Amid rising drug costs nationally, one state senator takes on diabetes in Nevada
Before she was diagnosed with diabetes six years ago, Soila Solano was an assistant manager at an alarm system installation company.
That was before the thousands of dollars of hospital bills, before she had to file bankruptcy, before she got on disability, before she was on 24/7 oxygen and before the depression kicked in because she couldn’t work. Between her diabetes, COPD (chronic obstructive pulmonary disease) and chronic asthma, the 44-year-old says she sometimes has to debate which medications to take — to help her breathe or to help balance her blood sugar.
Solano’s life is filled with statistics: more than $10,000 in medical bills, an $800 a month disability check, $100 a month for her insulin on Medicare (it was $400 a month on her husband’s insurance), $25 a month for test strips, $15 for lancets, $10 for alcohol, and $33 a month to rent her two oxygen machines, the one she keeps at home and the one she carries with her, as she did on a recent trip from Las Vegas to Carson City for “Diabetes Day” at the Legislature. She traveled to testify in support of a bill that would control the prices of certain diabetes drugs.
“If this bill is passed, it helps with me having a little bit of extra money so I can buy myself some shoes, buy some healthier food for me to eat, it means a lot,” Solano said. “Even if it’s $5, $10, $15 a month, I can save. It’s something.”
Solano isn’t alone.
Jeannie Sedich, a 76-year-old Las Vegas resident, has four children with diabetes. Her daughter, Mary, called doctors and pharmaceutical companies asking for samples of medication when she couldn’t afford to pay $2,108 a month for insulin, Seditch said. Mary died last year after a massive stroke that had left her with 50 percent brain damage, completely paralyzed on her right side, unable to swallow, catheterized and sent home from the hospital for six months until her heart gave out.
Single mother Keyonna Lawrence says she debates whether to pay her electricity bill, buy special food or purchase her diabetes medicine. Sometimes she only uses half of her medicine to make it stretch. Her biggest fear is that her 11-year-old son will wake up one morning and call for her but “mom is cold as ice.”
“These are the things we need to stay alive,” Lawrence said. “If I don’t get it my end result is ashes to ashes, dust to dust.”
It’s people like Solano, Sedich and Lawrence who Democratic Sen. Yvanna Cancela aims to help through a bill she introduced last month. SB265 seeks to improve access to essential diabetes drugs by implementing price controls, a measure the pharmaceutical industry has long opposed. Cancela’s goal with the legislation is stabilize the rapidly rising costs of diabetes drugs, which have risen by more than 450 percent over inflation, to help the 12 percent of Nevadans who are diabetic and the 38 percent who are pre-diabetic.
But the bill doesn’t stop there: It also requires manufacturers of diabetes drugs to submit annual reports to state officials with certain financial information about the drugs, mandates that manufacturers notify insurers at least 90 days before certain price increases and requires pharmaceutical sales representatives to be licensed by the state and annually report their interactions with doctors.
After the bill was introduced, the powerful pharmaceutical industry lobbying group, PhRMA, fired back, calling the legislation “nothing more than a fatally flawed problem masquerading as a solution.” Now, pharmaceutical companies have amassed an army of nearly 50 lobbyists in Carson City to quash the legislation, which they believe unfairly targets the pharmaceutical industry and doesn’t take into consideration the other players in the process of prescription drug pricing, such as insurers and pharmacy benefit managers.
It’s become nothing short of a battle royale between some of Nevada’s most politically powerful interests — labor, spearheaded by the Culinary Workers Union, and gaming, including MGM Resorts and Caesars Entertainment — and PhRMA, one of the most powerful interest groups with the kind of money to launch an ad campaign worth tens of millions of dollars to revamp the industry’s public image earlier this year, and various pharmaceutical companies.
Eight Democratic senators have signed onto Cancela’s bill and Majority Leader Aaron Ford has voiced his support, but it’s unclear whether there will be Republican support — and if there is, how much — for the bill. But Republican Gov. Brian Sandoval has signaled that he’s at least open to the conversation, directing his chief of staff and the Department of Health and Human Services to look into the policy proposals put forward in the legislation.
