Report of the
Minnesota Attorney General’s
Advisory Task Force on Lowering
Pharmaceutical Drug Prices
February 2020
The Office of
Minnesota Attorney General Keith Ellison
helping people afford their lives and live with dignity and respect • www.ag.state.mn.us
This document is made available electronically by the Minnesota Legislative Reference Library
as part of an ongoing digital archiving project. http://www.leg.state.mn.us/lrl/lrl.asp
Foreword
From Attorney General Keith Ellison
My job as Attorney General is to help Minnesotans
afford their lives and live with dignity and respect.
But the cost of prescription drugs is so high that far
too many Minnesotans are having to choose between
affording their lives and staying alive.
Take insulin, a life-saving drug for people with diabetes.
The researchers who discovered it almost 100 years
ago sold the patent for it for $1, because they wanted
it to save lives. So why has the price of insulin gone up
more than 1,100% in the last 20 years? Why does the
same drug cost 90% less in Canada?
Take Tysabri, a drug that Rep. Rod Hamilton, who
served on the Task Force, takes to control his muscular
sclerosis. The price has doubled and now costs $15,000
a month. Why? Who sets that price, anyway, and how?
And why do Minnesota families with health insurance
pay on average $5,000 in out-of-pocket costs each year?
These are the kind of questions Minnesotans want
answered and the kind of problems Minnesotans
want solutions to. They affect every single one of us,
because every single one of us has taken or will take a
prescription drug. And none of us can wait any longer
for answers and solutions.
This is why I created a Task Force to gather in the
best thinking in order to understand why the costs
of prescription drugs are so high — in some cases,
unconscionably so — and come up with legislative, legal,
regulatory, and community-based strategies to bring
them down. Task Force members heard hundreds of
hours of testimony, read thousands of pages of studies
and reports, and spent many more hours debating and
coming up with recommendations. The 15 people who
served on the Task Force have brought a great diversity
of experience, knowledge, and perspective. I thank each
one of them, especially co-chairs Nicole Smith-Holt and
Senator Scott Jensen.
This thorough, eye-opening report rst answers the
overall question of why the pharmaceutical-drug
market doesn’t work for people and drives prices so
high. Then it proposes 14 recommendations that will
put less-expensive drugs in people’s hands and give
us stronger tools for bringing more transparency and
public accountability to the industry.
This isn’t the end of the Task Force’s work — it’s the
beginning of the work that all of us now have to do
to implement these recommendations and bring drug
prices down so that Minnesotans can not only afford
their lives, but can afford to live with dignity and respect.
Report of the Advisory Task Force on Lowering Pharmaceutical Drug Prices
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Report of the Advisory Task Force on Lowering Pharmaceutical Drug Prices
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Executive Summary ............................................................................................................................................................................... 6
The Impact of High Drug Prices ...................................................................................................................................... 6
Causes and Contributors to High Drug Prices ................................................................................................................. 7
The Task Force’s 14 Recommendations .......................................................................................................................... 9
Next Steps .................................................................................................................................................................... 10
1. Introductions and Overview of the Advisory Task Force on Lowering Pharmaceutical Drug Prices ...........................11
1.1 Structure and Membership of the Task Force. ..................................................................................................... 11
1.2 The Scope of This Report and Its Intended Audience. ......................................................................................... 12
2. Understanding the Drug Industry, How it Works, and How Its Structure and Dynamics Permit and Incentivize
High Drug Prices. .............................................................................................................................................................................. 14
2.1 Understanding and Quantifying the Problem. ...................................................................................................... 14
2.2 The Entities Involved In the Distribution and Pricing of Pharmaceuticals. ........................................................... 20
2.3 The Current Federal and State Legal Landscape Regarding Prescription Drugs. .................................................. 24
2.4 Examples of Problematic Drug Pricing Practices. ............................................................................................... 29
2.5 How High Drug Prices and Price Increases Affect Minnesotans. ......................................................................... 31
3. Signicant Causes And Contributors Resulting In High Prescription Drug Prices. .........................................................36
3.1 The Misuse and Abuse of Patent, Exclusivity, and Related Laws to Insulate Drug Manufacturers
From Competition Signicantly Contributes to High Prescription Drug Costs. ..................................................... 36
3.2 Patients’ Inability to Access More Affordable Sources of Medications Through Safe, Vetted Importation
Programs Contributes to High Prescription Drug Costs. ..................................................................................... 39
3.3 Anticompetitive Conduct in the Drug Industry Signicantly Contributes to High Prescription Drug Costs. ........... 40
3.4 Deceptive and Other Unlawful Marketing Practices in the Drug Industry Signicantly Contribute to High
Prescription Drug Costs. .................................................................................................................................... 42
3.5 The Opacity of, and Conflicts of Interest Present in, PBMs’ Business Models Signicantly Contributes
to High Prescription Drug Costs. ........................................................................................................................ 43
3.6 Perverse Economic Incentives that Result in High-Cost Drugs Being Used Even When Generic Alternatives
Are Available Signicantly Contribute to High Prescription Drug Costs. .............................................................. 44
3.7 The Lack of Transparency Regarding How Drugs Are Priced and Paid For Signicantly Contributes to High
Prescription Drug Costs. .................................................................................................................................... 47
Table of Contents
Report of the Advisory Task Force on Lowering Pharmaceutical Drug Prices
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4. Selected Past and Current Legislative, Regulatory, and Law Enforcement Strategies That Have Attempted
to Address High Prescription Drug Prices. .................................................................................................................................49
4.1 Selected Past and Current Federal and State Legislative and Regulatory Strategies to Address
High Drug Prices. ............................................................................................................................................... 49
4.2 Selected Past and Current Law Enforcement Strategies to Address High Drug Prices. ........................................ 52
5. Recommendations of the Minnesota Attorney General’s Advisory Task Force on Lowering Pharmaceutical
Prices. ................................................................................................................................................................................................53
5.1 Create a “Prescription Drug Accountability Commission” to Oversee Drug-Industry Pricing Practices in
Minnesota .......................................................................................................................................................... 54
5.2 Import Critical-Access Drugs Into the State on a Trial Basis. .............................................................................. 56
5.3 Enact Legislation Dening and Prohibiting Price-Gouging Related to Prescription Drugs. ................................... 57
5.4 Strengthen Deceptive Trade Practices and Advertising Laws Related to Drug Pricing Information. ..................... 58
5.5 Enact a State Anti-Kickback Law, and Prohibit Copay Coupons and Similar Practices When a Generic
Version of a Drug is Available. ............................................................................................................................ 59
5.6 Strengthen Laws Targeting Anticompetitive Behavior in the Drug Industry. ......................................................... 60
5.7 Advocate for Reform of Certain Federal Patent and Exclusivity Laws Governing the Drug Industry. ..................... 61
5.8 Optimize and Expand Use of the 340B Drug Pricing Program. ............................................................................. 62
5.9 Create An Inventory of All Government Entities to Determine Whether They Purchase Drugs Directly or Indirectly,
and Identify Their Annual Expenditures. ............................................................................................................. 63
5.10 Optimize Use of MMCAP INFUSE Program and Further Expand It to Provide Similar Savings to Minnesota
Patients. ............................................................................................................................................................ 64
5.11 Minnesota Should Robustly Regulate PBMs and Their Business Practices, Building on the PBM Legislation
Enacted in 2019. ................................................................................................................................................ 66
5.12 Minnesota Should Encourage and Facilitate Price Transparency for Prescription Drugs. ..................................... 67
5.13 Assure Patient Access To Pharmacists’ Services for Effective Medication Use. .................................................. 68
5.14 Support More Research on Prescription Drug Prices & Drug Benets. ................................................................ 70
Conclusion and Next Steps ................................................................................................................................................................. 71
Glossary of Terms ................................................................................................................................................................................. 72
Committee Members ............................................................................................................................................................................73
Endnotes .................................................................................................................................................................................................75
Report of the Advisory Task Force on Lowering Pharmaceutical Drug Prices
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Executive Summary
The market for prescription drugs in Minnesota and the
United States is exceedingly complex, opaque, rife with
anticompetitive and other problematic business practices,
and the laws governing the industry are often misused
and abused. In short, the market for prescription drugs
is dysfunctional and the prices of them are far too high.
Signicant reforms to how such drugs are regulated,
distributed, and paid for are necessary to rein in the
skyrocketing cost of these often life-saving medications.
The goal of this report is to propose solutions that if
properly implemented, will lower the cost of prescription
drugs for the many Minnesotans who struggle to pay for
the medications they desperately need.
The Impact of High Drug Prices
Everyone will take a prescription drug at one point in their
lives. Currently, 58% of non-senior adults and 86% of seniors
were prescribed a medication in the last year. Minnesotans,
like Americans everywhere, spend a lot of money on them:
in 2017, Minnesota spent nearly $5.2 billion on retail
prescription drugs. If prescriptions administered in medical
settings (e.g., a hospital) are taken into account, this number
approaches $8.7 billion. And the cost is rising far more quickly than the rate of general inflation: according to data
compiled by the Minnesota Department of Health, prescription drug spending in Minnesota rose by 28.6% between
2013 and 2017.
But the market for prescription drugs does not function like markets for other goods and services for many
reasons that are unique to the pharmaceutical industry. (See Section 2.1.1.) The prescription drug market is also
fragmented between different types of drugs that are subject to different regulatory requirements, and involves
scores of entities in an exceedingly complex distribution chain that are all xated on maximizing their own prots
through the sale or administration of the drug at issue. (See Sections 2.1.2-.3.) These circumstances have led to
prices and price increases for drugs that are staggering, with the cost of some of the more expensive prescription
drugs now exceeding $60,000 per month. (See Sections 2.1.5-.6.)
The high cost of many pharmaceutical drugs has forced some people to spend less on groceries, postpone paying
bills, get a second job, or even declare bankruptcy. Indeed, some Americans—8% in one recent survey—have
resorted to crossing the border into Canada or Mexico to purchase drugs at a small fraction of the price that they
cost in the United States. (See Section 2.1.7.) Further, the high cost of prescription drugs has created signicant
Report of the Advisory Task Force on Lowering Pharmaceutical Drug Prices
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barriers to patients’ adherence to their prescribed medication regimes: almost one in ten Minnesotans, more than
half a million people have not lled a prescription in the last year due to its prohibitive cost. (See Section 2.1.8.)
The price of insulin illustrates how increases in the price even of old drugs whose original patents expired long ago
can cause nancial strains on Minnesota families. Insulin was rst discovered in 1922. About 330,000 people, or
nearly 8% of Minnesota residents, have diabetes today. But the price for some insulin products has increased more
than 1,100% over the last two decades. Diabetics’ insulin costs doubled between 2012 and 2016 alone and now
average about $5,705 a year. As a result, the Minnesota Attorney General’s Ofce has a pending lawsuit against the
three major manufacturers of insulin over pricing practices it alleges are deceptive, fraudulent, and unlawful. (See
Section 2.4.)
Causes and Contributors to High Drug Prices
Section 3 of this report details numerous causes and contributors to the high drug prices that Minnesotans are
forced to pay. These causes and contributors include:
First, the misuse and abuse of federal patent and exclusivity laws by drug manufacturers
has led to high-cost branded drugs being insulated from generic competition for years—
if not decades—beyond the initial patent and exclusivity periods. For example, AbbVie
created a “patent thicket” for Humira, which is used to treat arthritis and is the top-selling
drug in the world, by securing 132 patents for the drug, which resulted in 39 years of patent
protection. (See Section 3.1.)
Second, partly as a result of misuse and abuse of patent and exclusivity laws, the U.S. now
spends more money per capita on prescription drugs than any other high-income country
and this gap is continuing to grow. For example, Crestor, a medication used to lower high
cholesterol, costs between 169% to 336% more in the United States than it does in Canada,
France, or Japan. Minnesotans’ inability to safely access and import drugs at the often
dramatically cheaper prices found in other countries is another impediment to lower drugs
costs. (See Section 3.2.)
Third, various anticompetitive practices are also pervasive in the drug industry. One
such practice is called “product hopping,” where a branded drug manufacturer makes
minor changes to some aspect of a drug besides its active ingredient. After doing so, the
manufacturer secures additional patent or exclusivity rights to the “new” version of the
drug, and stops selling the prior version, extending its monopoly power.
Another anticompetitive paractice is “pay for delay” arrangements where a branded drug
manufacturer pays a generic competitor to delay the launch of its rival generic drug,
ostensibly to settle patent litigation.
1
2
3
Report of the Advisory Task Force on Lowering Pharmaceutical Drug Prices
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Fourth, certain industry marketing practices drive up demand for expensive, branded
pharmaceuticals. “Direct-to-consumer” advertising of drugs—which has increased
dramatically since it was largely deregulated in the 1990s and which is permitted in only
one other country in the world—signicantly contributes to high drug costs. The same is
true regarding the “off-label” marketing of drugs for conditions they are not approved to
treat. (See Sections 3.3-4.)
Fifth, the business practices of pharmacy benet managers (“PBMs”), which are middle men
in the drug sales chain further drive up the cost of prescription drugs in various manners.
Chief among them are PBMs’ rebate practices, which incentivize drug manufacturers to
increase the price of their drugs so these manufacturers can offer PBMs larger rebates—
which is an important source of revenue for PBMs—without affecting manufacturers’
bottom line. These same rebate practices also incentivize PBMs to sell more expensive
branded medicine through their pharmacy networks, as opposed to cheaper generics,
because the rebates offered on branded drugs are generally larger than those offered on
generic ones. PBMs lack of transparency into their business practices and how they are
reimbursed for drugs further obscures critical data that could be used to lower drug costs.
(See Section 3.5.)
Finally, perverse economic incentives that drug manufacturers offer patients can result in a
patient choosing a more expensive branded drug even when a cheaper generic is available.
Things such as “patient discount coupons” or “patient assistance programs” may lower
a patient’s upfront copay or other costs somewhat, but they incentivize a patient to use
a more expensive branded drug instead of an equivalent generic one, which their health
plan must ultimately pay for, thereby driving up patients’ monthly insurance premium. (See
Section 3.6.)
4
5
6
Report of the Advisory Task Force on Lowering Pharmaceutical Drug Prices
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The Task Force’s 14 Recommendations
Over the course of 2019, the Task Force conducted a thorough review of materials and information presented to
it by numerous speakers, consulted with various experts and other people knowledgeable about the drug industry,
and engaged in extensive discussion and debate about the best manner to address high drug prices. This resulted
in the Task Force formulating 14 policy proposals that, if satisfactorily adopted and implemented, it believes will
lower the cost of prescription drugs for all Minnesotans.
The Task Force’s 14 Recommendations
1
Create a “Prescription Drug Accountability Commission” to address drug pricing and
related practices in Minnesota. This commission would have the power to investigate, review,
and publish information on prescription drug prices. It would also have power to take action to
hold drug companies accountable for unreasonable or unlawful pricing practices, including by
“capping” or setting maximum reimbursement prices for drugs under certain circumstances
or referring the matter to the Minnesota Attorney General’s Ofce for potential enforcement
actions.
2
Import, through a prime vendor, four critical access drugs—insulin, EpiPen, Truvada,
and naloxone. This would be done on a trial basis initially, with the potential for expansion of
the program if it is successful. These four drugs should be imported for use in Minnesota at
affordable prices consistent with global market rates for the products.
3
Enact drug price-gouging legislation that prohibits drug manufacturers from
charging or causing to be charged an unconscionable price—that is, a price that
cannot be reasonably justied—for essential prescription drugs that are sold in Minnesota.
4
Strengthen Minnesota’s consumer fraud laws as they relate to deceptive and misleading
marketing, as well as other problematic business practices utilized in the drug industry.
5
Enact a state anti-kickback law that applies to both government programs and the private
sector, including prohibiting copay coupons or equivalent programs when a generic version of
the branded drug at issue is available.
6
Strengthen Minnesota’s antitrust laws to prohibit specic, anticompetitive practices
present in the drug industry, such as product hopping and pay-for-delay settlements.
Report of the Advisory Task Force on Lowering Pharmaceutical Drug Prices
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7
Minnesota’s federal and state lawmakers—and other policy leaders—should
strongly advocate for reform of federal patent and drug exclusivity laws that are being
misused and abused to block competition from cheaper generic drugs.
8
Optimize and expand Minnesota’s use of the federal 340B Drug Pricing Program,
which allows health care providers to purchase drugs at dramatically reduced prices under
certain circumstances, and then make the pricing discounts received through this program
available to more Minnesota patients.
9
Quantify how much all Minnesota government entities spend on prescription
drugs, to enable these entities to better pool and utilize their bulk purchasing power to obtain
additional pricing concessions from drug manufacturers when buying drugs.
10
Optimize and better utilize Minnesota’s bulk purchasing power through MMCAP
INFUSE, including by expanding the pricing discounts this buying program receives to everyday
Minnesotans, or create a parallel program that would do so.
11
Robustly regulate PBMs and their business practices, building on the PBM legislation
enacted in 2019, and further increase transparency into the rebates they receive.
12
Enact additional measures to increase transparency into how drugs are priced and
reimbursed throughout the drug sales chain.
13
Ensure patient access to pharmacists for effective medication use.
14
Support additional research into prescription drug pricing and drug benets.
Next Steps
The Task Force views this report as only the end of the beginning. It will be up to lawmakers, agencies with
rulemaking authority, advocates, and other policymakers, including not least the Minnesota Attorney General’s
Ofce, to continue to advocate for and lend their expertise to turning the Task Force’s recommendations into action.
Only if all stakeholders act with the urgency that this issue requires will the spotlight remain appropriately focused
on the life-or-death issue of lowering the skyrocketing cost of prescription drugs for Minnesotans.
Report of the Advisory Task Force on Lowering Pharmaceutical Drug Prices
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1.
Introductions and Overview of the Advisory Task
Force on Lowering Pharmaceutical Drug Prices
1.1 Structure and Membership of the Task Force.
The Advisory Task Force on Lowering Pharmaceutical Drug Prices (hereinafter “Task Force”) was established
in February 2019 by the Ofce of the Minnesota Attorney General, Keith Ellison. The Task Force consists of 15
members. Its members include experts on pharmaceutical drug prices, patients and their family members, medical
practitioners, a representative of the Minnesota Board of Pharmacy, and Minnesota legislators.
1
The full Task Force
rst met on April 23, 2019, and seven more times thereafter, with the nal meeting taking place on January 14, 2020.
The Task Force also formed three working groups that met numerous additional times.
The Task Force was comprised of the following members:
Senator
Scott
Jensen
(Co-Chair)
Senate District 47
Senator
Matt Little
Senate District 58
Representative
Rod
Hamilton
House District 22B
Nicole
Smith-Holt
(Co-Chair)
Charity Ambassador,
T1International
Phu Huynh
PharmD, RPh
NorthPoint Medical
Clinic
Rose Roach
Executive Director,
MN Nurses Association
Elo Alston
Patient Advocate
Christy
Kuehn
Patient Advocate
Stephen
Schondelmeyer
PharmD, PhD
University of Minnesota
Jessica
Braun
RN, APRN-CNP
Shirlyn
LaChapelle
RN
Founder & Director,
Nursing is the Answer
LLC
Leonard
Snellman
MD
General pediatrician,
HealhtPartners
Representative
John Lesch
House District 66B
Nazie
Eftekhari
Founder & CEO,
HealthEZ
Cody Wiberg
PharmD, RPh
Executive Director,
MN Board of Pharmacy
Report of the Advisory Task Force on Lowering Pharmaceutical Drug Prices
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In support of the Task Force, three working groups were established: Working Group #1 was tasked with determining
the role of federal and state legislative and regulatory actions in lowering drug prices;
2
Working Group #2 focused
on identifying root causes and contributing factors to the increase in pharmaceutical drug prices; and Working
Group #3 conducted a comprehensive analysis of various strategies that have been, and could be, undertaken to
lower drug prices. The working groups met numerous times throughout the spring, summer, and early fall of 2019.
Advisory Task Force Working Groups
Working Group #1
Legislative Regulatory
Action
Working Group #2
Causes & Contributors
Working Group #3
Past, Current, and Future
Strategies
Task:
Determine the role of the
federal and state legislative and
regulatory actions in lowering
drug prices
Task:
Identify the root causes and
contributing factors to the
increase in pharmaceutical
drug prices
Task:
Conduct a comprehensive
analysis of various strategies
that have been, and could be,
undertaken to lower drug prices
Members:
Sen. Matt Little
Rep. Rod Hamilton
Cody Wiberg
Shirlynn LaChapelle
Nicole Smith-Holt
Members:
Dr. Stephen Schondelmeyer
Dr. Leonard Snellman
Rose Roach
Rep. John Lesch
Christy Kuehn
Members:
Phu Huynh
Nazie Eftekhari
Jessica Braun
Elo Alston
Sen. Scott Jensen
Bylaws governed the operations of the Task Force.
3
Public participation was also welcomed at every stage of the
Task Force process. All meetings were open to the public, with dates, times, and locations of meetings posted
online in advance.
4
Time was also allocated for public testimonials at all full Task Force meetings.
5
Both the full
Task Force and working groups brought in numerous experts, advocates, industry members, and state ofcials
to provide them information and advice on addressing high drug prices.
6
Listening sessions attended by various
members of the Task Force and Attorney General Ellison were further held throughout the state.
1.2 The Scope of This Report and Its Intended Audience.
It was not the Task Force’s goal to write a report simply cataloging the problem of high drug prices. To comprehensively
summarize the legions of issues discussed by or presented to the Task Force and its working groups would require
a report so voluminous that it would be of limited use to all but drug-industry experts. The Task Force’s purpose was
instead to write a report easily understood by non-experts that can and will help everyday Minnesotans afford their
lives and live with dignity and respect by allowing themselves, policy makers, and others to effectively advocate for
measures to rein in the high cost of prescription drugs. The primary audience for this report was, correspondingly,
those who must turn the Task Force’s recommendations into action, not drug-industry experts.
Report of the Advisory Task Force on Lowering Pharmaceutical Drug Prices
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This report focuses on this audience in several ways. First, Section 2 provides a solid underpinning of information
and examples to assist in understanding the many entities involved in the complex drug sales and distribution
chain, the often-perverse economic and other incentives found throughout this chain, and how these dynamics
result in ever-increasing drug prices. Section 3 builds on this foundation by specically discussing and analyzing
some of the major causes that drive drug prices higher, without attempting to list every possible contributor. Section
4 highlights selected past and current legislative and regulatory efforts to address high drug prices, so advocates
and policymakers are aware of some of the initiatives to address drug prices that have been tried previously. Finally,
Section 5 lays out a series of clear and understandable recommendations the Task Force believes will help address
the problem of high drug prices. By structuring its report in this manner, the Task Force believes it can be an
effective tool for Minnesotans and policymakers to use to understand the problem of high drug prices and be more
effective advocates for change.
Report of the Advisory Task Force on Lowering Pharmaceutical Drug Prices
14
2.
Understanding the Drug Industry, How it Works,
and How Its Structure and Dynamics Permit and
Incentivize High Drug Prices.
2.1 Understanding and Quantifying the Problem.
The Task Force’s rst step in coming up with recommendations to lower the high and continually increasing cost of
prescription drugs, was examining a number of underlying factual circumstances that affect the cost and pricing
of pharmaceuticals.
2.1.1 Traditional Economic Principles Are Often Distorted or Do Not Apply to the Prescription
Drug Market
7
In a number of ways, traditional economic principles break down in the pharmaceutical market. Unlike in a typical
consumer market, the individual end-user of prescription drugs—the patient—has a limited ability to choose when,
where, and what to purchase. This, in turn, distorts the interaction between buyers and sellers in the market that
would ordinarily determine prices. In addition, competition in the pharmaceutical market is limited, both legally and
articially, which constrains the market forces that would otherwise drive down prices.
First, healthcare is different than other consumer goods because patients do not initiate the purchase or engage
in the market directly. In a prescription drug purchase, “the patient is not a consumer in the traditional sense,”
but typically learns of the need, evaluates options, and is directed to purchase a particular medicine by a third-
party, such as a doctor.
8
Patients often lack sufcient information or expertise to make fully-informed choices
themselves about the drugs they use. Even basic information on drug pricing may be unavailable to allow patients
to make fully-informed choices.
Patient also typically need a “permission slip”—in this case, a prescription—to purchase a drug. Unlike most
markets, patients are legally barred from making their own choices even if they desired to do so. In other words,
the health professional acts a “gatekeeper to the pharmaceutical market.”
9
This health professional may also not
know or even care about the price,
10
as their primary objective is the health of the patient. In addition, the health
professional may be subject to sales pressure from people marketing brand-name drugs.
11
Patients may also
be unaware that in some instances—for example, in arrangements where doctors are compensated based on a
percentage of the drug’s cost such as Medicare Part B’s 6% flat reimbursement rate—the doctor’s incentive to
prescribe a more expensive drug may be in direct conflict with the patients’ economic best interests. There is little
room in this dynamic for the patient’s independent choice and power in making decisions about which drugs to use.
Pharmaceutical purchases are also unique because they are about health. Patients have a limited ability to make
rational choices in the face of illness or life-or-death situations, where one’s health compels the patient to make the
purchase in a way that dees traditional ideas of choice. Additionally, the value of a drug to a patient—its health
benets—may not be felt until some unknown point in the future or the benet will be in avoiding some future
illness. In this way, drugs operate as a form of investment in one’s future health, making it difcult for a patient to
assess the value at the time of purchase. In short, when it comes to health, individuals’ choices are influenced by
motivations that upend the typical framework of rational economic choices by consumers that explain behavior in
other markets.
Report of the Advisory Task Force on Lowering Pharmaceutical Drug Prices
15
Second, there is a lack of competition in the pharmaceutical market not found in other, more traditional markets. As
discussed further below,
12
laws establish extensive periods of market protection through patents, exclusivities, and
other methods. These protections grant substantial market and pricing power to manufacturers, who are then able
to utilize their power to command higher prices. Compounding these effects, manufacturers sometimes abuse
these protections to further extend their pricing power beyond the initial, intended period, through such tactics as
product-hopping, ever-greening, and patent-thickets.
Indeed, some drug manufacturers take advantage of, or create, natural or articial monopolies. Natural monopolies
occur when high costs keep new entrants from the market, as well as in small markets where there is little incentive
for competitors to enter, both of which allow a drug manufacturer to drive up prices. Companies can also create
monopolies, and benet from their resulting pricing power, by acquiring competitors or gaining control over the
sources of a drug. Pharmaceutical companies may extend these advantages through further anticompetitive
behavior, such as price collusion, shadow pricing, pay-for-delay arrangements, authorized generics, and sham
petitions. Ultimately, drug companies are able to operate in an environment with limited competition and command
higher prices. Compounded by the limited power of patients to shop for different drugs based on price, the
pharmaceutical market exhibits a wide variety of market failures that defy traditional economic principles.
2.1.2 Not All Pharmaceuticals Are the Same—Branded Drugs, Generic Drugs, and Specialty
Drugs.
Patients often view concerns over the pricing and cost of drugs as uniform across the entire spectrum of all
pharmaceuticals. And from one perspective, they are correct. It does not matter to many patients why a drug costs
so much, just that it does. But in order to take effective action to reduce the high cost of drugs, it is important to
understand the basic differences between brand name drugs, generic drugs, and so-called “specialty” drugs.
Brand name drugs are prescription medications sold under a specic trade name. For example, “Zoloft” is the
brand nameof the generic name “sertraline”. Brand-name drugs are usually protected by a patent. During the time
a branded drug is protected by a patent it is free from competition. Once the patent runs out on a brand-name
drug, the United States Food and Drug Administration (“FDA”) can approve the sale of generic versions. For a new
drug to come to the market, the FDA requires that a drug manufacturer demonstrate safety and effectiveness with
laboratory, animal, and human testing of the drug. Oftentimes, drug manufacturers attempt to justify the high
prices of their brand-name medications by arguing that they need to cover costs incurred during the research and
development phase of bringing new drugs to the market.
Generic drugs are equivalent to their brand-name versions in active ingredients, dosage, safety, strength, route
of administration, and quality. For a generic drug to come to market, the FDA requires that the manufacturer
demonstrate that the generic alternative can be safely and properly substituted for the branded version of the drug.
According to the FDA, about 88% of prescriptions in the United States are lled with generic medications.
What drugs fall within the term “specialty” drugs is not always clear. This is because there is no specic denition
or classication for specialty drugs; instead, they are generally considered to be drugs with a high cost for a
course of treatment. Speciality drugs are also often novel, treat rare conditions, or require distinctive handling or
administration. Many, but not all, so-called specialty drugs are a type of drug known as “biologics,” which are drugs
derived from living organisms or parts of living organisms.
13
Often times, specialty drugs treat complex or chronic
conditions, such as cancer, multiple sclerosis, or rheumatoid arthritis.
14
Specialty drugs are frequently the most
expensive drugs on the market, with the price-tag charged to patients for a regular course of treatment totaling in
the tens to hundreds of thousands of dollars per year.
15
The annual increases in prices for specialty drugs has also
traditionally signicantly outpaced the rate of inflation.
16
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16
2.1.3 Self-Administered Drugs Versus Physician-Administered Drugs.
Self-administered drugs—also sometimes referred to as out-patient prescription drugs—are generally those that
a patient purchases at a pharmacy using a prescription and then takes as a health professional has instructed.
Most research on drug prices has focused on self-administered drugs (“SADs”) when evaluating the causes of
and solutions to the rising cost of drugs.
17
These studies have found that SADs account for approximately 10%
of all healthcare spending, both in Minnesota and nationally.
18
In reality, however, this gure is articially low and
providevs an incomplete picture of spending on drugs because it fails to measure the growing amount spent on
what are known as physician-administered drugs (“PADs”).
19
PADs and their costs are a far less studied and understood use of pharmaceuticals. PADs are drugs that are
administered to patients—often in a single dose injection or infusion—by medical professionals in hospitals, clinics,
and other health care facilities.
20
Unlike SADs, whose spending can be tracked by reviewing pharmacy claims data,
21
the cost of PADs is often captured only in a larger “bundle” of medical claims data that also includes expenses for
other healthcare services provided around the same time.
22
This means that researchers—as well as employers and
other entities that pay these claims—have no insight into what PADs (or their associated costs) are included in the
medical claims that they are paying.
23
When spending on PADs is included, the true total amount of drug spending
increases to at least 20% of all healthcare spending in Minnesota. That gure is twice the amount typically cited.
24
The use and costs of PADs has skyrocketed in recent years, and is a major contributor to the rise in overall health
care spending.
25
For example, more than one-half (55%) of the increased spending on drugs in Minnesota from
2009 to 2013 was caused by the increased use of PADs, even though such claims only accounted for one-fth (19%)
of all drug claims.
26
During this same time period, the spending on PADs increased nearly three times as much as
spending on SADs.
27
This is because PADs are usually for newer and higher-cost brand name drugs that do not
have generic equivalents available.
28
As a result, PADs in Minnesota cost approximately $180 per day, while SADs
cost approximately $2 per day.
29
2.1.4 The Prevalence of Prescription Drug Use Nationally and in Minnesota.
A signicant number of Americans are prescribed one or more prescription drugs on a regular basis. The Centers for
Disease Control and Prevention (“CDC”) estimated that, in 2017, 58% of adults age 18-64 years old were prescribed
medications in the past year. The percentage jumps to 86% for those age 65 and older. In both age groups, women
were prescribed medications at a slightly higher rate than men.
