Drug industry facing onslaught from frustrated states

Congress hasn’t done much to rein in the costs of prescription drugs, so states are taking matters into their own hands.

While lawmakers have railed against pharmaceutical executives and accused them of jacking up prices, they haven’t passed major legislation on the issue. That lack of action has, in part, spurred state legislatures to consider a slew of bills aimed at decreasing the cost of drugs, increasing price transparency and cracking down on controversial industry practices. 

“In terms of federal legislation, we really haven’t seen anything, and so I think that that makes states get active,” said Katherine Hempstead, a senior adviser at the Robert Wood Johnson Foundation, a public health group.{mosads}

“I think there’s a lot of legitimate consumer outrage about drug prices,” Hempstead continued, adding, “It’s a really strong bipartisan issue.”

At the White House, President Trump has repeatedly said pharmaceutical companies are “getting away with murder,” but an executive order on drug pricing that some deemed friendly to industry never came to fruition last summer. Trump is expected to give a speech on prescription drug prices Thursday, but the White House has indicated the speech will mostly be a call for new ideas to address drug prices.

Hempstead noted that Food and Drug Administration Commissioner Scott Gottlieb has been active in doing what he can at the agency level.

The costs of some prescription drugs have risen in recent years — some to the tune of hundreds of dollars — and states have taken notice. The vast majority of states, unlike the federal government, are required to balance their budgets, and unexpected costs, like higher drug prices, can make that difficult.

“States are really trying to find a way to land a punch,” Hempstead said. “You can see them trying a lot of different things.”

There’s been “significant growth” in the volume of bills introduced on drugs this year, said Trish Riley, the executive director of the National Academy for State Health Policy.

The burst of activity is even more notable, she said, because many state legislative sessions are much shorter this year, and not all state legislatures are convening in 2018. Some have wrapped up their sessions, while others will be finishing them up soon.

“These are three-month sessions max, sometimes less,” she said. “It’s pretty amazing to see the growth and to see states picking up each other’s examples, tweaking it for their own state and introducing it.” 

The proposals at the state level have come from across the political spectrum, and many have garnered opposition from different facets of the drug industry.

Many states have begun targeting so-called gag clauses in pharmacy benefit managers’ contracts, which have become highly controversial.

Pharmacy benefit managers (PBMs) are essentially middlemen — companies that administer prescription drug coverage. State lawmakers are attacking contracts preventing a pharmacist from telling their customers they could buy the medication cheaper if they paid for it out of pocket rather than through their insurance plan.

At least 35 states in total have considered bills prohibiting gag clauses in 2017 and 2018, and 15 states signed them into law (two other states had enacted similar laws previously), according to data from the National Conference of State Legislatures (NCSL).

The Pharmaceutical Care Management Association (PCMA), which represents PBMs, doesn’t condone using gag clauses.

“PBMs support the patient always paying the lowest cost at the pharmacy counter, whether it’s the cash price or the copay,” the association said in an emailed statement.

“We would oppose contracting that prohibits drugstores from sharing with patients the cash price they charge for each drug. These rates are set entirely at the discretion of each pharmacy and can vary significantly from drugstore to drugstore.”

Arkansas approved a more sweeping, first-of-its-kind bill allowing the state to license and regulate PBMs, while also banning “gag clauses.” Gov. Asa Hutchinson (R) swiftly signed the measure into law in mid-March.

“Our independent, our local pharmacists need to be adequately reimbursed and fairly reimbursed so they can survive and they can serve the patients and members of the community that mean so much to them,” Hutchinson said, according to The Associated Press.

PCMA argues the Arkansas law has “significant economic and legal risks associated with it.”

“The only possible beneficiary will be independent drugstore owners, who’ve made it clear they want to charge higher rates for consumers,” the association said in an emailed statement.

In mid-March, Oregon Gov. Kate Brown (D) signed a price transparency bill requiring drug manufacturers to provide the state government with certain information for any drug with a price tag increasing 10 percent or more in a year.

The major drug trade group, Pharmaceutical Research and Manufacturers of America (PhRMA), voiced concern with the bill.

“No one should have to worry about how they will access or afford the prescription medicines they need. We remain concerned, however, that H.B. 4005 as passed won’t deliver real answers or cost-savings for patients,” PhRMA spokeswoman Caitlin Carroll said in an emailed statement.

“If we want to alleviate the growing cost-sharing burden being placed on consumers, we have to fully address the realities of our current supply chain.”

California passed a similar measure last year, which supporters touted as the most comprehensive price transparency law in the nation.

PhRMA filed a lawsuit against it, arguing that “SB 17 attempts to dictate national health care policy related to drug prices in violation of the United States Constitution, singles out drug manufacturers as the sole determinant of drug costs despite the significant role many other entities play in the costs patients pay, and will cause market distortions such as drug stockpiling and reduced competition.”

Maryland has also been on the cutting edge of drug pricing legislation.

Last year, the state passed a price gouging measure, which lets the attorney general take legal action if the price of an off-patent or generic drug drastically increases — a first-of-its-kind measure. The Association for Accessible Medicines (AAM), the generic-drug trade group, filed a lawsuit, which resulted in a federal appeals court striking the law down in a 2-1 ruling last week. The state attorney general, Brian Frosh, is evaluating the next steps.

Yet the issue has garnered attention from other states with at least 16 introducing bills similar to what passed in Maryland; so far, four have failed, according to NCSL.

“Other states have looked at the Maryland law, and they found it to be bad policy,” said Jeff Francer, AAM’s general counsel. “It would interfere in the competitive generic drug market that is actually deflationary right now, and it would do nothing to get at the high cost of the brand name drugs.”

And drug importation has made a comeback, with eight states introducing measures this year that would allow the importation of medicines from Canada. However, none have passed, and the measures are controversial.

– The name of a group misidentified in this story was corrected on April 23.

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