The question now is what it will take for the bill to become law.
The thorny, complicated world of drug pricing
The seeds of the legislation were planted last fall when Cancela was Culinary’s political director, before she was appointed to the state Senate. The progressive think tank Center for American Progress, Doctors for America and the Health Services Coalition, of which Culinary is a member, hosted a meeting of about 100 people to talk about prescription drug prices and health care trends nationally, including a presentation on diabetes.
When she was appointed several months later, Cancela submitted a number of bill draft requests for various pieces of health care legislation, deciding to use one of those to tackle the diabetes epidemic in Nevada and increase transparency over drug costs.
“It was just startling, frankly, that a drug that is 95 years old has such significant price increases,” Cancela said. “It just made an impact.”
Diabetes is on the rise not only in Nevada but nationally. One in 10 adults in the United States has diabetes now, which the Centers for Disease Control and Prevention projects could increase to as many as one in three adults by 2050 if current trends continue.
The diabetes trend in Nevada is similar to the trend nationally, with 9.7 percent of 197,570 adults in Nevada with diabetes compared to 9.9 percent nationally in 2015, according to a preliminary report on diabetes in Nevada prepared by the Nevada Department of Health and Human Services. While the data show that diabetes prevalence has slightly decreased in Clark and Washoe counties over the last two years, it has quickly climbed in the rural counties, increasing from 7.7 percent in 2013 to 15.4 percent in 2015 in Carson City and from 5.2 percent to 17.9 percent in Elko County.
Diabetes also disproportionately affects people of color, who make up a disproportionate share of low-income and uninsured individuals. The report showed that 14.2 percent of adults in Nevada who identify as black, 10.5 percent Asian, 14.2 percent American Indian or Alaska Native and 11.2 percent Other are diabetic compared to 9.1 percent of people who identify as white.
The report estimates that Nevada’s total medical cost for diabetes in 2012 was $1.9 billion, with another $500 million in indirect costs to the state in the form of reduced labor force participation because of chronic disability, reduced productivity, missing work and premature death, for a total economic cost of $2.5 billion.
Bobbette Bond, senior director of the health policy for Culinary’s parent union UNITE Here’s health fund, said that the fund spends far more on diabetes drugs than on any other disease and that spending is increasing faster in that category than anywhere else. HIV drugs are a distant second, followed by arthritis and inflammatory meds, Bond said.
“This is not only our fastest growing cost, our highest spend cost, it’s also a national epidemic of growth,” Bond said. “It’s our highest-growing chronic disease.”
Meanwhile, spending on diabetes drugs, specifically insulin, has skyrocketed, driven both by price increases and increased use of the drugs. A lawsuit filed earlier this year accuses the top three insulin manufacturers — Eli Lilly and Company, Novo Nordisk and Sanofi — of conspiring to drive up drug prices. The companies have raised their prices in near lockstep, nearly 450 percent above inflation.
All three companies have lobbyists in Carson City this session: Marcus Conklin, Daniel Howle, Bianca Barquez, John Oceguera and Marla Williams are lobbying for Eli Lilly, Tom Boyer for Novo Nordisk and Deanne Calvert, Jessica Ferrato, Lucas Ingvoldstad and Paige Ritzman for Sanofi.
But, drug companies argue that the numbers are deceiving as pharmacy benefit managers (PBMs), middlemen in the prescription drug pricing process, negotiate for secret rebates and discounts off of the list price with manufacturers on behalf of insurance companies, numbers that aren’t public information. PBMs are third-party administrators of prescription drug programs for health plans responsible for contracting with pharmacies, negotiating rebates and discounts with pharmaceutical manufacturers, and processing and paying prescription drug claims.
An industry-funded study found that branded pharmaceutical companies retained $219 billion, or 63 percent, of the total gross spending based on the list price of drugs, with the rest going to retrospective rebates, discounts and fees paid to health plans, PBMs and the government.
