HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: HB 1431 International Drug Reference Pricing
SPONSOR(S): Fine and others
TIED BILLS: IDEN./SIM. BILLS: SB 1750
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Select Committee on Health Innovation 13 Y, 2 N DesRochers Calamas
2) Appropriations Committee
3) Health & Human Services Committee
SUMMARY ANALYSIS
In 2021, retail prescription drugs accounted for 8.9% of U.S. health spending. Over the last six decades, the
United States recorded an exponential increase in prescription drug spending per capita, adjusted for inflation.
Drug spending per capita increase from $101 in 1960 to $1,147 in 2021. Increased drug spending per capita is
attributable in large part to the high cost of drugs in the United States.
The most recent comprehensive study comparing U.S. drug prices to similarly situated countries in the
Organisation for Economic Co-operation and Development reveals that U.S. drug prices were in the aggregate
256% more than drug prices in other OECD countries. U.S. prices for brand-name originator drugs were 344%
of prices in other OECD countries. High prescription drug costs contribute to poor medication adherence which
leads to adverse downstream effects on health care spending and health outcomes .
International reference pricing refers to the practice of using the price of a pharmaceutical product in one or
several jurisdictions to derive a benchmark, or reference price, that informs price setting or price negotiation of
the product in the home jurisdiction. In other words, reference pricing sets an upper payment limit for
purchasers. Reference pricing is a cost-containment policy strategy to ensure the maximum price paid for a
drug is not excessive priced relative to its price in other countries.
HB 1431 requires the Agency for Health Care Administration (AHCA) to establish an upper payment limit for
prescription drug coverage based on an international reference for each prescribed drug. The upper payment
limit applies to Medicaid, the State Group Insurance Program, health maintenance organizations, authorized
insurers offering health insurance, and a pharmacy’s prescription drug transactions with cash-paying patients.
The bill creates a reporting requirement for drug manufacturers. Starting October 1, 2025, the bill requires drug
manufacturers permitted by Department of Business and Professional Regulation to annually provide AHCA
international prescription drug pricing data.
The bill requires the Office of Insurance Regulation and AHCA to submit a joint report every year detailing the
impact of international drug reference pricing. The first annual report is due January 1, 2026.
The bill obligates health insurers to reduce beneficiary premiums and co-pays to reflect savings generated by
applying the drug reference price to the reimbursement rate. The bill requires health insurers to document
beneficiaries’ anticipated savings and premium reductions in rate filings.
The bill has a significant negative fiscal impact on AHCA and no fiscal impact on local government.
The bill provides an effective date of July 1, 2024.
This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives .
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 FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Background
Health Care Spending in the United States
In 2021, the United States spent 17.8% of gross domestic product (GDP) on health care, nearly twice
as much as the average country in the Organisation for Economic Co-operation and Development
(“OECD”)1 which is 9.6%.2
3
Total health spending in the United States for 2021 reached $4.3 trillion. 4 Despite enormous health
care spending, health outcomes in the United States are poor compared to other similarly situated
countries in the international community.5 Regrettably, the United States has the lowest life expectancy
at birth, the highest death rates for avoidable or treatable conditions, the highest maternal and infant
mortality, and among the highest suicide rates.6
The COVID-19 pandemic, recent broad-based inflation trends in the economy, and health sector
employment trends complicate future spending projections.7 However, as health care utilization returns
to pre-pandemic levels, the average annual health care spending per person projection signals an
1
OECD. https://www.oecd.org/about/members-and-partners/ (last visited Dec. 11, 2023). The 38 OECD Member Countries are
Australia, Austria, Belgium, Canada, Chile, Colombia, Costa Rica, Czechia, Denmark, Estonia , Finland, France, Germany, Greece,
Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Latvia, Lithuania, Luxembourg, Mexico, Netherlands, New Zealand, Norw ay,
Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, United Kin gdom, and United States.
