Vermont may be first state to require drugmakers explain price increases

Legislation waiting for the signature of Vermont’s governor would make the state the first to require pharmaceutical manufacturers to justify raising drug prices.

If signed, the bill would require state health care regulators to submit an annual list of 15 drugs that have either increased in price by 50 percent or more in the prior five years or 15 percent or more in the span of a single year. Using the list, the state’s attorney general would then ask manufacturers for a detailed explanation of the price change, including assigning percentages to how different factors contributed to the increased cost.

If companies don’t provide their justification, the legislation would allow the state to fine manufacturers up to $10,000.

Similar bills have been introduced in 2015 and 2016 in California, Massachusetts, New York, Pennsylvania and Virginia, but none were signed into law. Vermont’s lone member in the U.S. House, Rep. Peter Welch, D-Vt., said if state legislatures put pressure on companies to explain rising drug costs, Congress may follow suit.

“Why can't the state say to the pharmaceutical companies selling the drug, 'Hey, if you're going to hammer us with a 50 percent price increase, we want to know why,’" Welch said to the Associated Press.

The legislation is opposed by the Pharmaceutical Research and Manufacturers of America (PhRMA), arguing Vermont lawmakers should have focused on better access to out-of-pocket costs rather than “making a political point.”

“No patient should have to worry about whether they can afford the healthcare they need,” PhRMA spokesperson Priscilla VanderVeer said in a statement to HealthExec. “That is why it is so disappointing that Vermont lawmakers have passed legislation that accepts the false notion that spending on medicines is the primary driver of healthcare cost growth and ignored the cost savings that medicines provide to the healthcare system overall in the form of fewer physician visits, hospitalizations, surgeries and other preventable procedures.”

Beyond drug prices, the legislation would also require insurers offering plans on the state’s health benefit exchange to disclose their plans’ prescription drug formularies, including information on enrollee cost-sharing.