30
The CDC has also noted an increase in the number of prescription medications used per person over time. Between
1988 and 2014, the percentage of the population who took at least one prescription drug within the previous 30
days rose from 38% to 49%. In the same time period, the percentage of persons who took ve or more prescription
drugs within the previous 30 days rose from 4% to 12%.
31
It is also important to consider the prevalence of prescription drug use among Minnesotans. The Minnesota
Department of Health determined in a recent study that, as of 2013, 68% of insured Minnesotans lled at least one
prescription at a pharmacy, and that number does not include Minnesotans who receive prescription drugs in a
medical setting.
32
The department also found that, between 2009 and 2013, Minnesotans averaged 12 prescription
lls per year.
33
Among Minnesotans who lled at least one prescription, those individuals averaged 17 lls at
the pharmacy in 2013.
34
When looking at prescription use by age, 88% of Minnesotans age 65 and older lled a
prescription in 2013.
35
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2.1.5 Drug Price Increases Have Signicantly Outpaced Overall Inflation.
One reason patients notice the rise of prescription drug prices is because it often signicantly outpaces general
inflation as measured by the Consumer Price Index (“CPI”). For example, AARP’s Rx Price Watch Report provides
pricing trend data for prescriptions widely used by older Americans. The report found that the “annual percent
change in retail prices for brand name prescription drugs has consistently increased substantially faster than
general inflation” at a “8.4% compared with 2.1%” rate.”
36
The increase in the cost of prescription drugs when
compared to the general inflation rate is stark:
AARP’s report also noted that the cost of an elderly American using 4.5 prescription drugs a month—the average
for seniors—would be approximately $30,000 annually, which exceeds the median annual income of Medicare
beneciaries of $26,200.
37
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2.1.6 Selected Examples of High Cost Prescription Drugs.
While troubling instances of high-priced generic drugs exist, generally the most egregious examples are found in
the branded and specialty drug markets. As of May 2019, the world’s most expensive drug was a newly approved
gene therapy called Zolgensma, costing $2.1 million, which treats spinal muscular atrophy in young children.
Other examples of astronomically priced prescription drugs include: Myalept, which treats complications caused
by leptin deciency and costs about $65,000 per month; Actimmune, which is approved for the treatment of
chronic granulomatous disease and is priced at approximately $48,000 per month; and Daraprim, which treats
toxoplasmosis and is used for the prevention of other infectious diseases in AIDS and transplant patients is priced
at approximately $45,000 per month.
As detailed earlier in the report, some medications are administered to patients by medical professionals in a
hospital or other infusion setting. Many examples of these high-cost infusion medications include those to treat
cancer or autoimmune disorders. For instance, Herceptin, a common drug used to treat breast cancer, costs more
than $76,000 for a yearlong course of treatment. For those suffering from rheumatoid arthritis, the annual cost for
Orencia infusions costs $46,000: another popular infusion option, Remicade, costs $37,000 annually. Yet other
examples of drugs with high or signicant price increases, which are discussed in depth below as case studies in
the phenomenon, are EpiPen, insulin, lorazepam, clorazepate, and the business model of Valeant Pharmaceuticals
(now known as Bausch Health Companies).
The high cost of prescription drugs affects all Minnesotans: it is likely that you or someone you know must take a
prescription drug that is exceedingly expensive. Indeed, for example, Task Force member Representative Hamilton
reported that one of the prescription drugs required to treat his multiple sclerosis—Tysabri—cost him about $15,000
per month in 2018.
2.1.7 The Impact of High Drug Prices on Patients and Their Families.
A signicant share of Americans’ household income is being spent on prescription drug therapy. One recent study
revealed, for example, that the average annual cost of drug therapy for the most widely used prescription drugs
was nearly $20,000 per year, or about one-third of the median U.S. household income in 2017 of $60,336.
38
The
share of household income spent on prescription drugs was even higher for those Americans who used a specialty
prescription drug. In 2017, the average annual retail cost for drug therapy with specialty prescription drugs was
nearly $79,000 per year, almost $20,000 more than the median U.S. household income.
39
Due to the high and rising costs of prescription drugs, many Americans have been forced to choose between
paying for basic needs and paying for their medications. For example, 32% of Americans whose prescription drugs
increased in price within the past year reported spending less on groceries so they could afford their medications.
Of these people, 32% also reported spending less on their family, 21% postponing the payment of other bills, 12%
reported postponing retirement, and 8% reported getting a second job, all just to pay for their medications.
40
Another
recent poll found that 18% of Americans borrowed money from friends or family, took out a loan, or even declared
bankruptcy to pay for their prescriptions.
41
Increasing drug costs have also created a barrier to Americans’ adherence to their prescribed drugs. Medication
“adherence” is a term that describes the degree to which a patient takes their medications at the doses and times
that their doctor has directed.
42
A 2019 survey found that 29% of Americans reported that they did not take their
medication at some point in the past year due to cost: this included 19% who did not ll a prescription, 18% who took
an over-the-counter drug instead of their prescribed drug, and 12% who cut pills in half or skipped doses. Of those
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19
who reported not taking a drug due to cost, 27% reported that their medical condition worsened as a result.
43
The
consequences of a patient failing to adhere to their medication regimen range from disease progression, reduced
functional abilities, increased hospital visits, and even death.
Americans have thus taken drastic measures just to afford their prescription drugs. Indeed, some Americans—8%
in one recent survey—have resorted to crossing the border into Canada or Mexico to purchase drugs at a fraction
of the price that they cost in the United States.
44
For example, while one person was in California to run the Los
Angeles Marathon, she crossed the border into Mexico to purchase a supply of insulin for her son for $600, which
would have cost her $3,700 in the U.S.
45
Similarly, a group of Minnesotans recently drove across the border to
Canada to buy insulin for their families, where they paid $1,200 for a supply of insulin that would have cost ten times
as much in the United States.
46
2.1.8 The Burden that High Cost Prescription Drugs Impose on Minnesota.
47
The national trend of rising prescription drug costs affects Minnesota. According to data compiled by the Minnesota
Department of Health, prescription drug spending in Minnesota rose by 28.6% between 2013 and 2017. In 2017,
Minnesota spent nearly $5.2 billion on retail prescription drugs. If prescriptions administered in medical settings
(e.g., hospitals, doctors’ ofces, nursing homes, etc.) are taken into account, this number is even higher, approaching
$8.7 billion. Together, this volume of drug spending accounted for 17% of health care spending in Minnesota that
year.
The high cost of prescription drugs has created signicant barriers to Minnesotans’ adherence to their prescribed
medication regimes, as an estimated 9% of Minnesotans —or more than half a million people —had not lled a
prescription due to cost in the preceding 12 months, according to the 2017 Minnesota Health Access Survey. For
Minnesotans with one or more chronic conditions, this estimate was even higher at 16%.
Notwithstanding these troubling facts, Minnesota also still lacks satisfactory data into the details of the Minnesota
patients who struggle to afford their prescription medications: where they live, which medications are not being
adhered to, and what time of year they have the most difculty taking their medication as prescribed. The wide-
ranging opacity in the pricing of prescription drugs, which limits insight in Minnesota about how to reduce the cost
of drugs, also extends to certain claims involving physician-administered drugs in hospital or other medical settings.
The costs of such drugs are often “bundled” into a larger claim, making it difcult to assess spending trends and
evaluate the effectiveness of prescribing patterns. Overall spending for these bundled medical claims rose 52%
between 2009 and 2013. As a result, Minnesota is still ill-equipped to deal with the effects of expensive prescription
drugs on patients in the demographic groups and in the geographic locations that need it and to support them in
emergencies.
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2.2 The Entities Involved In the Distribution and Pricing of Pharmaceuticals.
The sales and distribution chain for prescription drugs is maddeningly complex, with different companies involved
in different aspects of the process, as this diagram shows:
Accordingly, attempting to divide the drug sales chain into discrete segments is an inexact science because some
companies or persons simultaneously occupy multiple roles in the chain.
48
Generally speaking, however, there are
10 major participants in the drug sales chain, which are discussed below in the approximate order they appear
within the chain.
2.2.1 Active Pharmaceutical Ingredient Suppliers.
Among their many ingredients, all drugs contain at least one active ingredient. For over-the-counter drugs, for
example, the active ingredient is generally listed on the drug’s packaging. Active pharmaceutical ingredient (“API”)
suppliers make the active ingredients contained in drugs from raw materials, using both physical and chemical
processes. APIs may be manufactured in a different location from where the pill, liquid, or other nal form of the
drug is manufactured.
49
APIs are generally manufactured in bulk, and then sold to one or more drug manufacturers
who use this active ingredient to make the nal form of the drug. API suppliers’ primary regulator in the United
States is the FDA.
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2.2.2 Drug Manufacturers.
50
Drug manufacturers make the drugs that are ultimately purchased by patients, health plans, and other third-party
payers. As with API suppliers, drug manufacturers’ primary regulator is the FDA, with which each must register.
51
In
Minnesota, drug manufacturers must also be licensed by the Minnesota Board of Pharmacy.
52
Some drug manufacturers physically manufacture the drugs themselves at their own facilities using ingredients
purchased from API suppliers. Others do not engage in the actual physical manufacturing of drugs. Instead, such
drug manufacturers sub-contract with other companies, called “contract manufacturing organizations,” which do
the physical manufacturing of the drug on their behalf. Yet other drug manufacturers, called “repackagers,” simply
repackage or relabel a drug that is physically manufactured by someone else and sell it as their own.
Importantly from a pricing standpoint, manufacturers set the initial sales price of their drugs. This initial price is
often referred to as the manufacturer’s “list price.”
53
Equally important is that a manufacturer’s list price is often the
starting point—that is the benchmark for the price that others downstream in the sales chain charge when reselling
the drug. Thus, if a manufacturer increases its list price, this will have ripple effects by increasing the price that
wholesale distributors charge pharmacies and pharmacies charge patients, as well as the amount that health plans
will reimburse when a plan member is prescribed the drug. Manufacturers also pay rebates and administrative fees
to pharmacy benet managers, which are middlemen that drive demand for their drugs, as discussed further below.
2.2.3 Wholesale Drug Distributors.
54
Wholesale drug distributors, often simply called “wholesalers,” are the next step in the sales chain after drug
manufacturers. They buy and physically receive drugs from drug manufacturers. Wholesalers then sell these
drugs to retail pharmacies and health care facilities, which then in turn sell to patients. Some wholesalers also offer
services such as drug repackaging and reimbursement support. Wholesale drug distributors who do business in
Minnesota are required by state law to be licensed by the Minnesota Board of Pharmacy.
55
2.2.4 Pharmacy Benet Managers.
56
Pharmacy benet managers, or “PBMs,” as they are more commonly known, are middlemen in the drug sales chain.
PBMs typically never take physical possession of any drugs; instead, they only negotiate reimbursement, rebate,
and distribution terms with others involved in the drug sales chain. PBMs rst became a signicant force in the
health care industry in the late 1980s.
As further reflected in the above diagram, PBMs have relationships with three important entities in the sales chain:
health plans, drug manufacturers, and retail pharmacies. PBMs are hired by health plans (e.g., Blue Cross Blue
Shield, HealthPartners, Medica, etc.) to manage the drug benet that is provided to plan members on the plan‘s
behalf. PBMs do this, in part, by creating and managing what is known as a “formulary.” Formularies are simply a
list of drugs for which reimbursement will be paid by the health plan when the drug is prescribed to a health plan
member. If a drug is not included on the formulary, a patient, even if insured, must generally pay for it out of pocket.
57
As part of overseeing health plan members’ drug benet, PBMs act on behalf of health plans in two important ways.
First, PBMs contractually stitch together networks of retail pharmacies where a health plan’s members can get
the drugs they need. In building these pharmacy networks, PBMs negotiate with each participating pharmacy the
amount that the health plan will reimburse the pharmacy for drugs prescribed to the health plan members.
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Second, PBMs negotiate discounts with drug manufacturers off of manufacturers’ list prices for drugs, which take
the form of rebates paid from the manufacturer to a PBM.
58
A PBM may pass some or all the rebates it receives
from a drug manufacturer on to its health plan clients. PBMs claim that, as a result, the rebates they secure reduce
the cost of drugs for health plans. Often, however, a PBM keeps the entirety of the rebates it receives for itself, and
does not pass any of the amount along to its health plan clients. Rebates from drug manufacturers have become
a critical source of revenue for PBMs.
59
In 2019, the Minnesota Legislature and Governor enacted a bill that requires PBMs to be licensed by the Minnesota
Department of Commerce. Among many other things, this new licensure law requires PBMS to act in good faith
on behalf of their health plan clients and to disclose conflicts of interest, and it contains numerous transparency-
promoting mandates.
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2.2.5 Pharmacies and Pharmacists.
Pharmacies are entities that prepare, dispense, and sell medications. They are generally licensed and regulated
by state pharmacy boards in their respective states. In Minnesota, the Minnesota Board of Pharmacy regulates
pharmacies, though it does not regulate the prices pharmacies charge or the reimbursement rates they are paid by
health plans or health plans’ PBMs.
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For most prescription drugs, patients pay either: (1) a copay or coinsurance, as determined by their health plan
coverage; or (2) the pharmacy’s usual and customary price, also sometimes known as its “cash price,” if the patient
has no insurance coverage. The cash price of a prescription drug is typically calculated by the pharmacy as the
cost of the drug to the pharmacy, plus a small markup, plus a dispensing fee. One recent survey indicated that,
at independent retail pharmacies, 91% of prescriptions are submitted to third-party payers for reimbursement,
including Medicare, Medicaid, and private health plans. The remaining 9% of prescriptions are sold directly to
patients at the pharmacy’s cash price, and are not covered by insurance.
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2.2.6 Authorized Prescribers.
Authorized prescribers
63
are licensed health care professionals who determine which medications are appropriate
for a patient. Prescribers may have a variety of competing drugs to choose from to treat a particular patient’s
condition. At other times, they may have only a single available drug to do so. Determining which drug to prescribe
is a clinical decision in which the prescriber must take into account a variety of factors, including the anticipated
benet to the patient, side effect prole of the drug, and availability in the market.
Prescribers do not have up-front visibility into a patient’s health plan coverage for a given drug at the time the
prescription is written. When a patient’s medication is not covered by their insurance, sometimes the pharmacy will
work with the prescriber to nd an alternate medication, or try to obtain a “prior authorization” from the patient’s
health plan. Obtaining a prior authorization from the prescriber can delay the lling of the patient’s prescription, as
it generally requires that a prescriber submit clinical data to the health plan, or the health plan’s PBM, to justify the
need for a prescription drug that is not on the plan’s formulary.
One factor that may influence physician prescribing practices is the physician’s involvement with, or compensation
from, drug manufacturers or distributors. A 2016 study that examined physician prescribing patterns found a
“signicant association between attending a single meal promoting a specic drug…and the prescribing of
the promoted drug over therapeutic alternatives.”
64
For this and other reasons, Minnesota law prohibits any
manufacturer or wholesale drug distributor from providing health care practitioners with gifts valued at more than
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23
$50 in any calendar year.
65
But even under this law, manufacturers or distributors can pay for educational expenses
and provide payments to physicians for “reasonable” expenses.
66
Accordingly, some have argued for stricter laws
in an attempt to further decouple physician prescribing patterns from nancial reimbursement or other similar
incentives.
2.2.7 Health Plans, Insurers, and Managed Care Firms.
Generally, health plans, insurers, and other managed care rms (collectively “health plans”) are third parties that
pay for patients’ care, including for prescription drugs. The money used to cover these costs, however, ultimately
comes from the pooled resources of the patients themselves. As referenced above, health plans often outsource
the work of managing the prescription drug benet they provide to plan members to the PBM that the health plan
has hired. Health plans’ members incur more or fewer out-of-pocket expenses for the drug they are prescribed—in
the form of a deductible, copayment, or coinsurance payment—based on how the drug is classied on the formulary
of the health plan or its PBM. Uninsured patients are left to pay the pharmacy’s cash price entirely out of pocket for
the drugs they need.
2.2.8 Employers.
More than half of non-senior Americans—approximately 152 million people in total—receive health insurance
through private health plans that are selected and offered to them by either their employer or a close family
member’s employer.
67
Employees typically pay a contribution toward their individual or family coverage that is
deducted through the payroll process, and their employers pay the remainder of the insurance premium as a form
of compensation to the employee.
68
More than 99% of people with employer-provided health insurance can also
receive prescription drug coverage as a part of their offered health plans.
69
Most commonly, the drug coverage
offered contains cost sharing tiers, whereby patients pay different amounts out of pocket depending on the
characteristics of the prescribed drug, including whether it is a generic, brand name, or specialty drug.
Both federal and state governments regulate employer-provided health insurance. Workers and their families
enjoy important rights and protections under a variety of laws, including the federal Consolidated Omnibus Budget
Reconciliation Act of 1985 (“COBRA”), Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), and
the Affordable Care Act (“ACA”) of 2010.
2.2.9 Government.
State and federal government play a number of important roles in the pharmaceutical industry supply chain. First,
both the federal and state government are providers of prescription drugs benets. Through Medicare, for example,
the federal government provides insurance for all Americans 65 and older, as well as some younger Americans with
disabilities. In addition, federal and state governments jointly fund Medicaid, which is called “Medical Assistance”
in Minnesota. Medical Assistance provides low-cost prescription drug benets to approximately 1.1 million lower-
income Minnesotans. The Minnesota Department of Human Services also administers MinnesotaCare, which, in
addition to covering doctor visits and hospital stays, provides prescription drug benets for eligible residents whose
income falls below certain specied limits. As employers, federal, state, and local governments may also offer
health plan and prescription drug benet options to their employees.
Second, the government is a direct purchaser of prescription drugs. For example, MMCAP INFUSE
70
is a multistate
buying group that is open to governmental entities (in Minnesota and other states) that provide health care services,
such as certain state agencies, school districts, and correctional facilities. MMCAP INFUSE is administered by the
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24
Minnesota Department of Administration. It allows participating governmental entities to utilize their volume buying
power to negotiate lower prices for the drugs they purchase. Government entities that wish to participate in the
MMCAP INFUSE program must satisfy certain statutory and other criteria to do so.
71
The federal government is
also a major purchaser of prescription drugs, which it purchases on behalf of entities such as the Department of
Veterans Affairs and the Department of Defense.
Third, the government is a provider of prescription drugs. For example, the Minnesota Department of Corrections
administers prescribed drugs to adult and juvenile persons in the care of the department. The federal government
also provides prescribed drugs to many people, including eligible veterans.
Finally, the government regulates both brand-name and generic prescription drugs. As explained in greater detail
elsewhere in this report, the FDA regulates prescription drugs to ensure their safety and efcacy. The Minnesota
Board of Pharmacy likewise regulates, among other things, pharmacists and pharmacies to ensure that prescription
drugs are safely distributed to Minnesotans.
2.2.10 Patients.
Patients, of course, are the last link in the sales and distribution chain. Typically, patients either purchase drugs
from retail pharmacies that were prescribed to them by an authorized prescriber, or are administered drugs by a
health professional at a hospital, clinic, or other medical setting. Patients or their employers pay for all or a portion
of the drugs they use through copays or coinsurance, deductibles, and premiums (for insured patients) or out of
pocket (for uninsured patients). We are all patients because everyone at some point in their lives will need and use
prescription drugs.
Although patients are the intended beneciaries of the drug sales chain, all too often they are its victims. Most
patients do not understand the opaque nature of or the many parties involved in the drug sales chain. Nor do most
realize how the conduct of some of these parties, alone or in conjunction with others, result in ever-increasing drug
prices that patients are ultimately forced to bear.
2.3 The Current Federal and State Legal Landscape Regarding Prescription
Drugs.
While there are many federal and Minnesota laws that address prescription drugs in one manner or another, those
that are particularly relevant to the Task Force’s recommendations are (1) federal laws governing the process by
which the FDA approves and regulates prescription drugs, (2) federal patent laws, as well as federal exclusivity
laws that apply to prescription drugs that are distinct from patent laws, (3) the federal 340B drug pricing program,
which results in perhaps the lowest prices for drugs sold in the United States, and nally (4) certain Minnesota laws
regulating prescription drugs.
2.3.1 The FDA’s Approval and Regulation of Prescription Drugs Generally.
a. Overview of the FDA’s Regulatory Role.
Since the passage of the Food and Drugs Act in 1906, the FDA has been the primary regulator of prescription
drugs in the United States. Under the original 1906 law, the FDA’s authority was limited largely to ensuring that
drugs had not been adulterated or misbranded. In 1938, the FDA’s authority was signicantly expanded with the
passage of the Food, Drug, and Cosmetic Act. This law mandated pre-market approval for all new drugs, requiring
Report of the Advisory Task Force on Lowering Pharmaceutical Drug Prices
25
the manufacturer to prove the safety of the drug to the FDA before it could be legally sold in the United States.
The law also required that drugs have labels with adequate directions and disclosures to ensure their safe use. In
1962, the Food, Drug, and Cosmetic Act was amended to require drug companies to also prove the efcacy (i.e.,
effectiveness) of new drugs, before they could be legally sold in the U.S.
In addition to its regulating of so-called “small-molecule drugs”—which is what many people traditionally think of
when colloquially referring to prescription drugs—the FDA is also the primary regulator of biological products, or
“biologics,” in the United States.
72
Currently, the FDA has approved more than 20,000 drugs for marketing and sale
in the United States.
b. FDA Approval Process for New Drugs.
Before a new small-molecule drug may be legally sold in the United States, the drug manufacturer must submit a
New Drug Application (“NDA”) that provides the FDA with certain, specied information, including clinical testing
results, to determine whether the drug is safe and effective, whether the benets of the drug outweigh its risks,
whether the drug’s proposed labeling is appropriate, and whether the methods and controls used to manufacture
the drug are sufcient to preserve the drug’s strength, quality, and purity.
73
Biologics undergo a similar approval process before they may be sold in the United States. To obtain FDA approval,
a biologic manufacturer must le a biologic license application demonstrating through laboratory and clinical
studies that, among other things, the product satises safety, purity, and potency requirements.
74
While the federal
Public Health Services Act generally governs the approval process for biologics, they are also subject to regulation
as “drugs” under the Food, Drug, and Cosmetic Act.
75
c. FDA Approval Process for Small-Molecule Generic Drugs.
The FDA similarly approves and regulates generic small-molecule drugs, but generic drug manufacturers need
only submit an abbreviated new drug application (“ANDA”).
76
With an ANDA, the generic drug manufacturer relies
upon the FDA’s nding of safety and effectiveness for the original, brand name drug to essentially “fast track” the
approval process for the generic drug.
77
To obtain FDA approval, a generic drug manufacturer must generally show
that the drug contains the same active ingredients, dosage, and dosage delivery, and is bioequivalent to the original,
brand-name drug.
78
In addition, the generic drug manufacturer must certify either (1) that the brand name drug’s
patent has expired or is invalid, or (2) that the generic manufacturer’s sale of the drug will not infringe on any of the
brand name drug’s patents.
79
d. FDA Approval Process for Generic “Biosimilar” and “Interchangeable” Biologics.
Due to the complexities inherent in a drug derived from living organisms, generic versions of biologic drugs are not
approved in the same manner as generic small-molecule drugs. Because of complex issues surrounding approval
of generic biologics, in 2009, Congress passed the Biologics Price Competition and Innovation Act to allow for the
licensure of “biosimilar” drugs.
Biosimilar drugs are biologic products that are similar to a previously-licensed, branded biologic drug. The FDA
allows for abbreviated licensure and approval of a biosimilar biologic product if the manufacturer can show,
among other things, that the biosimilar drug is highly similar to the original biologic.
80
In addition, the biosimilar
manufacturer must demonstrate that the manner of administration, dosage form, and the strength of the biosimilar
is the same as those of the original biologic drug.
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“Interchangeable” biologic drugs are biosimilar drugs that, in addition to satisfying the just-discussed requirements,
have also demonstrated that among other things, they can be expected to produce the same clinical results as the
original biologic in any given patient.
82
As of July 2019, the FDA had not approved an interchangeable biological
product.
83
2.3.2 Federal Patent and Drug Exclusivity Laws.
a. Federal Patent Laws As Applied to Prescription Drugs.
It is important to note that drug manufacturers can obtain patents on many aspects of the drug, not just the creation
of its molecular structure that makes it a “drug” in the rst place. Pharmaceutical companies can obtain a patent
for a drug’s substance/active ingredient/molecule, its use, its dosage or delivery system, manufacturing process,
and for a combination product (i.e., combining two previously known drugs), among other things.
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For example, a
company may receive a patent on a newly-discovered drug molecule to treat a particular disease, and then, years
later, obtain a new patent related to the same molecule, but in an “extended release” form of the drug. Or the
manufacturer may recieve a patent for a drug in pill form, then years later, patent a new system whereby the drug
can be delivered by placing a dissolving strip on the patient’s tongue. A particular drug may thus be covered by
scores of patents, many of which are unrelated to the drug’s active ingredient.
Patent laws allow drug manufacturers to largely control the market for their drugs. A patent is a property right
that grants the holder 20 years to exclusively use, enjoy, and prot from their patented invention.
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The Patent and
Trademark Ofce is the federal agency that reviews patent applications and grants (or rejects) applications for a
particular patent. The applicant for the patent must establish that the invention is novel, useful, and non-obvious.
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Patent rights are privately enforced, meaning that a holder of a patent right must sue to stop any alleged infringement,
and if they prevail, may seek any damages, including any lost prots. Congress also enacted specialized patent
rules for pharmaceuticals in 1984. This law, commonly known as the “Hatch-Waxman Act,”
87
provides an extension
of up to ve years, in addition to the original patent term.
88
The act also provides for patent dispute procedures that
apply only to pharamaceuticals.
The FDA publishes all approved brand name drugs in a publication known as the “Orange Book,” which includes a list
of all of the patents that a drug manufacturer claims covers a particular drug.
89
A company seeking FDA approval
for a generic drug must, as described above, le an Abbreviated New Drug Application (“ANDA”) in which the generic
manufacturer certies its drug does not infringe on any patents protecting the branded drug.
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If the manufacturer
of the branded drug disputes the “no infringement” certication, it has 45 days to le a patent-infringement lawsuit
against the generic manufacturer. If a lawsuit is led, the FDA generally cannot approve the application from the
generic manufacturer for 30 months, so as to give the two drug manufacturers time to litigate the patent dispute.
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Special patent procedures also govern biologics and biosimilars. Biologic manufacturers do not have to provide
patent information in their licensure applications to the FDA. Federal law does, however, provide a process through
which the biologic drug manufacturer exchanges information (including applicable patent information) with the
applicant for the biosimilar drug about their respective products,
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which is sometimes known as the “patent
dance.” The exchange of information triggers deadlines for the parties to initiate any patent infringement litigation.
Similar to the process for small-molecule drugs under the Hatch-Waxman Act, this information exchange process
is designed to provide the parties with an opportunity to resolve patent disputes prior to the marketing of the
biosimilar.
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b. Federal Exclusivity Law as Applied to Prescription Drugs.
Wholly distinct from the patent rights discussed above, the FDA further grants periods of “exclusivity” in which drug
manufacturers are protected from any competition, including generic or biosimilar/interchangeable competition,
for a given time period. There are multiple types of exclusivity periods that can apply to prescription drugs, the most
signicant of which are:
“First Generic” Exclusivity. A particularly important exclusivity for pricing purposes is the FDA’s grant
of 180 days of exclusivity to the “rst applicant” seeking approval to market generic versions of small-
molecule drugs,
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and one year of exclusivity for the manufacturer of the rst interchangeable version of a
biological product.
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“Orphan Drug” Exclusivity. If a small-molecule drug or biologic is designated and approved to treat diseases
or conditions affecting fewer than 200,000 people in the United States, or the drug can treat more than
200,000 people but the manufacturer has no hope of recovering its costs, the FDA will not approve another
application for the same drug for the same orphan disease or condition for seven years from the time of
approval of the original drug.
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“New Chemical” Exclusivity. Generally speaking, if a drug contains a new chemical,
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the FDA will not
approve for ve years another drug that contains the same active molecule as in the new chemical entity.
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In addition to these exclusivities, the FDA grants several other drug exclusivities, all of which may affect the price
of prescription drugs.
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2.3.3 The Federal 340B Drug Pricing Program.
The federal 340B Drug Pricing Discount Program (“340B Program”) was established in 1992 after the enactment
of the Medicaid drug rebate program. The Health Resources and Services Administration (“HRSA”), an agency
within the U.S. Department of Health and Human Services, administers the 340B Program. The purpose of the
340B Program is to enable “covered entities to stretch scarce federal resources as far as possible” to reach “more
eligible patients and provid[e] more comprehensive services.”
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The 340B Program requires participating drug
manufacturers to sell outpatient drugs to eligible facilities and programs, referred to as “covered entities,” at
signicantly reduced prices in order to have their drugs covered by Medicaid.
101
Covered entities include sixteen eligible purchasing groups, such as qualifying hospitals, specialized clinics, federally
qualied health centers (“FQHCs”), and entities referred to as “FQHC Look-Alikes.”
102
In Minnesota, there are more
than 2,000 covered entities participating in the 340B Program, with over half being “disproportionate share hospitals”
who receive payments from the Centers for Medicaid and Medicare Services to cover the costs of providing care to
uninsured patients.
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Hospitals such as Hennepin County Medical Center, part of Hennepin Healthcare, and Abbott
Northwestern Hospital, part of Allina Health, participate under this covered entity type.
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Examples within other
types of covered entities in Minnesota include Mayo Clinic’s Hemophilia Treatment Centers in Rochester, and Min
No Aya Win Human Services on the Fond du Lac Reservation in Cloquet.
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These covered entities can dispense
340B drugs to eligible patients in a variety of ways, including in-ofce administration, dispensing through an in-
house pharmacy, or by contracting with a retail pharmacy to dispense 340B drugs to the patients.
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Covered entities may only administer and dispense the 340B drugs to eligible patients, who are dened as individuals
who have an established relationship with the covered entity and receive health care services from a practitioner
employed or contracted with the covered entity. An individual is not an eligible patient if the only service received
from the covered entity is the dispensing or administration of a drug.
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The discount on drugs through the 340B Program is signicant because the program requires thatmanufacturers
sell drugs at a price no higher than the net price paid by Medicaid. Further, drug manufacturers may offer even lower
prices without triggering a new Medicaid “best price.”
Some covered entities pass the lower prices they receive through the 340B Program along to eligible patients. In a
2018 study published by the U.S. Government Accountability Ofce, 30 of the 55 covered entities surveyed reported
providing low-income, uninsured patients discounts on 340B drugs, with 23 covered entities reportedly passing on
the full 340B discount on to these low-income patients.
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Covered entities that do not pass along direct cost savings on 340B drugs to low-income patients may still provide
benets to them through other mechanisms. There are no regulations, however, that require covered entities to
pass the savings they receive on the drugs they purchase through the 340B Program on to patients in any particular
manner. Accordingly, this has led some to question whether covered entities use the 340B Program as merely
another revenue stream, particularly if a health care provider participating in the 340B Program provides little
uncompensated care.
