States look to control drug prices
WASHINGTON — Frustrated by federal inaction, state lawmakers in 41 states have proposed detailed plans to lower soaring prescription drug costs. Some measures would give state Medicaid agencies more negotiating power. Others would disclose the pricing decisions of the drug manufacturers and the companies that administer prescription drug plans.
The more ambitious proposals would bump up against federal authority, such as legislation that would allow importing drugs from Canada or alter federal statutes on the prices states pay for drugs in Medicaid. They likely would have to survive a challenge in federal court. And many likely would face resistance from a deep-pocketed pharmaceutical industry.
According to the National Institute on Money and Politics, a nonprofit that collects campaign finance data, the pharmaceutical industry in 2018 contributed nearly $19 million to state campaigns, and $56 million to federal ones.
“States are limited in power in this area,” said Rachel Sachs, a health law expert at Washington University in St. Louis School of Law. “But one of the impacts of these efforts is to put pressure on the federal government, and force it to justify its actions to stymie the states.”
President Donald Trump has criticized soaring drug prices, and on Thursday the Department of Health and Human Services announced a draft regulation that would allow drugmakers to offer discounted prices directly to consumers — but without giving rebates to Medicaid managed care organizations or the middlemen known as pharmacy benefit managers.
Between 2012 and 2017, drug spending in the United States increased nearly 29 percent while overall health spending rose less than 25 percent. Since 2013, the growth in prescription drug spending has exceeded GDP growth, which means the industry is consuming an increasingly large share of the U.S. economy.
Some states are emphasizing transparency, with the goal of shaming drug companies into moderating their prices. New Hampshire, New Jersey and Washington state are considering requiring manufacturers to disclose to states (but usually not to the public, to protect proprietary information) what they spend on advertising, and research and development.
Still others, including Arizona, Florida, Maine, New Jersey and New York, also want to cast light on the operations of pharmacy benefit managers, known as PBMs, the giant buying networks that administer prescription plans on behalf of insurers.
The theory behind PBMs is that their size and expertise results in savings for consumers. In recent years, however, critics have argued that the PBMs are pocketing the savings rather than passing them on to consumers. And in many states, the pharmacy benefit managers impose a gag order on pharmacists, blocking them from telling consumers about cheaper drug options.
Other state legislators want to regulate PBMs. Legislators in Delaware, Minnesota and South Carolina have filed bills that would require PBMs to be licensed, so that the state could standardize their practices. While some states require PBMs to register with the state, only a few, such as Georgia and South Dakota, have licensing requirements.