Ris­ing drug prices pit­ting states vs. feds

If some pro­pos­als be­come laws, court fights are cer­tain.

Dayton Daily News - - MORE OF TODAY’S TOP NEWS - By Michael Ollove

Frus­trated WASHINGTON — 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.

Com­mit­tees in both houses of Congress held hear­ings in Jan­uary to con­sider how to ar­rest the trend.

In his open­ing state­ment, U.S. House Over­sight Com­mit­tee Chair­man Eli­jah Cum­mings, a Mary­land Demo­crat, praised what he said is a bi­par­ti­san con­sen­sus that drug com­pa­nies’ ag­gres­sive price hikes need to be reined in.

“We have seen time af­ter time that drug com­pa­nies make money hand over fist by rais­ing the prices of their drugs — of­ten with­out jus­ti­fi­ca­tion, and some­times overnight — while pa­tients are left hold­ing the bill,” Cum­mings said in his state­ment, adding later: “We have a duty to act now.”

On the other side of Capi­tol Hill, Dou­glas Holtz-Eakin, pres­i­dent of the self-de­scribed “cen­ter-right” Amer­i­can Ac­tion Fo­rum, told the Repub­li­can-led Sen­ate Fi­nance Com­mit­tee that govern­ment poli­cies were at least partly to blame for ris­ing drug prices.

Holtz-Eakin cited laws gov­ern­ing Med­i­caid pay­ments to drug com­pa­nies and the Af­ford­able Care Act’s tax in­creases on man­u­fac­tur­ers and im­porters.

“It should not be sur­pris­ing,” he said, that drug prices in­creased si­mul­ta­ne­ously with the pas­sage of the ACA.

Priscilla VanderVeer, a spokes­woman for the Phar­ma­ceu­ti­cal Re­search and Man­u­fac­tur­ers of Amer­ica, the lob­by­ing arm of the in­dus­try, said PhRMA, as the group is known, would op­pose many of the state bills.

The pro­pos­als wouldn’t lower prices on med­i­ca­tions, she said, and would discourage cor­po­rate in­vest­ment in re­search and de­vel­op­ment of new drugs.

“We ab­so­lutely un­der­stand where pa­tients are com­ing from, and their strug­gles to get the med­i­ca­tions they need at an af­ford­able price,” VanderVeer said. “But let’s fo­cus on the en­tire chain, not just man­u­fac­tur­ers.”

It isn’t the case, though, that law­mak­ers are fo­cus­ing only on man­u­fac­tur­ers; a few bills of­fered this ses­sion would force ac­tions ei­ther from in­sur­ers or phar­macy ben­e­fit man­agers, the com­pa­nies that ad­min­is­ter drug plans. Other pro­pos­als would study for­eign drug im­por­ta­tion or en­cour­age price ne­go­ti­a­tions to ben­e­fit, say, Med­i­caid pa­tients.

The fed­eral govern­ment has zeal­ously guarded its author­ity over drug pric­ing.

Last year, for ex­am­ple, the Trump ad­min­is­tra­tion re­jected Mas­sachusetts’ re­quest to be­come the first state to ex­clude cer­tain drugs from its Med­i­caid pro­gram, to ex­tract bet­ter prices from phar­ma­ceu­ti­cal com­pa­nies.

By law, all state Med­i­caid agen­cies must carry ev­ery drug ap­proved by the U.S. Food and Drug Ad­min­is­tra­tion, in re­turn for set re­bates from drug­mak­ers.

Mas­sachusetts pro­posed to of­fer at least one medicine in ev­ery “ther­a­peu­tic class,” that is, treat­ments in­tended to ad­dress a spe­cific con­di­tion or ill­ness, such as blood clots or angina.

It also sought the author­ity to eval­u­ate the ef­fec­tive­ness of newly in­tro­duced drugs, by com­par­ing them with other medicines in the same class.

That idea wor­ries some health an­a­lysts, who note that even within the same ther­a­peu­tic class, one med­i­ca­tion may work bet­ter than an­other for an in­di­vid­ual pa­tient. Some or­ga­ni­za­tions that rep­re­sent peo­ple with cer­tain dis­eases joined drug man­u­fac­tur­ers in ob­ject­ing to Mas­sachusetts’ pro­posal.

The Trump ad­min­is­tra­tion also op­poses states im­port­ing cheaper drugs from Canada.

