As feds dither, some states are moving to curb drug prices

Despite widespread public furor over the soaring  of prescription drugs and accusations of price-gouging against pharmaceutical firms, the federal government has to date failed to find a solution. Some states aren’t waiting around for it to deliver.

California residents will vote on a ballot initiative, Proposition 61, on Nov. 8 that would ensure state agencies pay the same or less for prescription drugs as the U.S. Department of Veteran Affairs. The federal agency gets a 24 percent discount off the list price, and often negotiates even steeper discounts on a drug-by-drug basis. 

The measure would come into play when the state buys drugs directly, such as for prison inmates, and when California directly or indirectly covers drugs, including when it reimburses pharmacies for drugs given to residents covered by state programs. If approved, the measure would take effect in July 2017.

The measure has been praised by Vermont Senator Bernie Sanders and the AIDS Healthcare Foundation, which has raised the bulk of the $9.4 million reportedly raised to generate support for Prop 61. Opponents include pharmaceutical companies and the Pharmaceutical Research and Manufacturers of America (PhRMA), which are bankrolling an effort to defeat the measure.

California isn’t the only state moving to control spiraling drug prices. A similar initiative is on the ballot in Ohio, although voters in the state aren’t scheduled to weigh in until November 2017. In June, meanwhile, Vermont became the first state in the nation to require drugmakers justify price hikes. Such “transparency” legislation has also been proposed in Massachusetts, New York, North Carolina, Oregon, Pennsylvania and Texas.

These initiatives come amid growing public support for reining in drug prices. A majority of Americans back policies to control prescription drug costs, the fastest rising part of the nation’s costly health care system, according to a September survey by the Kaiser Family Foundation. 

“Prescription drug costs have emerged as a significant pocketbook concern for consumers, and states are looking to respond to that,” Larry Levitt, Kaiser’s senior vice president for special initiatives, told CBS MoneyWatch. “For the most part, this boils down to a fight over whether there should be greater role for government in regulating or negotiating drug prices.”

About eight in 10 respondents to the survey said they favor letting the government negotiate with drug companies to lower costs for Medicare recipients, Kaiser found. Two-thirds endorsed the creation of an independent group to oversee the pricing of prescription drugs, as Democratic presidential candidate Hillary Clinton has proposed. Sizable majorities also want to require drug companies to disclose how they set prices, the nonprofit organization added. 

“With the big increases in drug prices and the political attention being paid to the issue, I think there is a potential window for action, both at the state level and federally,” he said. 

“We are likely to continue to see this unless policy makers step in,” added Levitt of the current marketplace, in which drug pricing is largely unregulated.

Insurance companies can negotiate discounts with drugmakers, but Medicare was specifically banned from doing so by lawmakers when the Medicare drug benefit was created a decade ago, said Levitt, who called it an illustration of the “political power of the pharmaceutical industry.”

President Obama’s budget proposed in January also contained a provision requiring drugmakers to disclose the costs that go into their drug pricing.

Generic versions of popular or vital drugs have been a relative bright spot amid a public outcry over pharmaceutical companies jacking up the prices by astronomical proportions. But recent years have also seen an increasing count of sharp cost spikes for generics -- the drugs produced after the patents on their branded versions expire. 

Generics represent about 90 percent of all prescription drugs, and about 30 percent of the costs. 

“The irony is that sometimes in this market the prices drop so low that competitors will drop out, and then suddenly you’re left with one manufacturer of an Epipen, or a similar product, and that provides them with the ability to raise prices,” Dana Goldman, director of the USC Schaeffer Center for Health Policy and Economics, recently told a Kaiser panel.

“It’s easy for patients to sort of assume that this is just all about profits, and I think there’s a big misconception about what’s actually driving health care costs more generally, and those misconceptions I think really play into potentially very problematic policy choices that will have long-running consequences,” Jennifer Bryant, PhRMA’s senior vice president of policy and research, said in the online discussion conducted by Kaiser earlier this month.

When governments set drug prices, it generally reduces choice, Bryant argued. “Everyone wants lower prices, but they alwo want access to a wide array of new treatment options.”