2 Munira Z. Gunja, Evan D. Gumas, Reginald D. William II, U.S. Health Care from a Glob al Perspective, 2022: Accelerating Spending,
Worsening Outcomes, The Commonwealth Fund (Jan. 31, 2023) https://www.commonwealthfund.org/publications/issue-
briefs/2023/jan/us-health-care-global-perspective-2022 (last visited Dec. 5, 2023).
3 OECD Health Statistics 2022 uses 2020 data. The chart reflects current expenditures on health for all functions by all providers for all
financing schemes. Data points reflect share of GDP. OECD average reflects the average of 38 OECD member countries, including
ones not shown here.
4 Imani Telesford, Shameek Rakshit, Matthew McGough, Emma Wager, and Krutika Amin, How has U.S. spending on healthcare
changed over time? Peterson-KFF Health System Tracker (Feb. 7, 2023) https://www.healthsystemtracker.org/chart-collection/u-s-
spending-healthcare-changed-time/ (last visited Dec. 8, 2023).
5 Id.
6 Id.
7 Matthew McGough, Meghan Salaga, Cynthia Cox, and Krutika Amin, How much is health spending expected to grow? Peterson-KFF
Health System Tracker (Oct. 11, 2023) https://www.healthsystemtracker.org/chart-collection/how-much-is-health-spending-expected-to-
grow/ (last visited Dec. 5, 2023).
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 increase from 3.9% per capita during 2014 to 2019 to 4.8% per capita from 2022 to 2031. 8 Already,
the average amount spent on health per person in the United states was $12,914 in 2021 – which
dramatically exceeds both the OECD average ($6,125 per person) and the next closest OECD country,
Germany ($7,383 per person).9 For 2023 and beyond, health care spending may outpace overall
economic growth and eventually hit 19.6% GDP by 2031. 10
Pharmaceutical Spending
U.S. Pharmaceutical Spending
In 2021, retail prescription drugs accounted for 8.9% of U.S. health spending. 11 Over the last six
decades, the United States recorded an exponential increase in prescription drug spending per capita,
adjusted for inflation.12 As the graph below indicates, prescription drug spending per capita increased
from $101 in 1960 to $1,147 in 2021.13
Some pinpoint the 1990s as the era when the relationship between high drug spending per capita and
high drug prices manifested for the first time. Signature characteristics of the 1990s drug market
include the rapid growth of brand-name drugs, increased advertising to physicians and consumers,14
and the FDA’s pivot to a user-fee model to expedite new drug approvals.15 In addition, Medicare,
Medicaid, and the Children’s Health Insurance Program expanded coverage to prescription drugs.16
8
Id.
9 Matthew McGough, Imani Telesford, Shameek Rakshit, Emma Wager, Krutika Amin, and Cynthia Cox, How does health spending in
the U.S. compare to other countries? Peterson-KFF Health System Tracker (Feb. 9, 2023) https://www.healthsystemtracker.org/chart-
collection/health-spending-u-s-compare-countries/ (last visited Dec. 8, 2023).
10 Supra, FN 7.
11
Emma Wager, Imani Telesford, Cynthia Cox, and Krutika Amin, What are the recent and forecasted trends in prescription drug
spending? Peterson-KFF Health System Tracker (Sept. 15, 2023) https://www.healthsystemtracker.org/chart-collection/recent-
forecasted-trends-prescription-drug-spending/ (last visited Dec. 5, 2023).
12 Supra, FN 7.
13 Supra, FN 11.
14
Drug manufacturers advertise to encourage consumers to ask their doctors for specific medications. Aaron S. Kesselheim, High Drug
Prices in the US: What We Can Learn from Other Countries (and Some US States), Testimony to the United States Senate Committee
on Health, Education, Labor, and Pensions (Mar. 23, 2021) https://www.help.senate.gov/imo/media/doc/Kesselheim1.pdf (last visited
Jan. 15, 2024). Aaron Kesselheim is a Professor of Medicine at Harvard Medical School and the Director of Program on Regulation,
Therapeutics, and Law (PORTAL) in the Division of Pharmacoepidemiology and Pharmacoeconomics at the Department of Medicine at
Brigham and Women’s Hospital.
