States Pass Record Number Of Laws To Reel In Drug Prices

Yves here. These efforts to tackle drug price gouging are long overdue, but a state-by-state effort is still piecemeal. But another dirty secret seems to be how arbitrary the consumer price is. I don’t have a pharmacy plan, but my meds are covered, which means I see what the prices are because I pay them and then submit for reimbursement. I recently had to have my 2 scrips filled at a different pharmacy chain. One is a super cheap generic. The other is more costly. I get 90 day scrips to lower the cost.

My old pharmacy said it was giving me a price break on the more expensive medication since I was a cash customer. I call new pharmacy and ask the pharmacist if I could get a better price as a cash customer. She said she could use a coupon. The result was it dropped the price to nearly 1/3 of what I had been paying. But the super cheap generic cost 50% more. Go figure.

By Steven Findlay. Originally published at Kaiser Health News

Whether Congress will act this year to address the affordability of prescription drugs — a high priority among voters — remains uncertain. But states aren’t waiting.

So far this year, 33 states have enacted a record 51 laws to address drug prices, affordability and access. That tops the previous record of 45 laws enacted in 28 states set just last year, according to the National Academy for State Health Policy, a nonprofit advocacy group that develops model legislation and promotes such laws.

Among the new measures are those that authorize importing prescription drugs, screen for excessive price increases by drug companies and establish oversight boards to set the prices states will pay for drugs.

“Legislative activity in this area is escalating,” said Trish Riley, NASHP’s executive director. “This year, some states moved to launch programs that directly impact what they and consumers pay for high-cost drugs.”

And more laws could be coming before year’s end. Of the handful of states still in legislative session — including California, Massachusetts, Michigan, New Jersey, Ohio and Pennsylvania — debate continues on dozens of prescription drug bills. In New Jersey alone, some 20 proposed laws are under consideration.

“Both Democrat and Republican leaders have shown a willingness to pursue strong measures that help consumers but also protect state taxpayer dollars,” said Hemi Tewarson, director of the National Governors Association’s health programs.

Riley, Tewarson and others note, however, that states can go only so far in addressing rising drug prices, and that federal legislation would be necessary to have a major impact on the way the marketplace works.

Federal lawmakers are keeping a close eye on the state initiatives, Tewarson said, to gauge where legislative compromise may lie — even as Congress debates more than a dozen bills that target drug costs. Political divisiveness, a packed congressional schedule and a looming election year could stall momentum at the federal level.

The pharmaceutical industry has opposed most — though not all — state bills, said Priscilla VanderVeer, a spokeswoman for the Pharmaceutical Research and Manufacturers of America, the industry’s main trade group.

“We agree that what consumers now pay for drugs out-of-pocket is a serious problem,” said VanderVeer. “Many states have passed bills that look good on paper but that we don’t believe will save consumers money.”

Limiting Gag Rules For Pharmacists

At least 16 states have enacted 20 laws governing the behavior of pharmacy benefit managers. The so-called PBMs serve as middlemen among drugmakers, insurance companies and pharmacies, largely with pharmaceutical industry support.

Those laws add to the 28 passed in 2018. Most of the new laws ban “gag clauses” that some PBMs impose on pharmacists. The clauses, written into pharmacy contracts, stop pharmacists from discussing with customers whether a drug’s cash price would be lower than its out-of-pocket cost under insurance.

With widespread public outrage over gag clauses pushing states to act, federal lawmakers got the message. In October, Congress passed a federal law banning such clauses in PBM-pharmacy contracts nationwide and under the Medicare Part D prescription drug benefit. The Senate passed it 98-2.

Even so, many of this year’s PBM laws contain additional gag clause limitations that go beyond the 2018 federal law.

Importing Cheaper Drugs

Four states — Colorado, Florida, Maine and Vermont — this year have enacted measures to establish programs to import cheaper prescription drugs from Canada and, in Florida’s case, potentially other countries. Six other states are considering such legislation.

Medicines in Canada and other countries are less expensive because those nations negotiate directly with drugmakers to set prices.

