Drug prices are rising at crazy rates; in 2015, almost one in three brand-name drugs saw a price increase of 20 percent. In response, more than a dozen states are considering legislation that would call the drug companies to account. Of course, PhRMA is fighting states on drug pricing.
On June 3, 2016, Vermont’s governor signed into a drug transparency law intended to make drug companies justify huge drug price increases. And, since then, the California Assembly’s Health Committee approved a similar drug price transparency bill, which its Senate has passed, intended to make drug companies justify huge drug price increases. That said, Stat reports that the bill has recently been gutted.
Now, a ballot initiative in California, Proposition 61, is designed to reduce the cost of drugs for state agencies. This would not only take a toll on drug company profits, it would set the stage for other states to pass similar initiatives. Not surprisingly, PhRMA has already put $70 million into fighting this initiative.
Proposition 61 would keep California agencies like MediCal, (California’s Medicaid), which covers poor children, from paying any more for a drug than the lowest price paid by the Veterans’ Administration (V.A.). Ohio has a similar initiative, but PhRMA may successfully keep it from being voted on by bringing a lawsuit challenging it.
California state agencies today spend $4 billion a year on drugs. If Proposition 61 passes, the state could could save hundreds of millions of dollars. But, some argue that it would be hard to implement.
Most drug prices, including discounts and rebates, are not transparent. So, it could be hard to know exactly what the V.A. is paying. That said, the CBO reported ten years ago that the V.A. pays about 42 percent of the retail prices and Medicaid pays about 52 percent.
California AARP supports Proposition 61 as does the California Nurses Association. But, according to the New York Times, some advocates oppose it for fear that it will lead drug companies to drive up prices at the V.A. and for others even further. It’s not clear whether some or all of these advocates take money from the drug companies and are therefore conflicted.
As important as it is for states to be taking action on drug pricing, state action is not likely to succeed at reining in drug prices as much as needed. The pharmaceutical industry is too powerful. But, state activity keeps a spotlight on the pharmaceutical industry and that in turn keeps pressure on Congress to act. How long that will take, however, is anyone’s guess.
Here’s more from Just Care:
- Six ways to save on your drug costs if you have Medicare
- Regulating drug prices is long overdue
- How safe are the drugs you’re taking?