States Take Lead on Health, Drug Pricing Reform

November 6, 2016

One result of gridlock in Washington is that state governments are moving forward with policies and programs to address public concerns about affordable healthcare and soaring drug prices.

One result of gridlock in Washington, which is slated to continue following the bitter and contentious presidential campaign, is that state governments are moving forward with policies and programs to address public concerns about affordable health care and soaring drug prices.

California has set the pace with a highly controversial ballot measure, Proposition 61, which would link payments for drugs purchased through state programs to those paid by the Veterans Administration health program. The measure would require the state to buy prescription drugs at prices no higher than those paid by the VA and would affect more than 4 million Californians, primarily those covered by the Medi-Cal Medicaid program and various state employees.

Pharma companies are spending millions to oppose the initiative and are backed by veterans’ groups fearing higher drug bills; Bernie Sanders leads the campaign for reform which has strong support throughout the state. Even if enacted, though, it’s not clear how the new law would affect pharma pricing, as VA rates are not uniform or publicly available. The VA, moreover, can exclude too-costly drugs from its formulary – a strategy not available to Medicare and Medicaid. Many states are watching the outcome in California, and Ohio is slated to consider a similar proposal next year.

States also are weighing strategies that require pharma companies to disclose information related to price changes on certain products, including outlays for research and development and for marketing and advertising. Vermont is leading the charge as it implements a law that went into effect last summer requiring manufacturers of the 15 most costly drugs in Vermont to justify price hikes of more than 15% within a year. Political leaders in New York and Massachusetts have proposed similar price transparency measures, and others are closely following the programs.

States also may look to pressure drug companies to meet spending goals by establishing state-based formularies as part of local single-payer health systems. While Democratic reformers face major hurdles in trying to establish a single payer health care system on the national level, health analyst Scott Gottlieb of the American Enterprise Institute points out that programs supported by the Affordable Care Act encourage states to experiment with such concepts on the local level.

Gottlieb is watching closely Vermont’s new drug pricing program, as well as a ballot proposal in Colorado to establish a single-payer health program for the state, he told industry research executives at an October conference sponsored by NDA Partners, which is headed by former FDA official Carl Peck. He was skeptical that the new administration or Congress will be able to create any kind of national formulary, despite all the talk about doing more to control drug prices. But he expects such proposals to emerge at the state level as part of local single-payer initiatives designed to manage health care expenditures.