“This is an area where states once feared to tread,” said Jane Horvath, a consultant who has advised Maryland and Oregon, among other states, on prescription drug policy. “Now both Republicans and Democrats view it as a way to infuse more price competition into the marketplace.”

Hurdles remain, however. A 2003 law allows states to import cheaper drugs from Canada but only if the federal Health and Human Services Department approves a state’s plan and certifies its safety. Between 2004 and 2009, the federal government halted nascent drug import efforts in five states.

Even so, momentum for importation has built in recent years in states and Congress as drug prices have continued to rise. And the Trump administration this summer threw its support behind the idea.

Florida Gov. Ron DeSantis, a Republican and close ally of President Donald Trump’s, signed his state’s measure into law on June 11, claiming he did so after Trump personally promised him the White House would back the initiative.

On July 31, HHS announced an “action plan” to “lay the foundation for safe importation of certain prescription drugs.” The plan includes a process to authorize state initiatives. It also requires formal regulatory review, including establishing Food and Drug Administration safety criteria. That process could take up to two years.

Two big problems remain: In the weeks since the announcement, the Canadian government has opposed any plan that would rely solely on Canada as a source of imported drugs. The pharmaceutical industry also opposes the plan.

Creating Drug Affordability Boards

Maryland and Maine enacted laws this year that establish state agencies to review the costs of drugs and take action against those whose price increases exceed a certain threshold.

New Jersey and Massachusetts are debating similar legislation this year.

Maryland’s law establishes a five-member board to review the list prices and costs of drugs purchased by the state and Maryland’s county and local governments. The board will probe drugs that increase in price by $3,000 or more per year and new medicines that enter the market costing $30,000 or more per year or over the course of treatment.

If approved by future legislation, upper payment limits on drugs with excessive price increases or annual costs would take effect in January 2022.

“My constituents have signaled loud and clear that bringing drug prices down is one of their top priorities,” said state Sen. Katherine Klausmeier, a Democrat representing Baltimore, who sponsored the legislation.

Maine’s law also establishes a five-member board. Beginning in 2021, the board will set annual spending targets for drugs purchased by the state and local governments.

Increasing Price Transparency

This year, four states — Colorado, Oregon, Texas and Washington — became the latest to enact laws requiring drug companies to provide information to states and consumers on the list prices of drugs and planned price increases.

The majority of states now have such transparency laws, and most post the data on public websites. The details vary, but all states with such laws seek to identify drugs with price increases above 10% or more a year, and drugs with price increases above set dollar values.

Oregon’s new law, for example, requires manufacturers to notify the state 60 days in advance of any planned increase of 10% or more in the price of brand-name drugs, and any 25% or greater increase in the price of generic drugs.

“That 60-days’ notice was very important to us,” said Rep. Andrea Salinas, chair of the Oregon House’s health committee, who represents Lake Oswego. “It gives doctors and patients advance notice and a chance to adjust and consider what to do.”

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  1. Brooklin Bridge

    “It [60 days notice on drug increases of 10% and over] gives doctors and patients advance notice and a chance to adjust and consider what to do.”

    You know there is a major problem when nibbling around the edges is touted as significant improvement, “No worries, you have 60 days to consider what to do since the only insulin you can get your hands on is going up by 50% more than you already can’t afford. Have a nice day.” Why not, you’ve got 60 of them left and you don’t even have the money for that.

    Increases of 30,000 dollars per year trigger alarms? In the coin of the realm, kill me now seems as appropriate as it is a hard reality for many people (not everyone is insured and anyway, insurers have to make up their own costs somehow) who have to face such outrageous prices. I have to blink in disbelief when I hear politicians with the gall to say in public that people will never give up their health care insurance, as if such a cold on one side and intimate on the other death spiral is rather some extraordinary love affair (battered spouse syndrome?) with unbreakable bonds. The really nagging question is how did situations like this (and there are many) ever get this far and what does it say about us as a species?

    That said, this is very positive news on the whole – people seem to be waking up to the point where even our pathologically corrupt politicians have to take notice. I think huge credit goes to people like Bernie and AOC, even Warren, who have started the process of “have you no shame?” in earnest.