15 C. Michael White, Why is the FDA Funded in Part b y the Companies it Regulates? UConn Today (May 21, 2021)
https://today.uconn.edu/2021/05/why-is-the-fda-funded-in-part-by-the-companies-it-regulates-2/ (last visited Jan. 15, 2024). C. Michael
White is the Department Head & Distinguished Profession of Pharmacy Practice at the University of Connecticut School of Pharmacy.
16 Austin Frakt, Something Happened to U.S. Drug Costs in the 1990s, The New York Times (Nov. 12, 2018)
https://www.nytimes.com/2018/11/12/upshot/why-prescription-drug-spending-higher-in-the-us.html (last visited Jan. 15, 2024). Austin
Frakt is a Senior Research Scientist in the Department of Health Policy and Management at Harvard T.H. Chan School of Public
Health.
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 While a critical mass of prescription drug patents expired17 throughout the mid-2000s, temporarily
scaling back per capita spending, new biologic drugs directed a per capita spending resurgence in the
mid-2010s. This era introduced precision medicine stemming from the completion of the human
genome project. Precision medicine means drugs made for smaller populations to match specific
genetic characteristics – making drugs more effective and creating a greater dependence on these
drugs.18
Other factors contribute to high drug prices in the United States:
 Pharmaceutical market consolidation;19
 Until recently, Medicare did not negotiate drugs prices. 20
 New medicine launches at record-high prices;21
 Increases in unit cost or dosage cost;22
 Delayed introduction of cheaper generic alternatives because drug manufacturers found ways to
extend regulatory exclusivities;23
 Pharmacy benefit managers 24 and other intermediaries between drug manufacturers and
consumers, 25
 Lack of price transparency.26
U.S. Pharmaceutical Spending Compared to Other Countries
For all drugs, U.S. prices were 256% of prices in other OECD countries. U.S. prices for brand-name
originator drugs were 344% of prices in other OECD countries. With the exception of unbranded
generics, the magnitude of the difference between prices in the United States and those in other OECD
countries was substantial. The bar graph below compares U.S. prices with OECD member countries. 27
17 Patents endorse the drug manufacturer’s sole right to sell and profit off their inventions and market exclusivities prevent generic and
biosimilar competitors from entering the drug manufacturer’s market for a period of time. Therefore, drug manufacturers producing
drugs under patent or exclusivity protection have pricing power. Dicken, John, Prescription Drug Spending, The United States
Government Accountability Office https://www.gao.gov/prescription-drug-spending (last visited Dec. 11, 2023).
18 Supra, FN 15; Steven Schwartz, Millie Mo, Jinesh John, Ryan Chandanais, and Stephanie LaPointe , Precision Medicine and the
Pharmacist’s Role as a Trusted Counselor in Specialty Pharmacy, Pharmacy Times (May 19, 2020)
https://www.pharmacytimes.com/view/precision-medicine-and-the-pharmacists-role-as-a-trusted-counselor-in-specialty-pharmacy (Jan.
15, 2024).
19
See Robin Feldman, Brent D. Fulton, Jamie R. Godwin, Richard M. Scheffler, Challenges with Defining Pharmaceutical Markets and
Potential Remedies to Screen for Industry Consolidation, 47 J. Health Pol. Pol’y & L. 583 (2022).
https://repository.uclawsf.edu/cgi/viewcontent.cgi?article=2922&context=faculty_scholarship (last visited Jan. 15, 2024).
20 Centers for Medicare & Medicaid Services, Medicare Drug Price Negotiation, U.S. Department of Health and Human Services (last
updated Jan. 5, 2024) https://www.cms.gov/inflation-reduction-act-and-medicare/medicare-drug-price-negotiation (last visited Jan. 15,
2024); Evan D. Gumas, Paige Huffman, Irene Papanicolas, and Reginald D. Williams III, How Prices for the First 10 Drugs Up for U.S.
Medicare Price Negotiations Compare Internationally, The Commonwealth Fund (Jan. 4, 2024)
https://www.commonwealthfund.org/publications/2024/jan/how-prices-first-10-drugs-medicare-negotiations-compare-internationally (last
visited Jan. 15, 2024).
