North Dakota will start to open the ‘black box’ on prescription drug prices with new transparency law

FARGO — The pricing of prescription drugs — which account for the largest share of health insurance premiums — has sometimes been compared to a “black box” that leaves consumers and other payers in the dark.

North Dakota is one of a growing list of states, including Minnesota, that are taking steps to pry open that black box so the public has more information about the factors that drive prescription drug prices.

Starting on Aug. 1, a new law takes effect in North Dakota requiring drug manufacturers and others to file quarterly reports disclosing what pharmaceutical companies pay for research and development and rebates, among other factors.

Drug manufacturers will have to disclose any increase of wholesale cost increases of 40% or more over a period of five years or 10% in the past year. Pharmaceutical companies must provide a “concise statement of rationale regarding the factor or factors” that caused the wholesale cost increase.

Drug makers also will be required to disclose rebates paid to pharmacy benefit managers, middlemen in prescription drug transactions that critics say play a role in driving up drug costs.

The quarterly reports will be compiled by the North Dakota Department of Health and will be posted online beginning next year.

Proponents say the drug price transparency bill will lay the foundation for possible future steps to control prescription drug prices, which are rising at more than twice the rate of general inflation, according to the AARP.

“Quite simply this is a first step,” said Josh Askvig, state director of AARP in North Dakota, adding that the pricing disclosures will provide information to guide policymakers. “Sunshine is generally a good thing.”

The North Dakota Legislature’s Interim Health Care Committee, which meets Aug. 4 , will study prescription drug prices and ways to control costs. The committee will explore allowing importation of drugs from other countries and a price index based on prices in other countries.

Requiring drug makers to disclose information about prescription drug pricing will put pressure on companies to justify those costs to the public, said Rep. Howard Anderson, R-Turtle Lake, a retired pharmacist.

“They have to step up and make some real excuses for why prices are the way they are in a way that people can believe,” Anderson said. Now, with little disclosure of the factors influencing price, it’s easy to deflect blame, he said.

“Everybody points their finger at the other guy as the reason,” Anderson said.

Americans pay three times what people in other countries pay for the same medicines, according to AARP.

From 2015 to 2020, the spiraling costs of three medicines illustrate the growing burden to consumers and other payers, according to examples cited by Askvig and AARP of North Dakota:

• Revlimid, used to treat cancer, increased from $185,524 per year to $267,583 per year.

• Victoza, which treats diabetes, increased from $7,956 per year to $11,300 per year.

• Spiriva Handihaler, for patients with asthma or chronic obstructive pulmonary disease, rose from $3,886 per year to $5,289 per year.

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Consumers’ out-of-pocket expenses for prescription drugs, in the form of health insurance co-pays and deductibles, keep rising and are especially burdensome for seniors, Anderson said.

“You hear a lot from constituents about the cost of the drugs they buy,” he said. Co-insurance typically is 20% for drugs. “That mounts up in a hurry,” Anderson said.

Vermont was the first state to pass a prescription drug transparency law and at least a dozen states now have the requirements.

Minnesota passed a drug transparency law in 2020 and will begin requiring drug makers to file drug price information in January 2022. The Minnesota Department of Health will post information from the reports online.

In North Dakota, drug pricing information should begin posted on a special website by Oct. 15, 2022, said Jon Godfread, state insurance commissioner. Any drug pricing information posted before then will be basic, because the funding for the more sophisticated website won’t be available earlier, he said.

“We’ll still comply with the law,” Godfread said. “It will be a little bit more rudimentary on the website. It’s not going to be pretty in the first year.”

Godfread hopes consumer and other stakeholder groups will analyze the pricing information that will be available online, because the staff of the North Dakota Department of Insurance isn’t equipped for that role.

The information will be useful to policymakers and others, especially over time, Godfread said.

“I think over the long term, this could be very, very interesting,” he said.

Prescription drug price transparency laws are just one step states are taking in the absence of federal action to restrain drug costs.

Another area of interest is to allow importation of prescription drugs from Canada, which the interim Health Care Committee will study.

Drug importation has been legal under a law that former Sen. Byron Dorgan, D-N.D., was instrumental in passing 17 years ago. The law has never been implemented, but the Trump administration adopted rules to allow drug importation, and the Biden administration now is working on streamlining the rules, Anderson said.

Canada’s minister of health has issued an order to prevent the bulk distribution outside Canada of drugs facing shortages, but Anderson said shortages are limited to only a few drugs and otherwise supplies are ample.

Canadian drug distributors likely will be happy to ship to customers in the United States, just as Canadian mail-order pharmacies once were, he said.

Another approach to reduce prescription drug costs that the interim health committee will study is using a price index based on drug prices in other countries — in effect, “importing prices,” Anderson said.

Earlier this year, lawmakers rejected a drug price indexing bill based on a model developed by the National Academy for State Health Policy. Instead, they decided to study the issue.

The model bill is based on international prices and establishes a referenced rate as the upper payment limit for payers.

The bill proposed using prices from Canada’s four most populous provinces — Ontario, Quebec, British Columbia and Alberta — to compare drug prices in the U.S. From that comparison, the proposal would use the lowest price as the referenced rate for payers.

Figures from the National Academy for State Health Policy for a sample of studied drugs showed average savings of 75% using the Canadian reference prices.

AARP continues to push reforms at both the federal and state levels. States can lead the way by being innovative and demonstrating results, Askvig said.

“I do think there’s a space for states to enact policies and pass laws … to put downward pressure on prescription drug prices,” he said.

North Dakotans are tired of paying the highest prices in the world for their medicines, Askvig said. “They want fair prescription drug prices now,” he said.