KEI Notes on California Assembly Health Committee Markup on AB 463 Pharmaceutical Cost Transparency Act of 2015

Yesterday (April 21,2015) the California Assembly held a Health Committee hearing to discuss various bills being offered, including Assembly Member Dan Chiu’s AB 463, titled the Pharmaceutical Cost Transparency Act of 2015.

AB 463 calls for the pharmaceutical industry to annually report its costs for developing and manufacturing a drug (for any course of treatment over $10k). The bill seeks to provide audited information on R&D costs, a topic for which the industry often makes unsupported and exaggerated claims.

For previous KEI coverage of AB 463, see our blogs here and here.

The bill was subject to lengthy debate, with some Assembly members voicing conditional support in an effort to move the Bill out of committee and generate further discussion. Opposition generally centered on concerns that the bill would harm innovation, or that the existence of data in SEC filings should suffice. In many respects, the debate was less about how to make the disclosures more useful, than dealing with the complaints from the drug companies that it would be “unfair” to require them to disclose actual R&D costs, since this would likely depress prices and chill investment in R&D.

Chiu’s bill was supported by an impressive array of labor groups, insurance industry, municipalities, and other civil society groups. In opposition, PhRma and a long list of drug companies.

The vote was voluntarily postponed by Chiu for one week in an effort to address various concerns that were raised. In our opinion, the California proposal is a very important initiative, since at present, the drug companies can charge whatever they like for new drugs for cancer and other diseases, and no government has done anything to require disclosures of the actual economics of drug development. The bill, as drafted, could be improved, but much of the lobbying by pharma companies is designed to kill the bill, or to make the disclosures much less useful. KEI will publish a more technical analysis of the bill tomorrow.

With apologies for my secretarial mistakes, what follows are some notes I took yesterday as fast as I could in trying to keep up with the April 21 debate in the Assembly Health Committee.

Chiu – talking about drugs >10k per treatment
drug price inflation tripled in past yr
>13% in last yr
sovaldi example $1k/pill, $84k per treatment
only able to serve 300 patients in California
costs far less to fly patients from california to other countries than to have them treated here
bill asks for high end specialty drugs to provide disclosure of costs of R&D, etc.
industry has raised concerns, addressed them with amendments to protect any proprietary or confi data
amendments to allow reports on costs of failed drugs
don’t have to go back 25 yrs, just general accounting principles (7yrs)
examples of transparency in other medical areas

testifying in support – labor, business, consumers, health plans, nurses, hospitals

Beth Capell (health access CA) in support. How is it that pricing is arrived at? This bill gives info to figure that out. Many other countries get their drugs cheaper than we do. Transparency is first step to understanding health care costs.

Sarah Flocks (Cali Labor Federation) in support. Costs unsustainable for union members and families. $ that state pays is $ not going into other things CA needs. Foregoing raises every year because cost of healthcare is killing us. We would support bill to regulate prices. But this is important, we support it.

Stephanie Roberson (Cali Nurses Assoc.) in support.

Nick Louisas (Cali Health Plans) in support.

Tony Rice (Cali chamber of commerce) in support.

Theresa Stark (Kaiser Permanente) in support.

AARP in support.

Emily Gattfield, individual, in support.

City and County of San Fran. in support.

Cali School Employees Assoc. in support.

Cali Assoc of Joint Powers Authorities in support.

Molina Health Care in support

Blue Shield of California in support.

AIDS Healthcare foundation in support.

Consumers Union in support.

Cali Hep Alliance in support

United … Commercial Workers in support.

Assoc of Cali Life and HEalth Insurance… in support

… in support

Cal PACE in support

State Building and Construction Trades Council in support.


Pharma. operational difficulties. at a loss as to what will become of the information to be reported. “to what end?” forced to submit “reams of data” to be verified by 3rd party auditor. “what will everybody do with all this data?” companies already submit information in the SEC filings, why isn’t that info adequate for the bill? in some cases, costs impossible to ascertain. clinical trial costs closely guarded. each company is different. would allow competitors to gain unfair advantage. drug spending accounts for 10% of health care dollar. Costs go up along with everything else. points finger at managed care in terms of their rationing access to medicines. These companies are innovators. To survive, they must continue to innovate.

VP/GC of TechNet. Focus of bill is “rather chilling.” Cali is home to amazing r&d, change the way people access information, get around, etc. Bill focuses on very onerous mechanism for r&d costs. Recouping high costs leads to high charges. Bill is one-sided, doesn’t look at outcomes or alternatives. Chills desire to do R&D in california.

CA Health Care Institute.
Biotechn Industry Org
Cali Manuf and Tech Assoc


Assembly Member Lackey. Supports transparency but believes bill is too draconian in regulatory demand.

Assembly Member Burke. “I’m struggling with this. But thank you…” Concerned about transparency not getting us to where we need to go in terms of solution to pricing issue. Is there any place in this bill where we are given a guideline as to where the threshold may be? Don’t want to just poke the pharm companies if there is a tool that can come from this.

