NM should negotiate on drug prices

As New Mexico struggles to cope with declining tax revenues and cuts to classrooms and health care, it is imperative for legislators to find new ways to improve the state’s bottom line. That is why it is time to enact innovative policies to rein in the soaring cost of prescription drugs. It places a growing burden on our state budget each passing year.

With its enormous buying power, New Mexico should be more vigorously negotiating pharmaceutical drug prices to lower taxpayers’ expense, and to free up resources for cash-strapped public education and other essential services. SB 354, creating an Interagency Pharmaceutical Purchasing Council, will make it happen.

The bill, if implemented, could save New Mexico up to $100 million per year in prescription drug costs, according to Dr. Martin Hickey, CEO of New Mexico Health Connections, the state’s largest nonprofit health plan.

The state, along with publicly funded health care institutions and retiree health plans, is a major purchaser of prescription drugs. Together they spent over $670 million on prescription drugs in 2016, a staggering 54 percent increase from just two years prior. Spending on prescription drugs now accounts for a large, and the fastest growing, part of our state’s health care budget. It could grow to a crippling portion in a few years if we do not act.

My bill would require we leverage the combined purchasing power of taxpayer-funded health agencies in New Mexico including Medicaid; the departments of Health, Human Services and Corrections; retired state government workers’ benefits; UNMH; and other public health organizations to drive hard bargains with pharmaceutical drug manufacturers for lower drug prices.

Using state buying power and bulk purchasing to negotiate for cheaper prescription drugs works. Some states are using this strategy on their own to save millions for their budgets. Other states have joined together in multistate cooperatives to create even larger purchasing pools and larger savings. It is long overdue for New Mexico to take a hard look at these successful strategies.

The U.S. Department of Veterans Affairs negotiates for its drug purchases. It pays 40 to 50 percent less on average for the same drugs purchased by Medicare, for example. Bulk purchasing of critical pharmaceuticals in the form of vaccines for children is used by the Centers for Disease Control and Prevention. It extracts steep discounts from manufacturers and distributes the vaccines at no cost.

The pharmaceutical industry opposes state government price negotiation because it hits their profits. We have seen the price gouging practices of some manufacturers, as in the case of EpiPen injection devices. The industry makes billions in profits. The industry is the nation’s most profitable, in fact, with margins several times the average for Fortune 500 companies. To address this unfair economic equation, the state must begin to bargain in earnest directly with the manufacturers, using its size and market share to get the best possible price from manufacturers on the prescription drugs it purchases.

Prescription drugs are valuable tools for health care and in protection and treatment of disease in our state. Spiraling costs and spending on pharmaceuticals is crowding out other key priorities in the state budget. We need new and effective approaches to get dramatically lower prices now. It can be done. That is exactly what will happen if we enact SB 354.

The bipartisan Senate passed this bill unanimously. We urge the House of Representatives to do the same and the governor to sign it into law.