Participation in the 340B Program is voluntary for covered entities. In Minnesota, not all eligible entities have
enrolled in the program. Entities may not be aware they are eligible, for example, as FQHC Look-Alikes. In the
absence of clear policies and rules for the 340B Program, the requirement to keep auditable records, and the risk of
HRSA and manufacturer audits, some eligible entities may choose not to enroll in the 340B Program rather than risk
operating in a non-compliant manner. This means some eligible Minnesota entities, and potentially their eligible
Minnesota patients, are missing out on signicant drug savings by failing to participate in the 340B Program.
2.3.4 Selected Minnesota Laws Regarding Prescription Drugs.
The FDA is the primary regulator of most aspects of drug manufacturing, distribution, and sales practices in the
United States. While far less extensive than the federal regulatory framework, Minnesota law also addresses the
distribution, sale, and use of prescription drugs in certain instances. For example, the Minnesota Board of Pharmacy
regulates, among other things, pharmacies and pharmacists in Minnesota.
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In addition, the Board of Pharmacy
helps ensure the quality of all drugs sold in the state
109
and licenses drug manufacturers operating in Minnesota.
110
Moreover, state law prohibits the manufacture, sale, or delivery of adulterated or misbranded drugs.
111
Minnesota has also enacted legislation that helps lower prescription drug costs by encouraging the use of generic
drugs. Under Minnesota law, pharmacists may generally substitute generic versions of small-molecule drugs
without the doctor’s intervention.
112
Similarly, pharmacists in Minnesota may substitute any interchangeable
biologic for the original branded biologic without the prescribing doctor’s intervention.
113
Moreover, in the last
legislative session, the Legislature enacted legislation regulating the conduct of PBMs in Minnesota, which will be
administered by the Minnesota Department of Commerce.
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2.4 Examples of Problematic Drug Pricing Practices.
Examples of exorbitant prices being charged for drugs—or signicant price increases on new drugs and even drugs
long off patent—are troublingly common. Below are four selected case studies that illustrate the problems the
recommendations in this report are intended to address.
Case Study #1—EpiPen
Epinephrine, or adrenaline, is used to treat severe allergic reactions known as anaphylaxis. Synthetic
epinephrine was rst manufactured in 1909. In the 1980s, auto-injector technology was paired with
epinephrine, and became available to civilians as the EpiPen. The FDA describes epinephrine auto-injectors
as “combination products” because they include both a drug, epinephrine, and the administration device, the
auto-injector. The development of generic alternatives for combination products includes recreating both
the device and the drug, which is more challenging than developing a generic alternative for a drug alone. As
such, EpiPen dominated the market for epinephrine auto-injectors as of 2014, with over 90% market share.
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In 2007, Mylan Laboratories (“Mylan”) bought the rights to sell EpiPen, although it had not developed either
the auto-injector or the drug it contains. At the time, each pen cost patients about $57. In 2011, Mylan
announced that it would begin selling EpiPen products exclusively in packs of two. By 2016, after repeated
price increases, Mylan was selling EpiPen 2-packs for over $700, a price increase of more than 500%. Mylan’s
prots jumped from $874 million in 2007—before it acquired EpiPen—to almost $4.8 billion in 2017. During
this period, the pay of Mylan’s CEO rose from nearly $2.5 million in 2007 to $97 million in 2016, an increase
of more than 3,800%.
At the same time it was raising the price for a drug it neither developed nor manufactured, Mylan repeatedly
misclassied the drug as generic, thereby allowing it to pay smaller rebates to the federal government for
EpiPen’s use in programs such as Medicaid. In 2017, Mylan paid $465 million in a settlement with the U.S.
Department of Justice over its misclassication of the product as a generic drug.
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This amount represented
less than half of its revenue from its sales of EpiPen for just the year of 2015.
Mylan garnered national attention in 2016 for its large price increases on EpiPen. It drew bi-partisan criticism
from Congress, as well as from parents who relied on the everyday presence of an EpiPen to keep their
children safe. Many patients reacted to the price hike by holding on to their expired EpiPens, attempting to
measure out a correct dose of epinephrine in a syringe themselves, or simply living without the security the
EpiPen offered until they could afford a new one. Other patients, including parents whose children required
EpiPen availability at both school and at home, admitted to splitting their EpiPen 2-pack to save money,
despite knowing that two doses may be needed in an emergency situation.
Mylan responded to this criticism by introducing a generic version of the EpiPen in December 2016, which it
sold for roughly $300 for the 2-pack, or roughly triple what its own name-brand pens were selling for in 2007.
By comparison, EpiPen 2-packs were available to consumers in Canada for less than $200, and in the United
Kingdom for less than $80.
Despite the public outrage, Mylan did not signicantly reduce EpiPen’s prices. When interviewed about its
reluctance to change, former executives commented that the company’s lack of action was in line with
Mylan’s history of learning to thrive by absorbing and then ignoring public dismay.
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Mylan and its EpiPen
product have thus become “a case study in the limits of what consumer and employee activism, as well as
government oversight” in the current regulatory climate can achieve.
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Case Study #2—Lorazepam and Clorazepate
119
Lorazepam is a benzodiazepine commonly used as a sedative and to treat anxiety, tension, and insomnia. It
was rst marketed for sale in the United States in 1977. Clorazepate is also a benzodiazepine and is used
to treat anxiety, hypertension and in adjunct therapy for opiate and other types of withdrawal. It was rst
marketed for sale in the United States in in 1972.
As discussed above, drug manufacturers purchase the active ingredients found in the nished-form of
their drugs from API suppliers. Often there are only a handful of API suppliers that make a particular active
ingredient needed to manufacturer a drug. This limited competition among API suppliers is referred to as
an “oligopoly” in antitrust jargon. As of the mid-1990s, there were only two API suppliers for the active
ingredients needed to make lorazepam and clorazepate.
In 1998, the Minnesota Attorney General’s Ofce and dozens of other state attorneys general, in conjunction
with the Federal Trade Commission, sued Mylan Laboratories—which, in addition to EpiPens, manufactures
generic lorazepam and clorazepate—for successfully seeking to monopolize the APIs needed to make these
two drugs. Mylan did so, the lawsuit alleged, by negotiating the exclusive rights to purchase the relevant
active pharmaceutical ingredients for these drugs from the only two API suppliers of the ingredients. These
exclusive contracts were to last for ten years, thereby denying Mylan’s rivals’ access to the APIs required to
manufacture competing versions of generic lorazepam and clorazepate.
Following these negotiations, Mylan increased the price it charged for lorazepam by amounts ranging from
1,900% to 2,600% (for example, it increased the price for a 500 count bottle of lorazepam from $7.30 to
$191.00). It similarly increased the price of clorazepate by amounts ranging from 1,900% to 3,200% (for
example, it increased the price for a 500 count bottle of clorazepate from $11.36 to $377.00).
Case Study #3—Insulin
About 330,000 people, or nearly 8% of Minnesota residents, have diabetes.
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Diabetes and pre-diabetes
related costs in Minnesota total about $4.4 billion per year.
121
Insulin was rst discovered in 1922. To ensure
it would be available to the public, the scientists who created the original method for insulin treatments sold
the patent for $1 to the University of Toronto. Despite the original patent expiring long ago, the price of insulin
has skyrocketed since the 1990s. The price for some insulin products has increased more than 1,100% over
the last two decades,
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and diabetics’ insulin costs doubled between 2012 and 2016 alone, now averaging
about $5,705 a year.
123
This has led to some diabetics rationing their insulin because they cannot afford the
medication, sometimes with tragic results.
124
A large driver of these price increases is the prevailing rebate practices between insulin manufacturers and
PBMs. Manufacturers raise their insulin prices so they can offer PBMs larger rebates off of these prices.
In return, PBMs provide more favorable payment terms to a particular manufacturer’s insulin—instead of a
competitor’s insulin—when it is later dispensed to a diabetic at a pharmacy. Put more simply, manufacturer-
PBM rebate practices are driving up insulin prices because manufacturers now compete to offer the largest
rebates, not the lowest priced insulin. Manufacturers increasing their prices, in turn, allows them to offer
larger rebates to PBMs while still holding their post-rebate, net price—and hence their prots—steady.
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Case Study #4—Valeant Pharmaceuticals, now known as Bausch Health Companies.
Valeant Pharmaceuticals International (“Valeant”) is a multinational healthcare company based in Canada
that sells, among other things, brand name, branded generic, and generic prescription drugs. In 2008, under
the leadership of a new CEO, J. Michael Pearson, Valeant began rapidly and aggressively acquiring existing
drug manufacturers. After doing so, it typically slashed these companies’ research activities and red much
of their staff. Through this business strategy, Valeant acquired decades-old, off-patent drugs, many of which
had little, if any, competition. After acquiring the drugs, Valent sharply increased their prices, and hence its
prots.
In 2010, for example, Valeant acquired the drugs Cuprimine and Syprine as part of its acquisition of the
specialty drug company, Aton Pharma. For decades, Cuprimine and Syprine had been used to treat Wilson‘s
disease, a potentially deadly disease characterized by the body’s inability to process copper. From the time
Valeant purchased these drugs to the summer of 2015, it cumulatively increased the price of Cuprimine by
5,786% and Syprine by 3,161%.
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Similarly, in 2015 Valeant acquired Salix Pharmaceuticals and increased the price of its diabetes medication,
Glumetza, by 800%.
127
That same year, Valeant purchased the rights to two life-critical cardiac drugs, Isuprel
and Nitropress, and increased their prices overnight by 525% and 212%, respectively.
128
During a 2015
investigation of Valeant by the House Committee on Oversight and Government Reform,
129
the Committee
obtained documents indicating that Valeant purchased Isuprel and Nitropress for the sole purpose of later
increasing these drugs’ prices and thus Valeant’s revenues. These documents also demonstrated that
Valeant “identied goals for revenues rst, and then set drug prices to reach those goals.”
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All told, Valeant
raised the price of more than 20 of its other drugs by at least 200% between 2014 and 2015.
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In the fall of 2015, Valeant’s business practices began to receive signicant congressional and regulatory
scrutiny, causing its stock price to plunge. In the summer of 2018, Valeant changed its name to Bausch
Health Companies in an attempt to distance itself from the controversies resulting from its dramatic drug
price increases and the ensuing investigations of its business practices.
2.5 How High Drug Prices and Price Increases Affect Minnesotans.
High pharmaceutical drug prices affect different groups of Minnesota patients and entities in different manners,
sometimes due to differing insurance coverage and sometimes for other reasons.
2.5.1 Impact on Insured & Underinsured Minnesotans.
Approximately 152 million Americans receive health insurance coverage through their employers,
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including
many Minnesotans. But even among people who have employer-sponsored insurance, many are considered
“underinsured” because they still incur signicant out-of-pocket costs to pay for prescription drugs and other
medical care not paid for by their health plan.
133
As of 2018, about a quarter of all persons with health insurance
were considered “underinsured.”
134
High and increasing drug prices impact insured and/or underinsured persons
in a number of ways.
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First, as health plans’ spending on drug costs increases, it—in combination with the increased cost of other medical
care—puts upward pressure on premiums. Employers, in turn, are asking their employees to shoulder an ever larger
share of health plan premiums. As of 2017, Minnesota families with health insurance paid on average $4,998 per
year in out-of-pocket costs towards their health insurance premiums.
135
Second, employers and individuals are increasingly turning to high-deductible health plans as a way to reduce the
premiums they must pay for the plan. Those covered by high deductible health plans have to pay the cost of the
drugs they need out of pocket until their deductible is met each year. IRS regulations dene a high deductible health
plan as any plan with a deductible of at least $1,350 for an individual or $2,700 for a family.
136
In practice, however,
such deductibles can be far higher for individuals or families. For example, one Minnesota employer offers plans
with deductibles of up to $3,150 for single coverage and $6,300 for family coverage.
137
As of 2018, almost 46% of
Americans are covered by a high deductible health plan.
138
This results in insurance coverage paying less and less
of the cost of the medications these patients need because they never reach their deductible.
Third, some health plans require members to make a “co-insurance” payment when purchasing a drug that the plan
covers. Co-insurance payments are typically a percentage of the price of the drug being purchased (e.g., 20%), as
opposed to a “copayment,” which is typically a flat fee regardless of the cost of the drug (e.g., $50). As the price of
drugs increase, the burden of Minnesotans’ covered by health plans that impose co-insurance payments likewise
increases.
Fourth, health plans are sometimes limiting or even excluding certain drugs from being covered by insurance at all.
This often is done through periodic adjustments to the list of drugs included on a health plan’s formulary, or through
pre-certication practices like prior authorization or step therapy. If a medication is not covered by the health plan,
generally patients must pay the entire cost out of pocket, notwithstanding that they are insured.
2.5.2 Impact on Uninsured Minnesotans.
In 2018, 13.3% of non-elderly Americans did not have health insurance.
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The impact that high and increasing drug
prices have on those without insurance is not a mystery—they are often crippling because such persons pay for the
entirety of the drugs that they buy. As a result, more than half of people who were uninsured at some point in 2018
were forced to forgo medical care despite a need for it, such as not lling prescriptions, skipping recommended
testing or treatment, not seeing a doctor despite experiencing a health issue, or not receiving needed specialist
care.
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2.5.3 Impact on Minnesota Seniors.
High drug prices are especially problematic for seniors, who tend to use a higher amount of prescription medications
than non-seniors and who may live on a xed or modest annual income, such as Social Security or a pension.
According to a recent Kaiser Family Foundation (“KFF”) poll, 89% of seniors report taking at least one prescription
medication, and more than half take four or more drugs.
141
The median yearly income of seniors on Medicare is just
$26,000, with a quarter of beneciaries reporting incomes of less than $15,000.
142
Not surprisingly, 76% of seniors
think the cost of prescription drugs is unreasonable, and nearly a quarter who take at least one drug report difculty
affording their medications.
143
In this same poll, nearly three quarters of seniors reported that they receive prescription drug coverage through
Medicare Part D.
144
Medicare Part D can be expensive for those who nd themselves in a coverage gap called the
“donut hole,” which, for 2019, is triggered when an enrollee incurs $3,820 in drug expenses. Once in the donut hole,
enrollees pay up to 25% of the costs for brand-name drugs and 37% of the costs for generics.
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Once the enrollee
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33
has paid $5,100 in drug costs out of pocket, he or she then qualies for what is called “catastrophic coverage,”
bringing their expense down to no more than 5% of the cost of each drug.
146
Seniors in the donut hole tend to pay far more for prescription medications. For example, in 2016, seniors with
drug spending below the donut hole had an average out-of-pocket expense of $268. Seniors with drug spending
signicant enough to enter the donut hole had an average out-of-pocket expense of $1,175, while seniors with drug
spending in the catastrophic range averaged $3,196. These statistics did not include seniors that received low-
income subsidies.
147
The KFF poll indicated that despite the fact that nearly all respondents had some form of drug coverage, as many as
21% of the seniors reported not taking medications as prescribed due to high drug costs.
148
These seniors reported
not lling a prescription, taking over the counter medicines instead of those prescribed by their doctors, and cutting
pills in half or skipping doses.
149
Compounding the problem, more than half failed to report this behavior to their
doctors.
150
The troubling result is that 22% of the seniors who failed to take medication as prescribed reported that
their health worsened as a result.
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2.5.4 Impact on Independent Minnesota Pharmacies.
Independent pharmacies in Minnesota and elsewhere are a vital source of care for patients. The number of
independent pharmacies in the United States continues to decline each year. In 2011, there were approximately
23,100 independent pharmacies; by 2017, that number dipped to less than 22,000. The number of independent
pharmacies in Minnesota has experienced an even steeper decline, from about 550 in 1996 to just over 200 today:
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Approximately 75% of independent pharmacies serve populations areas of 50,000 or fewer. It is thus critically
important to take into account the impact of high drug prices on such pharmacies when attempting to address the
issue, and to ensure that residents who live in greater Minnesota continue to have access to the prescription drugs
they need.
Independent pharmacies face several difculties that large pharmacy chains do not. One of them is often onerous
and opaque “direct and indirect remuneration” (“DIR”) fees.
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Some PBMs charge independent pharmacies—who
often accept a signicant number of Medicare and Medicaid patients and have small prot margins—DIR fees
months after a drug has been dispensed to a patient. By levying DIR fees on pharmacies PBMs effectively reduce
the amount the PBM pays a pharmacy for the drugs it dispenses to patients, saving the PBM money and also
obscuring the true amount a pharmacy is paid by a PBM.
Another challenge for independent pharmacies is that PBMs sometimes direct or “steer” patients to brick-and-
mortar or mail-order pharmacies that they own.
154
They do this through pharmacy network restrictions, offering
lower out-of-pocket costs to patients who patronize their own pharmacy, or limiting other pharmacies’ ability to
dispense 90-day supplies of prescription medications, which are often preferable to patients. For example, CVS
operates as both a network of pharmacies and also as a PBM (CVS Caremark and SilverScript). In doing so, CVS’s
PBM steers patients to its own pharmacy managed networks, thereby reducing the number of pharmacies available
to CVS patients in exchange for supposed pharmacy savings.
In short, as a former president of the National Community Pharmacists Association explained, “When prices go up,
payers—be they health plans or employers or PBMs on behalf of their clients—want a cut and where do they turn to
cut rst? The easiest target is our [pharmacy] reimbursement.”
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2.5.5 Impact on Minnesotans of Color.
High prescription drug costs present unique challenges for people of color. One such hurdle is the higher un-
insurance rates among people of color. According to a 2017 Kaiser Family Foundation survey, while 4% of
Minnesota’s nonelderly white population lacks insurance coverage, 7% of African Americans, 18% of Hispanics,
and 22% of Native Americans lack insurance coverage.
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In addition, some providers believe in and act on some racist myths that can lead to limited access to and affordability
of prescription medications for people of color. For example, a 2016 survey of white medical students revealed
that half of them held at least one false belief about physiological differences between black patients and white
ones, such as the idea that black people have less sensitive nerve endings or thicker skin than white people.
157
Not
surprisingly, African Americans and Hispanics are more likely than whites to receive lower doses of pain medication
or none at all, despite higher pain scores.
158
This disparate treatment of pain persists even in hospice settings.
159
Some providers’ hesitation or refusal to prescribe pain-reducing medications for peope of color despite the fact
that white people are more likely than African Americans and Latino/as to misuse these types of drugs.
160
Misuse of race in pharmacogenomics—a eld of research that studies how a person’s genes affect how he or
she responds to medications—can also lead to increased medication costs for people of color.
161
The history and
development of a drug called “BiDil” illustrates this point.
162
BiDil is a combination of two preexisting generic drugs
that have long been used to treat heart failure, regardless of the race of the patient. Despite a lack of scientic
evidence that race has any relationship to BiDil’s effectiveness, a company called NitroMed was able to obtain
race-specic FDA approval for the drug. NitroMed relied on a trial that enrolled only African Americans and then
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35
used the results to argue the drug provided specic benets to them. By marketing BiDil as a race-specic drug,
NitroMed was able to extend its patent on BiDil, and thus its control over the prots by 13 years. The ability to obtain
race-specic patents exists despite the lack of evidence that race is a relevant biological variable in assessing
the safety or efcacy of drugs. As one author put it, “[p]ooling people in race silos is akin to zoologists grouping
raccoons, tigers and okapis on the basis that they are all stripey.”
163
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There are legions of causes, perverse economic incentives, and other factors that contribute to the high and ever-
increasing cost of prescription drugs in the United States. Discussion of every such factor is beyond the scope of
the Task Force’s report, so the discussion in this section focuses on seven of the most signicant causes of high
drug prices:
3.1 misuse and abuse of federal patent and drug exclusivity laws;
3.2 patients’ inability to access more affordable sources of mediations through safe, vetted
3.3 importation channels;
3.4 anticompetitive conduct that occurs in the drug industry;
3.5 deceptive and other unlawful marketing practices used in the drug industry;
3.6 the opacity of, and conflicts of interest present in, PBMs’ business models;
3.7 perverse economic incentives that result in more expensive branded drugs being used even when
generics are available; and
3.8 the lack of transparency into pricing and other practices in the pharmaceitical drug industry.
3.1 The Misuse and Abuse of Patent, Exclusivity, and Related Laws
to Insulate Drug Manufacturers From Competition Signicantly
Contributes to High Prescription Drug Costs.
3.1.1 Misuse and Abuse of Patent Laws.
As discussed above, a single drug may be covered by dozens of patents. This is sometimes called a “patent thicket.”
Relatedly, some drug makers will le successive patents on a drug with the same active chemical ingredient, a
practice sometimes referred to as “evergreening” or “patent layering.”
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For example, AbbVie led 247 patent
applications for Humira, which is used to treat arthritis and is the top-selling drug in the world. A total of 132 of
those patents were issued, resulting in 39 years of patent protection.
Often, the patents making up a patent thicket or the successive patents that constitute evergreening cover only
minor innovations or improvements, and may offer little to no therapeutic benet to patients taking that particular
drug. Still, such abuse of patent laws allows a manufacturer of a brand name drug to effectively extend the articial
monopoly provided by patent protections on the branded drug, thereby delaying entry into the market of a competing
3.
Signicant Causes And Contributors Resulting In High
Prescription Drug Prices.
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37
generic version of the same drug. The price on the brand-name drug protected by a patent thicket or evergreening
stays high because there is no competition. This hurts patients and others who pay for the drug because the rst
generic on the market can lead to a price drop of 20%. When multiple generics are competing, prices can go down
by 80% to 85%.
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3.1.2 Misuse and Abuse of Drug Exclusivity Laws.
Proponents of FDA exclusivities argue that they provide incentives for drug manufacturers to create new drugs.
As with patents, however, these exclusivities can be manipulated to articially protect drug manufactures from
competition, leading to signicantly higher drug prices.
Perhaps the most widely abused FDA exclusivity is the “orphan drug” exclusivity. In 1983, Congress passed the
Orphan Drug Act with the goal of encouraging drug manufacturers to develop drugs to treat rare diseases and
conditions, such as ALS and Huntington’s disease.
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The act as originally designed allowed drug manufactures
to have seven years of exclusivity—in addition to tax credits and FDA fee reductions—to recoup investments on
research and development for new drugs likely to have reduced sales due to small patient populations. This
granting of an articial monopoly, however, has given drug makers a virtually unfettered ability to raise drug prices
during the exclusivity period. By 2014, the average annual price for an orphan drug was $111,820, versus $23,331
for a mainstream, non-orphan drug.
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By 2017, the world’s 10 most expensive drugs were all orphan drugs.
The orphan drug exclusivity grant has also morphed into a vehicle for drug manufacturers to insulate themselves
from competition for even well-established drugs that treat large patient populations. By 2015, seven of the
top ten best-selling drugs in the United States had also won designation as orphan drugs. Drug companies can
achieve this designation for even widely used drugs by the so-called “salami slicing” of a drug’s approved treatment
indication into ever narrower indications for disease subtypes until they can qualify for orphan drug status.
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For example, Humira, the best-selling drug in the world—with $19.9 billion in worldwide sales in 2018 alone—was
originally approved by the FDA in 2002 to treat rheumatoid arthritis.
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Three years after the drug’s initial approval
the manufacturer of Humira, AbbVie, sought orphan drug status for the drug to treat juvenile rheumatoid arthritis.
The FDA approved this use in 2008. Since that approval, AbbVie has obtained approval for Humira to treat four
more rare diseases, and one approved use of Humira for an eye disease extends the drug’s exclusivity for that
disease until 2023. While orphan disease uses of Humira likely constitute less than 25% of the drug’s total sales,
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even just 10% of total sales amounts to more than $1 billion in sales per year.
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Brand name drug makers also abuse orphan drug exclusivity in other ways. For example, in the late 1990’s, Roche’s
brand-name drug Rituxan was initially approved to treat only a rare type of non-Hodgkin’s lymphoma that affected
approximately 14,000 patients per year.
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After receiving orphan drug exclusivity, however, Roche obtained approval
to use Rituxan to treat a variety of much more common conditions, including rheumatoid arthritis. By 2017, Rituxan
had $7.9 billion in worldwide sales. Such tactics can allow brand name drug companies to claim seven years of
FDA marketing exclusivity, reduced FDA application fees, and tax subsidies intended to foster the creation of true
orphan drugs, all while reaping the benets of sales to much larger patient populations than Congress intended
when it established orphan-drug exclusivity.
Neither is the abuse of exclusivity laws conned to orphan drug exclusivity. For example, in order to sell a
prescription drug “over the counter” or in a different dosage form, the drug manufacturer must le a supplemental
NDA seeking FDA approval.
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However, because FDA approval of a supplemental NDA grants three years of
additional exclusivity for the new indication, drug manufacturers often delay ling a supplemental NDA until
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existing patent and exclusivity protections have almost expired, thus insulating the drug from generic competition
on the new approved indication.
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Moreover, because the FDA grants three years of exclusivity for certain clinical
investigations deemed “essential” to the approval of an NDA or supplemental NDA of a drug,
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to obtain additional
exclusivity drug manufacturers will often delay studies or conduct internal clinical investigations near the end of
existing exclusivities, thus delaying drug innovation and increasing drug prices.
Additionally, when generic competition becomes inevitable, brand name drug manufacturers may release their own
“authorized generic” version as the rst generic version of the brand name drug. This allows the brand name drug
manufacturer to obtain 180 days of exclusivity protection from true generic drug competition, thus further delaying
the price reductions that generic drug competition brings.
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For example, when PDL Biopharma discovered that a
competitor was planning to develop a generic version of Tekturna, a blood pressure medication, PDL developed its
own authorized generic version of the drug. PDL’s CEO admitted that the authorized generic version of Tekturna
“was timed to secure us the benet of being rst to market” for a generic version of the drug.
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3.1.3 Misuse and Abuse of Citizen Petitions and REMS Protocols.
Citizen Petitions. Under federal law, any “interested person” may le a petition with the FDA requesting that the
FDA take action, including on a pending application for approval of a generic or biosimilar drug.
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These are
commonly referred to as “citizen petitions.” While citizen petitions provide an important conduit for the exercise
of the First Amendment right to petition the government, they can be subject to abuse in the form of branded
drug manufacturers frivolously questioning the safety and efcacy of proposed generic drugs.
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The former Chief
Counsel for the FDA has stated that these meritless citizen petitions “appear designed not to raise timely concerns
with respect to the legality or scientic soundness of approving a drug application, but rather to delay approval by
compelling the [FDA]” to review late-presented arguments.
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By doing so, citizen petitions can delay the entry of
generic drugs into the market, allowing branded drug manufacturers to enjoy monopolistic pricing power for longer
than they would otherwise be entitled.
REMS Protocols. To obtain FDA approval for a generic drug, the generic manufacturer will have to conduct certain
dissolution and bioequivalence tests on the branded drug (known as the “Reference List Drug” or “RLD”) with which
it will compete. To do that, the generic manufacturer must obtain thousands of samples of the drug. For most
drugs, the generic manufacturer can simply buy the drug from a wholesaler. Some drugs, however, are subject
to a Risk Evaluation and Mitigation Strategy (“REMS”) protocol. A REMS protocol often consists of a series of
requirements and processes imposed by the FDA to ensure the safety of the drug at issue, such as certication of
prescribers or pre-prescription liver testing of patients, and can even include restrictions on distribution of the drug.
If a generic manufacturer wants to compete with a branded drug that is subject to a REMS protocol, the generic
manufacturer must establish an identical program.
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Some branded manufacturers will misuse REMS protocol to deny a generic manufacturer access to the drug. To
prevent this anticompetitive practice, the FDA has developed a program by which a generic manufacturer can obtain
a letter from the FDA stating that the FDA will not consider providing access to the drug a violation of the REMS
protocol. But this, in turn, has resulted in some branded drug manufacturers actually patenting the REMS protocol
itself, which may subject the generic manufacturer to a patent infringement lawsuit when it attempts to implement
its own, equivalent REMS protocol regarding its competing generic drug.
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3.2 Patients’ Inability to Access More Affordable Sources of Medications
Through Safe, Vetted Importation Programs Contributes to High
Prescription Drug Costs.
Although the opaque nature of the United States’ healthcare system makes it difcult to compare prescription drug
prices in the Unites States with those of other countries, it is clear that the United States spends far more money
per capita on prescription drugs than any other high-income country and this gap in spending is continuing to
grow. One analysis found, for example, that Crestor, a medication used to lower high cholesterol and triglyceride
levels, costs $86.40 per month in the United States and only after discounts are applied. Compare that to Canada,
where Crestor costs $32.10 per month; Japan, where it costs $28.80 per month; and France, where it costs $19.80
per month.
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Similarly, Humira, a biologic drug used to treat rheumatoid arthritis, costs $2,504.50 per month after
discounts in the United States, compared to $1,164.32 in Canada, $980.34 in Japan, and $981.79 in France.
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The
disparity in drug prices between the United States and other countries is not unique to these two medications: it
existsacross a wide variety of brand-name, generic, and biologic prescription drugs.
In light of the disparities in drug prices between the United States, Canada, and other developed countries, many
have proposed importing lower-priced drugs from elsewhere, with Canada being the most discussed option. The
majority of Americans support importation as a potential solution to access cheaper prescription drugs. A 2019
survey found that 80% of Americans support allowing the purchase of prescription drugs imported from Canada.
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Federal law, however, generally prohibits the importation of non-FDA-approved medications into the U.S., including
FDA-approved drugs produced outside the U.S. that have not been evaluated through the FDA process.
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The
federal Food, Drug, and Cosmetic Act (“FDCA”) establishes two exceptions to this rule. First, one part of the law
gives the Secretary of the Department of Health and Human Services (“HHS”) authority to promulgate regulations to
establish an importation program from Canada if the Secretary nds the program would pose no additional risk to
the public and would signicantly reduce the cost of drugs to U.S. patients. Second, the FDA may allow temporary
importation when a drug is in shortage. Additionally, the FDA has allowed individuals to bring into the U.S. a small
amount of an unapproved drug for personal use “where effective treatment is not available in the United States, it is
for the treatment of a serious medical condition, and there is no commercialization of the drug to U.S. residents.”
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Several states, including Vermont, Colorado, and Florida, recently passed drug importation legislation thatauthorizes
them to seek federal approval to import prescription drugs from Canada. To date, no state has sought and gained
federal approval. Previous attempts by states to allow the importation of prescription drugs from foreign countries
have failed because HHS opposed them due to safety concerns.
On July 31, 2019, the HHS and the FDA announced the “Safe Importation Action Plan,” which describes two potential
pathways for establishing an importation program. The rst would involve establishing new regulations that would
allow “States, wholesalers, or pharmacists [to] submit plans for demonstration projects for HHS to review outlining
how they would import Health-Canada approved drugs.”
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The second pathway would allow manufacturers of FDA-
approved drugs to import to the U.S. the versions of the drugs that they sell in foreign countries and then re-sell
these imported drugs at lower prices here, if they establish that the foreign version is the same as the U.S. version.
While all of these importation plans are in the early stages, those focused on importing drugs from Canada have
raised concerns over the possible effect on Canada’s pharmaceutical drug supply and potential price increases on
pharmaceutical drugs for Canadians. Canada has only approximately 38 million residents compared to the 330
million people that live in the United States. This raises questions about Canada’s ability to be an adequate source
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of supply for any drugs sought to be imported on a nationwide basis. Thus, any large-scale importation plan could
face roadblocks in Canada, and suggests that any importation of lower-priced drugs will have to be sourced from
other nations in addition to Canada.