In the complicated world of drug pricing, from the list price set by manufacturers to the amount the patient pays at the pharmacy counter, insurers, PBMs and the pharmaceutical companies all blame each other for the rising cost of prescription drugs and for taking too large a cut of the profits at each step of the process.
“The problem is everyone is correct, basically, and that’s what makes this so complicated,” said Dr. Walid Gellad, associate professor at the University of Pittsburgh’s medical school and co-director of the university’s Center for Pharmaceutical Policy and Prescribing. “You can blame someone else for something, and you may be right. But it doesn’t negate what you’re doing.”
An increasing number of consumers have chosen over the last decade to be covered under high-deductible health plans, which have lower premiums but typically only cover prescription drug costs after a high annual deductible is met, meaning patients can end up paying for the full cost of their prescription drugs out of pocket. In 2015, 24 percent of employees were enrolled in employer-sponsored high-deductible plans, up from 4 percent of employees in 2006, according to the Kaiser Family Foundation.
“Because of how drug pricing works, with list prices going up, all these things, it’s a perfect storm for what’s happening,” Gellad said. “It’s hard to say who’s at fault.”
Insurers argue that the pharmaceutical industry is gouging customers by setting such high list prices, making minor tweaks to their drugs to keep them under patent and not being transparent about how much it actually costs to make any given drug. On the other side, pharmaceutical companies argue that insurers and PBMs force them to set their list prices so high since they will be bargained down with rebates and discounts, numbers that aren’t public, which means it’s nearly impossible to know how much of those savings are being passed down to consumers.
“The fact is that those rebates and those discounts that they’re negotiating aren’t being passed down to patients,” said Priscilla VanderVeer, PhRMA deputy vice president. “What is actually being passed down to patients, that’s a conversation that we should be having about all of this and not just focusing on the (research and development) cost of one product, which isn’t even an accurate figure.”
The pharmaceutical industry opposes the legislation for a number of reasons but, a significant one is that they are the sole target of the legislation. Cancela has said that she wanted to start with the industry, since they are the starting point in the drug pricing process, but that she would be open to talking about including insurers or PBMs somehow in the legislation.
Cancela said she has had two meetings with a manufacturer lobbyist and with some PhRMA representatives but none of them offered amendment language or changes to the bill. Asked whether the industry would be open to some sort of amendment to the bill to incorporate the role that insurers and PBMs play in setting drug prices, VanderVeer said that she couldn’t “speculate on something that doesn’t exist.”
“Again, we’re open to having those conversations with the legislators, and we’re open to talking about what some of the challenges are that patients are having, but I can’t speak specifically to that,” VanderVeer said. “We haven’t seen it.”
A narrow, but multi-pronged, solution
The battle lines were drawn essentially as soon as the bill was introduced, but the schism was perhaps most clearly on display during the two and a half hour hearing on Cancela’s bill last month, which pitted diabetes patients, unions, gaming companies and health insurers against a host of pharmaceutical companies.
The focal point of the legislation is the regulations it seeks to place on manufacturers of diabetes drugs, including caps on price increases for certain essential diabetes drugs — insulin and a second type of diabetes drug used to treat type 2 diabetes called biguanides. Bills to control drug prices have been floated in legislatures across the country this year, including Oregon, Washington, Maryland, Illinois, Massachusetts, Indiana and Montana, and New York Gov. Andrew Cuomo proposed drug price controls as part of his executive budget.
The rising costs of prescription drugs were a common refrain during the 2016 presidential campaign, with Democratic contenders Hillary Clinton and Bernie Sanders focusing on the issue during the primary, and even President Donald Trump accusing the pharmaceutical industry of “getting away with murder” at his first news conference as president, promising to change the way the country bids on drugs to bring drug costs down.
Extreme examples of price gouging have popped up in headlines over the last couple of years, from self-proclaimed “Pharma Bro” Martin Shkreli, whose company Turing Pharmaceuticals obtained the manufacturing license for an antiparasitic drug and raised its price from $13.50 to $750 per pill overnight, to the recent controversy over the EpiPen, in which Mylan CEO Heather Bresch was called before Congress to explain why the cost of the drug had increased from $103.50 in 2009 to more than $608.61 in 2016.
