Examining State Drug Pricing Transparency Laws’ Impact on Supply Chain Transparency

A study published in JAMA Network Open found that most state drug pricing transparency laws in the US are insufficient to reveal true transaction prices across the entire supply chain, hindering policymakers' ability to target policy solutions. 

The cross-sectional study was conducted to analyze state drug pricing transparency laws in the US, which aim to increase transparency in the drug supply chain. The study aimed to assess the potential of these laws to improve transparency in the drug supply system, which address the gap on research surrounding state laws to enhance drug price transparency across the supply chain." 

Researchers examined US transparency laws on prescription drugs enacted between 2015 and 2018 via public data. They categorized each law based on which entity in the drug distribution system was required to provide information. They also evaluated if the laws revealed previously unavailable information on profits and transaction prices. Laws were labeled as informative if they provided new disclosure of this information and as uninformative if the reported information was already available from other sources. Data analysis was conducted from October 2018 to February 2019. 

Out of 166 drug pricing laws, only a small number included a transparency component. Researchers found only 7 laws in 6 states were considered informative regarding providing useful information on drug prices. Two states required the reporting of net prices, while only Oregon and Nevada required manufacturers to report profits. Other laws focused on aspects such as disclosure of pricing methodologies or advance notice of price increases. Most transparency laws targeted pharmacy benefit managers (PBMs) and insurers, with only 2 states targeting multiple segments of the drug supply chain. However, no state passed laws that provided a complete picture of transaction prices or profits across all segments. 

The complex pharmaceutical supply chain involving various commercial entities necessitates the revelation of real transaction prices to assess profits and distribution of rents, enabling regulators to address segments that generate excessive profits with appropriate policy solutions. 

“Despite many recent state laws about price transparency, we found that most of them were insufficient to reveal true transaction prices, and no state passed legislation that provided effective transparency across the entire supply chain,” said researchers.  

The authors recommended that policy makers should mandate the reporting of real price information, including discounts and rebates, by all supply chain participants for drugs that have the most impact on the state's budget or significant price increases to ensure effective drug price legislation. 

“If requiring such disclosure at the individual-drug level would invite legal challenge, states should at least require each supply chain segment to report aggregate profits from sales in that state,” said researchers.  

Reference  

Ryan MS, & Sood N. Analysis of state-level drug pricing transparency laws in the United States. JAMA Network Open. 2019;2(9), e1912104. doi:10.1001/jamanetworkopen.2019.12104