3.3 Anticompetitive Conduct in the Drug Industry Signicantly Contributes
to High Prescription Drug Costs.
Anticompetitive conduct is pervasive in the drug industry. Some types of anticompetitive conduct that have been
particularly prominent in the industry over the last two decades and that have contributed to high drug prices are:
(1) drug “product hopping,” which effectively coerces patients to use high-priced, brand-name drugs subject to
patent protection, (2) “pay for delay” arrangements that drug manufacturers use to delay competition from cheaper,
generic drugs, (3) per se anticompetitive conduct by drug manufacturers that continues despite it being clearly
unlawful, and (4) signicant industry consolidation among drug manufacturers.
3.3.1 Drug “Product Hopping” Prevents Patients’ from Switching to Cheaper Generic Drugs,
Resulting in Their Continued Use of Higher-Priced Branded Drugs.
As discussed above, when a manufacturer creates a new drug they are granted articial monopoly power over
the drug for a period of time through federal patent or drug exclusivity laws (or both). Because of this grant of a
monopoly, it is more protable to sell the drug during the time period the manufacturer’s patent or exclusivity rights
protect it from competition. When the monopoly period ends and generic versions of the drug can more easily
enter the market, prices—and prots—often fall signicantly. This provides a strong incentive for branded drug
manufacturers to try to extend the period the drug is covered by patent or exclusivity rights. One method of doing
so is called drug “product hopping.”
In a product hop, a branded drug manufacturer, typically shortly before its patent or exclusivity rights expire, makes
minor changes to some aspect of a drug besides its substance/active ingredient/molecule. After doing so, the
manufacturer secures additional patent or exclusivity rights to the “new” version of the drug, and ceases selling
the prior version. Generally, the minor alterations made to the drug are not intended to change its effects, but to
maintain the manufacturer’s monopoly pricing power.
Accordingly, in a product hop case, a manufacturer is not making a new or superior product; the manufacturer
is instead exploiting patent or exclusivity laws to extend its monopoly power and keep other, cheaper generic
equivalent drugs from entering the market. While product hopping has been held to likely violate antitrust laws,
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it is still a common practice in the drug industry.
One recent example of this practice regards the drug Suboxone, made by Indivior, Inc. Suboxone is a very protable
drug used to treat opioid withdrawal. More than 40 state attorneys general, including Minnesota, led a lawsuit
against Indivior in 2016 alleging unlawful product hopping.
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The lawsuit claims that, as Indivior’s period of
exclusivity on the tablet-form Suboxone was coming to an end, it created a therapeutically identical lm-strip
version of Suboxone, which it patented. Indivior then shifted the market to the newly patented, lm-strip version
of the product by falsely claiming that it was safer than the tablet form, delaying the entry of generic versions of
Suboxone tablets to market.
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3.3.2 Drug Manufacturers Routinely Enter Into “Pay for Delay” Arrangements that Delay the
Introduction of Cheaper, Generic Drugs.
Similar to product-hopping, “pay for delay” arrangements between drug manufacturers are a way to delay competition
from lower-priced generic drugs. Pay for delay agreements begin when a generic manufacturer les an Abbreviated
New Drug Application with the FDA to manufacture a generic version of a branded drug. Once this occurs, the
branded manufacturer has 45 days to dispute, by ling a lawsuit, the generic manufacturer’s certication to the FDA
that producing the generic version of the drug will not infringe on the branded manufacturer’s patent rights.
In litigation, a defendant typically pays a plaintiff to settle a lawsuit. In a patent case, this means that a generic
manufacturer (i.e., the defendant) would pay the branded manufacturer (i.e., the plaintiff) to settle the lawsuit. But
in a pay for delay arrangement, the exact opposite occurs—the branded manufacturer, whose patents are allegedly
being infringed, actually pays the generic manufacturer, who is allegedly doing the infringing. In exchange for this
payment, the generic drug manufacturer agrees to delay introducing its generic version of the drug into the market
until a certain amount of time has passed. These counterintuitive payment arrangements are also sometimes
called “reverse payment settlements.”
Regardless of what they are called, the essence of these arrangements is that a branded drug manufacturer pays
a rival generic manufacturer not to compete with it by delaying introduction of the rival’s generic drug into the U.S.
market, leaving the branded drug as the only one available. In some cases, while generic drugs have competed
with branded drugs in other countries around the world, pay-for-delay arrangements have resulted in the absence
of such competition—and the reduced prices it would bring—in the United States.
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3.3.3 Even Per Se Unlawfully Anticompetitive Practices, Such as Price Fixing, Remain a
Problem in the Drug Industry.
Due to a variety of factors, conduct that is patently unlawful is still troublingly common in the drug industry. Price
xing is just one example of such conduct. It has long been “per se” unlawful for two rivals to x the price of the
competing products that they each sell.
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Nevertheless, drug manufacturers have been repeatedly accused
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of
xing drug prices, including in an ongoing price-xing lawsuit brought by Minnesota and 48 other state attorneys
general in federal court in Pennsylvania.
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The lawsuit alleges that for many years, generic manufacturers have
participated in a per se anticompetitive scheme whereby each one agreed that it would only sell to certain customers
and avoid price competition to maintain what they believed was their “fair share” of the market for the drugs at
issue. Later, these manufacturers altered their alleged scheme to implement simultaneous price increases for
their competing generic drugs, with some of these increases exceeding 1,000%. Typically, “[f]or drugs that attract
a large number of generic manufacturers, the average generic price falls to 20% or less of the price of the branded
drug.”
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Because of the alleged price-xing agreement among competing generic manufacturers, however, the
normal effects of competition did not occur. As a result, these generic manufacturers signicantly increased their
prots at the expense of patients being able to buy cheaper prescription drugs.
3.3.4 Consolidation has Signicantly Reduced the Number of Competitors in the Drug Industry.
Finally, as in many industries, mergers and acquisitions between pharmaceutical companies can affect the price
and quality of their products. Large mergers have been the norm in the drug industry over the last twenty years,
with one of the more recent being a $74 billion deal between Bristol-Myers Squibb and Celgene, two of the largest
American drug companies. Other signicant mergers and acquisitions among drug manufacturers since the 1990s
include the following:
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• Amgen’s acquisition of Otezla in 2019 ($13.4 billion);
• Takeda Pharmaceutical’s acquisition of Shire in 2018 ($62 billion);
• Johnson & Johnson’s acquisition of Actelion in 2017 ($30 billion);
• Abbott Laboratories’ acquisition of St. Jude Medical in 2016 ($25 billion);
• Shire’s acquisition of Baxalta in 2016 ($32 billion);
• Bayer’s acquisition of Monsanto in 2016 ($66 billion);
• Actavis’ acquisition of Allergan in 2014 ($66 billion);
• Glaxo Wellcome’s merger with SmithKline Beecham in 2000 ($64.3 billion);
• Pharmacia & Upjohn’s merger with Monsanto in 1999 ($26.5 billion); and
• Pzer’s acquisition of Warner-Lambert in 1999 ($90.27 billion).
As the pharmaceutical industry grows more and more consolidated, these mergers cause increasing concern.
Consolidation among drug manufacturers presents several problems from a competition standpoint. Fewer major
players means less competition and potentially higher prices. It can also discourage research and development for
new drugs, as large companies may nd it more protable to simply buy companies that own new drugs, instead of
investing in developing new drugs.
Mergers in other parts of the drug industry, such as the recent merger between CVS (representing America’s largest
retail pharmacy chain, plus a PBM) and Aetna (the third-largest health insurer in the United States), can also cause
prices to rise by constraining competition. Because of the complex supply chains and payment schemes for
prescription drugs, as discussed above, antitrust enforcers must monitor excessive consolidation in many different
parts of the industry.
3.4 Deceptive and Other Unlawful Marketing Practices in the Drug Industry
Signicantly Contribute to High Prescription Drug Costs.
Drug manufacturers for decades primarily marketed their pharmaceuticals directly to health care providers. But
“direct-to-consumer” advertising of prescription drugs by manufacturers—that is, marketing a drug directly to
patients, such as in an advertisement on TV—exploded after the FDA loosened restrictions on this practice in
1997. From 1997 through 2016, direct-to-consumer advertising has been the fastest growing form of marketing
for prescription drugs, with spending on these type of ads increasing “from $1.3 billion (79,000 ads) in 1997 to
$6 billion (4.6 million ads, including 663,000 TV commercials)” in 2016.
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The United States is one of only two
countries in the world—the other being New Zealand, which has a population of only four million people—that
permits direct-to-consumer advertising of prescription drugs.
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Studies have found that direct-to-consumer advertising leads to increased patient requests for high-cost, brand-
name drugs—despite the availability of cheaper generic substitutes—as well as greater costs resulting from
increased visits with health care providers. For example, the House Commerce Committee found in 2008 that “[e]
very $1 spent on direct-to-consumer advertising results in up to a $6 increase in sales. One study demonstrated
that every $1,000 spent on direct-to-consumer advertisements resulted in 24 new prescriptions.”
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This has led to concerns that direct-to-consumer advertising may be placing added pressure on physicians to
prescribe expensive, branded drugs that are heavily advertised to, and subsequently requested by, patients. As a
result, the American Medical Association in 2015 called for a ban on direct-to-consumer advertising, explaining that
“a growing proliferation of ads is driving demand for expensive treatments despite the clinical effectiveness of less
costly alternatives,” and continuing that “direct-to-consumer advertising also inflates demand for new and more
expensive drugs, even when these drugs may not be appropriate.”
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Such advertisements further frequently tout the discount coupons and patient assistance programs that can
help a patient afford the advertised drugs.
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As discussed further below,
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“these strategies have been criticized
for encouraging use of expensive drugs despite lower-cost options, undermining insurance design, diminishing
competitive pressure to lower prices, and ultimately shifting higher costs back to payers.”
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Despite the signicant increase in direct-to-consumer advertising, the FDA has issued a decreasing number of
violation letters to manufacturers since 1997 (156 violation letters) through 2016 (11 violation letters).
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This may
be due to the FDA being “overwhelmed by the massive increase in promotional submissions” by manufacturers.
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It seems unlikely that the FDA’s absence of regulatory action is attributable to a lack of problematic advertising
practices by manufacturers. Indeed, since 2007, the U.S. Department of Justice and state attorneys general entered
into approximately 103 settlements with manufacturers over their allegedly unlawful marketing practices, resulting
in more than $10.5 billion in nancial penalties being imposed.
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Most commonly, these unlawful practices included
manufacturers advertising their prescription drugs for off-label purposes.
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The Minnesota Attorney General’s
Ofce itself has sued and obtained millions of dollars from drug manufacturers for engaging in allegedly unlawful
advertising practices.
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In May 2019, the Centers for Medicare and Medicaid Services (“CMS”) published a nal rule requiring direct-to-
consumer advertisements of any prescription drugs available through Medicare or Medicaid to include the list price
of that drug in the ad.
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The purpose of the rule was to ensure patients understood the cost of advertised drugs.
In June 2019, however, three drug manufacturers (Merck, Eli Lilly, and Amgen) sued CMS over the proposed rule,
arguing that it did not have the authority to issue it and that the rule violated their First Amendment rights.
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Hours
before it was to take effect, a federal judge blocked the implementation of the rule in response to this lawsuit.
CMS‘s appeal of this ruling is still pending.
3.5 The Opacity of, and Conicts of Interest Present in, PBMs’ Business
Models Signicantly Contributes to High Prescription Drug Costs.
As explained above, pharmacy benet managers occupy a critical position in the drug sales chain.
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Multiple
practices of PBMs are problematic because they either directly cause drug prices to increase, prohibit other people
from taking action to reduce the cost of drugs, or obscure critical information that would allow others to take such
action.
PBM Rebate Practices.
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A signicant source of revenue for PBMs is rebates that drug manufacturers pay to PBMs
for each unit of a drug sold through the pharmacy networks that PBMs create and maintain for their health plan
clients. The prevailing PBM rebate practices incentivize higher drug prices in a number of ways.
Because rebates that manufacturers pay PBMs are taken off of the manufacturer’s list price of a drug, a manufacturer
can offer larger rebates to PBMs—while still holding its post-rebate, net price steady—by increasing a drug’s list
price. This practice is akin to a department store increasing the price of a clothing line so it can offer shoppers
“bigger” discounts as part of a sale. This prevailing PBM rebate structure incentivizes manufacturers to increase
the price of the drugs they sell so PBMs can more easily demand, and manufacturers can more easily pay, larger
rebates without affecting manufacturers’ bottom line.
These same rebate practices also incentivize PBMs to sell more expensive medicine through their pharmacy
networks, as opposed to switching to cheaper generics. An example illustrates this issue best: A drug manufacturer
makes branded “Drug X,” which has a list price of $50 and for which the manufacturer pays a rebate of $20 to a
PBM for each unit of the drug that is sold. A different drug manufacturer makes a generic version of Drug X. The
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list price of this generic is $30, but a PBM will only receive a $10 rebate for each unit that is sold. Because the
PBM receives a larger rebate for continuing to sell the branded version of Drug X ($20) than it would by selling the
competing generic drug ($10), the PBM continues to keep branded Drug X on its formulary despite the price being
signicantly more than that of the generic version of the drug. This decision by the PBM drives up the cost of Drug
X for both patients and health plans.
PBMs Lack of Transparency.
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PBMs also impede the transparency that those who pay for drugs—typically health
plans and patients—have into how those drugs are priced, distributed, and utilized. This makes it difcult for health
plans and patients to attempt to control how much they spend on drugs or engage in efforts to hold down drug
costs. The lack of transparency results largely from the contracts that PBMs enter into with retail pharmacies
and health plans, which act as a “chokepoint” by restricting information these parties are entitled to learn about
how the PBM does business. PBM contracts tend to be very one sided and frequently include, among many other
problematic provisions:
• Substantial restrictions on health plans accessing data, including even claims data regarding reimbursement
rates and any difference between what a PBM reimburses a pharmacy and what the health plan pays the
PBM;
• Limiting audit rights and approval of audit rms;
• A lack of transparency into the contractual relationship between PBMs and the retail pharmacies;
• Failure to disclose the nancial incentives that drug manufacturers provide to PBMs to drive demand for
the manufacturer’s drugs; and
• Purposefully vague or nonexistent denitional terms governing, for example, classication and
reimbursement for branded versus generic drugs.
These and many other practices by PBMs that reduce transparency make it difcult for others in the drug supply
chain to take concrete steps to reduce the costs of drugs and the amount of money they spend on drugs.
PBM Conflicts of Interest. Some PBMs also operate their own “specialty” and/or mail order pharmacies that directly
compete with the retail and other pharmacies with which the PBM also does business. These circumstances
present obvious conflict-of-interest concerns: for example, a PBM could engage in business practices that steer
purchasers and payers to buy a drug from a pharmacy the PBM owns, even if the price of the drug is cheaper at a
competing pharmacy.
3.6 Perverse Economic Incentives that Result in High-Cost Drugs Being
Used Even When Generic Alternatives Are Available Signicantly
Contribute to High Prescription Drug Costs.
Financial inducements offered by drug manufacturers and others to prescribers and patients alike often result in
the use of high-cost branded drugs, even though cheaper generic versions of the same drug are available. Such
perverse economic incentives are sometimes attractive to patients because they reduce their direct out-of-pocket
costs but their decision to use a higher priced, branded drug drives insurance premiums higher because health
plans must pay for the remainder. Three particular types of drug industry practices that create perverse economic
incentives and contribute to higher drug prices are (1) patient discount coupons, (2) patient assistance programs,
and (3) prescriber nancial payments.
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3.6.1 Drug Manufacturers’ “Patient Discount Coupons.”
Many health plans use “tiered pricing” for prescription drugs, which charge plan members smaller copays for generic
drugs and higher copays for branded drugs.
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This tiered pricing is meant to incentivize patients to use cheaper
generic medications. To nullify this nancial incentive for using generic drugs, branded drug manufacturers now
offer copay or other drug discount “coupons” to patients through advertisements, physicians, online, or as debit-
type cards.
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The coupons are generally redeemed when the patient purchases the branded drug at the pharmacy, and reduce
or eliminate patients’ out-of-pocket copay costs. Typically, to assess their eligibility for the coupon, patients are
required to provide their personal information to the manufacturer, including their contact information, age, income,
and insurance status. These coupons are also usually time-limited, meaning that patients with chronic conditions
who use branded drugs will eventually be required to pay full price for the drug once their coupon discount period
expires. In 2010, drug discount coupons were used for approximately 100 million dispensed prescriptions.
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Since
then their prevalence has only grown. A more recent study has found that patients with insurance used drug
discount coupons for one out of every ve branded drug prescriptions they lled in 2016.
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For some branded
drugs, coupon use was as high as two-thirds of all lled prescriptions.
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Drug manufacturers argue that such coupons defray the out-of-pocket costs patients pay for branded prescription
drugs. In reality, however, discount coupons are used by branded drug manufacturers to bolster the sales of their
more expensive drugs; dissuade patients from using more cost-effective generic drugs, as a strategy to avoid
reducing the high prices they charge for these drugs; and to build patient loyalty to the branded version of the drug.
For example, manufacturers build the cost of discount coupons into their budget and pricing strategies and
use analytics—including leveraging the personally identifying data they gather from patients who apply for their
coupons—to target their coupon offers to maximize brand loyalty and bolster the market for the branded prescription
drug being discounted.
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One study estimated that manufacturers receive returns on investment in such coupon
programs of approximately 4 to 1, and as much as 6 to 1, in the form of increased use of the branded prescription
drug by patients.
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By increasing the sales of their higher priced branded drugs through these coupon campaigns, manufacturers also
prevent patients from switching to cheaper, generic versions of the drug. For example, a 2013 study found that
62% of all manufacturer coupons were for brand-name prescription drugs competing against a cheaper generic.
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Another study found discount coupons “increase branded sales by 60+ percent, entirely by reducing the sales of
bioequivalent generics.”
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Manufacturers further use discount coupons “as part of a marketing strategy to keep prices for brand-name
drugs higher than they otherwise would be after a lower-cost generic substitute comes to market.”
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Accordingly,
California
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and Massachusetts
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have banned the use of drug discount coupons for branded drugs where a
generic version of the drug is available. Moreover, Medicare, Medicaid, and military and veterans federal health
plans prohibit the use of discount coupons because they have been deemed unlawful inducements under the
federal anti-kickback statute.
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In sum, the result of drug manufacturers’ discount coupon programs is to raise overall health care costs by steering
patients away from cheaper generic medications and inducing them to buy higher cost branded drugs. While a
discount coupon may reduce the amount a patient pays out of pocket for a branded drug in the near term, the
coupon does not reduce the price a health plan is charged for that branded drug. Patients often do not realize that
third-party payers are still charged the higher price for the branded drug even when a generic version of the drug
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is available, thereby increasing costs and driving up premiums that the very same patient who used the discount
coupon must pay in the long term.
227
In this way, manufacturer “coupons” raise healthcare costs overall. Indeed,
one study estimated that discount coupons for just 23 branded drugs (that competed against a generic substitute
drug) resulted in an extra $700 million to $2.7 billion in drug spending over ve years for these 23 drugs alone.
228
Patients often don’t realize that this is the overall impact of using copay coupons.
3.6.2 Drug Manufacturer “Patient Assistance Programs.”
Similar to drug discount coupons, drug manufacturers have also created “Patient Assistance Programs” for
income-eligible patients to acquire drugs at no or reduced costs. These programs usually either directly distribute
branded drugs to patients at reduced cost, or defray copays, deductible expenses, or other out-of-pocket expenses
associated with using a branded drug. Like drug discount coupons, these programs are also controversial.
First, many Patient Assistance Programs (“PAPs”) are funded by branded drug manufacturers. Some manufactures
have attempted to conceal their relationship to the PAP, however, by discreetly establishing or supporting a nonprot,
tax-exempt charity to ostensibly run the program. For example, a number of drug manufacturers have been
investigated by the Department of Justice regarding their relationship with PAPs run by purportedly independent,
charitable organizations.
229
Second, manufacturer-sponsored PAPs “are almost always restricted to expensive, patented, brand-name
products.”
230
Just like drug discount coupons, this results in PAPs incentivizing patients to use expensive branded
drugs and steers them away from using cheaper, generic versions of the same medications.
231
Indeed, some
healthcare consultants have touted PAPs as “improving consumer loyalty to brand-name drugs, and increasing
[branded] drug utilization and sales.”
232
For example, one rm has called manufacturer-backed PAPs a “key strategy
for improving patient uptake” of branded drugs.
233
Thus, PAPs, just like discount coupons, contribute to increased
healthcare costs for all patients “in the form of higher insurance premiums, deductibles and copayments.”
234
3.6.3 Prescriber Financial Inducements for Prescribing Particular Drugs.
Manufacturers spend billions each year to market their pharmaceuticals directly to medical providers.
235
Based on
one study, their return-on-investment for such marketing is “2 to 1 overall and 10 to 1 for new branded drugs.”
236
Researchers have found that in 2016, manufacturers “paid physicians and teaching hospitals $978.96 million
for non-research activities, including $381.13 million to serve as faculty or speakers presenting [manufacturer]-
developed materials during lunch or dinner talks. Other payments were for consulting ($210.05 million), food and
beverages ($164.21 million), travel and lodging ($96.9 million), and honoraria ($14.64 million).”
237
Manufacturers often provide such payments to opinion leaders who serve as consultants and speakers that
champion the manufacturer’s expensive branded drug to other prescribers. Studies have found that these types
of payments and gifts to physicians “appear to stimulate physicians to prescribe the promoted drug; even small
gifts promote increased prescribing, although larger gifts are associated with larger effects.”
238
For this reason,
Minnesota bans manufacturers from providing gifts to healthcare practitioners, though this prohibition still allows
manufacturers to pay practitioners certain education-related expenses for speaking at a conference, for example,
as well as for certain consulting expenses.
239
Notwithstanding such laws, some manufacturers still attempt to increase demand for their branded drugs by
making improper payments to prescribers. For example, in May 2018 the Minnesota Attorney General’s Ofce sued
opioid manufacturer Insys Therapeutics, Inc., for allegedly engaging in an illegal marketing scheme designed to
Report of the Advisory Task Force on Lowering Pharmaceutical Drug Prices
47
induce Minnesota health care providers to prescribe their branded opioid products.
240
As one part of its scheme,
Insys allegedly created a sham speaker program to justify its payments to opioid prescribers.
241
Insys paid these
prescribers money disguised as bona de honoraria for participation in “educational events.”
242
Instead, the events
were shams that often did not even occur and the payments were bribes—i.e., illegal kickbacks— intended to induce
prescribers to write prescriptions for Insys’s branded opioid product, or reward them for already doing so.
243
Insys
targeted its ostensible speaker program in Minnesota to two physicians, allegedly paying them more than $43,000 in
sham “speaker fees.”
244
In exchange, these two Minnesota physicians allegedly wrote over 90% of the prescriptions
in the state for Insys’s opioid product, Subsys, generating over $4 million in sales.
245
Numerous Insys employees,
including high-level executives, have been criminally charged and convicted for their participation in this type of
illegal scheme.
246
A bankruptcy court recently conrmed the liquidation of Insys, resolving the enforcement actions
brought by the Minnesota Attorney General’s Ofce and the Minnesota Board of Pharmacy.
247
3.7 The Lack of Transparency Regarding How Drugs Are Priced and Paid
For Signicantly Contributes to High Prescription Drug Costs.
The prescription drug market is uniquely opaque at virtually all levels. As reflected in the diagram in Section 2.2, the
sales chain is complex and involves many different companies that manufacture, distribute, or pay for drugs in some
manner. Information gaps exist at each level of the sales chain. As a result of the different negotiations between
different parties in the sales chain, there is generally not a “single” price for a drug. Instead, the manufacturer’s
list price
248
serves as a starting point or “benchmark” for different prices paid by different payers. Health plans,
patients, and other payers do not have access to information reflecting what each entity pays in relation to this list
price, rendering it exceedingly difcult to understand the prices paid for prescription drugs at all level of the sales
chain.
Manufacturers set list prices for drugs sold. How a manufacturer determines the list price is not transparent. In
practice, list prices are sometimes inflated in anticipation of negotiations over rebates paid to PBMs, as discussed
previously, and other pricing concessions, such as discounts and coupons, as also discussed above. Manufacturer
rebates paid to PBMs generally vary by drug and PBM. There is no transparency into the size of the rebates
manufacturers pay to PBMs, as this information is labeled proprietary. This obscures the true price manufacturers
receive for the drugs they sell. The share of the rebates that a PBM passes on to its health plan client, if any, is also
often unknown, exacerbating the lack of transparency at this separate level of the sales chain.
A lack of transparency in pricing also exists for the other entities involved in the prescription drug distribution
system. The drug manufacturer typically sells drug products to a wholesaler, at a price often referred to as the
average manufacturer’s price or wholesale acquisition cost. Wholesalers then distribute drugs to pharmacies and
providers. Wholesalers generally charge pharmacies a percentage off of a reference price or list price. From the
pharmacy, medication goes to a consumer. A consumer with insurance pays an amount determined by the insurer.
Pharmacies are often reimbursed by insurers and PBMs based on a percentage off of the reference or list price.
Thus, cost sharing with consumers is often a function of the list price. Consumers without insurance are charged
a cash price. In each of these transactions, the purchaser often has little or no information about the actual prices
others in the distribution chain are paying, obscuring visibility into the entire process.
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Regarding reimbursements and pharmacies, little is publicly known about how health plans or PBMs reimburse
pharmacies for drugs dispensed to a health plan’s patients. The PBM or health plan generally determines both what
a patient’s copay will be and the reimbursement paid to the pharmacy for dispensing a drug. For generic drugs,
the reimbursement is referred to as the maximum allowable cost (“MAC”), a proprietary formula determined by the
PBM.
This lack of transparency at all levels of the distribution chain hinders the prescription drug market from functioning
according to normal market principles, as buyers need sufcient information about prices to foster competition
among rival sellers. But, in the market for prescription drugs, for the reasons described above, patients, health
plans, and other payers often lack even basic pricing information necessary to make informed choices about their
health care.
249
Transparency could benet multiple entities in the drug sales chain, in addition to patients, by making it difcult for
manufacturers or others to charge higher prices to some purchasers versus others, or provide different discounts or
rebates.
250
For example, one study considered whether knowledge of prices affected business-to-business markets
in the hospital supply purchasing context.
251
The study noted that there was variation across hospitals paying for
the same brand of medical devices. The study determined that when hospitals gained access to information on
peer hospitals’ purchasing, they saw savings on the same brands.
Increasing transparency could result in more accountability for manufacturers and allow regulators and the public to
more readily recognize abusive or unconscionable practices such as price-gouging. While the lack of transparency
allows manufacturers more opportunities to overprice drugs, transparency may disincentivize such practices. More
information about the gap between a list price and net price could inform future policy to curb drug spending.
Accordingly, transparency is needed to begin to address drug-pricing practices.
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4.
Selected Past and Current Legislative, Regulatory, and
Law Enforcement Strategies That Have Attempted to
Address High Prescription Drug Prices.
Numerous strategies have been contemplated, attempted, or implemented over the years that have sought to
combat high drugs prices, at both the state and federal level. Given the current cost of many prescription drugs
and how quickly they continue to increase in price, it is clear these efforts have yet to accomplish their intended
goal. Yet it is still important to be aware of and understand the major legislative, regulatory, and law enforcement
strategies that have been tried previously, to learn from them, and to consider whether drug prices would be even
higher had they never been attempted or implemented in the rst place.
4.1 Selected Past and Current Federal and State Legislative and Regulatory
Strategies to Address High Drug Prices.
Past federal and state efforts to curb excessive drug prices have long sought to identify targets for regulation, with
varying success. Through August 2019, state legislatures have introduced 880 bills addressing laws regarding
drugs, of which 130 were signed into law.
252
Legislatures and regulators, in particular, have focused on attempting to
increase transparency in drug pricing, build economies of scale, create punitive disincentives for abusive practices,
and directly legislate pricing and rebates.
4.1.1 Pricing Transparency Strategies.
Because the various actors in the drug industry—from manufacturers to PBMs to retail pharmacies—all affect
drug pricing through opaque mechanisms, states have struggled to effectively monitor abusive pricing practices.
Transparency-focused strategies take aim at this secrecy with the twin goals of (a) allowing governments to better
regulate pharmaceuticals, and (b) allowing patients to make more informed decisions about their drug purchases
based on price, thereby enhancing price competition among therapeutically equivalent drugs.
In June 2016, Vermont became the rst state in the nation to require that the manufacturers of 15 costly state-
purchased drugs justify price hikes, or be subject to a civil penalty of up to $10,000 per violation.
253
Numerous
other states have since followed suit.
254
Most of these laws, such as Oregon’s, require manufacturers to provide the
state with specied information designed to allow regulators to determine the reasonableness of a price increase,
including the total sales revenue for the drug for the previous calendar year and the ten highest prices paid for the
drug in any country outside the United States.
255
Fewer state laws require public disclosure of specic drug pricing,
though some do. For example, Florida has passed a law requiring that retail prices for certain frequently-prescribed
medications be published monthly on a public website,
256
and Nevada has passed a statute requiring manufacturers
to publicly disclose price increases for certain drugs.
257
The drug industry has vigorously opposed states’ efforts to require additional transparency. As an example, while
Vermont’s state senate has 30 members, the pharmaceutical industry has had at least 35 registered lobbyists in
Vermont.
258
Transparency legislation has been introduced, but defeated, in states across the country, including
Minnesota,
259
New Jersey,
260
North Carolina,
261
and Virginia.
262
Even after enactment, transparency legislation has
been challenged through litigation brought by the drug industry.
263
As of yet, however, the transparency aspects of
states’ legislative efforts have largely been upheld in court.
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The federal government has also made efforts to introduce price transparency into the prescription drug market.
In May 2018, for example, the United States Department of Health and Human Services (“HHS”) introduced the
“American Patients First” blueprint to bring down drug prices.
264
As a rst step in that blueprint, HHS required drug
companies to disclose the list price for prescription drugs in TV ads,
265
but, following a legal challenge by three
drug manufacturers, a federal district court ruled that HHS had exceeded its statutory authority in adopting this
requirement.
266
Other federal agencies have attempted to combat drug transparency problems. On May 16, 2019,
for example, the Centers for Medicare and Medicaid Services announced changes to Medicare Part D and Medicare
Advantage that would facilitate physicians in those programs discussing with their patients the out-of-pocket cost
of drugs any time a prescription is written.
267
The effect of transparency efforts on drug prices has yet to be determined. For example, Vermont’s 2016 initiative
resulted in a 2017 report
268
that generated criticism about the lack of specicity available to the public in the
report and a lack of understanding as to how the report would translate into lower drug prices. Responding to this
criticism, the Vermont legislature passed a second, broader bill in 2018.
269
4.1.2 Strategies to Increase Purchasing Power.
Cooperative purchasing, or the pooling of buying power to negotiate lower prices, is a popular tool in states’ arsenals
to combat rising drug prices. Two general models have emerged: (1) middlemen that leverage large membership
bases to obtain upfront discounts from drug manufacturers, and (2) group purchasing organizations (“GPOs”) that
purchase drugs in sufcient quantities to lower the acquisition cost.