21 Deena Beasley, Focus: Newly launched U.S. drugs head toward record-high prices in 2022, Reuters (Aug. 16, 2022)
https://www.reuters.com/business/healthcare-pharmaceuticals/newly-launched-us-drugs-head-toward-record-high-prices-2022-2022-
08-15/ (last visited Dec. 11, 2023).
22
American Academy of Actuaries , Prescription Drug Spending in the U.S. Health Care System , Issue Brief (Mar. 2018), available at:
http://www.actuary.org/files/publications/PrescriptionDrugs.030718.pdf (last visited Dec. 11, 2023).
23 Id. Delay tactics to extend the life of a brand-name patent include paying generic manufacturers to not enter the market, changing
formulations, strengthening doses, and expanding FDA-approved uses for the brand-name drug.
24 The Commonwealth Fund, Pharmacy Benefit Managers and Their Role in Drug Spending , (April 22, 2019) available at
https://www.commonwealthfund.org/sites/default/files/2019-04/Explainer_PBMs_1.pdf (last visited Aug. 14, 2023). Pharmacy benefit
managers are intermediary companies that manage prescription drug benefits on behalf of pharmacy benefit p lans or programs (health
insurers, Medicare Part D drug plans, large employers, state health plans, and other payers).
25 Id.
26 Id.
27 Andrew W. Mulcahy, Christopher Whaley, Mahlet G. Tebeka, Daniel Schwam, Nathaniel Edenfield, Alejandro U. Becerra -Ornelas,
International Prescription Drug Price Comparisons: Current Empirical Estimates and Comparisons with Previous Studies , RAND Corp.
p. xiv (2021), https://www.rand.org/pubs/research_reports/RR2956.html (last visited Dec. 18, 2023). Authors analyzed IQVIA MIDAS
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 U.S. Drug Prices as a Percentage of Drug Prices in OECD Countries
Nonadherence
High prescription drug costs contribute to poor medication adherence which leads to adverse
downstream effects on health care spending and health outcomes. 28 According to 2023 polling, six in
ten adults say they currently take at least one prescription drug and a quarter say they currently take
four or more prescription medications.29 As shown by the graph below, about three in ten of the adults
surveyed report not taking their medicines as prescribed at some point in the past year because of
cost.30
sales and volume data for calendar year 2018. Comparison co untries were the 32 OECD member countries at the time of the study.
Authors compared the top 60 drugs by U.S. Sales at the active ingredient level.
28
Julie Lauffenburger, Renee A. Barlev, Eniola Olatunji, Gregory Brill, and Niteesh Choudhry, Costs of Prescription Drugs for Children
and Parental Adherence to Long-Term Medications, PubMed Central, National Library of Medicine (Oct. 6, 2023)
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10580109/ (last visited Dec. 7, 2023).
29 Ashley Kirzinger, Alez Montero, Grace Sparks, Isabelle Valdes, and Liz Hamel, Pub lic Opinion on Prescription Drugs and Their
Prices: Methodology, KFF, (Aug. 21, 2023) https://www.kff.org/report-section/kff-health-tracking-poll-july-2023-the-publics-views-of-
new-prescription-weight-loss-drugs-and-prescription-drug-costs-methodology/ (last visited Dec. 5, 2023). Methodology: July 11-19,
2023, online and telephone survey among a nationally representative sample of 1,327 U.S. adults. Margin of sam pling error within the
accepted ± 3 percentage points.
30 Id.
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 The economic, clinical, and ethical consequences of medication non-adherence will continue to grow
as the burden of chronic diseases intensifies.31 Improving medication adherence provides an
opportunity for major cost savings to healthcare systems. 32
Pharmaceutical Regulation
The United States Food and Drug Administration
The United States Congress established the United States Food and Drug Administration (FDA) within
the United States Department of Health and Human Services (HHS). 33 In part, FDA protects the public
health by ensuring regulated drug products are safe and effective for human use. 34 Congress charges