The major pharmaceutical companies are quick to distance themselves from what they describe as “bad actors” in the industry, such as Shkreli. Still, price controls are hotly contested by the pharmaceutical industry, which argues the controls will stifle innovation and the amount of research and development in which companies are able to invest.
“Price controls are not the right approach at all,” VanderVeer said. “What our companies will tell you is they’re getting paid less and less for insulin by insurers who are negotiating heavier and heavier discounts.”
Still, the Nevada legislation is unique in that it very narrowly targets diabetes drugs, where bills in other states have been more sweeping.
“I figured if we’re going to look at transparency and cost control measures it’s important to narrow the focus completely to diabetes and start there because the numbers are so high,” Cancela said.
The legislation would require the state Department of Health and Human Services to compile a list of insulins and biguanides and require drug manufacturers to reimburse purchasers — either the patient or the insurance company — when changes in the wholesale acquisition cost, essentially the list price, of the drug exceed annual changes in the Consumer Price Index’s Medical Care Component.
The industry also opposes using increases in the list price of a drug to determine when reimbursements should kick in, since that’s not what pharmaceutical companies end up getting paid for a drug after the other discounts and rebates. But it is also the only consistent, publicly available number for what any drug costs at any given point in time, unless pharmaceutical companies and PBMs choose to disclose the negotiated price, Gellad said.
“Companies don’t want to use that cost and yet they don’t want to tell anyone what the real cost is,” Gellad said. “You can’t have your cake and eat it too.”
The industry also pushes back on the idea that the insulin of today is “your grandmother’s insulin.” While insurers argue that pharmaceutical companies are making minor tweaks to keep their drugs under patent, the companies argue that they are making small but meaningful changes that make drugs easier and better for patients use.
“To say our companies aren’t innovating in this space is not true,” VanderVeer said. “You may think that an incremental advance isn’t a big deal, but for a 12 year old who has type 1 diabetes to not have to leave the classroom three times a day to check their blood sugar or even have a cupcake to share in a birthday party, that is a big thing.”
Newer insulins are easier for patients to use, such as putting insulin in a pen instead of having to load it up into a syringe, but the innovations come with a price. There are cheaper insulins available — Walmart, for instance, sells three different insulins for $25 — but they’re older, which means someone wanting to switch from a newer insulin like Humalog or Lantus would have to change their lifestyle to use the older kind of drug.
Then there’s the broader question of stifling innovation, whether price caps would truly harm the pharmaceutical industry.
“No one is going to die, at least in the short term, with price caps,” Gellad said. “But 10 years from now, maybe the companies are going to make less money, they will invest less in research and so the drugs we hope won’t come out. There are other things that might improve life that we can’t spend money on because we’re spending more and more money on because of drugs. We might even be okay to say we’re only going to stifle it a little bit and take that money and put it into services that are going to save lives in other ways. There’s always a hint of truth to everything.”
The pharmaceutical industry also argues that the legislation stands to benefit insurers. For instance, the unions and gaming companies backing the legislation are self-insured and have publicly noted the high cost of insuring their diabetic patients without raising premiums or passing costs on to patients.
At the March hearing, Matt Morrison, executive director of health care operations for MGM Resorts noted that of the 40,000 Nevada residents covered under the company’s health plans, at least 2,500 have diabetes. “While MGM has been able to shelter our diabetic health plan members from double-digit annual price increases in insulin prices, those increases now threaten our ability to offer the same level of coverage for these as well as other life-saving drugs,” Morrison said.
Patients with high-deductible insurance plans who are paying their prescription drugs out of pocket, though, will benefit directly from the reimbursements proposed in the legislation, which Cancela has said is her primary focus with the bill.
