State Legislators Considering Measures to Control Drug Costs

By Ronald L. Scott

Despite extensive lobbying by the pharmaceutical industry, Maine recently became the first state to enact measures to control the spiraling costs of prescription drugs. S 1026, LD 2599 establishes the Maine Rx program. The statute provides that the state will act as a pharmacy benefit manager to negotiate discount agreements with pharmaceutical companies. Starting January 1, 2001, residents of Maine without prescription drug insurance may obtain discounted prices at participating pharmacies. The discount will initially be approximately 10% and should increase based on rebates received from pharmaceutical companies. Although pharmacies participate voluntarily, drug manufacturers and labelers whose drugs are provided to Medicaid enrollees must participate. In addition to establishing the Maine Rx program, the statute contains several other controversial provisions, including:

Alan F. Holmer, President of the Pharmaceutical Research and Manufacturers of America (PhRMA) said that the law "is anti-patient, anti-innovation, anti-business, and we believe unconstitutional." He also said that the law does not help patients without prescription drug coverage, but does harm those waiting for new cures and treatments for serious diseases such as Alzheimer’s, cancer and AIDS. See PhRMA opposes federal or state government-mandated price controls.

Although Maine may be the first state to pass such price control legislation, the National Conference of State Legislatures reports that more than 20 states provide drug-purchasing assistance to seniors and people with disabilities. A number of states considered, or are still considering, legislation to control prices by a variety of means. HB 2719 in Arizona (which did not pass) would have established the maximum price of drugs sold in Arizona by reference to the prices paid by the U.S. Department of Veterans Affairs or the drug formulary maintained by the Canadian province of Quebec. Texas is studying prescription drug pricing issues at present.

Although pharmaceutical companies will challenge several aspects of price control laws, Maine's concept of states acting as pharmacy benefit managers should withstand judicial scrutiny. Also, this approach could boost the use of medical savings accounts combined with high-deductible insurance policies. At present, a patient without prescription insurance coverage faces a double whammy. Not only does the patient lack insurance to pay for a prescription—but the cost of a prescription is significantly higher without the benefit of insurance-company negotiated price discounts.