MedTech Opposes the State’s Attempt to Establish Price Caps for Pharmaceuticals

Tuesday, February 2, 2016

MEMORANDUM OF OPPOSITION
Section 5, Part B
Health and Mental Hygiene Article VII Legislation
In relation to the setting of price ceilings for new high cost blockbuster drugs as determined by the State

New York is among the top tier of states in the size of its bioscience industry, and the scale and reach of its bioscience research complex, employing nearly 75,000 in the biosciences. The Bio/Med industry also plays a vital role in New York's economy supporting more than 205,000 jobs across all industries statewide and contributing $62.6 billion toward Gross State Product (includes direct, indirect and induced impacts). As of 2012, the average bioscience wage in New York was $72,000, approximately $30,000 more per year that the average private sector wage.

Statement of Opposition

MedTech opposes the State’s attempt to establish price caps for pharmaceuticals.

The proposal circumvents the market place, threatens access to essential products for Medicaid enrollees and sends a mixed message to companies harnessing the promise of scientific advances to improve health care which will ultimately drive research, development and manufacturing activities outside of the State leading to a loss of New York State jobs. New York based pharmaceutical companies have invested significant resources in capital and job creation throughout New York State including Western New York, Long Island, the Syracuse area and in particular the lower Hudson Valley. The proposal will send a destabilizing message to the pharmaceutical market place undermining current and potential investment in the State.

Cutting edge research and scientific discoveries are now translating into new therapies to treat some of the most costly and challenging disease states including cancer, lupus and infectious diseases. Many of these therapies frequently work with the body’s immunological system to identify and defend against otherwise unrecognized harmful agents such as cancer cells. These therapies, known as “biologics”, are complex agents and challenging to manufacture. A number of biologics are currently manufactured here in New York and the pipeline and corresponding investment for new therapies is significant. Bringing pharmaceuticals to the market place is costly and the majority of promising agents fail in the development process, 88 percent of clinical drug trials fail and a developed drug takes on average 10 years. All told, pharmaceutical companies spent $51 billion on research and development in 2014.

Within this robust market, the State is not in the best position to determine what is the appropriate price for breakthrough pharmaceuticals based on what it deems is “value” and based on that assessment the State will place a ceiling price for purposes of the Medicaid program. This would be an unprecedented intervention into the private marketplace by a state. Moreover, we note that the State will be acting as a purchaser like any other health plan in its role of operating the Medicaid program and as such, the State’s objectivity in making a determination on what constitutes appropriate value is doubtful at best. It is unclear how the State will evaluate the majority of trials which fail, the value of extending and saving lives and improvements in outcomes. We note that in the United Kingdom where government exercises similar market control, 80 percent of cancer medicines received some form of access restriction and in 2013 the government rejected all six new cancer medications that it reviewed.

The proposal is not only a governmental insertion into the private market but also requires pharmaceutical companies to provide the State with highly sensitive, confidential and proprietary information including: research and development costs including payments to universities, medical schools and other third parties, administrative and marketing costs, prices charged to other purchasers, clinical information, profit information, rebates and discounts provided to other payors, all of which is critically valuable proprietary information. The State’s Freedom of Information Law does not offer any guarantee that the information would be exempt from disclosure as that determination is made after the information has been submitted and the State receives a request for the information. Moreover, the proposal seems to only treat a limited amount of information as confidential: “All information disclosed … is confidential and shall not be disclosed by the department or its actuary in a form that discloses the identity of a specific manufacturer, or prices charged for drugs by such manufacturer, except as the commissioner determines is necessary to carry out the provisions of this section…” (emphasis added.) Considering the highly sensitive nature of such information, it is foreseeable that companies may respond by declining to provide the information which may restrict access to innovative therapies for Medicaid recipients. The ability of the State to routinely request such highly sensitive commercial information for its own commercial purposes also sets an ominous precedent.

The Medicaid program has numerous and less intrusive mechanisms right now under federal and state law and the activity of private market participants to properly address purchasing of life saving pharmaceuticals. Under federal law, pharmaceutical manufacturers pay a rebate of 23.1% of average manufacturer’s price1. Federal law also requires that any best price achieved by any market purchaser is extended to the Medicaid program. Federal law also protects against price increases greater than the consumer price index and imposes an additional rebate for any increase greater than that amount. The State has also created a preferred drug list and has imposed access barriers to many pharmaceuticals largely on the basis of price.
Additionally, the State relies on managed care companies to administer the Medicaid program. Like the State, health plans utilize preferred drug lists and leverage the purchasing power of pharmaceutical benefit managers, the two largest of which cover 90 million and 85 million lives, respectively. In comparison, the State’s total population is approximately 20 million and the State’s Medicaid population is approximately 5 million. Managed care plans also impose access barriers to pharmaceuticals by excluding drugs from their formularies and requiring prior approval from a prescriber. Finally, the State enjoys the robust competition in the pharmaceutical sector itself. The drive to discover and bring to market innovative products increases competition, drives down total health care costs and improves outcomes.

For all of the above reasons, MedTech requests your opposition to State price controls for pharmaceuticals.

For additional information please contact Jessica Crawford, President of MedTech at 315-423-7200 or jcrawford@medtech.org.

About MedTech

MedTech is a trade association which connects New York State’s bioscience and medical technology (Bio/Med) industry through collaboration, education and advocacy. We are an active association of over 100 pharmaceutical, biotech and medical technology companies, their suppliers and service providers and research universities in New York State. For over 10 years we have boosted the success and growth of our members and the New York Bio/Med industry.

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