Not Waiting for the Feds, Some States Are Tackling Drug Pricing


Like the rest of the country, Californians will head to the polls on Nov. 8 to vote for a new President and Congress.  The liberal state is also known for offering a laundry list of ballot initiatives each election cycle covering issues ranging from agriculture to the entertainment industry to healthcare.

This year, Golden State residents will vote on the Drug Price Relief Act, which would require the state to pay no more for prescription drugs than the US Department of Veterans Affairs rates. The initiative is sponsored by the AIDS Healthcare Foundation and may impact three to seven million Californians currently, such as those on Medicaid and who receive other state healthcare benefits.

Democratic presidential candidate Bernie Sanders supports the measure. And anything with the pharmaceutical industry’s disdain is bound to be supported by a good chunk of the California public.

For over a year, surveys have shown that Americans are fed up with high drug prices. Presidential candidates are talking about solutions on the campaign trail. HHS has even proposed a controversial Part B drug demonstration (that is likely to be scaled back due to stakeholder opposition).

Fearing that the federal government may be moving too slowly, roughly a dozen states have embarked on initiatives to improve drug pricing transparency or deliver other solutions to address citizens’ concerns that medicines are simply too expensive.

On June 3, the governor of Vermont, Peter Shumlin, signed into law one of the first state drug pricing bills.  Vermont’s bill will require regulators to develop a list of 15 drugs each year that are deemed too burdensome to state finances and/or where their prices that have increased substantially. It will require drug manufacturers to justify the price increases to the attorney general’s office and will require insurers to report on the extent to which drug spending is driving up premiums.

In contrast to Vermont, California’s size is enough to materially affect market dynamics. The state’s Medicaid population is about 16% of the total U.S. Medicaid program, a jointly funded federal and state healthcare program for the poor and disabled. The Affordable Care Act (ACA) expanded the Medicaid program significantly to the point that Medicaid now has more covered lives than Medicare– 72 million vs. 54 million beneficiaries. The November 8 ballot measure would exempt some purchases of drugs through California’s Medicaid program, Medi-Cal.

California is often seen as a bellwether state for shaping legislative ideas for the rest of the country. That means that a measure that passes there could soon see traction soon in other states.

However, the CA ballot initiative has its limitations, to be sure.

For instance, there is no discussion of the interaction between healthcare government prices at VA levels, along with other prominent programs, such as the Medicaid rebate program and/or 340b.

Ballot measure opponents would argue that government spending on certain drugs could actually increase in Medicaid, given the hefty rebates that biopharmaceutical companies provide to the state and other dynamics.

Two other bills are slowly moving through the CA state legislature: One bill would require manufacturers that plan to hike drug prices over 10 percent to notify the state with two months advance notice, with justification of the spike. In addition, manufacturers with drugs that cost over $10,000 would also be required to notify officials, as well as health plans. Manufacturers would have to disclose research and development (R&D) as well as marketing costs, prescription assistance, and profits for high priced drugs.

Quietly, other states are moving ahead.

At least ten states—California, Massachusetts, New York, North Carolina, Oregon, Pennsylvania, and Texas for instance—have introduced drug price transparency legislation, which would require drug manufacturers to disclose costs of R&D, production, and marketing.

In the past two years, at least 30 states have considered legislation establishing state standards for substitution of a “biosimilar” prescription product to replace an original biologic product.

Drug cost containment strategies are being used in 25 states to rein in prescription drug costs. Strategies include: higher rebates, clinical criteria, prior authorization, and Hepatitis C specific policies.

At least seven states—Delaware, Louisiana, Maine, Maryland, Montana, New York, and Vermont—have laws that limit the out-of-pocket payments of patients in private health plans.

For once the states may be moving ahead of the feds and Vermont has paved the way. California will be a state to watch this fall because ballot initiative passage means that other states could follow suit more quickly.

Drug transparency is an initiative most patients, employers, hospitals and physicians support. It’s no surprise that many in the pharmaceutical industry are opposed, and between now and November 8 they will be making their case to Californians. It’s sure to be a long, hot summer.

Morning Consult