Turning to the States to Solve the National Problem of Drug Pricing

Turning to the States to Solve the National Problem of Drug Pricing
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Drug pricing is a national problem. So a nonprofit wants to help hand off some of that burden to the states.

The National Academy for State Health Policy just launched a new center, called the Center for State Rx Drug Pricing, to help state governments navigate the treacherous waters of drug pricing. It just received about a million dollars in funding from the Laura and John Arnold Foundation to help states get drug pricing initiatives underway.

“We believe that pricing is such a difficult, complicated issue at the federal level that states can serve as laboratories of innovation,” said Trish Riley, executive director of NASHP. “It’s an opportunity for states to try all kinds of different approaches to lower drug prices.”

It’s an opportunity, too, to allow states to learn from one another — seeing what works and what does not in lowering pricing, and using the new NASHP center as a conduit of information.

“States are desperate for meaningful efforts to address the ever-increasing burden of drug prices on our budget,” said Dr. Rebekah Gee, secretary of the Louisiana Department of Health. There was initial optimism that President Trump might enforce a new drug price negotiating process — “but that interest seems to have dwindled, so it’s up to states to drive the conversation,” she said.

NASHP, a nonprofit, has long served as a coalition of state health policy wonks. Last year it assembled 11 points of possible policy options for states to lower prices — suggesting reforms in rate regulation, importation, bulk drug ordering, and more.

Some states already have drug cost-containment initiatives underway. Maryland, for instance, now has a law in place that punishes price gouging on generic drugs. And Nevada just passed a strict pricing transparency law that focuses primarily on diabetes drugs.

“Over the last year, 79 bills on transparency, PBMs, and the like have been introduced,” Riley said. “It’s now a very active field.”

But some think that such state-driven measures to lower prices just aren’t enough. The federal government has to be involved.

“Generally it’s difficult for programs such as these to effect real industry-level change without policy-setting power at the national level,” said Scott Hinds, an analyst at Sector & Sovereign Research. Public pressures on pricing have prompted drug makers to voluntarily decrease their inflation rates, he pointed out. And payers are now limiting formularies — lists of medicines with favored insurance coverage — which forces price competition, and could therefore lower rates, he said.

“Absent policy changes that would allow Medicare to negotiate Part D prices, I’m skeptical that there’s much that would have as much of an impact at the aggregate level as these self- or market imposed- changes,” Hinds said.

Rachel Sachs, an associate professor of law at Washington University of St. Louis, agrees that it’s likely not feasible for states to go it alone. While states could embark on a number of initiatives to promote transparency in drug pricing decisions, or tinker with spending, “most of the ambitious proposals states have advanced so far would require the federal government’s cooperation.”

She said that states could, indeed, use their existing Medicaid formularies more aggressively to also force that competition, as evidenced by the work states did around Hepatitis C drugs. However, Sachs said that price cap provisions simply won’t work on their own.

The new drug pricing center will also dole out small grants — taken from the larger Arnold Foundation gift — to a handful of states in order to help fuel their proposals for lowering drug pricing.

“We’re on a fast track to get that money out,” Riley said.

The Arnold Foundation has had a sustained interest in lowering drug pricing. Last year, for instance, it gave Memorial Sloan Kettering Cancer Center a $4.7 million grant to support the Evidence Driven Drug Pricing Project — a three-year study that examines the payment structures of specialty drugs. It also granted $5.2 million to a Boston nonprofit, the Institute for Clinical and Economic Review, to analyze whether new drugs are worth what they cost.

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