Chiu answer: prices are skyrocketing and could cripple state gov budget, businesses, labor unions. need to do something. want to move conversation forward. completely opaque as to information about pricing. if suggestion is that more info will not help, what info will allow us to get to different prices? very willing to consider amendments.

Asem Member … -companies ARE discounting drugs. example of 46% discount on sov and harvoni.

As. Mem. … – brings up costs that were paid by Pharmasset, not Gil.

As. Mem . Bonilla – Trying to get to “usefulness” of data. SEC filings – what is difference between that info and info you are asking for other than breakdown by drug? Would like to hear from opponents as to what could be done with existing data to make that useful. Supporting today but reserving right to change position pending future discussions.

Chiu – very difficult to find that SEC data. This makes it much easier to aggregate it in one place. Helpful to know on drug by drug basis.

Phrma – considerable amount of info provided by SEC. some of it is on per drug basis. would be tremendously difficult and present enforcement risk if would present r&d costs per drug, where other estimates may come out differently in SEC filings. same for clin trial costs, even more problematic because of multiple trials… Happy to talk with Chiu about how to better present the SEC filings.

As.Mem Wood – personal story of cancer in family. cost was $1k to treat, improved quality of life. weighs heavy, becomes personal very quickly. No good guys, no bad guys here. But potential winners and losers. Conversation should be about policies that improve health, and healthcare. Now all conversations are about money. Who spends it, who wins, who loses. Patients in prison may ironically have better chance of getting treated with Sovaldi than private citizen. Preference would have been a select committee to address issues over a longer period of time. But now we are asked on limited debate to move a bill that may have huge consequences. Taking this out on doctors, stats on doctor morale. Fears that this bill is not seeing the forest for the trees. Wishes this could be 2-yr bill. If voting for it today, would reserve right to challenge it on the floor.

As Mem Maienschein – biggest cost driver is getting drug to market, approval by FDA is time-intensive and costly. Most drugs fail. In part b/c so many drugs fail, companies spend huge amounts of $. Estimated sometimes up to $5B. Concerned about how you would attempt to delineate how research was developed. If drug developed for kidney cancer, didn’t work for that but did work for bladder, how would you account? Costs of drugs for other countries – many countries have single payor systems. CLs where countries will steal patents.
We shouldn’t go without noting that admin costs have risen at an even more rapid rate. More generics; the only part of the health care system where prices go down. In terms of transparency, pharm is most heavily regulated in health care system. I did oppose sp76 last year … i do want to be consistent. I would conclude, in 2013 americans spent more than $22 billion vs xx retail meds. I won’t be supporting the measure today.

Rodriguez – Well-intentioned, I know where you’re going with this. I may be able to support in the future, but not now.

Thurmond – I lost both my parents to cancer. I want the innovation that everyone is talking about. I want people to think about the people we represent, sick, elderly … I thought the pharma presentation as spectacular. It’s that issue … that this could cost so much. It’s one of the most meaningful conversations we’ve had in the assembly all year. What I appreciate about the bill … around proprietary protections concerns.

Chiu – To be clear, I am accepting the committee’s amendments. These are difficult and important questions.

Chavez – Life expectancy has increased in developing increased because of health care, pharmaceuticals. Pharmaceuticals cost have been relatively flat. The reality is that at one time HIV was considered ‘You’re done’. That’s because of the breakthrough in technology. Last year, we were worried about ebola. Now we have a vaccine … Not everyone knows about this. Because of BioCom industry. Diabetes and cancer will be solved in my lifetime. If you look an innovation … aspirin was a miracle drug …. Now you have DNA therapy. They have rooms of computers that are sequencing DNA … attacking from a DNA perspective. 3D printers to create organs. This is a cost issue … this is a battle of giants. I would submit to you that the reason we have people regardless of economic status have a longer lifespan is because of the investment in pharma. It’s not only a good thing for the health of the country or jobs or educating our young people. There’s a huge advantage to this industry to do the right thing … it’s not just about transparency. Need to look at the totality. Won’t support.

As. Mem Waldron – Really appreciate what you are trying to do. We can all agree health care costs are huge and rising. new life-saving drugs are putting more intense focus on costs, but HC in general has so many moving parts. This addresses one part, the pharmaceutical companies. Very complex. could be stifling of innovation. Both sides told me that they already publicize costs and profit info. Already out there, even if in different places. I’m a business owner. When I look at price of my product, I look at everything. But do appreciate what you’re trying to do. Need to have everyone at the table. How much does govt regulation impact cost? Can’t support.

Chiu – appreciate challenges that every biz has in recouping costs. But pharm industry is different. Patent protections, pricing differences based upon where you are. Only country without pricing controls.

Chiu close- thank you for grappling with big questions, difficult questions. I want the right answers. Want to thank members who have offered to move this out of committee. Suggesting to hold for one week. Would like to have conversations on how to move this forward and to work with industry to see if there are better ways to get the information. We all have constituents priced out. Story about churchmember in his district who can’t afford hep medicine. Not just about one industry. Fundamental to who we are as policymakers. Work with me in coming days to see if we can move something forward.

No vote. Coming back in 1 wk.