and Safety Code in 2019 to improve transparency around drug prices. The program, called the Prescription Drug Price Disclosure Program, is administered by DSHS and requires drug manufacturers to report information on drug costs, patents, and the reasons for certain price increases. While the program succeeds in gathering drug prices into an easily accessible format, compliance with the more qualitative components of statute is limited. Opportunities for improving the program can be roughly categorized into two areas: clarity and compliance.

Clarity

Chapter 441 requires the submission of two reports — the Wholesale Acquisition Cost (WAC) Report, which is submitted by all drug manufacturers for all drugs sold in the state, and the Price Increase Report, which applies only to drugs that cost more than $100 for a thirty day supply and have increased in price at least 15% in the preceding year or at least 40% in the preceding three years (we deem these “high cost drugs”).

When a high cost drug triggers the reporting requirement, manufacturers have to submit information to two separate reports. In the WAC Report, the manufacturer must include: company level research and development costs and the name of any drug that lost patent exclusivity in the previous three years. This provision dictates that the information be comparable in quality to that submitted to the SEC on an annual Form 10-k or other public disclosure. For those same high cost drugs, the manufacturer must submit a separate Price Increase Report that includes a statement on the factors causing the WAC increase. This leads to an unnecessary bifurcation of information that increases complexity and decreases the usefulness of the information submitted.

Compliance

Compliance with Chapter 441 can be improved. When substantive information regarding price increases is required by statute, manufacturers generally provide minimal additional comment. The charts below show examples of recent reporting compliance with elements of the PDPDP statute.

Emily prescription drugs testimony blog art
DSHS provides information on current disciplinary actions, which are taken after a manufacturer has the opportunity to correct the deficiency. Currently, 18 violations are alleged, with a majority of fines being $100 or $200. The violations fall into two categories: noncompliance with Texas Administrative Code 229.3, which outlines the fee requirement for report submission, and noncompliance with Ch 441.0051, which pertains to submission of the WAC report. To date, DSHS has not penalized a manufacturer for neglecting to submit substantive information on research and development or reasoning for high price increases.

Policy Recommendations

Addressing compliance issues and simplifying the requirements of statute will prompt submission of information in line with the intent of the PDPDP and will ultimately provide the transparency into drug pricing the Legislature has sought. To streamline and improve the program, the Legislature could:

Merge the Wholesale Acquisition Report and the Price Increase Report to improve cohesion and clarity.
Review manufacturers’ federal SEC 10-k filings for relevant transparency information and require direct linkages from the federal filings to the PDPDP.
Increase administrative penalties to encourage compliance, and make penalties for noncompliance mandatory rather than discretionary.

This written testimony was presented to the House Committee on Insurance on Sept. 5, 2024.