State efforts to rein in prescription drug costs

The overwhelming majority of the public supports government intervention to bring down drug prices. While the federal government is doing precious little about prescription drug prices other than holding hearings, states are acting in the somewhat limited ways they can. Thomas Huekskoetter of the Center For American Progress has a new report on state efforts to rein in prescription drug costs.

Huekskoetter describes three types of state efforts to address prescription drug prices. One effort is to increase price transparency of drugs so that we can see how much drugmakers are actually charging middlemen and how much middlemen are hiking up the prices. Another effort strengthens the power of states to negotiate prices. A third effort attempts to reduce pharmaceutical company price gouging. All of them spotlight drugmaker abuses and help to galvanize the public and pressure Congress to act. It’s not clear whether any of them will have any effect in reining in prices.

Drug price transparency itself will not bring down prices. But, it will expose and shame drugmakers. It is a good step forward in the fight to rein in prices. Nevada’s law focuses exclusively on insulin and requires drugmakers to justify significant insulin price increases as well as report manufacturing costs, marketing expenses and profits. In addition PBMs must reveal the rebates they get from drugmakers for insulin. And, advocacy groups must disclose any donations from pharmaceutical companies to expose the groups that are in the pockets of Pharma.

California’s law is broader in that pharmaceutical companies must notify the state if they are raising list prices on their drugs by 16 percent or more over two years. And health insurers must disclose the amount that higher drug costs affect an annual premium increase. Oregon’s recent law largely piggybacks off of Nevada’s law requiring drug company expenses and profits reporting, but it is far broader, covering all drugs with annual price increases of 10 percent or more.

This all said, Vermont has a price transparency law that has not been helpful at all, even though it requires pharmaceutical companies to justify certain drug price increases. For some reason, confidentiality rules made Pharma’s justifications inaccessible even to legislators.

It is far harder for states to increase their negotiating power against pharmaceutical companies than to require some transparency. Maryland has been trying. But, so far, a bill to create a Drug Cost Commission to track prescription drug prices, especially for the most costly drugs, has passed only the House. The Drug Cost Commission’s authority would essentially be to issue reports on what they find and to recommend policy solutions. It is awaiting Senate passage.

Massachusetts has proposed using a formulary for its Medicaid population as a way to secure greater leverage over pharmaceutical companies. The formulary would only cover certain drugs, relying on comparative effectiveness data on drugs as one way to determine whether Medicaid should cover a drug. Massachusetts’ waiver request to the Centers for Medicare and Medicaid Services makes the compelling case that because of the 21st Century Cures Act, “Many drugs coming to market through the FDA’s accelerated approval pathway have not yet demonstrated clinical benefit and have been studied in clinical trials using only surrogate endpoints.” Understandably, Massachusetts does not want to pay for high-priced prescription drugs that are not found to have clinical benefits. It is not at all clear that the Trump administration will approve the request for a waiver.

New York passed a law that imposes a drug spending cap for Medicaid. The law requires state Medicaid officials to renegotiate rebates for high-priced drugs responsible for substantial Medicaid drug spending that could trigger the drug spending cap.

Some states are also trying to address pharmaceutical company price gouging–big increases in drug prices from one year to the next. But, that is a big challenge. A Maryland land focused on penalizing drugmakers for excessive generic drug price increases was found to violate the dormant commerce clause of the US Constitution by the 4th US Circuit Court of Appeals. If Maryland or another state can succeed in implementing a law of this type, every other state likely would benefit.

Drug importation: Vermont now has a law that legalizes drug importation from Canada. But, the law requires the state health agency to design an implementation proposal for importation for HHS approval. And, it is unclear what HHS will do.

Setting state agency drug prices at same level as US Department of Veterans Affairs: The pharmaceutical industry was able to defeat this ballot initiative in both California and Ohio, spending $109 million in California and $60 million in Ohio.

If you want Congress to rein in drug prices, please sign this petition.

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