Open Letter To Gov. Brian Sandoval Re: SB 539

Do not sign it.

Open Letter to The Honorable Brian Sandoval, Governor of Nevada

Dear Governor Sandoval:

You have on your desk bill SB 539, which you have signaled that you are prepared to sign. The law is actually a terrible idea for the state of Nevada, and sets an incredibly bad example for the rest of the country. The intent of the law is to address the rise in the price of diabetes medications, particular the increases in the cost of insulin. The reporting is not clear, but the concern that caused a majority of the state legislators to vote affirmatively for the bill seems to be the copayments that Nevadans living with diabetes are required to pay to access diabetes medications. Certainly the examples of the high cost of medications that were featured in local media were about consumer copayments.

The media focused less on the price that insurers pay drug manufacturer on behalf of the patient. There was also some passing mention of the rebates that manufacturers make to middle man (distributors, prescription drug benefit managers [PBMs], and pharmacies), and the effect those rebate payments have on rising medication costs. How money flows within the prescription drug distribution system is worthy of review, particularly if system cost can be reduced and the saving passed on to consumer, creating greater access to medicines. The unsigned law on your desk does not address system cost that might be inflating drug prices.

As the media used the complaints of some Nevadans about the copayments for their diabetes medications, in this letter I would like to take a moment to describe in a bit more detail the system from which those copayments originate to help us understand why signing this legislation into law would add regulatory burdens, but do almost nothing to help patients afford their medications.

Medical care in this country (including drugs, devices, and professional services) is purchased primarily through insurance (either through a private insurer or through government-mandated social insurance), because the average patient (consumer) does not have the financial ability to purchase health care directly. The principal feature and benefit of insurance (private or public) is the pooling and sharing of beneficiary risk. Insurance allows consumers to purchase medical care that they otherwise could not afford.

Ideally, from the consumer’s point of view, the insurance premium that the individual pays should embody the fully loaded cost of medical care, including drugs, devices and professional services, allowing the consumer to have access to care without a copayment or additional out-of-pocket expenses. Unfortunately, ideal circumstances do not prevail. More typically, at the time of service a beneficiary is faced with additional out-of-pocket expenses (deductibles, copayments, and/or coinsurance) that dilutes the risk-pooling effect of insurance and introduces inequalities, particularly as these expenses are not adjusted for variations in income, disease severity, gender, or the type of medical treatment required.

By way of a quick example let’s look at all prescription copayments made by Nevadan Medicare fee for service beneficiaries being treated for diabetes in 2014. 25% of them had an annual copayment of $85. The median copayment was $282 per year (a little over $14 per month). 10% of them, however, had an annual payment of $2,303. The point is that disease intensity, drug type, and variations in insurance coverage help to determine annual copayments for prescription drugs. Presumably, the beneficiary’s decision on drug coverage was informed by the insurance premium―lower premium higher copayment. What is an affordable copayment is relative to each beneficiary’s financial situation. $282 per year could be just as difficult for some as is $2,303 for others. Among the tens of thousands of Nevadans on insulin therapy, it would not be hard for the news media to find some who were struggling with the copayments. It is not that their pain is not real, but is their pain representative of the majority? Even if it were representative, the law that you are about to sign will not help Nevadans struggling with copayments. In fact, it is likely to make their situation much worse.

The law, for example, requires nonprofit organizations who receive grants from insurers, PBMs, or biopharmaceutical companies to report those grants to the Nevada Department of Health and Human Services. We have seen this nonsensical approach before at the federal level with physicians. It is called The Physician Payments Sunshine Act. The law required physicians who received any gratuity from a pharmaceutical company to report that payment to the United States Department of Health and Human Services. The law created a new set of reporting cost for the companies, physicians and physician organizations. It is drawing resources away from medical organizations—particularly smaller minority medical organizations―as industry grantors attempted to avoid costly regulations by reducing grants. For all of these new costs, there is no evidence that this Sunshine Act is reducing the cost of medications. Nonprofit in Nevada should anticipate the same results―a reduction in grants, increase cost for reporting and no financial relief for the consumer. The law punishes charitable organizations that have nothing to do with how copays are determined.

The fact is that through medical advances many Nevadans are living today with diabetes. Fifty years ago they would have died; certainly many of them would not be productive members in your labor force. There are costs associated with diabetes therapies that are extending the lives and productivity of Nevadans workers. Realistically, the only way forward that does not involve rationing, unequal access to medical therapies, or hamstring pioneering companies is acceleration of the discovery process and government involvement in reducing the financial risk associated with discovery. You want to be known as the Governor who led Nevadans into the 21st century where their investments in innovate therapies produced healthy sustainable communities in your state where no resident is denied access to essential therapies. The law awaiting your signature will not get them there.

Finally, just imagine for a moment if 50 other states adopted your law. What a statutory mess! Insurers, PBMs, and biopharmaceutical companies would now have reporting requirements to fifty different regulatory bodies. If they continue to support charitable organizations, and the likelihood is that they would have to curtail their support to reduce cost, the cost of reporting will find its way into higher drug cost—hardly the anticipated results.

Do not sign SB 539. Demand of your legislators statutes that advance Nevada’s role in the medical revolution that will give greater control over the chronic diseases that shorten the lives of your constituents.

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