Constant Clamor

Dennis Linthicum

Constant Clamor

This week I joined as a Co-Sponsor of HB 4005 – the Prescription Drug Price Transparency Act because for the past twenty years pharmaceutical prices have been sky-rocketing upwards. US drug prices have long out-paced historical norms and there is no foreseeable downward pressure on the cost curve.

I'll be the first to admit that government intervention is problematic because it creates a constant clamor for more government. Once some segment of any industry gains a legislated upper hand then everyone else rushes in for more legislation and government grows. Congressional meddling, over-regulation and unintended consequences, stemming from well-meaning healthcare policy initiatives, has caused a large part of these price increases.

HB 4005, however, is not invasive government intervention but a well-crafted surgical strike focused on the cost of prescription drugs. It will shed light on drug pricing whenever a drug manufacturer has a steep price increase or when they bring a new expensive blockbuster drug onto the market.

President Trump mentioned the problem in his State of the Union address, He said, “One of my greatest priorities is to reduce the price of prescription drugs. In many other countries, these drugs cost far less than what we pay in the United States. That is why I have directed my Administration to make fixing the injustice of high drug prices one of our top priorities.”

It will be fascinating to see how Congress handles this challenge because they created the lopsided environment where complexity reigns and patients lose.

The federal healthcare system is a giant spaghetti ball of legislation, with myriads of alphabet-soup agencies and 50 years of re-do’s, take-overs and fixes. The end result is an overly complex and extremely messy bundle of rules, regulations and unintended consequences.

And, we’re stuck in the middle…

However, in the face of continued skyrocketing prescription drug prices, Oregon can provide a little bit of needed transparency. Oregonians for Affordable Drug Prices announced bipartisan and statewide support for HB 4005 that will require pharmaceutical manufacturers to share information on any drug price increase that is more than 10% annually.

I have more faith in free, open and voluntary markets than government bureaucracies. The injection of government into the healthcare arena did not create better solutions for those in need. What it did supply is a source of revenue – the taxpayer.

Decades of lobbying has resulted in a protectionist system plagued by three systemic issues. First, the beneficiaries, or patients, present an insatiable, unquenchable and uncontrollable demand on the system. This is a hallmark of socialism where third-party payers carry the burden of an ever-growing desire for more and more services.

Secondly, current law provides the best of crony capitalism – market monopolies. Healthcare service providers composed of delivery system cartels of doctors, hospitals, nursing homes, pharmaceutical suppliers, medical device makers, etc., have implanted themselves deep into congressional organs.

Patients experience the results in a complex system of excessive wait-lines, multiple referrals, and continual follow-ups while the providers are party to a rigged reimbursement system which maximizes revenue gains, minimizes system efficiency and has no competitive discipline.

The graphic below shows dramatic tandem price increases over the past twenty years for two competing insulin analogues. The upward trend is not due to normal inflationary increases; it is due to federal policies.

Rising Prices


Competitive pressure should surface when supply chain circumstances, commodity contracts or manufacturing advantages present themselves in a free market. As can been seen, even when alternatives exist, there is little competition and prices do not go down. In fact, the opposite occurs – prices increase in tandem with one another.

This is because the Medicare Modernization Act of 2003, which established Medicare Part D, banned direct negotiations for lower prices on prescription drugs by the government. If the Centers for Medicare and Medicaid Services could negotiate with pharmaceutical companies, the agency could leverage its enormous purchasing power to pay less for drugs.

Lower prices would reverberate through the market because information is power. “I can't give you a discount because when the word gets out then I’ll have to give discounts to everyone.” 

Also, in the thousands of ACA pages there are several items that favor the lopsided pricing fiasco we recognize. These items are a mandate prohibiting re-importation of drugs (like insulin from Canada), preserving Medicare’s over-payment for drugs, mandates requiring state subsidies for drugs under Medicaid, and hundreds of billions in subsidies for drugs in Medicare part B and D.

Under HB 4005 drug makers will be required to give advance notice to payers before price increases of more than 10 percent a year. Additionally, for all drugs that increased more than 10 percent in the prior years, the manufacturer must report to the state their research, development and marketing costs, profit margins and whether generic drug alternatives are available.

Another feature of the bill requires companies to report what the price for their medication is in other countries, an especially pressing issue when prices are, on average, 50 percent lower in other industrialized nations. The graph below illustrates the enormous price discrepancy for insulin in the US verses other countries.

Worldwide Insulin


The US spends 18% of GDP on health care compared to 10-12% in the rest of the developed world. There is no hope of slowing down the health care monster without some transparency and the restoration of basic free market principles like consumer sovereignty, patient responsibility, risk-based pricing and a free market supply chain.

HB 4005 is one small step for transparency and gaining insight into the problem of rising prescription drug prices. The public hearing for HB 4005 will be on Monday, Feb. 5th at 3:00pm in Hearing Room E in the Capital Bldg.

Remember, if we don't stand for rural Oregon values and common sense – No one will!

Best Regards,

Senator Dennis Linthicum signature

Dennis Linthicum
Oregon State Senate 28

Capitol Phone: 503-986-1728
Capitol Address: 900 Court St. NE, S-305, Salem, Oregon 97301