Taxpayers Have Right To Know What They Pay For Prescription Drugs

Donald J. Pfundstein
Published on : 2022-09-19

The NH Prescription Drug Affordability Board (PDAB) was created with enactment of RSA 126-BB during the first Covid dominated session and became effective July 1, 2020.  The PDAB’s lynchpin duty is setting “annual spending targets” for prescription drugs purchased by New Hampshire’s “public payors” (the “taxpayers” of the state, counties, cities and towns).  RSA 126-BB: 5 I (a).  The overall purpose of the statute is to save NH taxpayers money!

It is curious, then, why the PDAB refuses to specify how the taxpayers’ “spending targets” will be established.  The PDAB’s Proposed Rules simply copy language from the statute (which itself is copied from Maine’s PDAB statute) and provide zero guidance to the regulated community on “spending targets”.  The PDAB has been asked repeatedly, how will they “determine annual spending targets for prescription drugs purchased by public payors [TAXPAYERS] based upon a 10-year rolling average of the medical care services component of the United States Department of Labor, Bureau of Labor Statistics Consumer Price Index, medical care services index, plus a reasonable percentage for inflation and minus a spending target for pharmacy savings….”? (RSA 126-BB: 5 I (a))  The Final Proposal fails to provide any answer much less a useful, clear answer to this fundamental question.

We asked the PDAB more than once to provide some clarity or precision in its rules so that the regulated community could understand how the “spending targets” will be determined.  More importantly, we all need to know so that the Board can uniformly apply the law.  The Board ignored these requests and, in failing to simply explain how the “spending targets” will be determined, failed to comply with the legal requirements governing adoption of the proposed rules under RSA 541-A, JLCAR Rules and the JLCAR Rules Drafting Manual.[i]

It gets worse. The PDAB doesn’t want the taxpayers to know what they are paying for physician/hospital administered drugs.  Contrary to the enabling statute, the PDAB (which is majority controlled by retired physicians and hospital executives) recently voted to exclude physician and hospital administered prescription drugs from its cost data collection and “spending targets” responsibilities.

As the New Hampshire Insurance Department’s most recent Report of Health Care Premium and Claim Cost Drivers in New Hampshire (“Report”) found, specialty drugs have become the largest contributor to prescription drug spending in New Hampshire, contributing 53% of total prescription drug spending.  Specialty pharmacy prescription drugs include drugs that are administered at a physician’s office or in a hospital setting.  (See NHID Report, page 45).  The Report shows that physician/hospital administered drugs alone represent 46% of New Hampshire’s entire drug spending!  Think about that.  The PDAB has voted to ignore nearly half of the state’s entire prescription drug spending!

The price of these drugs can be tens of thousands of dollars per treatment or more.  There are numerous studies reporting on the prices charged to payors (including TAXPAYERS) by physicians and hospitals and on the physician/hospital’s enormous markups, with 200-400% being quite common.  These outrageously inflated drug costs are in addition to fees separately charged by providers for administering the drugs to patients.  NH taxpayers deserve to know how much public payors and others are paying for physician/hospital administered drugs.[ii]

The Board’s duty under RSA 126-B: 5 I (a) and proposed rule PDAB 301.01(b) is to determine annual spending targets for “prescription drugs” purchased by public payors.  (1) The statute does not exclude physician/ hospital administered prescription drugs nor any other subset from the definition of “prescription drugs” for which the Board is obligated to collect cost data and to establish spending targets.  (2)  In fact, RSA 126-BB: 1, II & III make clear that “prescription drugs” include both name brand and generic drugs including biological and biosimilar products, commonly physician/hospital administered drugs.  (3) Moreover, Maine’s and NH’s PDAB laws require use of the “medical care services component of the United States Department of Labor, Bureau of Labor Statistics Consumer Price Index, medical care services index…”  This is the “physician/hospital administered prescription drugs” index.  (4) The retail, on-line and mail order prescription drugs are reported in a different CPI index, namely the medical care commodities (not services) component of the federal CPI, which component is not even incorporated in the NH law.   (5) Finally, New Hampshire already has the physician/hospital administered prescription drug data in existing collection and reporting systems.  Assertions that physician/hospital prescription drug billing and reimbursement practices are too complicated and complex to track and decipher are incorrect, as evidenced by the fact that the NH Department of Insurance actually uses the state’s statutorily established Comprehensive Health Information System (CHIS) database to report such drug spending and reported it is nearly half of the total cost that NH consumers and taxpayers are paying for prescription drugs!  [iii]

