Budget Drug Provisions Increase Bureaucracy, Decrease Patient Access

By Jennifer Hawks Bland | April 1, 2023

This year’s Executive and Senate Budget proposals contain a provision to address prescription drug prices and supply chain transparency. The provisions seem to be simply a new price reporting structure.  However, the impact of the legislation runs counter to New York’s health care goals. By imposing onerous new reporting requirements, and potentially limiting the sale of medicines into the state, it ultimately undermines the stability of the prescription medication supply chain.

New York is home to a rich bioscience community that makes New Yorkers’ lives better – through life-saving research but also by providing good jobs, economic activity and needed state and local tax revenue. The industry is a bright spot of growing businesses and investments in New York, in part because of the policies that New York has adopted over the years to encourage the growth of this industry.  NewYorkBIO supports the work that these hundreds of bioscience companies, universities, research institutions, and others do to advance life science research and bring treatments to patients. We drive innovation and support the development and growth of New York State’s life science industry.

The policies in the budget proposals would create significant unintended consequences. The policies attempt to address the complex issue of drug pricing by creating a new unwieldy and inefficient reporting structure that could reduce New Yorkers’ access to important therapies. It would prohibit any drug to be sold in New York unless manufacturers file detailed reports with the Department of Financial Services (DFS) related to any price increase for any reason, with significant penalties for not reporting the price increase well in advance of it happening.

Critically, New York already has several tools at its disposal to address unreasonable price increases for pharmaceuticals.  In 2020, New York enacted legislation that gave DFS significant authority to investigate and sanction “Drug Price Spikes.”  Moreover, the Attorney General has and exercises investigatory authority over price gouging and other anti-consumer practices.  Finally, Medicaid, which provides coverage for millions of New Yorkers, has its own policies to address prices and transparency.

NewYorkBIO is particularly concerned about how this would have a disproportionately punitive effect on our smallest innovative companies.  Appropriately pricing a new therapy can be challenging and may require adjustments early in the life cycle of a drug, which would create financial penalties for the company and possibly deny that company’s new drug to New Yorkers waiting on groundbreaking new medicines.  A large manufacturer with many approved therapies would also face significant challenges to operate in a marketplace with this policy in place.

The bill also gives DFS incredibly broad and vague investigatory powers related to price increases, including giving the state agency nearly unfettered discretion to release trade secrets or other confidential information that manufacturers would be required to provide under the new reporting rules.

In all of this, the budget proposal does nothing to help patients access the medicines they need. In fact, we expect it would make it more difficult by destabilizing the supply chain.  A major flaw associated with these burdensome reporting requirements is that the mandated information is not tied to what health plans or patients pay. A patient’s out-of-pocket cost for medicines is determined by their insurance benefits. Mandatory price reporting of a medicine’s list price has little relationship to what patients pay for their medicine.

Finally, this idea is fraught with serious legal and constitutional issues. A similar proposal in Oregon is already the subject of litigation.

Health care exists to help people live better, fuller lives. The reporting requirements in the budget proposal do not advance that goal. In fact, they will set New York back by adding layers of bureaucracy on top of an already bureaucratic health care system, increase the likelihood of decreased access for patients and harm this important economic contributor to the state.

Jennifer Hawks Bland is Chief Executive Officer of NewYorkBIO. NewYorkBIO brings together nearly 300 of New York’s bioscience companies, universities, research institutions, and others dedicated to advancing life science research and commercialization. We are the leading advocate for the life science industry in New York.