The bill also mandates certain transparency-related measures for manufacturers of diabetes drugs. Companies would be required to submit annual reports to state officials with certain financial information about the costs of manufacturing the drugs, a provision that was made broader by a recently proposed amendment to the bill.
“The language is now broader to capture the core pieces we wanted to capture but not necessarily a ton of other details, with the intent being to protect what could be proprietary information and make sure that it is flexible enough to allow manufacturers to disclose but not put them in a position where they would black line everything and call it all proprietary information,” Cancela said.
The pharmaceutical industry also opposes the transparency-related measures proposed in SB265, saying that it’s nearly impossible to calculate the true cost of research and development for an individual product and that publicly traded companies already disclose some of that information to the federal government.
Democratic Assemblywoman Amber Joiner’s AB215, heard earlier this month in committee, proposes similar transparency-related measures, requiring pharmaceutical manufacturers to submit to the state a report with certain costs related to research and development, materials, securing patents and more. Where Cancela’s bill addresses diabetes-related drugs, Joiner’s would apply to drugs whose list price has increased more than 25 percent over the last year or that costs $10,000 or more per year or for a course of treatment.
Other provisions in Cancela’s bill require manufacturers to notify insurers at least 90 days before certain planned price increases and insurers that use a formulary — a list of prescription drugs covered by an insurance plan — publish notices during open enrollment periods of any drugs that have been removed from the formulary or will be removed during the current or subsequent plan year.
The legislation also includes two other provisions that go beyond diabetes drugs.
It would create a pharmaceutical sales representative licensing program, where sales representatives would be required to submit annual reports to the state with a list of which providers they contacted, which drugs they provided free samples of and details about any compensation like gifts, food or supplies given to providers. The provision was modeled off of a similar program approved by the Chicago City Council in November.
Some states have enacted legislation requiring drug companies to disclose certain payments to providers and make that data public. The Affordable Care Act also included a provision requiring drug manufacturers to report payments to physicians and teaching hospitals, available through the Open Payments program administered by the Centers for Medicare and Medicaid Services.
The legislation would require certain health care-related nonprofits to disclose contributions they receive from the pharmaceutical industry, information that would be compiled and made public on a state website. Health care nonprofits backed by the pharmaceutical industry have sent letters to Cancela in recent weeks, arguing among other things that the reporting burden would be onerous for nonprofits, which already disclose contributions to the IRS on their yearly Form 990.
But the list of donors filed with Form 990 is not public information, except for donors to private foundations and political organizations, meaning it is difficult if not nearly impossible to figure out from where a nonprofit is receiving the bulk of its contributions.
Cancela said the fact that she received so many similarly worded letters from health care nonprofits making the same arguments the pharmaceutical industry only solidified her belief that there is more need for transparency in the health care space.
“To me, it was a perfect example of why there should be more transparency in what entities fund these organization and just how much those entities rely on those funds,” Cancela said. “It’s not to diminish the work these groups do — they do tremendous work for patients and tremendous advocacy — it’s just troubling when you can have multiple unrelated organizations using the same language and not know if that’s a result of their funders or connections that they may share that we might not know about.”
A representative of one of the nonprofits that wrote to Cancela, the Epilepsy Foundation, said that though the organization receives funding from the industry, when the foundation speaks on an issue they do so with their own voice and noted that the organization aims to be transparent about their funding sources. The foundation lists its corporate partners, including PhRMA and other pharmaceutical companies, on a page on its website.
“We’re very transparent about who we partner with and who supports our efforts,” said Beatriz Duque Long, senior director of government relations at the Epilepsy Foundation. “Some people think all patient groups are just fronts for the industry, and we don’t think that reflects accurately the work that we do.”
What comes next
It’s now been a month since the hearing on the bill.
Since then, Cancela has been working on an amendment to the bill — with the help of proponents of the bill, including insurers, unions and other individuals, as well as the Department of Health and Human Services — that makes a number of technical changes to shore up the language in the bill, such as making the language about financial disclosures more broad and allowing the department to establish by regulation the exact process by which patients and insurers could apply for reimbursements under the legislation.