In the 1980s, Minnesota became a national leader in the rst effort, founding MMCAP INFUSE, a multistate
collaborative bargaining arrangement whose membership now consists of public entities in all 50 states.
270
Members include public health facilities, correctional facilities, education institutions, mental health facilities, and
public safety/rst responders, which collectively make up over 90% of the membership. The Minnesota Department
of Administration began operating MMCAP INFUSE with the goal of leveraging group purchasing power to procure
prescription drugs at the best price possible. MMCAP INFUSE is voluntary, free to participating entities, and funded
through administrative fees collected from vendors. MMCAP INFUSE’s expertise is self-administered drugs, as
opposed to physician-administered drugs. As such, MMCAP INFUSE’s member entities generally have a pharmacy
operation to dispense purchased pharmaceuticals. Purchases exceed $1 billion annually.
Following Minnesota’s lead, other cooperative purchasing arrangements have emerged in Washington and Oregon.
Multiple private consortia requiring state and federal approval have also emerged for various states’ Medicaid
markets.
271
Yet other states, including Massachusetts and Washington, have established intrastate purchasing
arrangements.
The purchasing power of these pooled-resource arrangements allows participants to enjoy signicantly lower
prices than the general public.
272
While some arrangements do not extend membership to the general public,
273
some emerging programs have fewer restrictions. Washington’s program, for example, is open to all Washington
residents.
Leveraging buying power through GPOs is a time-proven method of obtaining lower drug prices, but it should
be noted that the reduction is signicant mostly when compared to the prices advertised to the general public,
as opposed to the undisclosed prices paid by industry participants. All 50 states, and several cities, currently
participate in some form of intra- or interstate GPO. Such GPOs provide a framework for states to work together
and coordinate efforts to lower drug prices.
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4.1.3 Disincentivizing Abusive Practices.
Drug prices can be improperly inflated by bad industry actors that use a variety of abusive practices, including
misuse of patents, coordinated price-gouging, and outright kickbacks. There are numerous administrative, civil,
and criminal laws designed to reduce and punish fraud. This report summarizes only a small subset of the tools
available to federal and state governments.
While patents and drug approvals are administered by federal agencies—the U.S. Patent and Trademark Ofce and
the FDA, respectively—enforcement of relevant laws that can be used to address unlawful drug industry practices
falls to both federal and state governments. Many states, for instance, have enacted consumer protection laws,
which, as in Minnesota, restrict drug manufacturers from mislabeling or falsely marketing drugs to improve sales
and reduce competition.
274
Additionally, 29 states have passed some form of a False Claims Act,
275
which, in
conjunction with state contracts, often functions to prevent drug companies from billing the government after
materially violating a state or federal law. The False Claims Act, and some consumer protection acts, have
mechanisms for private parties to bring lawsuits against bad actors in the pharmaceutical market, thereby
broadening the reach of these laws.
While 34 states have enacted some form of price-gouging laws that apply in cases of emergency, regulating
arbitrary increases in drug prices has proven difcult. Many state drug pricing transparency laws contain reporting
requirements triggered by spikes in drug pricing; however, of the 17 states to consider regulating unconscionable
price increases of pharmaceuticals, only Maryland has enacted specic drug price-gouging legislation.
276
That
legislation, which permitted Maryland to regulate drug prices based on sales from manufacturers to third parties,
was struck down as unconstitutional in 2018.
277
4.1.4 Direct Pricing Legislation.
Historically, legislation directly regulating the cost of drugs has been limited to those drugs eligible for reimbursement
in a federal or state health care program. Medicaid, for instance, requires that a provider of drugs accept Medicaid’s
reimbursement for a drug at a “best price” rate, which is determined by nding the lowest price available from the
manufacturer.
278
Medicaid further authorizes the government to solicit and accept rebates from manufacturers to
meet those “best prices.”
279
Maine has also successfully leveraged its “best price” Medicaid purchasing power to induce pharmaceutical
manufacturers to provide lower drug prices to Maine consumers. With its program, Maine Rx, the state essentially
lled the role of a PBM to Maine residents, and sought rebates from manufacturers that were at least equal to the
rebate calculated under a federal program. For those manufacturers that did not enter into the agreement with
Maine Rx, the state would publicly post the name of the manufacturer and require that all of its manufactured drugs
obtain prior authorization before being reimbursed by Medicaid. Signicantly, Maine’s program regulated only sales
of pharmaceuticals in Maine. The drug industry sued Maine over this initiative, but the United States Supreme
Court upheld the program in 2003.
280
In 2019, several states, including Maine and Maryland, passed new legislation forming a “Prescription Drug
Affordability Board” that seeks to regulate pricing through annual spending targets for prescription drugs in
state programs, utilizing new transparency legislation, the power to alter the state’s formulary, and direct rebate
negotiations.
281
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Other state efforts to directly regulate drug prices have not fared well. As discussed above, Maryland’s law
was invalidated. Colorado, Florida, Maine, and Vermont have also passed laws that would permit international
importation of drugs and their respective lower prices, but such efforts have been met with skepticism because
federal approval is required.
282
4.2 Selected Past and Current Law Enforcement Strategies to Address High
Drug Prices.
In addition to the legislative efforts to address high drug prices, state and federal law enforcement agencies have
also brought numerous law enforcement actions against companies to stop problematic practices that contribute
to increased drug prices. Between 1991 and 2017, federal and state agencies have reached a total of 412
settlements, totaling $38.6 billion dollars, with drug manufacturers.
283
Nonetheless, the $38.6 billion in penalties
represents “only 5% of the $711 billion in net prots made by the 11 largest global drug companies during just 10 of
those 27 years (2003-2012).”
284
Further, individual enforcement actions that typically only concern one or a handful
of drugs, are a comparatively inefcient way to address this issue, given that the FDA has approved more than
20,000 prescription drugs for sale.
Sometimes the most consequential outcome of law enforcement actions that target problematic drug industry
practices is that such litigation prompts policymakers to address the type of conduct at issue in the lawsuit
more broadly, generally through legislative or rulemaking efforts. Examples of such actions are discussed at
various points throughout this report. One example worth further discussion here, however, is the successful law
enforcement campaign to change industry practices regarding how government programs pay for prescription drug
coverage, which shifted the payment benchmark used by these programs from the average wholesale price (“AWP”)
to the average sales price (“ASP”).
285
Under government health programs, AWP served as the pricing benchmark for government reimbursement to health
care providers. AWP was supposed to reflect the average price of the drug received by manufacturers. In practice,
however, drug manufacturers falsely inflated and set articially high AWPs for their drugs. Such false AWPs were
“often considerably higher than the actual amount providers pay for drugs because the AWPs do not reflect the
many discounts drug companies offer providers as an incentive to purchase their products.”
286
This AWP-inflation scheme created incentives that could increase drug costs. For example, providers could benet
by prescribing drugs with high “spreads” (the difference between the AWP and actual price providers pay) and
drug companies could benet by offering providers higher spreads through inflated AWPs. Despite widespread
knowledge and discussion of the problem in the 1990s, Congress did not act to change the pricing system.
At the same time, state and federal prosecutors took up the issue, leading to landmark settlements with Bayer
Pharmaceuticals and TAP Pharmaceuticals in 2001. Both settlements were based on the False Claims Act and
allegations that the companies reported AWPs that were signicantly higher than the average sales price offered
to providers and further marketed that spread to providers. TAP Pharmaceuticals agreed to pay $875 million and
begin reporting a new pricing benchmark, the average sales price (“ASP”), tied to the actual market price of the
drug. Bayer similarly agreed to report the ASP for its drugs. Both companies also agreed to enhanced internal
compliance mechanisms and enhanced federal oversight.
These settlements led the way for other litigation by state attorneys general and private groups. They also
prompted Congress to adopt the ASP standard, borrowed directly from the denition found in the settlements, for
reimbursement rates in the Medicare Part D program.
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In an effort to lower the price of pharmaceutical drugs, the Task Force makes 14 recommendations , all of which
contains additional, specic action steps. Each of the Task Force’s recommendations stem from presentations or
discussion at a working group or task force meeting, or individual suggestions by a Task Force member based on
these presentations and discussions. The Task Force’s recommendations are to:
5.1 create a Prescription Drug Accountability Commission to address drug pricing and related practices in
Minnesota;
5.2 import through a prime vendor four critical access drugs (insulin, EpiPen, Truvada, and naloxone) on a
trial basis, and if successful, expand this importation program
5.3 enact legislation prohibiting drug price-gouging;
5.4 strengthen Minnesota’s consumer fraud laws as they relate to deceptive and misleading practices
utilized in the pharmaceutical drug industry;
5.5 enact a state anti-kickback law that applies to both government programs and the private sector,
including prohibiting copay coupons or equivalent programs when a generic version of the branded
drug at issue is available;
5.6 amend Minnesota’s antitrust laws to prohibit specic, anticompetitive practices long present in the drug
industry, such as pay-for-delay settlements and product hopping;
5.7 advocate for reform of federal patent and drug exclusivity laws that are being misused and abused to
block competition from rival generic drugs;
5.8 optimize and expand Minnesota’s use of the 340B Drug Pricing Program to make the program’s pricing
discounts available to more Minnesota patients;
5.9 quantify how much all Minnesota government entities spend on prescription drugs, to enable these
entities to better pool and utilize their bulk purchasing power to obtain additional pricing concessions
from drug manufacturers;
5.10 optimize and better utilize Minnesota’s bulk purchasing power through MMCAP INFUSE, including by
expanding the pricing discounts this buying program receives to all Minnesotans;
5.11 more robustly regulate PBMs’ business and pricing practices and increase transparency into the rebates
they receive, through building on the legislative succes of 2019;
5.12 enact measures to further increase transparency into how drugs are priced and reimbursed throughout
the sales chain;
5.13 ensure patient access to pharmacists for effective medication use; and
5.14 support additional research into prescription drug pricing and drug benets.
5.
Recommendations of the Minnesota Attorney
General’s Advisory Task Force on Lowering
Pharmaceutical Drug Prices.
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54
5.1 Create a “Prescription Drug Accountability Commission” to Oversee
Drug-Industry Pricing Practices in Minnesota
Recommendation.
The Task Force recommends that Minnesota establish a Prescription Drug Accountability Commission. The
objective of this Prescription Drug Accountability Commission (“Commission”) should be to create a review
process to assure that prescription drug and biological drugs are priced reasonably, and that those entities involved
in establishing drug prices may be held accountable for their decisions. Although accountability measures can
take various forms, the Task Force recommends that the legislature authorize the Commission to investigate,
review, and publish information on prescription drug prices, to take action to hold drug companies accountable for
unreasonable or unlawful pricing practices, including by “capping” or setting maximum reimbursement prices for
drugs under certain circumstances, and to make recommendations for additional legislative, regulatory, or other
action necessary to address high drug prices.
Action Steps.
5.1.1 Perform a “drug affordability review” of high drug prices or signicant drug price increases that
impose an excess cost on Minnesota patients and the state’s healthcare system. Criteria to consider
that would trigger a drug affordabilitiy review include:
For brand name drug and biological products:
a. If the list price for one-month (or normal course of therapy) supply exceeds $____;
b. If the list price changes more than __% at a single point in time; or
c. If the list price changes more than __% over a one-year period.
For generic drug and biological products:
a. If the list price for one-month (or normal course of therapy) supply exceeds $____;
b. If the list price changes more than __% at a single point in time; or
c. If the list price changes more than __% over a one-year period.
For specialty drug and biological products:
a. If the list price for one-month (or normal course of therapy) supply exceeds $____;
b. If the list price changes more than __% at a single point in time; or
c. If the list price changes more than __% over a one-year period.
For all drug and biological products, if one of the following apply:
a. The drug product is in a “protected class” under Medicare Part D;
b. Minnesota statutes or rules require coverage of the drug or drug products;
c. The drug has a list price that is more than 10% above the evidence-based value assessment price
established by the Institute for Clinical and Economic Review;
d. The Minnesota Attorney General has designated the drug product pricing as “price-gouging”;
e. The FDA or the American Society of Health System Pharmacists has designated the drug product as a
“drug shortage”;
f. The patent for the drug product’s active ingredient has expired, and the drug product is still protected
by one or more other patents or exclusivities;
Report of the Advisory Task Force on Lowering Pharmaceutical Drug Prices
55
g. The drug product is subject to patents or exclusivities on a combination, a change in dosage strength
or form, an isomeric conguration, or another “ever greening” strategy after the drug product’s initial
active ingredient patent and exclusivities have expired;
h. The drug product has a Risk Evaluation and Mitigation Strategies (“REMS”) process in place and the
REMS process is being used to delay generic entry; and
i. A biological product has had more than seven years of market exclusivity due to patents, exclusivities,
or other reasons.
The Commission should also have the authority to establish other criteria that would trigger an affordability review.
5.1.2 The Commission should require manufacturers to notify it of price changes that meet the criteria
above, and the Commission could also commence its own review based on publicly available
information.
If the Commission cannot obtain sufcient information from these sources, the Commission should be
authorized to compel drug manufacturers, PBMs, and others to provide the necessary data regarding their
pricing practices.
5.1.3 If the Commission determines that an affordability review of a drug is warranted, the Commission
may require drug companies whose products meet the above criteria to submit price-justication
information.
The Commission could then consider whether appropriate utilization of the product under review has led
or would lead to excess costs for Minnesota patients or Minnesota’s health care system. The Commission
should also review new drugs entering the market to determine price-justication information. The
Commission should allow public input into each affordability review it conducts.
5.1.4 To better promote accountability and affordability, the Commission should be authorized to take
appropriate actions if it determines that the price of a drug under review has led or would lead to
excess costs for Minnesota patients or Minnesota’s health care system.
Among other things, the Commission should be authorized to “cap” or establish a maximum level of
reimbursement that would be billed and paid among those in the supply chain; to identify a rebate for drugs
covered by public payers in Minnesota; and to determine methods for public payers to meet spending
targets. If after the affordability review, the Commission determines that a drug’s price or price increase
is unreasonable or otherwise unlawful, it should refer the matter to the Mtinnesota Attorney General’s
Ofce for potential prosecution, in addition to other action the Commission is authorized to take on its own
accord.
5.1.5 In crafting this legislation, the legislature should review and draw from Task Force Co-Chair Senator
Jensen’s Senate File 353 (91st Leg. 2019-20) bill, model legislation introduced by the National
Academy for State Health Policy (“NASHP”),
287
and similar drug pricing legislation introduced in
other states such as Illinois, Maryland, Maine, Massachusetts, Missouri, New Jersey, and Oregon.
288
The Oregon and Texas legislation, in particular, provide examples of legislation that enables state agencies
to undertake pricing reviews. SF353, the NASHP model legislation, and Maryland’s legislation also provide
examples of reimbursement capping, while bills in Maine and Massachusetts address public payers.
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56
Responsible Persons/Entities.
Legislature would enact laws establishing the Prescription Drug Accountability Commission and dening its role.
Subsequently, the Governor’s Ofce and other stakeholders would appoint members to the Commission. The
Minnesota Attorney General’s Ofce would review and bring enforcement actions referred to it by the Commission
under the law, as appropriate, including to enforce any action by the Commission to “cap” or set maximum
reimbursement rates.
5.2 Import Critical-Access Drugs Into the State on a Trial Basis.
Recommendation.
The Task Force recommends that Minnesota develop a new channel to import and distribute of four critical access
drugs—insulin, EpiPen, Truvada, and naloxone—through a prime vendor on a trial basis. These drugs should be
imported for use in Minnesota at affordable prices that are consistent with the global market rates for these four
pharmaceuticals. As Minnesota learns from its experience importing these critical access drugs, it can rene
the importation process and eventually expand the importation program, if feasible. This importation process
would not involve direct purchase or acquisition of prescription drugs by Minnesota patients through the internet
or similar avenues.
Action Steps.
5.2.1 Pursuant to the recently-established federal Safe Importation Action Plan
289
and 21 U.S.C. § 384,
Minnesota should approach HHS and the FDA to develop and receive approval of policies, processes,
and procedures for the importation and distribution of insulin, EpiPen, Truvada, and naloxone in
the state through a prime vendor.
5.2.2 Minnesota should then issue a request for proposal soliciting bids from the prime vendor that will
identify safe and feasible sources for each of these critical access drugs and negotiate the price of
the drug with appropriately licensed manufacturers and/or distributors.
Concurrently, Minnesota should design and establish appropriate roles within the state for the entities
involved in the importation process, such as establishing a regulator, nancer, and/or distributor to work
with the prime vendor selected to import these critical access drugs and ensure their availability at
Minnesota pharmacies and other health care providers.
5.2.3 Within 24 months of implementing this importation channel for insulin, EpiPen, Truvada, and
naloxone, Minnesota should evaluate and assess the effectiveness of this process. If it is found
effective, it should be expanded to include additional drugs.
5.2.4 The Legislature should pass any legislation needed to facilitate and support the importation of high-
quality drug products at negotiated and affordable prices for distribution in Minnesota through this
process.
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Responsible Persons/Entities.
The Governor’s Ofce should select members of the Minnesota Department of Health and the Minnesota Department
of Human Services to be included as part of an interagency working group to develop, in consultation with the
relevant federal agencies, a satisfactory importation plan for insulin, EpiPen, Truvada, and naloxone. In addition,
one or more representatives of the Minnesota Attorney General’s Ofce should serve on the working group. The
Legislature should enact appropriate legislation to facilitate and fund this initiative.
5.3 Enact Legislation Dening and Prohibiting Price-gouging Related to
Prescription Drugs.
Recommendation.
As described throughout this report, some prescription drug manufacturers engage in a number of pricing practices
that have resulted in skyrocketing costs for certain drugs, with prices sometimes increasing by 300-500% or more.
The purpose of an anti-price gouging statute is to prevent and deter drug manufacturers from engaging in price-
gouging practices for essential prescription drugs that are made available in Minnesota.
Action Steps.
5.3.1 An anti-price gouging statute should prohibit drug manufacturers from charging or causing to be
charged an unconscionable price—that is, a price that cannot be reasonably justied—for essential
prescription drugs that are sold in Minnesota.
Representative Lesch, a member of the Task Force, authored and introduced such a bill—House File 4
(91st Leg. 2019-20)—last legislative session. The statute should further provide for a notice mechanism
to the Attorney General, such as the mechanism provided for in House File 4,
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for any unconscionable
prescription drug price increases. Additionally, any such bill should be carefully crafted and reviewed so as
to be able to survive any constitutional challenge from the drug industry.
Responsible Entities/Persons.
The legislature would enact an anti-price gouging statute of the nature described above. Once enacted, the
Minnesota Attorney General’s Ofce would enforce this statute by, among other things, reviewing reported price
increases and bringing enforcement actions referred to it, as appropriate, to deter and remediate price-gouging
practices within the state.
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5.4 Strengthen Deceptive Trade Practices and Advertising Laws Related to
Drug Pricing Information.
Recommendation.
Minnesota’s consumer fraud and deceptive trade practices laws
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generally prohibit fraudulent, deceptive, and
misleading conduct, including with respect to prescription drugs. These laws, however, do not contain an “unfair”
or “unconscionability” prong, as do equivalent laws in many other states,
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prohibiting unfair or unconscionable
conduct. These laws also do not address specic deceptive and misleading practices found in the drug industry.
The Task Force recommends that the legislature reform and strengthen Minnesota’s consumer protection laws in
both of these manners.
Action Steps.
5.4.1 “Unfair” and “unconscionability” prongs should be added to Minnesota consumer-protection laws
to allow the Attorney General’s Ofce to take legal action against unconscionable pricing and other
unfair business practices, including unconscionable drug-pricing practices.
5.4.2 Review, dene, and update the statutory text of Minnesota’s consumer protection statutes by
specically addressing deceptive and misleading practices that relate to prescription drugs and
their pricing, including by:
a. specically prohibiting deceptive marketing practices that disclose only the copay amount for a drug
without also disclosing the list price of the drug for a standard course of therapy;
b. specically prohibiting deceptive marketing practices that represent the price of a drug is “90% off,” for
example, after a copay coupon, patient assistance program, or similar program is taken into account,
which do not reflect what third-party payers (e.g., health plans) actually pay for the drug;
c. specically prohibit deceptively marketing drug benet programs that disclose only the copay amount,
the plan paid amount, and the patient out-of-pocket amount, versus the total price of the drug.
5.4.3 More closely monitor and engage in additional enforcement actions to prevent and deter deceptive
and misleading pricing practices used in the drug industry, including by giving private litigants the
authority to do so directly when they have been harmed by such practices.
Responsible Persons/Entities.
Legislature would amend and strengthen Minnesota’s consumer-protection laws in the manners described above.
The Minnesota Attorney General’s Ofce, as well as injured Minnesotans, would enforce these laws, once amended.
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5.5 Enact a State Anti-Kickback Law, and Prohibit Copay Coupons and
Similar Practices When a Generic Version of a Drug is Available.
Recommendation.
The Task Force recommends that the legislature pass a state anti-kickback bill into law. The objective of this
law should be to empower Minnesota enforcers to take action against behavior that is already illegal on a federal
level
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by giving local law enforcement agencies, including the Minnesota Attorney General’s Ofce, an additional
tool to curb problematic practices in the drug industry.
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Action Steps.
5.5.1 This anti-kickback statute should encompass kickbacks in the private marketplace, not just with
respect to drugs paid for by state health care programs.
As currently written, the federal anti-kickback statute prohibits illegal remuneration only if money is
expended by government health programs, such as Medicare and Medicaid. The Task Force recommends
that private payers, including private citizens, be protected from kickback-type behavior to the same degree
as is the government.
The Task Force also recommends Minnesota enact a statute prohibiting copay coupons and equivalent
nancial inducements regarding branded drugs when a generic equivalent to the branded drug exists, as it
views such nancial inducements to use a branded drug in these circumstances as a form of a kickback.
As discussed above,
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while the copay coupon may result in a lower up-front cost to a patient, that patient’s
insurance premium may rise as a result of the increased costs to the health plan of paying for the more
expensive branded drug, resulting in a higher overall cost to the patient.
5.5.2 Even when a copay coupon is offered for a branded drug for which no generic exists, Minnesota
law should require patients to be told if there is a time limit on the copay coupon when it is rst
offered to the patient, and manufacturers should be required to provide patients sufcient advanced
warning if they will no longer be eligible or otherwise able to use the coupon in the future, among
other disclosures.
Responsible Entities/Persons.
Legislature would enact a state anti-kickback statute of the nature described above, as well as statute prohibiting
copay coupons and equivalent nancial inducements when an equivalent generic drug is available. The Minnesota
Attorney General’s Ofce would enforce these statutes, once enacted.
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5.6 Strengthen Laws Targeting Anticompetitive Behavior in the Drug
Industry.
Recommendation.
Because the market for drugs is so complex, opaque, and often does not function in a competitive manner for the
reasons discussed throughout this report,
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competition-focused solutions will only go part of the way towards
addressing high drug prices. Nevertheless, they are important. While the anticompetitive conduct described
in this report is extremely problematic, it is not easy and often resource-intensive to address using Minnesota’s
current antitrust laws, which speak in terms of broad standards, not specic practices.
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Changing these laws
to make certain anticompetitive conduct in the drug industry explicitly illegal would greatly aid enforcement. The
Task Force thus recommends that specic provisions be added to Minnesota’s antitrust law rendering certain
anticompetitive practices that exist in the drug industry as “per se” unlawful, including pay-for-delay and product
hopping arrangements.
Action Steps.
5.6.1 To deter pay-for-delay schemes, Minnesota should amend its antitrust laws by adopting a provision
similar to one recently enacted by California, which renders these arrangements presumptively
unlawful.
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Because the bill establishes the presumption that pay-for-delay agreements are anticompetitive, it shifts
the burden to drug manufacturers to prove that these type of agreements foster competition and increase
access to affordable drugs in the marketplace.
5.6.2 To deter product-hopping schemes, Minnesota should amend its antitrust laws to also render these
schemes presumptively unlawful.
In drafting such statutory language, guidance can be drawn from New York ex rel. Schneiderman v.
Actavis PLC, 787 F.3d 638 (2d Cir. 2015), which discusses circumstances that render product-hopping
arrangements anticompetitive.
5.6.3 Pay-for-delay schemes and product-hopping arrangements should be added to Minnesota Statutes
section 325D.53, which currently lists several specic behaviors— unrelated to the drug industry—
that are per se unlawful.
5.6.4 Federal and state regulators should increase enforcement resources dedicated to reviewing mergers
in the drug industry, and blocking those that are anticompetitive.
The question of how to slow corporate consolidation in the drug industry is broad and multifaceted. At
the federal level, the U.S. Department of Justice and Federal Trade Commission review all large mergers.
State attorneys general may also sue to prevent these mergers. Specic statutes governing drug-industry
mergers may also be necessary.
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Responsible Persons/Entities. Legislature would enact the additional statutory subsections needed to
address pay-for-delay arrangements and product hopping. The Minnesota Attorney General’s Ofce would
enforce these statutes, once enacted, as well as increase its enforcement activities with respect to policing
drug-industry mergers.
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5.7 Advocate for Reform of Certain Federal Patent and Exclusivity Laws
Governing the Drug Industry.
Recommendation.
The Task Force recommends that Congress enact legislation to curb misuse and abuse of the patent and FDA
drug exclusivity laws. Regarding patent laws, new legislation should be enacted to address patent thickets and
“evergreening” of patents, such as modifying the current patent standards with respect to drugs to make it more
difcult for minor changes that offer only trivial improvements to be the basis to secure new patent rights for a
drug. The U.S. Patent and Trademark Ofce should also more closely scrutinize non-“new chemical” patents to
prevent these type of practices, and more frequently refuse to grant a patent if the applicant simply makes an
obvious improvement on an existing patent.
Action Steps.
5.7.1 Congress should reform federal patent laws by:
a. Raising the standard for obtaining a patent on prescription drugs;
b. Giving the FDA more authority to scrutinize which patents appear in the Orange Book;
c. allowing for the removal of patents from the Orange Book that are later invalidated;
d. requiring drug makers to elect a single period of market exclusivity—whether that be through a patent
right, an FDA exclusivity, or other regulatory provision—so that multiple exclusivity periods could not be
stacked;
e. making it easier for generic drug makers to obtain samples of branded drugs needed for testing; and
f. deeming REMS non-patentable.
5.7.2 Minnesota’s congressional delegation should propose and/or endorse these and other measures
designed to eliminate drug companies’ misuse of patent laws.
5.7.3 Congress should also ensure that the U.S. Patent and Trademark Ofce has adequate resources to
meaningfully review patents prior to the patent being granted.
5.7.4 Congress should continue to study means to combat drug manufacturers’ abuse of patent laws,
including considering whether to create different standards for drug patents, deem certain subject
matters non-patentable, or prevent stacking of patent terms, to ensure that patent laws promote
innovation and patient health without increasing health care costs.
Regarding exclusivity laws, proposed legislation already exists that would combat misuse of FDA
exclusivities. The “Improving Access to Affordable Prescription Drugs Act”
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would, among other things,
allow the FDA to consider a generic drug manufacturer’s application to market a generic of a brand name
drug that is covered by the “new chemical” exclusivity after three years instead of the current ve, shorten
the regulatory exclusivity of biologics from 12 years to 7 years, add additional requirements before branded-
drug manufacturers could gain the three-year clinical investigation exclusivity, and would terminate all
FDA exclusivities for a drug if the manufacturer engaged in certain wrongful acts, including misbranding,
illegally marketing the drug, or entering into an anticompetitive settlement of a patent lawsuit.
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5.7.5 Congress should reform federal exclusivity laws by passing the Improving Access to Affordable
Prescription Drugs Act.
5.7.6 Minnesota’s federal congressional delegation should propose and/or endorse this act and other
measures designed to eliminate drug companies’ misuse of exclusivity laws.
5.7.7 Congress should continue to study means to combat drug manufacturers’ abuse of FDA exclusivities,
including considering whether to eliminate certain exclusivities, shortening exclusivity lengths,
and adding additional requirements to ensure that exclusivities promote innovation and patient
health without increasing health care costs.
Responsible Persons/Entities.
Congress has the power to amend current patent and exclusivity laws. The entirety of Minnesota’s federal
Congressional delegation should introduce and/or sign on as co-authors to such legislation. The Minnesota
Attorney General’s Ofce should be a public champion for the reform of federal patent and exclusivity laws.
5.8 Optimize and Expand Use of the 340B Drug Pricing Program.
Recommendation.
Because of the signicantly reduced prices that drug manufacturers are required to charge through the 340B Drug
Pricing Program (“340B Program”), the Task Force recommends that Minnesota develop strategies and take actions
to expand and optimize participation in —and use of— the 340B Program in the state, in government healthcare
programs and the private market. This expansion and optimization of drugs procured through the 340B Program
should include both self-administered drugs and physician-administered drugs.
Action Steps.
5.8.1 A designated agency should perform and publish an inventory of all health care providers in the
state to identify whether they are eligible for—and participating in—the 340B Program.
This list could be used to identify any additional entities eligible for, but not enrolled in, the program and
encourage them to join.
5.8.2 Minnesota should develop and fund strategies to increase the participation of eligible entities in the
340B Program.
Often times, eligible entities may choose not to enroll in the 340B Program due to the burden of maintaining
records that document their compliance with all program requirements, or for other reasons.
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This means
some eligible entities are not receiving the benet of being able to procure drugsat signicantly reduced
prices.
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5.8.3 Minnesota should establish a technical assistance program to assist eligible entities with enrollment,
implementation, and compliance with the 340B Program requirements.
The technical assistance program would encourage all eligible entities, even non-governmental entities,
to effectively participate in and utilize the 340B Program. The technical assistance program would also
clarify the eligibility criteria for participation in the program.
5.8.4 Regulatory changes should be enacted to require entities sharing in 340B Program drug pricing
discounts to pass on a signicant portion, if not all, of these savings directly to patients.
There are currently no regulations that require participating entities to pass the 340B Program savings on
to patients in any particular manner.
5.8.5 As necessary and appropriate, legislation should be developed and enacted to facilitate and support
the participation of Minnesota government and non-governmental entities in the 340B Program.
Responsible Persons/Entities.
As the primary regulator of health care providers in Minnesota, the Minnesota Department of Health should take
the lead expanding and optimizing Minnesota’s use of the 304B Program, with the support and assistance of the
Governor’s Ofce. To the extent any statutory changes are needed to facilitate additional entities participating in
the 340B Program and ensure that drug savings obtained through the program are passed along to patients, this
would be the responsibility of the legislature.
5.9 Create An Inventory of All Government Entities to Determine Whether
They Purchase Drugs Directly or Indirectly, and Identify Their Annual
Expenditures.
Recommendation.
The Task Force recommends that Minnesota survey, identify, and catalog what it spends on prescription drugs in
the aggregate, including at the county and municipal level. The objective of this initiative is to better understand
and quantify the total drug expenditures of Minnesota governmental entities, and to track these trends over time.
To fully leverage its buying power—as discussed further in the next recommendation regarding MMCAP INFUSE—
Minnesota needs to better collect and evaluate the current expenditures of state, county, and local entities on
prescription drugs.
Actions Steps.
5.9.1 Create a survey in which the relevant Minnesota government entities identify their expenditures,
both direct and indirect, on prescription drugs.