We all have reason to hope.  Perhaps the PDAB will revisit their decision and acknowledge the fact that New Hampshire cost data includes physician/hospital administered drugs costs.   Certainly, the PDAB can do something with this data!  We cannot allow the PDAB to ignore nearly half of taxpayers’ entire expense for prescription drugs.   NH taxpayers have the right to know what they are paying, and the PDAB has the duty to tell them!


[i] The Administrative Rules Law at RSA 541-A: 7 requires that a rule be clear and understandable by the regulated community.  The Administrative Rules Drafting Manual (”Manual”), which is binding on the PDAB (and other boards and agencies) pursuant to RSA 541-A: 8, at Chapter 4, Part 2, at 2.1 requires “Clarity” and provides the following directive: “Be clear and precise so that the substance of the rule is readily understood by the person regulated. Use language that does not leave the rule open to different interpretations…”  The Manual, Chapter 4, Part 2, 2.2 requires “Specificity”…” and instructs the PDAB:  “Be specific in your rules. Rules that need oral clarifications or interpretations to be understood are not detailed enough. This leads to so-called “oral rulemaking” where the written rules need oral rules in order to be implemented. Enforcement of such “unadopted” rules is prohibited…”  The bottom line as cautioned in the Manual is “Statutes are not rules, so don’t repeat a statute verbatim as a rule …” (emphasis added, The Manual, Chapter 4, Part 2 at 2.10).   The PDAB ignored these requirements.

 [ii] • JAMA Internal Medicine (2021): The median negotiated prices for the 10 drugs studied ranged from 169% to 344% of the Medicare payment limit.47 The largest variation in markup came from Remicade, an IV drug that treats a range of autoimmune conditions – the median rate paid by commercial insurers at Mayo Clinic’s hospital in Phoenix was more than 800% of the Medicare rate.

• Bernstein (2021): This analysis found that some hospitals mark up prices on more than two dozen medicines by an average of 250%.48 For example, hospitals were found to charge up to five times the purchase price for Epogen, which is used to treat anemia caused by chronic kidney disease for patients on dialysis, and 4.6 times the price for Remicade, a rheumatoid arthritis medication. According to the analysis, administering treatments to commercially insured patients is 20 times more profitable than administering the same drugs to Medicare patients. The analysis also showed hospitals have been slow to begin using biosimilars, which are nearly identical to brand-name biologic treatments and produce the same health outcome, but at a much lower cost.

• Health Affairs (2021): This study examined the 2019 prices paid for by Blue Cross Blue Shield plans for certain drugs administered in hospital clinics versus provider offices. The study found the prices paid for hospital outpatient departments were double those paid in physician offices for biologics, chemotherapies, and other infused cancer drugs (99-104% higher) and for infused hormonal therapies (68% higher). Blue Cross Blue Shield plans would have saved $1.28 billion, or 26 percent of what they actually paid, if the insurance provider had all patients receive their infusions in a provider’s office instead of hospital clinics.

• AHIP (2022): This analysis comparing drug claims data for drugs in specialty pharmacies, physician offices and hospitals found that costs per single treatment for drugs administered in hospitals (2018-2020) were an average of $7,000 more than those purchased through pharmacies. Drugs administered in physician offices had costs on average $1,400 higher than those from pharmacies.

[iii] The Board actually had it right in its April 13, 2022 draft rules.  The Final Proposal abandoned the previous inclusion of “physician and hospital administered drugs” found in proposed PDAB 102.07 (k) of the draft rules dated April 13, 2022, at p. 5.   Clearly, the drafters recognized that the law requires the inclusion of physician/hospital administered drugs.

Attorney Pfundstein is admitted in the state and federal courts of New Hampshire.