It also creates an appeals process by which manufacturers could argue they aren’t able to earn a reasonable return if they issue reimbursements, which could be a violation of the so-called Takings Clause in the U.S. and Nevada constitutions. The clause protects against government from taking private property without the due process of law or just compensation.
The amendment also aims to remove millions of dollars in fiscal notes placed on the bill by the Public Employees’ Benefits Program, Medicaid and the Children’s Health Insurance Program by exempting the programs from the legislation to ensure that existing rebates the programs receive aren’t jeopardized.
The bill received a waiver from legislative leadership ahead of the first committee deadline in mid-April, meaning that it is not subject to the legislative calendar and is still in the Senate Health and Human Services Committee awaiting a vote. (Joiner’s bill was subject to the same fate, with no new discussions happening on the bill since it was heard in early April and the legislation still waiting for a vote in Assembly Health and Human Services after also being granted a waiver.)
The pharmaceutical industry, for its part, hasn’t offered many specifics about its next steps, only that it remains open to having discussions with legislators. VandeerVeer declined to elaborate about PhRMA’s next steps in a Friday email.
The union foot soldiers, meanwhile, are attempting to drum up community support for the legislation, sending 30 people out from the Culinary Union, UFCW and the Teamsters to distribute about 5,000 door hangers across both Republican and Democratic Senate and Assembly districts this week. The door hangers include statistics on the prevalence of diabetes in Nevada and the name and phone number of the individual’s state senator or assemblymember, urging them to call and voice their support for SB265.
The unions, under the banner of the Nevada Diabetes Political Coalition, have also launched a website in support of the bill and flew more than a dozen patients and advocates to Carson City last week to host a press conference and meet with legislators on “Diabetes Day.”
The biggest question that remains is which, if any, Republicans will sign onto the bill, likely a necessary step for the legislation for the governor to sign it into law. Assembly Minority Leader Paul Anderson said in a recent interview that he isn’t sure that it is the government’s role to get in the middle of health care policy decisions.
“It scares me and makes me nervous to sort of wade into those battles before I understand all the players and we know the players are the Culinary pushing the (Nevada Resort Association) to get involved because they’re self-insured and the other self-insured companies are coming in play,” Anderson said. “It all comes down to a price fixing match, and I’m not sure who’s right or wrong when it comes to fixing these prices.”
Sandoval, for his part, seems open to the concept of the legislation, asking his chief of staff, Mike Willden, and the Department of Health and Human Services to work through some of the policy issues laid out in the legislation.
“Transparency in prescription drug pricing is an important and complex issue that requires collaboration and candid dialogue from all stakeholders. The Governor is looking for an informed and comprehensive explanation of the overarching policy goals of any proposed legislation on this topic and any fiscal consequences to consumers and the State,” said Sandoval’s spokeswoman Mari St. Martin in a statement. “For these reasons, the Governor’s office continues to meet with the sponsor of SB265, the Department of Health and Human Services and other interested parties.”
The other question is whether the legislation gets a vote sooner rather than later or gets ensnared in the so-called “end game” in the final days of the session as the governor and Democrats and legislative leadership attempt to come to a compromise over some of the thorniest issues of 2017, such as taxing recreational marijuana and the future of the state’s Education Savings Accounts program.
Cancela said she’s focused on making sure the bill is properly vetted and that the policy is right, whether it is voted on in the next two weeks or the next five weeks. And she remains hopeful that she’ll be able to get some of her Republican colleagues’ support before the final vote.
“There has to be, first and foremost, and understanding of the problem we’re trying to fix, which is the high cost of insulin coupled with the prevalence of diabetes in the state and people really being unable to access lifesaving medications,” Cancela said. “The next piece is trying to help folks understand what it is that the bill does to address that and so I think that as long as long as there are open minds about the bill and the problem that we’re trying to fix a real conversation can happen.”
Photo courtesy of Alan Levine under Creative Commons.
This story has been updated at 12:15 p.m. on 5-4-17 to correct the spelling of Soila Solano’s name.