To ensure a complete picture of expenditures, this survey should seek drug spending data on self-
administered drugs purchased from manufacturers, wholesalers, or pharmacies, as well as physician-
administered drugs used in a medical setting. Entity proles could be compared with nationwide community
pharmacy purchasing information contained in National Average Drug Acquisition Cost proles to ensure
best pricing practices for purchasers.
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5.9.2 Minnesota should distribute this survey to all state, county, and municipal government entities on
an annual basis.
5.9.3 Minnesota should utilize a centralized entity to collect and evaluate the survey responses on an
annual basis and provide a report on the results to the participating government entities and the
public, including an analysis of trends over time.
5.9.4 As necessary and appropriate, legislation should be developed and enacted to facilitate and support
this survey process and ensure that all Minnesota government entities are able to provide the
requested data.
Responsible Persons/Entities.
The Governor’s Ofce is best positioned to coordinate the distribution, collection, and evaluation of survey responses
from all relevant Minnesota government entities. The Governor’s Ofce should be assisted by both the Minnesota
Department of Health and/or the Minnesota Department of Human Services, as they license many facilities that
provide health care in the state, as well as other state agencies that oversee entities that purchase prescription
drugs. The Legislature would enact any statutory changes needed to facilitate this survey process.
5.10 Optimize Use of MMCAP INFUSE Program and Further Expand It to
Provide Similar Savings to Minnesota Patients.
Recommendation.
Pooled cooperative purchasing can be leveraged to extract lower prices from drug companies. Building on the
recommendation to better quantify how much Minnesota spends on drugs, the Task Force recommends that
Minnesota develop strategies and take action to expand and optimize participation by Minnesota government
entities in the buying cooperative MMCAP INFUSE, the program that currently pools and leverage such buying
power for the benet of participating entities when purchasing drugs.
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In addition, MMCAP INFUSE should be
expanded to allow non-governmental Minnesota purchasers, i.e., private patients, to take advantage of the reduced
pricing on prescription drugs the program achieves. In the alternative, a parallel program should be established to
do so. An example of such a program is the Northwest Prescription Drug Consortium.
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Actions Steps.
5.10.1 Accordingly, a survey should be conducted of all Minnesota government entities—state, county, and
municipal—to identify whether they participate in the MMCAP INFUSE program, the level of their
participation, and the reasons they do or do not participate in the program.
MMCAP INFUSE’s expansion to serve additional Minnesota governmental entities requires that MMCAP
INFUSE be aware of Minnesota governmental entities that are either not participating, or have only limited
participation in the program.
5.10.2 Based on this survey, strategies to increase the participation of Minnesota government and other
entities in MMCAP INFUSE should be developed and implemented.
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5.10.3 Regulatory and statutory changes should be implemented to facilitate and encourage the
participation of Minnesota government and other entities in MMCAP INFUSE, including as follows:
a. At present, many different statutes give many different government entities their own procurement
power, which results in disaggregating buying power, instead of all purchasers buying drugs through
MMCAP INFUSE. With respect to prescription drug purchases, the Legislature should amend the
relevant procurement statutes to require Minnesota governmental agencies to consider MMCAP
INFUSE’s contracting rst, before signing a procurement contract with a drug manufacturer or
wholesaler directly, which is likely to be more expensive
b. The Legislature should also consider consolidating statutes that give different government entities
their own, separate procurement power, including with respect to drugs, into one statutory scheme;
c. The Governor’s Ofce should direct relevant state agencies to amend any procurement policies that
inhibit participation in MMCAP INFUSE, as necessary, to ensure such policies and rules do not inhibit
purchasing drugs through MMCAP INFUSE;
5.10.4 Expand MMCAP INFUSE and leverage its purchasing power to lower drug prices for Minnesota
private patients.
MMCAP INFUSE’s clientele is currently restricted by Minnesota statute to governmental entities and
certain non-prot organizations.
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MMCAP INFUSE’s current model erects barriers to the creation of a
prescription drug card program that Minnesota residents can use at privately-run pharmacies. Although
less desirable than expanding MMCAP INFUSE because it disaggregates purchasing power, creating a
parallel buying program for the benet of Minnesota private patients, or joining the Northwest Prescription
Drug Consortium, should be considered as an alternative.
Responsible Persons/Entities.
Any changes to administrative regulations or policies that inhibit optimization of MMCAP INFUSE as currently
structured would be changed by the relevant state agency, as overseen by the Governor’s Ofce. The Minnesota
Department of Administration, as the operator of MMCAP INFUSE, should inventory what other state, county, and
local government entities are currently eligible to use the program, and foster additional use of MMCAP INFUSE
by those entities that do not currently rely on it. The Department of Administration should also take the lead
in expanding the program to private Minnesota residents, or establishing a parallel program for their use. The
Legislature would pass statutory changes optimizing and/or expanding MMCAP INFUSE.
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5.11 Minnesota Should Robustly Regulate PBMs and Their Business
Practices, Building on the PBM Legislation Enacted in 2019.
Recommendation.
In 2019, Minnesota enacted legislation regulating PBMs. See 2019 Minn. Laws ch. 39 (to be codied at Minn.
Stat. ch. 62W). While a good rst step, the Task Force recommends that this law should be strengthened to better
address problematic PBM business practices, including the opaqueness of their business model, and that the
Minnesota Department of Commerce (“Commerce”), who will administer this law, robustly use its rulemaking and
other authority granted by the law to ensure proper oversight of, and transparency into, the operations of PBMs in
Minnesota.
Action Steps.
5.11.1 Section 62W.06 should be amended to require public disclosure of the pricing information referenced
in this statute
Currently, disclosure is required only to a health-plan client on request, or to the Department of Commerce
as part of a transparency report of which portions will be non-public.
5.11.2 Commerce should promptly implement the provisions of the PBM law, including engaging in robust
rulemaking necessary to appropriately regulate PBMs;
5.11.3 Commerce should develop a nancial indicator for PBMs that is the equivalent of the medical loss
ratio for health plans. It should reect the proportion of PBMs’ revenue that is used to provide drug
benets to health plan enrollees, versus the proportion used for administrative costs, prots, and
other purposes.
5.11.4 Commerce should annually report, on a dedicated and easily-accessible website, on the following
activities and practices of PBMs that operate in Minnesota:
a. the number of PBMs licensed each year in Minnesota;
b. the number and nature of any complaints it has received that a PBM has engaged in fraudulent activity
or conduct that fails to comply with the requirements of Minn. Stat. § 62W;
c. the number of PBMs that have been alleged to, or found to, not “exercise good faith and fairdealing in
the performance of its contractual duties.” See Minn. Stat. § 62W.04.
d. the network adequacy of all PBMs, and the methods used to determine network adequacy for each
PBM;
e. a quantitative summary of the provisions and requirements related to transparency of rebates,
discounts, fees, and list prices of all licensed PBMs in a manner that allows comparability among
PBMs operating in Minnesota (see Minn. Stat. § 62W.06);
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f. the pharmacy ownership status of pharmacies that contract with each PBM, see Minn. Stat. § 62W.07,
and pharmacies in the network of each PBM, including but not limited to the number and percent of
network pharmacies owned by the PBM, the ownership of any mail-order pharmacies, and specialty
pharmacies used by the PBM;
g. the number of Maximum Allowable Pricing lists used by each PBM for Minnesota health plans, (see
Minn. Stat. § 62W.08); and
h. any other provisions of chapter 62W that demonstrate the intended impact of the results and outcomes
these statutes were meant to bring about, as well as any signicant unintended consequences.
Responsible Persons/Entities.
The Minnesota Department of Commerce will be responsible for regulating PBMs, publicly reporting data on their
practices, and administrative rulemaking, pursuant to chapter 62W. It would be the responsibility of the legislature
to amend and strengthen Chapter 62W, including its transparency-promoting provisions.
5.12 Minnesota Should Encourage and Facilitate Price Transparency for
Prescription Drugs.
Recommendation.
The Task Force believes additional pricing transparency is a necessary—but not a sufcient—measure required
to address the high cost of prescription drugs. Accordingly, the Task Force recommends that Minnesota enact
legislation to promote transparency into prescription drug prices. The objective of the legislation should be to
establish a process to make transparent the actual, net price of critical and high visibility drugs in Minnesota. The
information gathered through this process should be easily accessible to the public through a dedicated and easily-
accessible website.
Action Steps.
5.12.1 Identify a list of critical and/or high-visibility drugs in Minnesota.
Such drugs may include: drugs advertised on television; drugs for which the pricing practices have been
found to be price-gouging, as dened by the price-gouging statute the Task Force recommends be enacted;
drugs in a “protected class” of drugs under Medicare Part D; drugs for which Minnesota statutes and
rules require coverage; drugs above a certain price threshold for a course of therapy; drugs known to have
copay coupons or that are subsidized through a patient assistance program when a generic equivalent is
available; and drugs which are highlighted in the public media. The Legislature should also empower the
entity compiling this list to establish other criteria for inclusion on the list, which should be published on a
regular basis.
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5.12.2 For the drugs that have been identied as critical and/or high-visibility drugs in Minnesota, develop
a means to determine the current or recent actual, net price per course of therapy of the drugs,
including through the ability to compel the production of this pricing information, if necessary.
Once this is accomplished, establish a process to publish the list of the drugs, and the prices of such drugs,
online. The list should be updated at least quarterly.
5.12.3 The published information should also contain household economic information, including but not
limited to the poverty level for an individual or a family, Social Security income, personal income,
household income, and state and national gross domestic product.
Such information should assist the public in determining the affordability of drugs.
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5.12.4 As necessary and appropriate, legislation should be developed and enacted to facilitate and support
this transparency-related initiative.
Responsible Persons/Entities.
The Legislature would enact any appropriate legislation. Once law, the Minnesota Department of Health would
administer this process.
5.13 Assure Patient Access To Pharmacists’ Services for Effective Medication
Use.
Recommendation.
The Task Force recommends that Minnesota take additional steps to assure that all Minnesotans have access
to a pharmacist in their local communities who can collaborate with other healthcare providers to facilitate safe,
effective, efcient, and optimal medication use.
Action Steps.
5.13.1 Minnesota should promote policies aimed at preventing pharmacy closures in rural and other
underserved areas.
The closing of independent and other pharmacies in greater Minnesota and other non-urban areas throughout
the country has rightfully been met with concern. Such pharmacy closures contribute to nonadherence of
prescription medications, among other negative effects on patient outcomes. The elderly, in particular, are
at high risk as a result of such pharmacy closures, due to their high rates of prescription medication use,
concerns over drug interactions, their greater likelihood of experiencing transportation problems, and often
limited nancial resources. One possibility is to consider is whether a program similar to the one designed
to support “critical access hospitals,”
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which generally serve rural areas, would be appropriate to support
“critical access pharmacies.”
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5.13.2 Expand the use of Medication Therapy Management (“MTM”) to control drug costs.
MTM services provided by healthcare professionals, including pharmacists, to review and optimize
therapy regimens for patients. They are especially effective for patients with chronic conditions, complex
medication therapies, high drug costs, and those with multiple prescribers.
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The additional use of MTM to
control drug costs should include optimizing use of this practice in Medicare, Medicaid/Medical Assistance,
MinnesotaCare, and commercial health plans.
5.13.3 Encourage and promote collaborative practice agreements (”CPAs”) to foster better patient outcomes
with prescription drugs.
Minnesota already permits CPAs,
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which dene certain patient care functions that a pharmacist can
autonomously provide, including optimization of drug therapies. Pharmacists are well-positioned to perform
medication and wellness interventions that improve patient outcomes and these should be encouraged
and promoted to foster better patient outcomes with respect to prescription drugs.
5.13.4 Encourage “academic detailing”to improve prescribing practices of targeted drugs.
“Academic detailing” is educational outreach to prescribers by other, independent health-care professionals
who are unconnected to the drug industry. Offering physicians current research and evidence-based
information provides them the opportunity to make informed clinical decisions regarding medication
effectiveness, safety, and cost of therapy. The growth and success stemming from this process shows
that physician prescribing can be changed without regulatory involvement.
5.13.5 Provide sufcient resources to ensure successful implementation of Minnesota’s recently-passed
drug repository program
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and to engage in a public awareness campaign to ensure that patients
(and authorized subscribers) are aware of the benets of the program.
This program provides that prescription drugs, in their original, sealed, unopened, tamper-evident packaging,
may be saved by dened donor patients upon discontinued use of the medication or supply. These unused
drugs or supplies become available for use by other eligible individuals, who may not otherwise be able to
have access to the drug.
Responsible Persons/Entities.
The Minnesota Board of Pharmacy, as the primary regulator of the practice of pharmacy in the state, should take the
lead in implementing the recommendations in this section. The Legislature should pass any funding or statutory
changes needed.
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5.14 Support More Research on Prescription Drug Prices & Drug Benets.
Recommendation.
In 2017, Minnesotans spent nearly $8.7 billion on prescription drugs in retail and medical settings.
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Despite this
spending making up a signicant share of the state’s economy, Minnesota does not currently have a dedicated
government agency or unit responsible for studying the trends and policies of the drug industry, including with
respect to its pricing practices. The Task Force recommends that additional resources be devoted to such research.
Action Steps.
5.14.1 Minnesota should support additional research on inter-professional collaboration among healthcare
providers who work in conjunction with one another to prescribe drugs to their patients and how
this can be used to reduce drug costs.
5.14.2 Minnesota should support additional research related to understanding how drug product
discoveries and subsequent commercialization are funded, including how much funding provided
to public entities—for example, public universities, government agencies, etc.—underlies the
discovery, development, and commercialization of new prescription drugs.
5.14.3 Minnesota should support additional research related to the use of pharmacogenomics in clinical
practice, and how this method of personalized medicine may be used as a cost saving tool for
individual patients and the state.
5.14.4 Minnesota should support additional research related to broadly examining drug pricing, including
the lack of transparency of prices, how drug costs impact Minnesotans, and exactly how much
the state expends in prescription drug costs (most of which has been discussed in more depth in
previous recommendations).
Minnesota should also support additional research to track changes in drug-pricing policies implemented
in the state and how these policies have affected drug spending.
5.14.5 Minnesota should support additional research related to the continued role of PBMs in the drug
sales chain, including whether they should be subject to further regulation beyond what the Task
Force had recommended above.
Responsible Persons/Entities.
The Legislature should provide the Minnesota Department of Health with resources sufcient to initiate and conduct
this research.
Report of the Advisory Task Force on Lowering Pharmaceutical Drug Prices
71
The Task Force considers this report as only a rst step among many needed to lower skyrocketing
pharmaceutical-drug prices. It will be up to lawmakers—and state and federal agencies with the administrative
rulemaking authority—to implement some of the above recommendations. It will be up to the Minnesota
Attorney General’s Ofce and other law enforcers to re-double their efforts to police unlawful practices in the
drug industry, under both existing law and any new legal tools implemented as a result of this report. It will be
up to advocates to ensure the spotlight remains on the often life-or-death issue of lowering the exorbitant cost
of prescription medications. The Task Force, with the assistance of the Minnesota Attorney General’s Ofce,
intends to be at the forefront of efforts to ensure the recommendations contained in this report are turned into
policies that lower the cost of prescription medications for all Minnesotans.
Conclusion and Next Steps
Glossary of Terms
Report of the Advisory Task Force on Lowering Pharmaceutical Drug Prices
72
Acronym Term
API supplier
active pharmaceutical ingredient manufacturer
ANDA
abbreviated new drug application
ASP
average sale price
AWP
average wholesale price
CDC
Centers for Disease Control
CMS
Centers for Medicare and Medicaid Services
CPA
collaborative practice agreements
CPI
consumer price index
DHS
Minnesota Department of Human Services
DIR fees
direct and indirect remuneration fees
FDA
Food & Drug Administration
FQHC
federally qualied health center
GPO
group purchasing organization
HHS
U.S. Department of Health and Human Services
HRSA
Health Resources and Services Administration
KFF
Kaiser Family Foundation
MAC
maximum allowable cost
MDH
Minnesota Department of Health
MTM
medication therapy management
NDA
new drug application
PAD
physician administered drug
PAP
patient assistance program
PBM
pharmacy benet manager
REMS protocol
Risk Evaluation and Mitigation Strategy protocol
SAD
self-administered drug
WAC
wholesale acquisition cost
Committee Members
Report of the Advisory Task Force on Lowering Pharmaceutical Drug Prices
73
Co-Chair Nicole Smith-Holt.
Ms. Holt serves as a patient advocate on the Task Force. Ms. Holt tragically lost her 26-year-old son because he
was unable to pay for the insulin he needed to treat his diabetes. She has since become a national leader in the
ght to make insulin affordable for all diabetics.
Co-Chair Senator Scott Jensen, MD.
Senator Jenson is a legislative member of the Task Force. He is a practicing family physician who also represents
Minnesota Senate District 47. Senator Jensen is the lead author of SF353 (91st Leg. 2019-20), the Prescription
Drug Affordability Act. Senator Jensen was also the lead author of a recently-enacted law requiring the licensure of
and regulating pharmacy benet managers, better known as “PBMs.” See 2019 Minn. Laws ch. 39.
Elo Alston.
Mr. Alston serves as a patient advocate on the Task Force. He has been a type 1 diabetic for over 30 years.
Mr. Alston has rsthand experience with the challenges faced by patients who require life-saving drugs, but lack
medical insurance.
Jessica Braun, RN, APRN-CNP.
Ms. Braun is a medical practitioner representative on the Task Force. She is a family nurse practitioner with
over 10 years of experience in a variety of health care settings including college health, acute care, chronic pain
management, and family practice.
Nazie Eftekhari.
Ms. Eftekhari is a health insurance industry representative on the Task Force. She is the CEO and principal architect
of HealthEZ, a Minneapolis-based company that provides services designed to simplify health-plan administration
for employers, consumers, health care providers, and insurers.
Representative Rod Hamilton.
Representative Hamilton is a legislative member of the Task Force. He represents Minnesota House District
22B. Representative Hamilton has been a multiple sclerosis patient since 1994, giving him rsthand experience
managing the rising costs of necessary prescription drugs. He is the co-author of multiple bills intended to make
pharmaceutical-drug pricing more transparent.
Phu Huynh, PharmD, RPh.
Dr. Huynh is a small, independent pharmacy representative on the Task Force. He is a pharmacist and a pharmacy
manager at NorthPoint Medical Clinic, where he has managed all operational aspects of this independent clinic and
pharmacy for more than eight years. Through this experience, he has witnessed the impact on underserved patient
populations of skyrocketing drug costs.
Report of the Advisory Task Force on Lowering Pharmaceutical Drug Prices
74
Christy Kuehn.
Ms. Kuehn serves as a patient advocate on the Task Force. Her husband suffers from type 1 diabetes and requires
insulin, which costs their family more than $2,200 a month. She has experience managing a family budget in the
face of rising drug prices, which has led her husband to ration his insulin by taking half doses.
Shirlynn LaChapelle, RN, APN, SNP.
Ms. LaChapelle serves as a patient advocate on the Task Force. She has been working in healthcare as a Surgical
Nurse Practitioner since 1976. Ms. LaChapelle has served as the president of the Minnesota Black Nurses
Association, where she organized a number of outreach activities around the metro area to improve health outcomes
in underserved communities. Ms. LaChapelle is the owner of Nursing is the Answer LLC, and is currently completing
her Psychiatric Mental Health Nurse Practitioner Program.
Representative John Lesch.
Representative Lesch is a legislative member of the Task Force. He represents Minnesota House District 66B. He
is chair of the House Judiciary Finance and Civil Law Division and the lead author of HF4 (2019-20), a bill to prohibit
price-gouging on prescription drugs and rein in skyrocketing drug prices.
Senator Matt Little.
Senator Little is a legislative member of the Task Force. He represents Minnesota Senate District 58. Senator
Little has introduced numerous bills aimed at increasing transparency and curbing high drug prices. He is also a
co-author of SF472 (2019-20), The Alec Smith Emergency Insulin Act, which is named after Task Force Co-Chair
Nicole Smith-Holt’s son.
Rose Roach.
Ms. Roach serves as a patient advocate on the Task Force. She has served as the executive director of Minnesota
Nurses Association since October 2014. Before joining Minnesota Nurses Association, Ms. Roach spent 25 years
advocating for high-quality healthcare in Minnesota and California.
Stephen Schondelmeyer, PharmD, PhD.
Dr. Schondelmeyer serves as a pharmaceutical industry academic on the Task Force. He is a nationally-recognized
expert in pharmaceuticals. He is a professor of pharmaceutical economics and an Endowed Chair in Pharmaceutical
Management & Economics and Professor & Director of the PRIME Institute with the College of Pharmacy at the
University of Minnesota, which focuses on pharmaceutical research related to management and economics.
Leonard Snellman, MD.
Dr. Snellman is a medical practitioner representative on the Task Force. He has been a pediatrician since 1985. He
has served on the Pharmacy and Therapeutics Committee of HealthPartners since 1986, and is currently the chair
of the Pharmacy and Therapeutics Committee for Children’s Hospitals and Clinics of Minnesota, where he reviews
new and existing medications and the role they play in the therapeutic regimen of patients.
Cody Wiberg, PharmD, RPh.
Dr. Wiberg is the executive director of the Minnesota Board of Pharmacy. Prior to joining the board he was the
Pharmacy Program Manager for the Minnesota Department of Human Services. Dr. Wiberg is also a Clinical
Assistant Professor for the University of Minnesota College of Pharmacy and an Afliate Clinical Instructor and
Course Director for the University of Florida Graduate School.
Report of the Advisory Task Force on Lowering Pharmaceutical Drug Prices
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Endnotes
1 Although not ofcial members of the Task Force, Representative Robert Bierman (House District 57A) and Representative
Kristin Bahner (House District 34B) attended numerous Task Force meetings and were active participants in the Task
Force’s work.
2 The members of Working Group #1 were Co-Chair Ms. Smith-Holt, Senator Little, Representative Hamilton, Dr. Wiberg, and
Ms. LaChapelle.
3 See generally Bylaws of Advisory Task Force on Lowering Pharmaceutical Drug Prices (hereinafter “Bylaws”).
4 See Bylaws § 8.10.
5 See Bylaws § 8.11.
6 The Task Force in particular wants to recognize the assistance provided by the Minnesota Department of Health and the
Minnesota Department of Administration. In addition to Commissioner Malcom’s testimony, representatives of each
agency testied before the Task Force. Representatives from each department also participated in multiple working
group meetings, and provided invaluable information to the Task Force.
7 For more information on the subjects discussed in this subsection, see generally Management Sciences for Health, MDS-
3: Managing Access to Medicines and Health Technologies (3rd ed. 2012), www.msh.org/resources/mds-3-managing-
access-to-medicines-and-health-technologies (last visited December 5, 2019) (“MDS-3”), and Henry Waxman et al., The
Commonwealth Fund, Getting to the Root of High Prescription Drug Prices (July 2017), www.commonwealthfund.org/
sites/default/les/documents/___media_les_publications_issue_brief_2017_jul_waxman_getting_to_root_high_rx_
drug_prices_ib_v2.pdf (last visited December 5, 2019).
8 MDS-3 at 9.3.
9 MDS-3 at 9.3.
10 MDS-3 at 9.3.
11 See Section IV.F (discussing subscriber marketing and nancial inducements).
12 See Section III.A (discussing patent, exclusivity, and related laws and rules).
13 Examples of biologics include insulin, vaccines, and Humira—the top-selling drug in the world.
14 Dr. Stephen W. Schondelmeyer & Leigh Purvis, AARP Rx Price Watch Report - Trends in Retail Prices of Specialty Prescription
Drugs Widely Used by Older Americans: 2017 Year-End Update, p. 1. (June 2019) (“June 2019 AARP Rx Price Watch
Report”).
15 June 2019 AARP Rx Price Watch Report at 1.
16 June 2019 AARP Rx Price Watch Report at 1.
17 Minnesota Department of Health, Issue Brief: Pharmaceutical Spending and Use in Minnesota: 2009-2013 at 2 (Nov. 2016),
www.health.state.mn.us/data/apcd/docs/RxIssueBrief1Proof20161102.pdf (“MDH November 2016 Issue Brief”).
18 Centers for Medicare & Medicaid Services, National Health Expenditures 2017 Highlights at 1, www.cms.gov/Research-
Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/ Downloads/highlights.pdf
(discussing national statistics); see also MDH November 2016 Issue Brief at 5 (discussing Minnesota statistics)..
Report of the Advisory Task Force on Lowering Pharmaceutical Drug Prices
76
19 MDH November 2016 Issue Brief at 2.
20 MDH November 2016 Issue Brief at 3.
21 Pharmacy claims generally refers to health insurance claims for prescription drugs that are “typically covered as part of
a pharmacy benet and may be obtained at retail and other pharmacy settings.” MDH November 2016 Issue Brief at 2.
22 MDH November 2016 Issue Brief at 2.
23 Stefan Gildemeister, Director Health Economics Program, Minnesota Department of Health, Presentation to Advisory
Taskforce on Lowering Pharmaceutical Drug Prices, at slide 6 (July 23, 2019) (hereafter “7/23/19 Gildemeister
Presentation”) (showing that in 2013 $943 million was spent on these bundled medical claims for drugs in Minnesota,
which was far more than any other therapeutic category).
24 MDH November 2016 Issue Brief at 5-6 (noting that this is a low estimate due to certain categories of data that were not
captured as part of this study).
25 MDH November 2016 Issue Brief at 1-2.
26 MDH November 2016 Issue Brief at 2.
27 MDH November 2016 Issue Brief at 2.
28 MDH November 2016 Issue Brief at 3.
29 MDH November 2016 Issue Brief at 4 n.6.
30 Centers for Disease Control and Prevention (“CDC”), Percentage of Adults Aged ≥18 Years Who Were Prescribed Medication
in the Past 12 Months, by Sex and Age Group — National Health Interview Survey, 2017. Morbidity and Mortality Weekly
Report, Vol. 68 (No. 4) (February 1, 2019), www.cdc.gov/mmwr/volumes/68/wr/ mm6804a6.htm?s_cid=mm6804a6_w
(last visited October 25, 2019).
31 CDC, Prescription drug use in the past 30 days, by sex, race and Hispanic origin, and age: United States, select years 1988-
1994 through 2011-2014. Table 79, United States, 2017, https://www.cdc.gov/nchs/hus/ contents2017.htm#079 (last
visited October 25, 2019).
32 Minnesota Department of Health, Background Statistics on Prescription Drugs Compiled by the Health Economics Program
for the MN AG Task Force on Prescription Drugs at 4. (October 1, 2019) (the report and statistics the Minnesota Department
of Health compiled for the Task Force are on le with Ms. Sadaf Rahmani, the staff liaison from the Minnesota Attorney
General’s Ofce to the Task Force) (hereafter “MDH Prescription Drugs Report”).
33 MDH Prescription Drugs Report at 4.
34 MDH Prescription Drugs Report at 4.
35 MDH Prescription Drugs Report at 4.
36 Dr. Stephen W. Schondelmeyer & Leigh Purvis, AARP Rx Price Watch Report - Trends in Retail Prices of Brand Name
Prescription Drugs Widely Used by Older Americans: 2017 Year-End Update at 5 (September 2018), www.aarp.org/content/
dam/aarp/ppi/2018/09/trends-in-retail-prices-of-brand-name-prescription-drugs-year-end-update.pdf (last visited
October 25, 2019).
37 Id. at 1.
38 Stephen W. Schondelmeyer & Leigh Purvis, Trends in Retail Prices of Prescription Drugs Widely Used by Older Americans:
2017 Year-End Update, AARP Public Policy Institute, (September 2019), www.aarp.org/content/dam/aarp/ppi/2019/09/
trends-in-retail-prices-of-prescription-drugs-widely-used-by-older-americans.doi.10.26419-2Fppi.00073.003.pdf (last
visited November 26, 2019).
Report of the Advisory Task Force on Lowering Pharmaceutical Drug Prices
77
39 Stephen W. Schondelmeyer & Leigh Purvis, Trends in Retail Prices of Specialty Prescription Drugs Widely Used by
Older Americans: 2017 Year-End Update, AARP Public Policy Institute (June 2019), www.aarp.org/content/dam/aarp/
ppi/2019/06/trends-in-retail-prices-of-specialty-prescription-drugs-year-end-update.doi.10.26419-2Fppi.00073.001.pdf
(last visited November 26, 2019). The AARP Public Policy Institute analyzed 97 widely used specialty prescription drugs.
Examples of the specialty drugs included in the analysis included Capecitabine (used to treat certain cancers), Avonex
(used to treat multiple sclerosis), Truvada (used to treat and prevent HIV infection), and Humira (used to treat arthritis and
other inflammatory conditions).
40 Lisa L. Gill, How to Pay Less for Your Meds, Consumer Reports (April 5, 2018), www.consumerreports.org/ drug-prices/
how-to-pay-less-for-your-meds/ (last visited October 22, 2019).
41 Thomas Goetz, Health insurance aside, Americans still struggle to pay for their medications, GoodRx (November 25,
2018), www.goodrx.com/blog/health-insurance-aside-americans-still-struggle-to-pay-for-their-medications/ (last visited
October 22, 2019).
42 Dr. Lars Osterberg & Dr. Terrence Blaschke, Adherence to medication, The New England Journal of Medicine, 353:487-97
(August 4, 2005), www.nejm.org/doi/full/10.1056/NEJMra050100?url_ver=Z39.88-2003&rfr_id=ori: rid:crossref.org&rfr_
dat=cr_pub %3dpubmed (last visited November 25, 2019).
43 Ashley Kirzinger et al., KFF Health Tracking Poll – February 2019: Prescription Drugs, The Kaiser Family Foundation (March
1, 2019), www.kff.org/health-costs/poll-nding/kff-health-tracking-poll-february-2019-prescription-drugs/ (last visited
November 25, 2019).
44 Kaiser Family Foundation, Kaiser Health Tracking Poll: November 2016 (2016), http://les.kff.org/ attachment/Kaiser-
Health-Tracking-Poll-November-2016-Topline (last visited November 25, 2019).
45 Bram Sable-Smith, American travelers seek cheaper prescription drugs in Mexico and beyond, National Public Radio
(February 11, 2019), www.npr.org/sections/health-shots/2019/02/11/691467587/americans-seek-cheaper-meds-in-
mexico (last visited November 25, 2019).
46 Emily Rauhala, As price of insulin soars, Americans caravan to Canada for lifesaving medicine, The Washington Post (June
16, 2019), www.washingtonpost.com/world/the_americas/as-price-of-insulin-soars-americans-caravan-to-canada-for-
lifesaving-medicine/2019/06/14/0a272fb6-8217-11e9-9a67-a687ca99fb3d_story.html?utm_term= .f1566f95c50d (last
visited November 25, 2019).
47 See generally MDH Prescription Drugs Report and 7/23/19 Gildemeister Presentation.
48 For example, a person may be both an active pharmaceutical ingredient manufacturer and a drug manufacturer, or be
both a health plan and operate a provider network
49 See Margaret A. Hamburg, M.D., Remarks at the Annual Conference of the Food and Drug Law Institute, 67 Food & Drug
L.J. 123, 128 (2012) (“FDA-regulated products originate from approximately 300,000 foreign facilities spread across more
than 150 countries. On the drug side, astoundingly, approximately 80% of the active pharmaceutical ingredients used in
FDA-approved drugs sold in this country are manufactured outside of the United States, and 40 percent of nished drugs
consumed here are manufactured elsewhere.”).
