Is that clear?

How Vermont's drug price transparency law could pave the way for price controls

The pharmaceutical cost transparency law recently enacted in Vermont and similar bills pending in other states are part of a loosely coordinated effort to pressure Congress to impose drug price controls.

The bills reflect a political consensus that drug prices and price increases are unreasonable, are limiting access by individual patients and are threatening the financial stability of the healthcare system.

Most of the bills are predicated on the idea that exposing the profit margins for high-priced drugs will fuel demands for federal action. The next president and Congress will consider a wide range of drug cost-containment proposals, including imposing new cost, value and price transparency requirements, but it is not possible to predict what measures will attract enough support to be translated into action.

In the meantime, action is shifting to state legislatures. Vermont Gov. Peter Shumlin signed S.216 on June 3, making Vermont the first state to enact a pharmaceutical price transparency law.

S.216 does not specifically require disclosure of R&D and other costs of developing, manufacturing and selling drugs. The law requires companies to justify price increases for some drugs and gives the state attorney general discretion to request data on those costs as part of the companies' explanations.

Bills pending in several other states seek to require more explicit disclosures of R&D, marketing and other costs on a per-drug basis. One would directly tie cost and pricing disclosures to state price controls, and state bills that expired this year without legislative action sought to require disclosure of net prices and prices charged outside the U.S. (see "Transparency Provisions").

Transparency proponents argue the public has a right to know how manufacturers set prices, how much it costs industry to create drugs, how companies spend revenues - especially revenues from government purchases - and the reasons for price increases.

Biopharmaceutical companies counter that the data sought in

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