    1. Susan the other`

      Thanks BB. This was exactly my take as well. I also do not understand why states can’t get together and decide to manufacture drugs themselves. Promote cooperation and interstate trade. Jobs.

      1. Oh

        Maybe the first step should be for States to get together and negotiate with the legal drug pushers (pharmas) to get lower prices.

      2. Philip

        Drug manufacturing requires a large amount of expertise, experience, competence, manufacturing infrastructure as well as a good raw materials supply chain. Individual states will never manufacture drugs

        1. Yves Smith Post author

          Sorry, as we have described repeatedly, most drugs and their active ingredients come from China. India has started making its own generics. The barrier to manufacture isn’t as high as you suggest. It’s political will and lack of experience of government in manufacturing beyond, say, building schools, roads, and bridges. If India can do it, US government bodies could if they had the will. They don’t.

    2. a different chris

      >and what does it say about us as a species

      Pretty sure this is an American, not a homo sapiens, problem last I checked.

  2. Chris

    I note with some dismay that the sponsored content ad showing on this page right now is “Oncologists reveal true cause of cancer – uncovered documents reveal a cure for cancer has been concealed since WW2.” :/

    I agree that these laws are a positive first step. If we can keep making changes for things like balance billing too, then maybe we can start to provide healthcare to citizens instead of access.

      1. Chris

        FDA has been intentionally starved of funds and limited in scope so that it needs industry to do it’s job. There are a lot of good people at the FDA who would be happy to do the work we need if only our masters would let them. But there’s too much money sloshing around to ever force the people who profit off the current system to back away.

  3. Keith Howard

    Nibbling around the edges is a good way to characterize this State activity. But it also looks somewhat disingenuous to me. Sure, there are horror stories about medicines that are astronomically expensive, and the shocking gouging by Pharma companies naturally gets attention from politicians. But I suspect that far more people are affected, as am I, by the total annual cost of staying out of the hospital by controlling chronic conditions using prescription drugs. None of the medicines I need is shockingly expensive (pace what they actually cost to manufacture and distribute,) but the annual premium for a Medicare Part D plan, plus co-payments, plus the risk of falling into the Doughnut Hole, all together add up to a significant burden. This gets worse with each passing year. Prices of generic medicines appear to be blatantly manipulated, and the price I pay for really old drugs is absurd. Nibbling around the edges will do nothing to correct this basic situation. I doubt that Medicare Part D is reformable. A completely new plan is needed.

    1. a different chris

      Bingo. Note this carefully worded “hey we’re on your side” statement:

      >“We agree that what consumers now pay for drugs out-of-pocket is a serious problem,” said VanderVeer. “Many states have passed bills that look good on paper but that we don’t believe will save consumers money.”

      “Out-of-pocket” — what they want to do is make the insurance companies cover them at these outrageous prices, then said insurance companies will spread the cost yet again among us all, and all the executives involved will still be able to trade in their Maserati’s every 6 months.

      Family blog the lot of them.

    2. Yves Smith Post author

      You are lucky and are probably on old meds that are off patent.

      Anti leukemia meds cost $14K a month.

      My mother has COPD and her co-pay for one inhaler on Medicare with one of those drug plans is $90 a month. She pays over $500 a month in co-pays and all her meds are old tech for common problems like stroke preventatives when one adult aspirin a day would probably do her as much good.

      I find it appalling that one of the meds I take, which is a simple hormone, is $100 a month. A hormone? Are you kidding?

      1. Chris

        What’s appalling is that drug research and discovery has never been cheaper. Yet people still buy the “it takes billions of $$$ to bring a drug to market” schtick. Most of these companies spend over 100% of their profits on stock price manipulation and dividends. Many of them don’t do any research anymore – they buy small Boston or San Francisco based start-ups and roll them into their portfolio. Your typical pharmaceutical company today is an M&A hedge fund with a drug habit. It’s not doctors in white coats developing cutting edge tech anymore.

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