En español | Today, AARP endorsed new legislation that would hold drug companies more accountable for their pricing decisions. Thank you to Sens. Tammy Baldwin (D-Wis.) and John McCain (R-Ariz.) and Rep. Jan Schakowsky (D-Ill.) for introducing the bipartisan FAIR Drug Pricing Act of 2016 calling on drug companies to be more transparent in how they price their products.
As evidenced by the recent uproar over the lifesaving allergy drug EpiPen, exorbitant prescription drug prices and price increases have been all over the news lately. According to the latest AARP report, the average annual retail cost of widely used specialty prescription drugs was over more than $53,000 in 2013. Meanwhile, more and more people are using prescription drugs. Nearly 60 percent of Americans are taking at least one prescription drug regularly, and the average older American takes four drugs every month. These trends have helped push U.S. prescription drug spending to a record high of $425 billion in 2015, with expectations that such spending will surpass $600 billion by 2020.
The relentless increases in prescription drug prices and spending have not gone unnoticed by the public. Affordability is a growing concern as people face ever-increasing out-of-pocket costs for their medications. A 2015 AARP survey of the 50-plus population found that more than 80 percent believe that prescription drug prices are too high, and nearly 90 percent think it is important for politicians to support efforts to reduce prescription drug prices.
AARP believes one way to help address high prescription drug prices and spending is through improved price transparency. Drug manufacturers regularly justify their pricing decisions with the claim that it costs $2.6 billion to bring a new drug to market. However, there is no way to verify this figure. There is also no way of determining how much pharmaceutical companies actually invest in research and development activities. Improved access to such information could help consumers, payers and policymakers assess whether a drug price or price increase is reasonable.
Drug price transparency is also extremely popular with the public; 84 percent of older adults believe that drug companies should publicly explain how they price their products.
The FAIR Drug Pricing Act would require pharmaceutical companies to submit a justification report to the Department of Health and Human Services (HHS) for prescription drugs with a price increase that is more than 10 percent 30 days prior to the price increase’s becoming effective. The report would include a justification for each price increase that took place during the year, manufacturing costs for the drug, net profits attributable to the drug, marketing and advertising spending on the drug, among other information. HHS would make the information from the reports available online with appropriate protections for confidential and proprietary information.
The FAIR Drug Pricing Act represents a step in the right direction that would benefit everyone by shedding much-needed light on drug pricing decisions. We urge Congress to advance this important legislation.
Nancy LeaMond, chief advocacy and engagement officer and executive vice president of AARP for community, state and national affairs, leads government relations, advocacy and public education for AARP’s social change agenda. LeaMond also has responsibility for AARP’s state operation, which includes offices in all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands.
You can follow her on Twitter @NancyLeaMond.