Pharma industry has some explaining to do in Minnesota over 10 costly drug classes

Pharmaceutical manufacturers and distributors will now have to explain to the state of Minnesota why 10 classes of drugs that treat cancer and other disorders are selling well above their listed costs.

The Minnesota Department of Health on Wednesday released its first-ever list of drugs of “substantial public interest,” a unique effort among the states to expose the reasons certain prescription prices are marked up.

Minnesotans and their private insurers paid more than $19 million in 2022 for various forms of abiraterone acetate, a hormone-based chemotherapy for cancer, even though the wholesale cost was less than $5 million. Manufacturers, wholesalers, benefit managers and pharmacies have 90 days to supply data showing how their mark-ups in the complex pharmaceutical supply chain contributed to that 294% gap.

“This is a strong first step toward pulling back the curtain to show the cost drivers that make up prescription drug prices in Minnesota,” said Dr. Brooke Cunningham, state health commissioner.

State regulators suspect manufacturers are largely responsible for mark-ups of some drugs, but that distributors can take the blame for others. Those most responsible should become apparent in a review of all 10 classes, which encompass 364 drugs when considering their different manufacturers and dosage levels.

“There are multiple problems ailing the prescription drug market,” said Stefan Gildemeister, state health economist.

The state picked drugs for its first list based on how much their costs were marked up and how widely they were used by Minnesotans. Truvada and other forms of oral HIV tablets had the widest spending gap among the 10 drug classes; Minnesotans and their private insurers spent more than $13 million on that drug class in 2022 despite a wholesale cost of $1.3 million.

Publicity alone could have an effect on pricing, and provide insurers and policymakers with information they could use to rein in costs. The data also will be useful for Minnesota’s new prescription drug affordability board, which was formed earlier this year with a goal of setting price limits that cap state spending on expensive medications.

The Health Department planned to release an initial list months ago, but delayed in order to get public comment on its selection process. Gov. Tim Walz hailed Wednesday’s release.

“Access to necessary medications is a right, not a privilege,” he said. “Yet, for many across the state and nation, the high cost of prescription drugs forces tough decisions when it comes to affording health care.”

Representatives for drug manufacturers did not reply to requests for comment Wednesday. The PhRMA trade group lobbied unsuccessfully against the 2023 legislation that created the state affordability board, arguing it could reduce Minnesotans’ access to medication. Lawmakers created the public interest reporting system that same year.

The trade group for the nation’s pharmacy benefit managers did not address the new reporting requirement but said in a statement that their role in drug distribution cuts costs by $1,040 per person per year.

The drug list may be unfamiliar to many Minnesotans because it focuses on treatments for cancer and HIV, but also multiple sclerosis, seizures, ADHD and pancreatic disorders. It doesn’t include more common medications such as insulin for diabetes, or the GLP-1 weight-loss injections that are surging in popularity and forcing employers and insurers to either restrict their usage or substantially increase premiums for their health plans.

The state will likely select 10 new drug classes in three months for its next list, said Annelisa Steeber, manager of the Minnesota Department of Health’s prescription drug price transparency initiative. Over time, the state will likely put some of these initial drugs back on its public interest list to see if mark-up levels in their prices have changed.