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The California drug transparency bill (SB-17), signed into law in October 2017, seeks to promote transparency in pharmaceutical pricing, enhance understanding about pharmaceutical pricing trends, and assist in managing pharmaceutical costs. This article examines the legal and regulatory aspects of SB-17, explores legal challenges to the law, compares it to other state efforts to address rising drug prices, and discusses how California can maximize the impact of SB-17 by coupling the law with other incentives. While SB-17 might not significantly reduce drug prices, the new law represents a meaningful step for one state seeking to negotiate the political and legal boundaries of state action to rein in drug prices. [ABSTRACT FROM AUTHOR]

Reference pricing in health insurance creates incentives for patients to select for nonemergency services providers that charge relatively low prices and still offer high quality of care. It changes the "choice architecture" by offering standard coverage if the patient chooses cost-effective providers but requires considerable consumer cost sharing if more expensive alternatives are selected. The short-term impact of reference pricing has been to shift patient volumes from hospital-based to freestanding surgical, diagnostic, imaging, and laboratory facilities. This article summarizes reference pricing's impacts to date on patient choice, provider prices, surgical complications, and employer spending and estimates its potential impacts if expanded to more services and a broader population. Reference pricing induces consumers to select lower-price alternatives for all of the forms of care studied, leading to significant reductions in prices paid and spending incurred by insurers and employers. The impact on consumer cost sharing is mixed, with some studies finding higher copayments and some lower. We conclude with a discussion of the incentives created for providers to redesign their clinical processes and for efficient providers to expand into price-sensitive markets. Over time, reference pricing may increase pressures for price competition and lead to further cost-reducing innovations in health care products and processes. [ABSTRACT FROM AUTHOR]

Some employers are implementing reference-pricing benefit designs, which establish limits on the amount they will pay for some procedures covered by employer-sponsored insurance. Employees are required to pay the difference between the employer's contribution limit and the actual price received by the hospital. These initiatives encourage patients to select low-price facilities and indirectly encourage facilities to reduce prices to increase patient volume. We evaluated the impact of reference pricing on the use of and prices paid for knee and hip replacement surgery by members of the California Public Employees' Retirement System (CalPERS) from 2008 to 2012, using enrollees in Anthem Blue Cross as a comparison group. In the first year after implementation, surgical volumes for CalPERS members increased by 21.2 percent at low-price facilities and decreased by 34.3 percent at high- price facilities. Prices charged to CalPERS members declined by 5.6 percent at low-price facilities and by 34.3 percent at high-price facilities. Our analysis indicates that in 2011 reference pricing accounted for $2.8 million in savings for CalPERS and $0.3 million in lower cost sharing for CalPERS members. [ABSTRACT FROM AUTHOR]

The prices paid in 2019 by Blue Cross Blue Shield health plans in hospital outpatient departments were double those paid in physician offices for biologies, chemotherapies, and other infused cancer drugs (99-104 percent higher) and for infused hormonal therapies (68 percent higher). Had these plans excluded hospital clinics from their networks, channeling all of the infusions to physician offices, they would have saved $1.28 billion per year, or 26 percent of what they actually paid. Had they relied on cost-sharing incentives to channel infusions to physician offices--with either uniform 20 percent coinsurance or reference pricing--they would have realized savings but increased the financial burden on patients who received care at the higher-price hospital clinics. Under 20 percent coinsurance, patients' payment obligations for care at hospital clinics would have exceeded those for care in physician offices by a median of 67 percent for biologies, 72 percent for chemotherapies, 87 percent for hormonal therapies, and 75 percent for other cancer drugs. Large savings are potentially available to commercial insurers from shifting cancer infusion care to nonhospital settings, but cost-sharing burdens could become very high for patients. [ABSTRACT FROM AUTHOR]