50 Generally, drug manufacturers’ pricing and other business practices as described in this paragraph, including their
relationships with other entities in the drug sales chain, are described in depth in In re Pharm. Indus. Average Wholesale
Price Litig., 491 F.Supp.2d 20 (D. Mass. 2007), aff’d 582 F.3d 156 (1st Cir. 2009) (“In re AWP Litigation”).
51 21 U.S.C. § 360; see also 21 C.F.R. pt. 207.
52 Minn. Stat. § 151.252.
53 In industry jargon, the list price is known as the “wholesale acquisition cost (WAC),” which is in turn used to set the
“average wholesale price (AWP)” of the drug. Manufacturers set WAC directly. AWP is generally set by adding a certain
markup to WAC, usually about 20%. Thus, setting WAC also functionally sets AWP. See In re AWP Litigation, 491 F.Supp.2d
20 (D. Mass. 2007).
54 Generally, wholesale drug distributors business practices as described in this paragraph, including their relationships with
other entities in the drug sales chain, are described in depth in In re Pharm. Indus. Average Wholesale Price Litig., 491 F.
Supp. 2d 20 (D. Mass. 2007), aff’d 582 F.3d 156 (1st Cir. 2009).
Report of the Advisory Task Force on Lowering Pharmaceutical Drug Prices
78
55 See Minn. Stat. § 151.47, subd. 1a(b) (requiring licensure to act as a wholesale distributor), Minn. R. 6800.1400 et seq.
(describing licensing requirements and qualications).
56 Generally, PBMs’ rebate, pricing, and other business practices as described in this paragraph, including their relationships
with other entities in the drug sales chain, are described in depth in In re Pharm. Indus. Average Wholesale Price Litig., 491
F. Supp. 2d 20 (D. Mass. 2007), aff’d 582 F.3d 156 (1st Cir. 2009).
57 Even within the formularies, drugs are typically sorted into differing “tiers.” Depending into which tier a PBM classies
a particular drug, a health plan’s member will pay more or less out of pocket for the drug. Oregon Joint Interim Task
Force on Fair Pricing of Prescription Drugs, Report on Transparency Strategies for The Pharmaceutical Supply Chain, 19
(November 2018), https://olis.leg.state.or.us/liz/2017I1/Downloads/ CommitteeMeetingDocument/152412 (last visited
November 14, 2019) (“Oregon Drug Pricing Report”).
58 Manufacturers will sometimes offer bundled discounts known as ‘rebate walls,’ wherein the manufacturer promises large
rebates to PBMs, but only if the PBMs agree to cover a large number of drugs from the same manufacturer. Refusing to
cover even one drug in the bundle could result in the entire rebate being taken away. See David Balto, FTC Must Tackle
Anticompetitive Drug Rebate Practices, Law360 (May 17, 2019).
59 Manufacturers agree to pay PBMs rebates because a PBM can drive demand for a particular drug by agreeing to provide
it preferential pricing or other treatment over a competing drug through use of the PBM’s formulary.
60 See generally 2019 Minn. Laws ch. 39 (to be codied at Minn. Stat. ch. 62W).
61 See generally Minn. Stat. ch. 151 (establishing the Minnesota State Board of Pharmacy and charging it with licensing and
regulating pharmacies and pharmacists in the state).
62 National Community Pharmacists Association, NCPA 2017 Digest at 21 (2017), www.ncpa.co/pdf/digest/
2017/2017-digest-lr.pdf (last visited November 14, 2019).
63 Licensed health care professionals authorized to prescribe in Minnesota include: physicians, physician assistants nurse
practitioners, dentists, optometrists, and podiatrists, as well as veterinarians (for animal use only).
64 Colette DeJong et al., Pharmaceutical Industry-Sponsored Meals and Physician Prescribing Patterns for Medicare
Beneciaries, JAMA Internal Medicine (August 2016), https://jamanetwork.com/journals/jamainternal
medicinefullarticle/2528290 (last visited November 14, 2019).
65 Minn. Stat. § 151.461
66 Minn. Stat. § 151.461. There are other ways that practitioners are influenced to use specic drugs. For example, Centers
for Medicare and Medicaid reimburses at a rate of 106% of the Average Sales Price of a drug, giving physicians an incentive
to choose a more expensive drug over a cheaper one. See Centers for Medicare and Medicaid Services, Medicare Part B
Drug Average Sales Price, www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/
index.html (last visited November 14, 2019).
67 The Kaiser Family Foundation, The Uninsured: A Primer, Supplemental Table #1 (December 2017), http://les.kff.org/
attachment/Supplemental-Tables-The-Uninsured-A-Primer-Key-Facts-about-Health-Insurance-and-the-Uninsured-Under-
the-Affordable-Care-Act (last visited November 25, 2019).
68 In 2018, the average worker contributed 18% of the premium for individual coverage and 29% for family coverage. The
Kaiser Family Foundation, Employer Health Benets: 2018 Annual Survey, 9 (2018), http://les. kff.org/attachment/
Report-Employer-Health-Benets-Annual-Survey-2018 (last visited November 25, 2019).
69 Id. at 153
70 MMCAP INFUSE was previously known as the Minnesota Multistate Contracting Alliance for Pharmacy.
71 See, e.g., Minn. Stat. §§ 16C.105, 471.59, subd. 1(b).
72 Biologics are derived from living materials, whether they be human, animal, or microorganism in origin. They include
any “virus, therapeutic serum, toxin, antitoxin, vaccine, blood, blood component or derivative, allergenic product, . . . or
analogous product, . . . applicable to the prevention, treatment, or cure of a disease or condition of human beings.” 42
U.S.C. § 262, subd (i). The FDA also approves over the counter drugs.
Report of the Advisory Task Force on Lowering Pharmaceutical Drug Prices
79
73 See generally 21 U.S.C. § 355 (small molecule new drug application).
74 21 C.F.R. § 601.2, subd. (a).
75 42 U.S.C. § 262, subd. (j).
76 21 U.S.C. § 355, subd. (j).
77 See 21 U.S.C. § 355, subd. (j)(2)(A)(i).
78 21 U.S.C. § 355, subd. (j)(2)(A).
79 21 U.S.C. § 355, subd.(j)(2)(A)(vii). If the generic manufacturer claims that the patent is invalid or that the generic
manufacturer’s sale of the drug will not infringe on the drug, it must give notice to the owner of the patent and the holder
of the approved brand name drug, which triggers a 45-day window to le a lawsuit for infringement of the patent. Id., subd.
(j)(5)(B)(iii). If no such infringement action is led, the application may proceed. If an infringement action is led, this may
result in the FDA freezing the ADNA for up to thirty months. Id.
80 42 U.S.C. § 262, subd. (k).
81 42 U.S.C. § 262, subd. (k)(2)(A)(i)(II).
82 42 U.S.C. § 262, subd. (k)(4).
83 FDA, Center for Drug Evaluation and Research, List of Licensed Biological Products (July 23, 2019), www.fda.gov/
media/89589/download (last visited November 25, 2019).
84 See 35 U.S.C. § 101
85 35 U.S.C. § 154(a)(2).
86 35 U.S.C. §§ 101, 102.
87 The law’s ofcial name is Drug Price Competition and Patent Term Restoration Act, Public Law 98-417 (1984) (codied at
21 U.S.C. §§ 301, 355, 360cc).
88 35 U.S.C. § 156.
89 21 U.S.C. § 355(b)(1).
90 21 U.S.C. § 355(j)(2)(vii).
91 21 U.S.C. § 355(j)(5)(B)(iii).
92 See 42 U.S.C. § 262(l)(2)(A),(B).
93 See Sandoz Inc. v. Amgen Inc., 137 S. Ct. 1664, 1672 (2017).
94 21 U.S.C. § 355, subd. (j)(5)(B)(iv).
95 42 U.S.C. § 262, subd. (k)(6). This period of exclusivity can be extended in the event of a patent dispute involving the
biological product.
96 21 C.F.R. § 316.31.
97 “New chemical” means “a drug that contains no active moiety that has been approved by FDA in any other [new drug
application] under [21 U.S.C. § 355, subd (b)].” 21 C.F.R. § 314.108, subd (a).
98 21 C.F.R. § 314.108, subd. (b)(2). The FDA reduces the period of exclusivity to four years if the subsequent drug application
contains a certication of patent invalidity or noninfringement. Id.
99 Other exclusivities that may apply to prescription drugs are: a biologic reference drug exclusivity, see 42 U.S.C. § 262,
subd. (k)(7); a pediatric exclusivity, see 42 U.S.C. § 284m, 21 U.S.C. § 355a; an antimicrobial exclusivity, see 21 U.S.C. §
355f; and, essentially, an “other” exclusivity, see 21 C.F.R. § 314.108, subds. (4), (5).
Report of the Advisory Task Force on Lowering Pharmaceutical Drug Prices
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100 United States Government Accountability Ofce, Drug Discount Program – Federal Oversight of Compliance at 340B
Contract Pharmacies Needs Improvement, GAO Report No. 18-480 (June 2018), www.gao.gov/products/GAO-18-480 (last
visited November 25, 2019).
101 HRSA, 340B Drug Pricing Program (August 2019), www.hrsa.gov/opa/index.html (last visited October 29, 2019).
102 HRSA, 340B Eligibility (May 2018), www.hrsa.gov/opa/eligibility-and-registration/index.html (last visited November
1, 2019). Specically, covered entities include Federally Qualied Health Centers (“FQHC”), FQHC Look-Alikes, Native
Hawaiian Health Centers, Tribal / Urban Indian Health Centers, Ryan White HIV/AIDS Program Grantees, children’s
hospitals, critical access hospitals, disproportionate share hospitals, free standing cancer hospitals, rural referral centers,
sole community hospitals, Black Lung Clinics, comprehensive hemophilia diagnostic treatment centers, Title X family
planning clinics, sexually transmitted disease clinics, and tuberculosis clinics.
103 HRSA Table of Minnesota 340B Entities and Contract Pharmacies (October 1, 2019) (hereafter “Minnesota 340B Entities
Table”) (this table was compiled for the Task Force, and is on le with Ms. Sadaf Rahmani, the staff liaison from the
Minnesota Attorney General’s Ofce to the Task Force); see also 42 U.S.C. § 1395ww (establishing which hospitals are
considered “disproportionate share hospitals”).
104 Minnesota 340B Entities Table.
105 Minnesota 340B Entities Table. The Minnesota Board of Pharmacy website also allows persons to search for 340B Program
entities in Minnesota, which can be accessed at https://mn.gov/boards/pharmacy/public/ savingonprescriptiondrugs.jsp
(last visited November 27, 2019).
106 HRSA, Notice Regarding Section 602 of the Veterans Health Care Act of 1992 Patient and Entity Eligibility, 61 Fed. Reg.,
55,158 (October 24, 1996), www.hrsa.gov/sites/default/les/opa/programrequirements/ federalregisternotices/
patientandentityeligibility102496.pdf (last visited November 25, 2019). Specically, HRSA denes an individual as an
eligible patient if (1) the covered entity has established a relationship with the individual and maintains the individual’s
health records, (2) the individual receives health care services from who is employed or contracted with the covered
entity, and (3) the individual receives health care services consistent with the services for which grant funding or federally-
qualied health center look-alike status has been provided to the covered entity.
107 United States Government Accountability Ofce, Drug Discount Program – Federal Oversight of Compliance at 340B
Contract Pharmacies Needs Improvement, GAO Report No. 18-480, at 35 (June 2018), www.gao.gov/ assets/700/ 692697.
pdf (last visited November 25, 2019).
108 Minn. Stat. § 151.06.
109 Minn. Stat. § 151.22.
110 Minn. Stat. § 151.252.
111 Minn. Stat. § 151.34.
112 Minn. Stat. § 151.21, subd. 3 (stating that pharmacists may substitute generic versions of drugs unless the prescribing
physician has personally handwritten or indicated electronically, “dispense as written” or “D.A.W.”).
113 Minn. Stat. § 151.21, subd. 3. The FDA had yet to approve any biosimilar products as interchangeable as of July 2019,
however, see FDA, Center for Drug Evaluation and Research, List of Licensed Biological Products (July 23, 2019), www.fda.
gov/media/89589/download (last visited November 25, 2019), and biosimilar drugs that are not interchangeable must be
specically prescribed by doctors. Minn. Stat. § 151.21, subd. 3.
114 See 2019 Minn. Laws ch. 39 (to be codied at Minn. Stat. ch. 62W).
115 Tori Marsh, 2 Years After the EpiPen Price Hike, Here’s What’s Changed, GoodRx (August 16, 2018), www.goodrx.com/
blog/epipen-price-change-since-mylan-released-generic-epinephrine (last visited November 25, 2019).
116 The United States Department of Justice, Press Release: Mylan Agrees to Pay $465 Million to Resolve False Claims
Act Liability for Underpaying EpiPen Rebate (August 17, 2017), www.justice.gov/opa/pr/mylan-agrees-pay-465-million-
resolve-false-claims-act-liability-underpaying-epipen-rebates (last visited November 25, 2019).
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117 Charles Duhigg, Outcry Over EpiPen Prices Hasn’t Made Them Lower, The New York Times (June 4, 2017), www.nytimes.
com/2017/06/04/business/angry-about-epipen-prices-executive-dont-care-much.html (last visited November 25, 2019).
118 Id.
119 In general, the information discussed in this paragraph is summarized from the allegations in the complaints in Federal
Trade Commission v. Mylan Laboratories, et al., Court File No. 98-cv-3114 (D.D.C.), and State of Connecticut et al. v. Mylan
Laboratories, et al., Court File No. 98-cv-3115 (D.D.C.). Some of these materials are also accessible on the Federal Trade
Commission’s website at www.ftc.gov/enforcement/cases-proceedings/9810146/mylan-laboratories-inc-cambrex-
corporation-profarmaco-sri-gyma (last visited November 25, 2019).
120 Minnesota Department of Health, Diabetes in Minnesota, www.health.state.mn.us/diseases/diabetes/data/
diabetesfacts.html (last visited November 25, 2019).
121 American Diabetes Association, The Burden of Diabetes in Minnesota, http://main.diabetes.org/dorg/PDFs/ Advocacy/
burden-of-diabetes/minnesota.pdf (last visited November 25, 2019).
122 Carolyn Johnson, Why treating diabetes keeps getting more expensive, The Washington Post (October 31, 2016), www.
washingtonpost.com/news/wonk/wp/2016/10/31/why-insulin-prices-have-kept-rising-for-95-years/ (last visited
November 25, 2019).
123 Robin Respaut and Chad Terhune, US insulin costs per patient nearly doubled from 2012 to 2016, Reuters (January 22,
2019), www.reuters.com/article/us-usa-healthcare-diabetes-cost/u-s-insulin-costs-per-patient-nearly-doubled-from-
2012-to-2016-study-idUSKCN1PG136 (last visited November 25, 2019).
124 Jeremy Olson, Son’s death pushes Minnesota mom into ght against high, rising drug prices, The Minneapolis Star Tribune
(May 11, 2018), www.startribune.com/son-s-death-pushes-mom-into-drug-price-spotlight/482344871/ (last visited
November 25, 2019).
125 The Minnesota Attorney General’s Ofce sued Sano Aventis, Eli Lilly, and Novo Nordisk over the alleged pricing practices
described in this subsection in 2018, claiming they were deceptive, fraudulent, and unlawful. The lawsuit remains pending
in federal court in New Jersey. See State of Minnesota, by its Attorney General, Keith Ellison v. Sano Aventis et al., Case
No. 18-cv-14999 (D.N.J.).
126 United States Senate, Special Committee on Aging, Sudden Price Spikes in Off-Patent Prescription Drugs: The Monopoly
Business Model that Harms Patients, Taxpayers, and the U.S. Health Care System (December 2016), www.aging.senate.
gov/imo/media/doc/Drug%20Pricing%20Report.pdf (last visited October 22, 2019).
127 Andrew Pollack and Sabrina Tavernise, Valeant’s drug price strategy enriches it, but infuriates patients and lawmakers,
The New York Times (October 4, 2015), www.nytimes.com/2015/10/05/business/valeants-drug-price-strategy-enriches-
it-but-infuriates-patients-and-lawmakers.html (last visited October 22, 2019).
128 Andrew Pollack, Drug goes from $13.50 a tablet to $750, overnight, The New York Times (September 20, 2015), www.nytimes.
com/2015/09/21/business/a-huge-overnight-increase-in-a-drugs-price-raises-protests.html?_ r=1&pagewanted=all (last
visited October 22, 2019).
129 United States House of Representatives, Committee on Oversight and Reform, Oversight Committee Requests Info on
Documents Withheld from Congress by Valeant Pharmaceuticals: Press Release (March 10, 2016), https://oversight.
house.gov/news/press-releases/oversight-committee-requests-info-on-documents-withheld-from-congress-by-valeant
(last visited October 22, 2019).
130 United States House of Representatives, Committee on Oversight and Reform, Memorandum - Documents Obtained by
Committee from Valeant Pharmaceuticals (February 2, 2016), https://oversight.house.gov/sites/ democrats.oversight.
house.gov/les/documents/Memo%20on%20Valeant%20Documents0.pdf (last visited October 22, 2019).
131 Id. Moreover, in 2015, Valeant’s alleged relationship with mail-order specialty pharmacy Philidor Rx Services was revealed,
which was unknown even to its shareholders at the time. Greg Roumeliotis & Alexandria Sage, Valeant under criminal
investigation over Philidor ties: WSJ, Reuters (August 10, 2016), www.reuters.com/article/us-valeant-investigation-
idUSKCN10L2RG (last visited October 22, 2019). Valeant reportedly used Philidor “to mask its price increases and
circumvent the traditional insurance reimbursement process, as well as the company’s compliance with federal securities
laws.” United States House of Representatives, Committee on Oversight and Reform, Oversight Committee Requests Info
Report of the Advisory Task Force on Lowering Pharmaceutical Drug Prices
82
on Documents Withheld from Congress by Valeant Pharmaceuticals: Press Release (March 10, 2016), https://oversight.
house.gov/news/press-releases/oversight-committee-requests-info-on-documents-withheld-from-congress-by-valeant
(last visited October 22, 2019).
132 The Kaiser Family Foundation, The Uninsured: A Primer, Supplemental Table #1 (December 2017), http://les.kff.org/
attachment/Supplemental-Tables-The-Uninsured-A-Primer-Key-Facts-about-Health-Insurance-and-the-Uninsured-Under-
the-Affordable-Care-Act (last visited November 14, 2019); see also Susan L Hayes, Sara R. Collins, and David C. Radley,
How Much U.S. Households with Employer Insurance Spend on Premiums and Out-of-Pocket Costs: A State-by-State Look,
The Commonwealth Fund (May 2019), www.commonwealthfund.org/publications/issue-briefs/2019/may/how-much-
us-households-employer-insurance-spend-premiums-out-of-pocket (last visited November 14, 2019).
133 Denitions vary somewhat, but generally a person is considered “underinsured” if they spend a certain portion of their
income, often 5-15%, on drugs and other medical care despite their insurance coverage.
134 Sara R. Collins et al., Health Insurance Coverage Eight Years After the ACA, The Commonwealth Fund (February 2019),
www.commonwealthfund.org/publications/issue-briefs/2019/feb/health-insurance-coverage-eight-years-after-aca (last
visited November 14, 2019).
135 Sara R. Collins and David C. Radley, The Cost of Employer Insurance Is a Growing Burden for Middle-Income Families: State
Proles – Trends in Employer Insurance Costs, 2008-2017: Minnesota, The Commonwealth Fund, (December 2018), www.
commonwealthfund.org/publications/issue-briefs/2018/dec/cost-employer-insurance-growing-burden-middle-income-
families (last visited November 14, 2019).
136 IRS Publication 969 (2019).
137 Michelle Andrews, Employers Are Scaling Back Their Dependence On High-Deductible Health Plans, Kaiser Health News
(October 29, 2019), https://khn.org/news/employers-are-scaling-back-their-dependence-on-high-deductible-health-
plans/ (last visited December 2, 2019).
138 Robin A. Cohen et al., Health Insurance Coverage: Early Release of Estimates From the National Health Interview Survey,
2018, Centers for Disease Control - National Center for Health Statistics (May 2019), www.cdc.gov/nchs/data/nhis/
earlyrelease/insur201905.pdf (last visited November 14, 2019).
139 Robin A. Cohen et al., Health Insurance Coverage: Early Release of Estimates From the National Health Interview Survey,
2018, Centers for Disease Control - National Center for Health Statistics (May 2019), www.cdc.gov/nchs/data/nhis/
earlyrelease/insur201905.pdf (last visited November 14, 2019).
140 Sara R. Collins et al., Health Insurance Coverage Eight Years After the ACA, The Commonwealth Fund (February 2019),
www.commonwealthfund.org/publications/issue-briefs/2019/feb/ health-insurance-coverage-eight-years-after-aca (last
visited November 14, 2019).
141 The Kaiser Family Foundation, Data Note: Prescription Drugs and Older Adults (Aug. 9, 2019), www.kff.org/health-reform/
issue-brief/data-note-prescription-drugs-and-older-adults/ (last visited November 21, 2019) (hereafter “KFF Older Adults
Poll”).
142 Leigh Purvis, AARP, Presentation to Advisory Task Force on Lowering Pharmaceutical Drug Prices (July 23, 2019) (Ms.
Purvis’s presentation materials are on le with Ms. Sadaf Rahmani, the staff liaison from the Minnesota Attorney General’s
Ofce to the Task Force).
143 KFF Older Adults Poll.
144 The Kaiser Family Foundation, An Overview of the Medicare Part D Prescription Drug Benet (Nov. 13, 2019), https://www.
kff.org/medicare/fact-sheet/an-overview-of-the-medicare-part-d-prescription-drug-benet/ (last visited November 21,
2019)
145 Dena Bunis, What You Need to Know About Part D Prescription Drug Plans, AARP (August 8, 2018), https://www.aarp.org/
health/medicare-insurance/info-2018/part-d-prescription-drugs.html (last visited November 21, 2019)
146 Id.
147 The Kaiser Family Foundation, 10 Essential Facts About Medicare and Prescription Drug Spending (Jan. 29, 2019), www.kff.
org/infographic/10-essential-facts-about-medicare-and-prescription-drug-spending/ (last visited November 21, 2019).
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148 KFF Older Adults Poll.
149 Id.
150 Id.
151 Id.
152 Minnesota Board of Pharmacy, Licensing and Registration Statistics (2019), https://mn.gov/boards/pharmacy/
resourcesfaqs/licensingandregistration.jsp (last visited November 26, 2019).
153 Originally, DIR fees were created by the Center for Medicare and Medicaid Services (“CMS”) to reconcile drug manufacturer
rebates after the sale, but are now frequently levied by PBMs on pharmacies. A DIR fee can consist of a number of different
fees, including network participation fees, periodic reimbursement reconciliations, and fees assessed to pharmacies for
claimed non-compliance with certain quality measures. PBMs are not required to disclose how the fees are calculated.
National Community Pharmacists Association, Frequently Asked Questions (FAQs) About Pharmacy “DIR” Fees (October
8, 2018), www.ncpa.co/pdf/dir-faq.pdf (last visited November 27, 2019).
154 The recent passage of Minnesota Statutes section 62W.07 should help mitigate the impact of this PBM business practice
on independent pharmacies in Minnesota.
155 Beth Longware Duff, How Pharmacies are Confronting Rising Drug Costs, 164 Drug Topics 6 (June 15, 2018), www.
drugtopics.com/article/how-pharmacies-are-confronting-rising-drug-costs (last visited November 27, 2019).
156 Kaiser Family Foundation, Uninsured Rates for Nonelderly By Race/Ethnicity (2017), www.kff.org/uninsured/state-
indicator/rate-by-raceethnicity/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22a
sc%22%7D (last visited November 27, 2019).
157 Linda Villarosa, Myths about Physical Racial Differences Were Used to Justify Slavery-And Are Still Believed by Doctors
Today, The New York times (Aug. 14, 2019), www.nytimes.com/interactive/2019/08/14/magazine/racial-differences-
doctors.html (last visited November 27, 2019).
158 Ronald Wyatt, Policy Forum – Pain and Ethnicity, American Medical Association Journal of Ethics (May 2013), https://
journalofethics.ama-assn.org/sites/ journalofethics.ama-assn.org/les/2018-05/pfor1-1305.pdf (last visited November
27, 2019).
159 Id.
160 Id.
161 Harriet A. Washington, Presentation to Working Group #1 of the Advisory Taskforce on Lowering Pharmaceutical Drug
Prices (July 18, 2019) (Ms. Washington is the author of the book “Medical Apartheid: The Dark History of Medical
Experimentation on Black Americans from Colonial Times to the Present.” A recording of Ms. Washington’s presentation
is on le with Ms. Sadaf Rahmani, the staff liaison from the Minnesota Attorney General’s Ofce to the Task Force.).
162 See generally Jonathan Kahn, Race in a Bottle (Columbia University Press August 2014), and Jonathan Kahn, Bidil and
Racialized Medicine, www.councilforresponsiblegenetics.org/pageDocuments/PLMVM6FTAO.pdf (Apr. 23, 2009)
(hereafter “Racialized Medicine”).
163 Racialized Medicine at 3 (Apr. 23, 2009) (quoting an editorial in Nature Biotechnology).
164 Congressional Research Service, Drug Pricing and Intellectual Property Law: A Legal Overview for the 116th Congress at 14
(April 4, 2019), https://crsreports.congress.gov/product/pdf/R/R45666 (last visited November 22, 2019); see also John
R. Thomas, Visiting Scholar, Patent “Evergreening”: Issues in Innovation and Competition, Congressional Research Service
(November 13, 2009), www.ipmall.info/sites/default/les/hosted_resources/crs/R40917_091113.pdf (last visited
November 22, 2019). A similar phenomenon is known as “product hopping,” which happens when a drug maker changes
a drug that is about to go off-patent, and aggressively encourages users of the rst drug to switch to the new version. This
is discussed further below. See Section III.C.1.
165 Robin Feldman, May Your Drug Price Be Evergreen, 5 Journal of Law and the Biosciences 590, 601 (2018), https://
academic.oup.com/jlb/article/5/3/590/5232981 (last visited November 22, 2019).
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84
166 Orphan Drug Act, Public Law 97-414 (January 4, 1983).
167 EvaluatePharma, Orphan Drug Report, at 9 (3rd ed. 2015), http://info.evaluategroup.com/rs/607-YGS-364/images/
EPOD15.pdf (last visited November 22, 2019).
168 National Public Radio, Drugs For Rare Diseases Have Become Uncommonly Rich Monopolies (January 17, 2017), www.npr.
org/sections/health-shots/2017/01/17/509506836/drugs-for-rare-diseases-have-becomeuncommonly-rich-monopolies
(last visited December 23, 2019). The Orphan Drug Act has also been criticized for allowing the re-classication of
already-developed drugs or the development of “orphan drugs” that are actually marketed for off-label use. See, e.g.,
Sarah Jane Tribble, FDA Moves to Rein In Drugmakers’ Abuse of Orphan Drug Law, National Public Radio (September 13,
2017), https://www.npr.org/sections/health-shots/2017/09/13/550700062/fda-moves-to-rein-in-drugmakers-abuse-of-
orphan-drug-law (last visited November 22, 2019).
169 Sarah Jane Tribble & Sydney Lupkin, Drugmakers Manipulate Orphan Drug Rules To Create Prized Monopolies, Kaiser Health
News (January 17, 2017), https://khn.org/news/drugmakers-manipulate-orphan-drugrules-to-create-prized-monopolies/
(last visited November 22, 2019).
170 EvaluatePharma, Orphan Drug Report, at 3 (3rd ed. 2015), http://info.evaluategroup.com/rs/607-YGS-364/images/
EPOD15.pdf (last visited November 22, 2019).
171 Sarah Jane Tribble & Sydney Lupkin, Drugmakers Manipulate Orphan Drug Rules To Create Prized Monopolies, Kaiser Health
News (January 17, 2017), https://khn.org/news/drugmakers-manipulate-orphan-drugrules-to-create-prized-monopolies/
(last visited November 22, 2019).
172 Johns Hopkins Medicine, ‘Orphan Drug’ Loophole Needs Closing, Johnson Hopkins Researchers Say, (November 19, 2015),
www.hopkinsmedicine.org/news/media/releases/orphan_drug_loophole_needs_closing_johns_hopkins_researchers_
say (last visited November 22, 2019).
173 21 U.S.C § 355(j)(5)(F)(iv).
174 Rebecca S. Eisenberg, Patents and Regulatory Exclusivity, The University of Michigan Law School, Scholarship Repository,
at 15 (2012), https://repository.law.umich.edu/cgi/viewcontent.cgi?article=1126&context=book_chapters (last visited on
November 22, 2019).
175 21 U.S.C. § 355(j)(5)(F)(iii), (iv).
176 Erin Fox, How Pharma Companies Game the System to Keep Drugs Expensive, Harvard Business Review (April 6, 2017),
https://hbr.org/2017/04/how-pharma-companies-game-the-system-to-keep-drugs-expensive (last visited on November
22, 2019).
177 Jay Hancock & Sydney Lupkin, Drugmakers Master Rolling Out Their Own Generics To Stifle Competition, Kaiser Health
News (August 5, 2019), https://khn.org/news/drugmakers-now-masters-at-rolling-out-their-owngenerics-to-stifle-
competition/ (last visited on December 2, 2019). Moreover, because drug manufactures often offer price rebates for the
name-brand version of a drug but not the authorized generic version of the drug, an authorized generic often has the same
amount of prot as the brand name version of the drug. For example, the list price for the authorized generic version of
Eli Lilly’s Humalog insulin is $137—less than half of brand-name Humalog—and yet after rebates for Humalog are taken
into account, Eli Lilly nets approximately the same amount of prot for either version of the drug. As a pharmacy benets
executive told Congress, “Authorized generics are just another tactic for drug manufacturers to improve protability.” Id.
178 21 C.F.R. §§ 10.25, 10.30.
179 Robin Feldman & Connie Wang, A Citizen’s Pathway Gone Astray – Delaying Competition from Generic Drugs, The New
England Journal of Medicine (April 20, 2017), www.nejm.org/doi/10.1056/NEJMp1700202 (last visited on November 21,
2019).
180 Marc Kaufman, Petitions to FDA Sometimes Delay Generic Drugs, The Washington Post (July 3, 2006); see also Michael A.
Carrier & Daryl Wander, Citizen Petitions: An Empirical Study, 34 Cardozo L. Rev. 261 (2012-2013).
181 Michael A. Carrier & Brenna Sooy, Five Solutions to the REMS Patent Problem, 97 Boston University Law Review 1661,
1669-71 (2017).
182 See id.
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85
183 Robert Langreth, Blacki Migliozzi, and Ketaki Gokhale, The U.S. pays a lot more for top drugs than other countries,
Bloomberg, (December 18, 2015), https://www.bloomberg.com/graphics/2015-drug-prices/ (last visited November 14,
2015).
184 Id.
185 Kaiser Family Foundation,. KFF health tracking poll – February 2019, Kaiser Family Foundation (February 2019), at 8.
http://les.kff.org/attachment/Topline-KFF-Health-Tracking-Poll-February-2019 (last visited November 14, 2019).
