How Big Pharma Became the Biggest Villain of the 2019 Minnesota Legislature
When the state Senate passed legislation to force the makers and distributors of opioids to pay $20 million in order to help fight the addiction crisis in Minnesota, there was disagreement over some of the details.
Was the funding source the right one? Would those responsible for the deaths of tens of thousands of Americans — 400 last year in Minnesota alone — be held accountable? Is the money going to be spent in the right places?
There was little disagreement, however, over who was to blame. That would be the drug companies, especially those that make and market highly addictive opioids. While Purdue Pharma, the maker of Oxycontin, has gotten most of the criticism, generic manufacturers haven’t escaped notice. Neither have distributors and dispensers of prescription drugs.
Big Pharma, it appears, has become the villain du jour for 2019 — both in Minnesota and around the country. And as more details about Purdue’s knowledge of the addictive nature of OxyContin and its decisions around marketing the drug come to light, a new willingness to confront the company — and other drug manufacturers — has been unleashed.
It isn’t just opioids. The price of insulin is a significant issue at the Legislature this session, as is the lack of affordability of other essential drugs. In fact, Big Pharma has become such an inviting target that in a Legislature divided between a DFL House and a GOP Senate, bills to rein in the industry are still alive in both bodies.
“They’re sort of like Babe Ruth walking out to the plate,” GOP Sen. Scott Jensen said of the industry. “They expect to be able to hit the ball out of the park when they need to. I think they understand there is a sea change happening.”
Or as House Majority Leader Ryan Winkler, DFL-Golden Valley, says: “Big Pharma has been a protected class for far too long. It is time that we end it.”
The 411 on PBMs
Minnesota is one of many states that is trying to figure out whether it will continue to defer to the federal government to regulate drug prices and availability. “We need an all-hands-on-deck approach,” said Rep. Mike Howard, DFL-Richfield. “The federal government absolutely does have a role to play … but this Legislature can’t wait on Congress or Washington, D.C., to take action. That’s just a recipe for the status quo and gridlock.”
To bring home the issue, lawmakers have frequently brought in members of the public with stories about their fights with the drug companies. First among them are James Holt Jr. and Nicole Smith-Holt, who have been telling the story of their son Alec, who died in 2017 because he had started rationing his insulin after falling off their insurance at age 26.
State Sen. Chris Eaton getting a hug from her aunt, Jean Schiebel, after passage of HF 400, a bill combatting opioid abuse. The legislation passed on what would have been the 35th birthday of Eaton's daughter, Ariel, who died in 2007. (Photo by: Peter Callaghan).
But the Legislature has also heard from people with multiple sclerosis, lupus and rheumatoid arthritis, all of whom have seen steep increases in drugs they need to live daily lives. “Medications can only change lives if people can access them,” said Nikki Foster, of Brooklyn Park, who needs drugs to manage her multiple sclerosis.
While some of the bills proposed at the Legislature so far deal specifically with insulin and opioids, others attempt to regulate drug manufacturers and a business likely unknown to many state residents: pharmacy benefit managers.
A business that has become a significant force in health care, the pharmacy benefit manager, or PBM, is an entity that works between drug makers and insurance companies. These people manage pricing and supply and create formularies or lists of drugs that are covered. Five of the largest PBMs handle 85 percent of prescription drug transactions and nine of 10 Americans have prescriptions handled by a PBM, said Stephen Schondelmeyer, a professor of pharmaceutical economics at the University of Minnesota.
“There are things they do that we need and we need to keep in the marketplace,” Schondelmeyer said. “But with that influence they’ve also grown as big as any other player, bigger than the drug companies; they’re bigger than the physician groups and pharmacists and other providers, bigger than the hospitals.”
Sen. Jim Abeler, R-Anoka, in expressing his support for the bill also voiced his frustration at the industry. “I feel like we’re throwing pebbles at a bulldozer,” he said. “No one from PBMs have come to me to say why this bill is a bad idea. It’s a great idea. It’s what people expect us to do.”
But GOP Sen. Michelle Benson, the chair of the senate’s Health and Human Services Finance and Policy Committee, also noted the breadth of the PBM licensing bill. “Regulating an entire industry is a really big step for the Legislature to take,” she said.
Pricing and transparency
One of the first 10 bills introduced by House DFLers is House File 4, which would empower the state attorney general to intervene when drugs prices increase significantly. The poster child — or perhaps the wanted poster — for the issue is Martin Shkreli, aka the “pharma bro.” In 2015, Shkreli’s Turing Pharmaceuticals purchased the rights to existing drugs such as Daraprim, then increased prices by up to 5,000 percent. “He didn’t invent this life-saving drug. He didn’t invest in its manufacture. He merely bought the patent and increased the price because he could,” said Rep. John Lesch, DFL-St Paul, sponsor of the price gouging bill.
Under the bill, drug companies would have to report price increases of 15 percent or more on drugs deemed essential by the state commissioner of human services. The state attorney general could intervene in court to try to show that such price increases were “unconscionable,” which is a legal standard established in case law.
“You have a right to make a reasonable profit. You may even have a right to make an excessive profit,” Lesch said. “But the intent of unconscionable is to raise it to such a level where it would raise the eyebrows of any jurist or any juror and say this is ridiculous.”
Schondelmeyer said he published a study last year looked at the top 267 brand name drugs and of those, 30 had a price increase the previous year of 15 percent or more. Attempts by politicians to draw attention to Shkreli and others who increase prices significantly haven’t worked. “Drug companies don’t respond to naming and shaming,” he said.
The bill is one of Attorney General Keith Ellison’s top legislative priorities. “It all starts with the personal,” Ellison said in an interview last week. A woman who worked with his congressional office has a parasitic infection that causes toxoplasmosis and relies on one of the drugs Shkrelli purchased, Daraprim.
