A Vermont drug price transparency bill threatens to make it hard for drug makers to increase drug prices without explanations. The bill seeks to shed more light on the world of prescription drug pricing, though as all prices are driven by supply and demand to a market clearing price where buyers and sellers equal out, it is unclear what explanations are needed beyond Economics 101. It is unclear whether the bill will have an impact on the likes of Mylan NV (NASDAQ:MYL), AbbVie Inc (NYSE:ABBV) and Sanofi SA (ADR) (NYSE:SNY) pricing practices, as explanations can always be made.
Drug Price Transparency Bill
Under the new law, manufacturers in the State will have to submit all the factors that contribute to any price increases as well as percentages attributable to each supposed factor. The enactment of the bill comes at a time of increased outrage from the public who have had to contend with double or even triple price increases on some drugs.
Mylan NVs EpiPen allergy treatment drug is one such treatment whose price has soared by 205% over the past five years. Sanofi’s SA Lantus insulin has also registered a 90% price increase with Abbvie’s Arthritis treatment Humira price having increased by 114%.
Vermont Bill Deficiencies
While the bill is seen as a reprieve for consumers, there is still a wave of uncertainty over whether it will do much to curtail extreme drug price increases. The fact that drug makers have signed a confidentiality provision means the public will not be able to see what might have caused price increases on drugs.
The fact that the state lacks the power to roll back prices in cases of what it considers excessive increases means the likes of Mylan, Sanofi, and AbbVie may continue with their practice of increasing prices. A $100,000 fine on companies that fail to provide information about price increases may, after all, be an insignificant punishment especially on companies that generate billions of dollars from such practices.
The Vermont bill is already having a ripple effect with other states including California considering such laws in a bid to curtail extreme price increases. However, if such bills are to have any major impact in the long run then the Federal government may have to pass legislations requiring drug makers to justify price increases of more than 10%.
Sanofi was up by 1.84% in Monday trading outside the US, closing at highs of $40.44 a share as AbbVie edged lower by 0.18% to close at $62.62 a share.