186 Amanda K. Sarata, Agata Dabrowska, Prescription Drug Importation, Congressional Research Service at 1 (December 21,
2018), https://crsreports.congress.gov/product/pdf/IF/IF11056 (last visited November 14, 2019).
187 Id. at 2.
188 U.S. Food & Drug Administration, Safe importation action plan, U.S. Department of Health and Human Services (2019),
https://www.hhs.gov/sites/default/les/safe-importation-action-plan.pdf (last visited November 14, 2019).
189 New York ex rel. Schneiderman v. Actavis PLC, 787 F.3d 638 (2d Cir. 2015) (holding that drug “product hopping” under
the circumstances present there—withdrawing a twice-daily version of a drug and replacing it with a once-daily version
of the same drug—was likely to be found to violate antitrust laws, and upholding a preliminary injunction against the
practice); see also Federal Trade Commission, Mylan Pharmaceuticals, Inc. v. Warner Chilcott PLC et al., Case No. 15-
2236, Brief of Amicus Curiae Federal Trade Commission Supporting Plaintiff-Appellant, ECF# 03112088104 (3rd Cir. Sept.
30, 2015), www.ftc.gov/policy/advocacy/amicus-briefs/ 2015/09/mylan-pharmaceuticals-inc-v-warner-chilcott-plc-et-al
(last visited December 2, 2019).
190 State of Wisconsin et al v. Indivior Inc., et al, Case No. 16-cv-5073, First Amended Complaint (E.D. Pa.).
191 Apart from this ongoing civil litigation, the United States Department of Justice has also indicted Indivior criminally. See
United States Department of Justice, Press Release: Indivior, Inc. Indicted for Fraudulently Marketing Prescription Opioid
(April 9, 2019), www.justice.gov/opa/pr/indivior-inc-indicted-fraudulently-marketing-prescription-opioid (last visited
November 27, 2019).
192 Sano, Press Release: Sano Reaches Patent Settlement on Lantus® SoloSTAR® (September 28, 2015), www.news.
sano.us/2015-09-28-Sano-Reaches-Patent-Settlement-on-Lantus-SoloSTAR (last visited December 18, 2019) (“The
agreement resolves a U.S. patent infringement lawsuit regarding Lilly’s pursuit of regulatory approval for a product that
would compete with Lantus SoloSTAR. . . . In the U.S., Lilly will not sell its insulin glargine product before December 15,
2016.”).
193 See, e.g., United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 218 (1940) (“[F]or over forty years this Court has consistently
and without deviation adhered to the principle that price-xing agreements are unlawful . . . and that no showing of so-
called competitive abuses or evils which those agreements were designed to eliminate or alleviate may be interposed as a
defense.”). Other types of per se unlawful conduct under antitrust laws are market allocation schemes where competitors
agree not to compete with one another in a particular geographic area or for a particular class of customers, group
boycotts in which multiple competitors refuse to do business with another company unless that company stops doing
business with other competitors, and certain types of tying arrangements in which unrelated products are sold together
as a single unit, to force customers to buy both.
194 Antitrust lawsuits involving allegedly per se anticompetitive conduct often settle prior to a ruling on the merits by a court
or a jury. As part of such settlements, drug manufacturers rarely are forced to admit the unlawfulness of their alleged
conduct.
195 State of Connecticut et al v. Actavis Holdco U.S. Inc., et al, Case No. 17-cv-03768 (E.D. Pa. October 31, 2017).
196 State v. Actavis Holdco Compl. ¶ 7.
197 Lisa M. Schwartz & Steven Woloshin, Medical Marketing in the United States: 1997-2016, The Journal of the American
Medical Association, Vol. 321, No. 1, at 80 (January 8, 2019), https://jamanetwork.com/journals/jama/ fullarticle/2720029
(last visited November 27, 2019) (hereafter “Medical Marketing”). According to one study, “[s]pending increases from 1997
through 2016 were greatest for drugs for diabetes/endocrine diseases (from $22 million to $725 million), dermatology
conditions ($67 million to $605 million), pain/central nervous system disorders ($56 million to $542 million), arthritis ($27
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86
million to $484 million), cardiac diseases ($0 to $379 million) and cancer ($3 million to $274 million), largely reflecting
competition among expensive new biologics and cancer therapies.” Id. at 82; see also Joanne Kaufman, Think You’re
Seeing More Drug Ads on TV? You Are, and Here’s Why, The New York Times (Dec. 24, 2017) (discussing another study
that found TV ads for prescription drugs in 2017 increased to 771,368).
198 World Health Organization, Bulletin of the World Health Organization: Direct-to-Consumer Advertising Under Fire, Vol. 87,
No. 8 (August 2009), www.who.int/bulletin/volumes/87/8/09-040809/en/ (last visited November 27, 2019).
199 United States House of Representatives, Committee on Energy and Commerce, Subcommittee on Oversight and
Investigations, Direct-to-Consumer Advertising: Marketing, Education, or Deception? (May 8, 2008), www.govinfo.gov/
content/pkg/CHRG-110hhrg54104/html/CHRG-110hhrg54104.htm (last visited November 27, 2019) (Hon. Bart Stupak
opening statement).
200 American Medical Association, Press Release: AMA Calls for Ban on DTC Ads of Prescription Drugs and Medical Devices
(November 17, 2015), www.ama-assn.org/press-center/press-releases/ama-calls-ban-dtc-ads-prescription-drugs-and-
medical-devices (last visited November 27, 2019).
201 Medical Marketing at 88.
202 See Section III.F (discussing patient assistance programs, patient discount coupons, and other practices that create
perverse economic incentives to purchase higher priced drugs).
203 Medical Marketing at 88.
204 Id. at 85.
205 Id. at 89.
206 Id. at 85.
207 Id.
208 See, e.g., State v. Boehringer Ingelheim Pharmaceuticals, Inc., Court File No. 62-CV-17-7562 (2d Judicial Dist.) (deceptive
marketing of Aggrenox, Atrovent, Combivent, and Micardis); State v. Johnson & Johnson et al., Court File No. 62-CV-17-
3263 (2d Judicial Dist.) (deceptive marketing of over the counter medications, including infants and children’s Tylenol
liquid products as well as Tylenol, Benadryl, Rolaids, Motrin, and Zyrtec); State v. Bristol-Myers Squibb Co., Court File No.
62-CV-16-6869 (2d Judicial Dist.) (deceptive marketing of Abilify); State v. Amgen, Inc., Court File No. 62-CV-15-5054 (2d
Judicial Dist.) (deceptive marketing of Aranesp and Enbrel); State v. GlaxoSmithKline LLC, Court File No. 62-CV-14-3930
(2d Judicial Dist.) (deceptive marketing of Advair, Paxil, and Wellbutrin); State v. Wyeth Pharmaceuticals, Inc., Court File
No. 62-CV-14-5503 (2d Judicial Dist.) (deceptive marketing of Rapamune); State v. Abbott Laboratories, Court File No.
62-CV-12-4065 (2d Judicial Dist.) (deceptive marketing of Depakote); State v. GlaxoSmithKline, LLC, Court File No. 62-
CV-12-8721 (2d Judicial Dist.) (deceptive marketing of Avandia); State v. Janssen Pharmaceuticals, Inc., et al., Court File
No. 62-CV-12-6880 (2d Judicial Dist.) (deceptive marketing of Risperdal); State v. AstraZeneca Pharmaceuticals LP, et al.,
Court File No. 62-CV-11-1785 (2d Judicial Dist.) (deceptive marketing of Seroquel).
209 United States Department of Health and Human Services, Regulation to Require Drug Pricing Transparency, 84 Fed. Reg.
20,734-20,758 (May 10, 2019).
210 Merck & Co., Inc., et al. v. U.S. Dep’t of Health & Human Servs., et al., Case File No. 19-cv-01738 (D.D.C. June 14, 2019).
211 See Section II.B.4 (providing an overview of PBMs and their business practices).
212 The prevailing rebate practices between drug manufacturers and PBMs discussed in this paragraph, and how they put
upward pressure on drug prices, is described in depth in In re Pharm. Indus. Average Wholesale Price Litig., 491 F. Supp.
2d 20 (D. Mass. 2007), aff’d 582 F.3d 156 (1st Cir. 2009).
213 The transparency-related discussion in this paragraph is based on Henry C. Eickelberg, The Prescription Drug Supply
Chain “Black Box”: How it Works and Why You Should Care, American Health Policy Institute (2015), http://www.
americanhealthpolicy.org/Content/documents/resources/December%202015_AHPI%20Study_Understanding_the_
Pharma_Black_Box.pdf (last visited November 27, 2019).
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87
214 Joseph S. Ross and Aaron S. Kesselheim, Perspective: Prescription-Drug Coupons – No Such Thing as a Free Lunch,
New England Journal of Medicine at 1189 (September 26, 2013), www.nejm.org/doi/full/ 10.1056/NEJMp1301993 (last
visited November 27, 2019) (hereinafter “NEJM No Such Thing as a Free Lunch”).
215 Congressional Research Service, Prescription Drug Discount Coupons and Patient Assistance Programs (PAPs) at 9 (June
15, 2017), https://crsreports.congress.gov/product/pdf/R/R44264 (last visited November 27, 2019) (hereinafter “CRS
Discount Coupons and PAPs Report”).
216 NEJM No Such Thing as a Free Lunch.
217 CRS Discount Coupons and PAPs Report at 1.
218 Id.
219 CRS Discount Coupons and PAPs Report at 8-9.
220 Id. at 8 n.32 (this study noted that, among other things, “a well-designed coupon program could add 30 days to 60 days
of patient drug use during a year.”).
221 NEJM No Such Thing as a Free Lunch.
222 Leemore Dafny et al., When Discounts Raise Costs: The Effect of Copay Coupons on Generic Utilization, The National
Bureau of Economic Research (October 2016), www.hbs.edu/faculty/Publication%20Files/DafnyOdy Schmitt_
CopayCoupons_32601e45-849b-4280-9992-2c3e03bc8cc4.pdf (last visited November 27, 2019).
223 CRS Discount Coupons and PAPs Report.
224 2017 Cal. Stat. ch. 611 (codied at Cal. Health & Safety Code §§ 132000 et seq.), https://leginfo. legislature.ca.gov/
faces/billTextClient.xhtml?bill_id=201720180AB265 (last visited November 27, 2019).
225 Mass. Gen. Laws ch. 175H § 3(b)(2); see also Thomas Sullivan, Massachusetts & Drug Coupons: To Ban or Not to
Ban, that is the Question, Policy & Medicine A Rockpointe Publication (May 5, 2019), www.policymed .com/2019/05/
massachusetts-drug-coupons-to-ban-or-not-to-ban-that-is-the-question.html (last visited November 27, 2019) (“The
current law . . . prohibits manufacturers from offering discounts for any prescription drug that has an AB rated generic
equivalent . . . or for any prescription drug that is a schedule II opioid”).
226 CRS Discount Coupons and PAPs Report at 12.
227 Recently, some health plans have attempted to combat the extra costs they pay as a result of discount coupons for
branded drugs by implementing so-called “copay accumulators” policies. Under such policies, the health plan “doesn’t
allow the value of a copay coupon to count against the [patients’] deductible or out-of-pocket maximum.” John S.
Linehan, State Legislatures Spring Ahead with Restrictions on Drug Copay Accumulators, Managed Care (April 16,
2019), www.managedcaremag.com/voices/state-legislatures-spring-ahead-restrictions-drug-copayaccumulators (last
visited November 27, 2019). Some have argued these programs are deceptive, and three states have enacted legislation
restricting or banning such policies. Id.
228 Leemore Dafny et al., When Discounts Raise Costs: The Effect of Copay Coupons on Generic Utilization, American
Economic Journal: Economic Policy (May 2, 2017), www.aeaweb.org/articles?id=10.1257/pol.20150588 (last visited
November 27, 2019).
229 CRS Discount Coupons and PAPs Report at 19-20 (noting that manufacturers Celgene, Gilead Sciences, and Regeneron
have been investigated by federal authorities, and that another PAP charitable fund changed its name and revamped its
board and operations after news reports disclosed its ties to Questcor Pharmaceuticals); see also Jayne O’Donnell, Drug
Co-Pay Assistance Programs Facing Increasing State, Federal Scrutiny, USA Today (June 8, 2016), www.usatoday.com/
story/news/politics/2016/06/08/drug-co-pay-assistance-programs-facing-increasingstate-federal-scrutiny/85547788/
(last visited November 27, 2019) (stating Gilead Sciences, Jazz Pharmaceuticals, Biogen, and Valeant Pharmaceuticals
disclosed receiving subpoenas from federal investigators related to their funding of PAPs).
230 Norman V. Carrol, Commentary – Pharmaceutical Patient Assistance Programs: Don’t Look a Gift Horse in the Mouth or
There’s No Such Thing as a Free Lunch, Journal of Managed Care & Specialty Pharmacy, Vol. 13, No. 7, at 615 (Sept. 2007),
www.jmcp.org/doi/pdf/10.18553/jmcp.2007.13.7.614 (last visited November 27, 2019).
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88
231 See id. (“physicians who treat medically indigent patients frequently face the choice of providing a ‘free’ PAP drug or an
equally effective generic alternative.”)
232 CRS Discount Coupons and PAPs Report at 23.
233 CRS Discount Coupons and PAPs Report at 23-24 (quoting Jan Nielsen, Division President, of SonexusHealth).
234 Norman V. Carrol, Commentary – Pharmaceutical Patient Assistance Programs: Don’t Look a Gift Horse in the Mouth or
There’s No Such Thing as a Free Lunch, Journal of Managed Care & Specialty Pharmacy, Vol. 13, No. 7, at 615 (Sept. 2007),
www.jmcp.org/doi/pdf/10.18553/jmcp.2007.13.7.614 (last visited November 27, 2019).
235 Medical Marketing at 84 (nding manufacturers consistently spend approximately $5 billion annually on marketing
directly to health providers).
236 Id.
237 Id.
238 Id. at 92; see also Freek Fickweiler, Ward Fickweiler, & Ewout Urbach, Interactions Between Physicians and the Pharmaceutical
Industry Generally and Sales Representatives Specically and their Association with Physicians’ Attitudes and Prescribing
Habits: A Systematic Review, BMJ OPEN (2017) (“Physicians are susceptible to pharmaceutical industry and [physician-
sales representative] interactions, which influences their clinical decision making leading to greater prescriptions of
branded drugs over low-cost generic medicines and increasing healthcare costs.”)
239 Minn. Stat. § 151.461.
240 State v. Insys Therapeutics, Inc., Case File No. 27-cv-18-9081 (4th Judicial Dist. Minn. 2018) (see generally Complaint).
241 State v. Insys Compl. ¶ 108.
242 State v. Insys Compl. ¶ 108.
243 State v. Insys Compl. ¶¶ 108, 110, 140-46.
244 State v. Insys Compl. ¶ 138.
245 State v. Insys Compl. ¶¶ 128, 133, 136; Aff. of Cerissa Stoltz in Support of the State’s Mot. For Temp. Inj., ¶ 4.
246 State v. Insys., Minnesota Bd. of Pharmacy Committee on Prof’l Standards Am. Notice & Order for Prehearing Conf. &
Hearing, ¶¶ 188-189.)
247 See In re Insys Therapeutics, Inc. et al., Bankruptcy No. 19-11292, ECF# 1115 (Bankr. D. Del. 2020).
248 In industry jargon, the list price is known as the “wholesale acquisition cost (WAC),” which is in turn used to set the
“average wholesale price (AWP)” of the drug. Manufacturers set WAC directly. AWP is generally set by adding a certain
markup to WAC, usually about 20%. Thus, setting WAC also functionally sets AWP. See In re AWP Litigation, 491 F.Supp.2d
20 (D. Mass. 2007).
249 Moreover, some argue that patients often do not have choices so transparency is not sufcient to address problem
drug pricing practices—they may not be able to switch drugs or forego using a drug, depending on what they have been
prescribed, what alternative options exist, and what drug is covered by their health plan. See generally Alison Kodjak,
It Will Take More Than Transparency To Reduce Drug Prices, Economists Say, National Public Radio (March 22, 2019),
www.npr.org/sections/health-shots/2019/03/22/705469296/it-will-take-more-than-transparencyto-reduce-drug-prices-
economists-say (last visited November 27, 2019).
250 Congressional Budget Ofce, Increasing Transparency in the Pricing of Health Care Services and Pharmaceuticals (June
5, 2008), www.cbo.gov/sites/default/les/110th-congress-2007-2008/reports/06-05-pricetransparency.pdf (last visited
November 27, 2019); see also Kaitlyn N. Dana et al., Drug Pricing Transparency: The New Retail Revolution, Hospital
Pharmacy (February 2017) www.ncbi.nlm.nih.gov/pmc/articles/PMC5345916/#i0018-5787-52-2-155-b3, (last visited
November 27, 2019); America’s Health Insurance Plans, Why Prescription Drug Price Transparency Matters (June 2018),
www.ahip.org/wp-content/uploads/2018/06/AHIP_IssueBrief_RxTransparency_62018FINAL.pdf, (last visited November
27, 2019).
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251 Matthew Grennan & Ashley Swanson, Transparency and Negotiated Prices: The Value of Information in Hospital-Supplier
Bargaining, National Bureau of Economic Research (February 2, 2018), www.nber.org/papers/w22039.pdf (last visited
November 27, 2019).
252 National Conference of State Legislations, Prescription Drug Database: 2015-Present (December 9, 2019), www.ncsl.org/
research/health/prescription-drug-statenet-database.aspx (last visited December 12, 2019).
253 See 2016 Vermont Act No. 165 (S.216), https://legislature.vermont.gov/bill/status/2016/S.216 (last visited December
12, 2019).
254 See The National Academy for State Health Policy, Comparison of State Transparency Laws (June 4, 2018), https://nashp.
org/wp-content/uploads/2018/04/Transparency-Law-Comparison-Chart-nal.pdf (last visited December 12, 2019).
255 See 2018 Oregon Laws ch. 7, https://olis.leg.state.or.us/liz/2018R1/Downloads/MeasureDocument/HB4005 (last visited
December 12, 2019).
256 Fla. Stat. § 408.062.
257 Nev. Rev. Stat. §§ 439B.600-695.
258 April McCullum, Drug Costs Get Fresh Look in Montpelier, Burlington Free Press (February 6, 2017),
www.burlingtonfreepress.com/story/news/politics/government/2017/02/06/lawmakers-consider-updating-drug-cost-
law/97465466/ (last visited December 12, 2019).
259 See, e.g., Minnesota House File 284 (91st Leg. 2019-20), www.revisor.mn.gov/bills/text.php?number=
HF284&version=0&session_year=2019&session_number=0 (last visited November 27, 2019); Minnesota House File
288 (91st Leg. 2019-20), www.revisor.mn.gov/bills/text.php?number=HF288&version=0&session_year= 2019&session_
number=0 (last visited November 27, 2019); Minnesota House File 289 (91st Leg. 2019-20), www.revisor.mn.gov/bills/
text.php?number=HF289&version=0&session_year=2019&session_number=0 (last visited November 27, 2019).
260 New Jersey Senate Bill 2389 (2019), https://legiscan.com/NJ/bill/S2389/2018 (last visited November 27, 2019).
261 North Carolina House Bill 466 (2017-18), https://legiscan.com/NC/bill/H466/2017 (last visited November 27, 2019).
262 Virginia House Bill No. 1436 (2018), https://lis.virginia.gov/cgi-bin/legp604.exe?181+sum+HB1436 (last visited
November 27, 2019).
263 See, e.g., Pharmaceutical Research and Mfrs. of America et al. v. Sandoval et al., Case No. 2:17-cv-02315 (D.Nev. Sept.
1, 2017); see also Pharmaceutical Research and Mfrs. of America v. David, Case No. 2:17-CV-02573 (E.D.Cal. Sept. 28,
2018).
264 United States Department of Health and Human Services, Press Release: CMS Drug Pricing Transparency Fact Sheet (May
8, 2019), https://www.hhs.gov/about/news/2019/05/08/cms-drug-pricing-transparency-fact-sheet.html (last visited
November 27, 2019).
265 Id.
266 Merck & Co., Inc., et al. v. United States Dept. of HHS, 385 F. Supp. 3d 81, 84 (D.D.C. 2019). HHS has appealed this order,
and the appeal is currently before the United States Court of Appeals for the District of Columbia.
267 Centers for Medicare & Medicaid Services, Press Release: CMS Takes Action to Lower Prescription Drug Prices and Increase
Transparency (May 16, 2019), https://www.cms.gov/newsroom/press-releases/cms-takes-action-lower-prescription-
drug-prices-and-increase-transparency (last visited November 27, 2019).
268 Jill S. Abrams, Report of Attorney General to the Legislature Regarding Pharmaceutical Cost Transparency Pursuant to 18
V.S.A. § 4635, Vermont Ofce of the Attorney General (Feb. 23, 2018), https://legislature.vermont. gov/assets/Legislative-
Reports/2018-2-23-AGO-Pharma-Cost-Transparency-Report-for-2017.pdf (last visited November 27, 2019).
269 2018 Vermont Act No. 193 (S.92), https://legislature.vermont.gov/bill/status/2018/S.92 (last visited November 27,
2019).
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270 Minnesota Ofce of State Procurement, See Who Uses MMCAP Infuse (2019), www.infusemn.gov/about/mmcapviewers/
index.jsp (last visited December 17, 2019); see also National Conference of State Legislatures, Pharmaceutical Bulk
Purchasing (May 29, 2019), www.ncsl.org/research/health/bulk-purchasing-ofprescription-drugs.aspx (last visited
December 17, 2019).
271 For example, the National Medicaid Pooling Initiative. See National Conference of State Legislatures, Pharmaceutical
Bulk Purchasing (May 29, 2019), www.ncsl.org/research/health/bulk-purchasing-of-prescriptiondrugs.aspx (last visited
December 17, 2019).
272 According to MMCAP, members enjoy an average savings of approximately 23.7% below AWP for brand name drugs and
65% below AWP for generics. National Conference of State Legislatures, Pharmaceutical Bulk Purchasing (May 29, 2019),
www.ncsl.org/research/health/bulk-purchasing-of-prescription-drugs.aspx (last visited December 17, 2019).
273 MMCAP, for instance, is restricted to governmental and certain nonprot entities. National Conference of State Legislatures,
Pharmaceutical Bulk Purchasing (May 29, 2019), www.ncsl.org/research/health/bulk-purchasing-ofprescription-drugs.
aspx (last visited November 27, 2019).
274 See, for example, Minnesota’s Prevention of Consumer Fraud Act at Minn. Stat. §§ 325F.68-70.
275 United States Department of Health and Human Services, Ofce of Inspector General, State False Claims Act Reviews
(2019), https://oig.hhs.gov/fraud/state-false-claims-act-reviews/ (last visited December 17, 2019). The federal False
Claims Act is found at 31 U.S.C. § 3729.
276 See National Conference of State Legislatures, Prescription Drug Resource Center, State Actions to Halt Price Gouging
for Generic Drugs (July 20, 2018), www.ncsl.org/Portals/1/Documents/Health/Generic_drug_antiprice_gouging_
Maryland_31894.pdf (last visited December 17, 2019).
277 Assoc. for Accessible Medicines v. Frosh, 887 F.3d 664 (4th Cir. 2018), cert. denied, No. 18-546 (April 13, 2018).
278 42 C.F.R. § 447.505; see also Ramsey Baghdadi, Health Policy Brief: Medicaid Best Price, Health Affairs (August 10, 2017),
www.healthaffairs.org/do/10.1377/hpb20171008.000173/full/ (last visited December 17, 2019).
279 42 C.F.R. § 447.509.
280 Pharmaceutical Research and Mfrs. of Amer. v. Walsh, 538 U.S. 644 (2003).
281 See Ofce of Governor Janet T. Mills, Press Release: Governor Mills Signs Into Law Comprehensive Prescription Drug
Reform Package (June 24, 2019), www.maine.gov/governor/mills/news/governor-mills-signslaw-comprehensive-
prescription-drug-reform-package-2019-06-24 (last visited December 17, 2019); Maryland House Bill 768 (2019 Regular
Session); see also Jane Horvath, Maryland Passes Nation’s First Prescription Drug Affordability Board Legislation, National
Academy of State Health Policy (April 15, 2019), https://nashp.org/maryland-passes-nations-rst-prescription-drug-
affordability-board-legislation/ (last visited December 17, 2019).
282 See, e.g., 5 Me. Rev. Stat. §§ 2401 et seq.; see also Selena Simmons-Dufn, Florida Wants to Import Medicine
from Canada. But How Would That Work?, National Public Radio (June 18, 2019), www.npr.org/sections/
healthshots/2019/06/18/733483431/florida-wants-to-import-medicine-from-canada-but-how-would-that-work (last
visited December 17, 2019).
283 Sammy Almashat et al., Twenty-Seven Years of Pharmaceutical Industry Criminal and Civil Penalties: 1991 Through 2017,
Public Citizen, at 4 (March 14, 2018), www.citizen.org/article/twenty-seven-years-ofpharmaceutical-industry-criminal-
and-civil-penalties-1991-through-2017/ (last visited November 27, 2019).
284 Id. at 6.
285 The discussion herein of this consequential AWP litigation, and the changes to the law it prompted, is based on an article
by Paul Nolette, Law Enforcement as Legal Mobilization: Reforming the Pharmaceutical Industry Through Government
Litigation, 40 Law & Social Inquiry 123 (Winter 2015).
286 Id. at 129-30.
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91
287 See National Academy of State Health Policy, Model Legislation: Affordability Review (2019), https://nashp.org/policy/
prescription-drug-pricing/model-legislation/#toggle-id-3 (last visited December 2, 2019).
288 See National Academy of State Health Policy, Comparison Chart of States’ Affordability Review Board Bills (March 19,
2019), https://nashp.org/comparison-of-bills-creating-state-prescription-drug-affordability-reviewboards/ (last visited
December 26, 2019).
289 See generally Food & Drug Administration, Importation of Prescription Drugs, 84 Fed. Reg. 70,796 (December 23, 2019),
www.govinfo.gov/content/pkg/FR-2019-12-23/pdf/2019-27474.pdf (last visited on December 26, 2019).
290 Specically, the bill provides that the Minnesota Board of Pharmacy, the Minnesota Department of Human Services,
and private health plans must notify the Attorney General of any increase of 15% or more in the price of any essential
prescription drugs sold in Minnesota.
291 See, e.g., Minn. Stat. § 325F.67, Minn. Stat. § 325F.69, and Minn. Stat. 325D.44.
292 See The National Consumer Law Center, Consumer Protection in the States: A 50-State Evaluation of Unfair and Deceptive
Practices Laws, Map 2 (March 2018), www.nclc.org/images/pdf/udap/udap-report.pdf (last visited December 2, 2019)
(noting that consumer protection statutes in 39 states include prohibitions against unfair or unconscionable conduct).
293 See 42 USC § 1320a-7b(b) (anti-kickback law); see also 42 USC § 1395nn (Stark law).
294 Currently, federal anti-kickback restrictions are effectively a stopgap measure until Minnesota enacts its own anti-
kickback rules. See Minn. Stat. § 62J.23. This state statute, however, only vaguely references “restrictions” in federal law,
and does not appear to explicitly adopt at least two important pieces of the federal anti-kickback statute: criminal liability
and per se materiality in enforcement of the Minnesota False Claims Act.
295 See Section III.F.1 (discussing how copay coupons incentivize persons to use expensive, brand name drugs).
296 See, e.g., Sections II.A.1 (discussing how the drug industry is unique and often does not function like other markets), III.C
(discussing various anticompetitive practices present in the drug industry).
297 See, e.g., Minn. Stat. 325D.51 (rendering unlawful “unreasonable” restraints on trade, without dening the term
“unreasonable”).
298 California Assembly Bill No. 824 (2019), https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_
id=201920200AB824 (last visited December 11, 2019).
299 For example, in 2013, the FTC created a regulation specically stating that transfers of patent rights to drugs are
reviewable. 16 C.F.R. §§ 801.1(o) to (q), 801.2(g).
300 Improving Access to Affordable Prescription Drugs Act, S. 771 (115th Congress 2017-18).
301 NACHC 340B Manual for Health Centers (2d Ed. March 2018) at 6 (noting that the rules and expectations for 340B are
“signicantly less clear” than other federal programs and maintaining compliance “requires an on-going investment of
signicant resources and attention”)
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92
302 See generally Section IV.A.2 (discussing strategies to increase purchasing power).
303 The Northwest Prescription Drug Consortium (“NPDC”) is a government-run organization similar to MMCAP INFUSE
in that it offers participating private residents the opportunity to use a free prescription-drug card. NPDC reports that
it is able to leverage its purchasing power to obtain an average discount of 80% on generic drugs, and 20% on brand
name drugs. In 2018, those discounts were used by nearly 240,000 individuals who saved roughly $10.8 million, when
compared to usual and customary pricing. See generally Washington State Health Care Authority, NW Prescription Drug
Consortium & Washington Prescription Drug Program (this slideshow is on le with Ms. Sadaf Rahmani, the staff liaison
from the Minnesota Attorney General’s Ofce to the Task Force).
304 MMCAP INFUSE currently utilizes regional sales executives to connect with potential new clients and promote awareness
at trade shows, for example. MMCAP INFUSE has had success with regional/local initiatives as an introduction or
entryway into learning about MMCAP INFUSE services. For example, select emergency medical services and police
departments are utilizing MMCAP INFUSE for Narcan purchases at discounted pricing. As these departments become
aware of MMCAP INFUSE savings and services, the awareness and desire to expand usage of MMCAP INFUSE grows.
305 See Minn. Stat. § 471.59
306 Minnesota may look to legislation in Texas as an example of legislation that addresses ascertaining drug prices and
publishing that information online. The Texas law requires drug manufacturers to submit a report stating the wholesale
acquisition cost information for certain drugs; and to submit additional information if the wholesale acquisition cost
increases by a certain amount. The agency must then publish general public drug price information on a website. See
Texas HB 2536 (86th Legislature 2019-20), https://legiscan.com/TX/text/HB2536/id/1932058 (last visited December
18, 2019); see also Dena Bunis, Texas Governor Signs Prescription Price Transparency Bill, AARP (June 17, 2019), www.
aarp.org/politics-society/advocacy/info-2019/texas-prescription-drug-price-bill.html (last visited December 18, 2019).
307 See generally United States Department of Health and Human Services, Center for Medicare and Medicaid Services, Critical
Access Hospitals (July 2019), www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/
downloads/CritAccessHospfctsht.pdf (last visited December 2, 2019).
308 For example, HealthPartners initiated a diabetes pilot program to determine MTM’s effectiveness, which revealed a
projected cost savings of $967,000 based on reduced hospital admissions and emergency room visits for their patient.
See Dan Rehrauer, PharmD, Senior Manager, Medication Therapy Management Program and Community Pharmacy
Partnerships, HealthPartners, Presentation to Advisory Taskforce on Lowering Pharmaceutical Drug Prices at slide 9
(September 25, 2019) (this presentation to the Task Force and the information contained therein are on le with Ms.
Sadaf Rahmani, the staff liaison from the Minnesota Attorney General’s Ofce to the Task Force).
309 See Minn. Stat. § 151.01, subd. 27.
310 See Minn. Stat. § 151.555.
311 MDH Prescription Drugs Report at 1-2.
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93
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