“She’s been at death’s door three or four times,” Ellison said. “For this guy to make this drug out of reach for her is the worst thing anybody can do. But Abby’s just my friend. What about Alec Smith? I just think it’s immoral and it’s wrong.”
The GOP Senate, however, has shown little interest in the price gouging bill and it is unlikely to pass this session. Instead, Republican lawmakers are more inclined toward bills that provide the state and drug purchasers more information about prices. One bipartisan attempt at that was introduced by Sen. Julie Rosen, R-Vernon Center, and Rep. Kelly Morrison, DFL-Deephaven. The bill would require drug makers to tell the state Department of Health about price increases. That information would be posted on the department’s website at least 30 days before taking effect and allow for public comment.
“The idea is to put public pressure on the pharmaceutical manufacturers,” said Morrison, a doctor. “There’s a lot of mystery among all of us. Why are all these drugs so expensive and why did the price apparently inexplicably increase. I think there’s the potential for a little bit of a public uprising to hold them accountable. It is our hope that that may help bring prices down.”
Making it a political issue
In 2018, Rosen’s bill to assess a fee on opioids makers and distributors passed the GOP-controlled Senate 60-6. But it never came to a vote in the House, after being blocked by then-House Speaker Kurt Daudt. Earlier this session, now-House Speaker Melissa Hortman, DFL-Brooklyn Park, said that was an easy vote for GOP senators, since they knew the House would keep it from becoming law.
But this year’s version of the bill — sponsored by Rosen and DFL Rep. Liz Olson of Duluth— passed the Senate by a nearly identical 59-6 vote on Monday, with all senators knowing the House had already passed their version, 94-34, and that Gov. Tim Walz has said he expects to sign a bill once it gets to him.
Some of the most active lawmakers on the issue — Republican Jensen; DFLers Morrison, Alice Mann of Lakeville and Sen. Matt Klein of Mendota Heights — are doctors.
GOPer Jensen, who runs clinics in Watertown and Chaska, said he thinks the 2019 will make changes to how prescription drugs are regulated and priced, and has made the issue the centerpiece of his first term in office. “I think my caucus knows that I’m willing to be labeled whatever people want to label me but, dammit, we’re gonna get it done and if we don’t, I want to know why the hell we didn’t.”
Sen. Chris Eaton, DFL-Brooklyn Center; State Sen. Julie Rosen, R-Vernon Center; Rep. Liz Olson, DFL-Duluth; and Rep. Dave Baker, R-Willmar; speak at a press conference about opioids. (Photo by: Peter Callaghan).
Still, DFLers held a press conference last week that attempted to blame Senate Republicans for lack of action on bills, including Howard’s emergency insulin bill. “There’s been quite a bit of silence, really, from the Senate as to why some of these bills aren’t moving,” Howard said.
Health and Human Services Finance and Policy Committee Chair Benson responded to the complaints about the lack of movement in the Senate by saying she has held hearings on most of the big issues being discussed: the PBM licensing bill; Rosen’s price transparency bill; a bill to allow people to sign contracts with doctors for basic care called direct primary care. The Senate has also already passed a bill to require hospitals to tell patients how much care will cost.
While the DFL was “trying to make political points, we’re just going to do good policy work,” Benson said. “We are focusing on Minnesotans with high deductibles, Minnesotans with no insurance and Minnesotans who need access to expensive drugs.”
But Benson — who was criticized for saying that people who can’t afford needed insulin should go to emergency rooms if they are in crisis — said the Senate would not take up the emergency insulin bill, saying the Senate doesn’t want to respond drug by drug. She has also said the Senate wants to help patients struggling with affordability by making rebates and coupons that drug companies offer available at the pharmacy counter.
Where is Pharma on all of this?
Earlier in the session, Walz convened a phone conference with manufacturers of opioids to tell them a bill is coming. “I think it is their best interests to engage,” the governor said of the talk.
Lawmakers say pharmaceutical interests have been more visible this session than last. But while the industry has testified and submitted letters, its response to the issues being raised has at times been to point fingers elsewhere. When accused of causing the drug pricing problems, for instance, drug makers tend to point to PBMs and insurers.
“Pharmacy Benefit Managers, insurers and hospitals are getting billions of dollars every year from discounts,” Kristina Moorhead, state policy director for the industry’s trade group, the Pharmaceutical Research and Manufacturers of America (PhRMA), said last month. “Instead of using these savings to lower what patients pay for medicines, these funds are often used to pad their bottom line, to lower premiums or to fill other holes in their budgets.”
On opioids, lobbyists have said the state shouldn’t be adding fees that will make health care more expensive, an argument some House GOP lawmakers have also been making.
PhRMA also argues that brand name opioids make up just 4 percent of the pills sold. Still, the organization has distributed safe disposal pouches to keep unused drugs out of the wrong hands and has helped fund treatment programs. It supports limiting the lengths of prescriptions for less-chronic pain treatment. And it has argued that rebates paid to states under Medicare could be a source of funding for new state programs.
Meanwhile, the Association for Accessible Medicines (AAM), which represents the makers of generic drugs, has testified that it didn’t create opioids and didn’t market them to doctors (that was Purdue and other makers of the original drugs). The AAM argues that the bills could force generic drug makers out of the market rather than pay the new fees. “The best way to ensure a robust and sustainable pool of fund to pay for opioids remediation programs is to equitably distribute the costs across all responsible groups,” the AAM said in a statement.
Rosen said at the beginning of session that she hoped the industry would be appearing with her at a press conference announcing bills that were worked on together. She doubts that will happen now. Only the kind of lawsuit that Purdue settled last week with Oklahoma for $270 million appears to get the industry to admit culpability, it seems. “It’s just amazing the denial,” she said.