Last year, Ver­mont be­came the first state to pur­sue im­por­ta­tion. Ver­mont’s mea­sure would save the com­mer­cial in­sur­ance in­dus­try be­tween $1 mil­lion and $5 mil­lion a year, a state re­port es­ti­mated. Law­mak­ers in Colorado, Con­necti­cut, Illi­nois, Mary­land, Mis­souri, Ore­gon and Vir­ginia have pro­posed stud­ies of the idea.

But buy­ing drugs from Canada re­quires fed­eral ap­proval, which, un­til re­cently, seemed un­likely. U.S. Health and Hu­man Ser­vices Sec­re­tary Alex Azar last spring said sev­eral times he had no in­ter­est in al­low­ing Ver­mont or other states to pro­ceed with such a plan.

But in re­sponse to some dra­matic in­creases in drug prices, he soft­ened his po­si­tion, at least in the case of some generic med­i­ca­tions pro­duced by a sin­gle man­u­fac­turer. He said last sum­mer that he was set­ting up a work­ing group to study im­port­ing drugs from abroad.

Mary­land’s at­tempt to con­trol drug prices ran aground last year in a fed­eral court­room. The 4th Cir­cuit Court of Ap­peals in April threw out a 2017 Mary­land law en­acted to curb “un­war­ranted” price hikes, say­ing the state had no author­ity to reg­u­late in­ter­state com­merce.

Know­ing that states are on shaky ground, some drug com­pa­nies have pushed back against at­tempts to limit their prices.

They did so in New York, where law­mak­ers in 2017 en­acted a re­quire­ment that mak­ers of cer­tain high-priced drugs give the state’s Med­i­caid agency dis­counts be­yond those set by fed­eral statute.

Ver­tex, the man­u­fac­turer of a cys­tic fi­bro­sis med­i­ca­tion with a re­tail price of $272,000 a year, re­fused. And New York was forced to ac­knowl­edge it could not re­quire com­pli­ance.

Ver­tex touted the ef­fi­cacy of its cys­tic fi­bro­sis drug. “The price of our medicines re­flect the sig­nif­i­cant value they bring to pa­tients,” said Sarah D’Souza, a Ver­tex spokes­woman, adding, “We do not be­lieve an ad­di­tional re­bate is war­ranted.”

Still, other states see prom­ise in that ap­proach. Mas­sachusetts Gov. Char­lie Baker, a Repub­li­can, re­cently pro­posed a mea­sure that would en­able the state Med­i­caid agency to ne­go­ti­ate fur­ther dis­counts on cer­tain drugs.

If ne­go­ti­a­tions don’t work, the state could sub­ject the man­u­fac­turer to a pub­lic rate-set­ting process, re­quire more trans­parency on pric­ing, or re­fer the mat­ter to the state’s at­tor­ney gen­eral’s of­fice for pos­si­ble prose­cu­tion un­der con­sumer pro­tec­tion laws.

Leg­is­la­tors in Con­necti­cut and Mary­land are push­ing sim­i­lar pro­pos­als.

State law­mak­ers in Mas­sachusetts, Min­nesota, New York and Vir­ginia also want to pre­vent drug­mak­ers from en­act­ing steep year-to-year price in­creases in the com­mer­cial mar­ket.

Linda Gor­man, di­rec­tor of the Health Care Pol­icy Cen­ter, at the In­de­pen­dence In­sti­tute, a lib­er­tar­ian think tank based in Den­ver, said in­ter­fer­ing in the mar­ket is a bad idea.

“It’s a waste of time, and you’ll only end up with more reg­u­la­tion and higher over­all prices,” Gor­man said. She ar­gues, for ex­am­ple, that by re­quir­ing drug­mak­ers to give dis­counts to Med­i­caid agen­cies, the fed­eral govern­ment drives up drug prices in com­mer­cial plans.

TOM BREN­NER / THE NEW YORK TIMES BLOOMBERG 2018 AN­DREW HARRER /

Rep. Eli­jah Cum­mings (left) the chair­man of the House Over­sight and Govern­ment Re­form Com­mit­tee, has praised what he said is a bi­par­ti­san con­sen­sus that drug com­pa­nies’ ag­gres­sive price hikes need to be reined in. Alex Azar (right), sec­re­tary of Health and Hu­man Ser­vices, an­nounced ear­lier this week a draft reg­u­la­tion that would al­low drug­mak­ers to of­fer dis­counted prices di­rectly to con­sumers.

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