Jim Johnson’s Plan for Affordable Prescription Drugs

On the campaign trail, Jim has heard the voices of those who feel they have to choose between the medicines they need and other essentials for a peaceful life. That has to change. One of the largest drivers of rising health care costs has been the increase in prescription drug prices. In recent years, prescription drug prices have often increased by double-digit percentages. Often, these burdens are borne by those who can least afford it, such as seniors that are on fixed incomes. Johnson’s policies to lower prescription drug costs are centered on three principles: Transparency, Research Before Marketing and Anti-Trust Action, with the aim of ending price gouging by pharmaceutical companies. To accomplish these objectives, Johnson will require pharmaceutical companies to detail how their prices are set and justify any price increases by proving that their increases are not the result of marketing costs or executive compensation. Finally, Jim will direct his Attorney General to join in anti-trust actions to curb monopolistic behavior by pharmaceutical companies. These steps will lower drug prices and put a stop to price gouging by pharmaceutical companies.

Transparency and Ending Price Gouging

One of the biggest reasons that prescription drug prices continue to rise is the complete lack of transparency. The prescription drug market is largely opaque, making it difficult to fully understand the root causes of sudden price increases. The first step in addressing the issue of prescription drug costs will be to mandate more transparency in the pricing process. As Governor, Johnson will push pharmaceutical companies for transparent pricing that details how prices are set, how much they spend on marketing, and how much their executives are compensated. Johnson would also call for transparency in provider-supplier relationships to ensure that providers don’t have financial incentives to prescribe more costly drugs. Then, Johnson would call for legislation that requires drug manufacturers to justify any price increases beyond a certain annual threshold (10% for brands and 25% for generics) to the state’s Insurance Commissioner. Finally, Johnson would increase transparency by requiring manufacturers to disclose price concessions to pharmacy benefit managers and require health plans to base co-insurance and deductible payments on the net price of drugs, after rebates, rather than the list price, which is often much higher than the final price paid by a health plan.

Research and Development Before Marketing

The Affordable Care Act instituted a highly successful policy known as the medical loss ratio rebate, where insurance companies had to submit data on what percentage of premiums was spent on improving health care quality and what percentage was spent on marketing and administrative costs. It also required insurers to issue rebates to customers if they spent too high of a percentage on costs that did not increase health care quality. Building upon this model, Johnson will call for prescription drug companies to be held to the same standard, disclosing the percentage of their costs that are from marketing as well as the percentage spent on research and development. Johnson will also work with health care experts to determine a minimum standard for costs that must be spent on research and development. If pharmaceutical companies do not meet those standards, they will have to issue a rebate to drug purchasers.

Antitrust Action

In partnership with the Justice Department and Federal Trade Commission, state attorneys general have been a powerful bulwark against monopolistic actions by pharmaceutical companies. As Governor, Johnson would direct New Jersey’s attorney general to join in anti-trust action by states and municipalities to make sure that there is fair competition and end to price-fixing. As pharmaceutical companies continue to merge, resulting in a non-competitive market, public officials will have to fight back to respond to dramatic price increases and attempts to create monopoly power.

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