Not waiting for Congress, states pass laws to lower drug costs

This is a Kaiser Health News story.

Whether Congress will act this year to address the affordability of prescription drugs — a high priority among voters — remains uncertain. But states aren’t waiting.

So far this year, 33 states have enacted a record 51 laws to address drug prices, affordability and access. That tops the previous record of 45 laws enacted in 28 states set just last year, according to the National Academy for State Health Policy, a nonprofit advocacy group that develops model legislation and promotes such laws.

Among the new measures are those that authorize importing prescription drugs, screen for excessive price increases by drug companies and establish oversight boards to set the prices states will pay for drugs.

“Legislative activity in this area is escalating,” said Trish Riley, NASHP’s executive director. “This year, some states moved to launch programs that directly impact what they and consumers pay for high-cost drugs.”

And more laws could be coming before year’s end. Of the handful of states still in legislative session — including California, Massachusetts, Michigan, New Jersey, Ohio and Pennsylvania — debate continues on dozens of prescription drug bills. In New Jersey alone, some 20 proposed laws are under consideration.

“Both Democrat and Republican leaders have shown a willingness to pursue strong measures that help consumers but also protect state taxpayer dollars,” said Hemi Tewarson, director of the National Governors Association’s health programs.

Riley, Tewarson and others note, however, that states can go only so far in addressing rising drug prices, and that federal legislation would be necessary to have a major impact on the way the marketplace works.

Federal lawmakers are keeping a close eye on the state initiatives, Tewarson said, to gauge where legislative compromise may lie — even as Congress debates more than a dozen bills that target drug costs. Political divisiveness, a packed congressional schedule and a looming election year could stall momentum at the federal level.

The pharmaceutical industry has opposed most — though not all — state bills, said Priscilla VanderVeer, a spokeswoman for the Pharmaceutical Research and Manufacturers of America, the industry’s main trade group.

“We agree that what consumers now pay for drugs out-of-pocket is a serious problem,” said VanderVeer. “Many states have passed bills that look good on paper but that we don’t believe will save consumers money.”

Limiting Gag Rules For Pharmacists

At least 16 states have enacted 20 laws governing the behavior of pharmacy benefit managers. The so-called PBMs serve as middlemen among drugmakers, insurance companies and pharmacies, largely with pharmaceutical industry support.

Those laws add to the 28 passed in 2018. Most of the new laws ban “gag clauses” that some PBMs impose on pharmacists. The clauses, written into pharmacy contracts, stop pharmacists from discussing with customers whether a drug’s cash price would be lower than its out-of-pocket cost under insurance.

With widespread public outrage over gag clauses pushing states to act, federal lawmakers got the message. In October, Congress passed a federal law banning such clauses in PBM-pharmacy contracts nationwide and under the Medicare Part D prescription drug benefit. The Senate passed it 98-2.

Even so, many of this year’s PBM laws contain additional gag clause limitations that go beyond the 2018 federal law.

Importing Cheaper Drugs

Four states — Colorado, Florida, Maine and Vermont — this year have enacted measures to establish programs to import cheaper prescription drugs from Canada and, in Florida’s case, potentially other countries. Six other states are considering such legislation.

Medicines in Canada and other countries are less expensive because those nations negotiate directly with drugmakers to set prices.

“This is an area where states once feared to tread,” said Jane Horvath, a consultant who has advised Maryland and Oregon, among other states, on prescription drug policy. “Now both Republicans and Democrats view it as a way to infuse more price competition into the marketplace.”

Hurdles remain, however. A 2003 law allows states to import cheaper drugs from Canada but only if the federal Health and Human Services Department approves a state’s plan and certifies its safety. Between 2004 and 2009, the federal government halted nascent drug import efforts in five states.

Even so, momentum for importation has built in recent years in states and Congress as drug prices have continued to rise. And the Trump administration this summer threw its support behind the idea.

Florida Gov. Ron DeSantis, a Republican and close ally of President Donald Trump’s, signed his state’s measure into law on June 11, claiming he did so after Trump personally promised him the White House would back the initiative.

On July 31, HHS announced an “action plan” to “lay the foundation for safe importation of certain prescription drugs.” The plan includes a process to authorize state initiatives. It also requires formal regulatory review, including establishing Food and Drug Administration safety criteria. That process could take up to two years.

Two big problems remain: In the weeks since the announcement, the Canadian government has opposed any plan that would rely solely on Canada as a source of imported drugs. The pharmaceutical industry also opposes the plan.

Creating Drug Affordability Boards

Maryland and Maine enacted laws this year that establish state agencies to review the costs of drugs and take action against those whose price increases exceed a certain threshold.

New Jersey and Massachusetts are debating similar legislation this year.

Maryland’s law establishes a five-member board to review the list prices and costs of drugs purchased by the state and Maryland’s county and local governments. The board will probe drugs that increase in price by $3,000 or more per year and new medicines that enter the market costing $30,000 or more per year or over the course of treatment.

If approved by future legislation, upper payment limits on drugs with excessive price increases or annual costs would take effect in January 2022.

“My constituents have signaled loud and clear that bringing drug prices down is one of their top priorities,” said state Sen. Katherine Klausmeier, a Democrat representing Baltimore, who sponsored the legislation.

Maine’s law also establishes a five-member board. Beginning in 2021, the board will set annual spending targets for drugs purchased by the state and local governments.

Increasing Price Transparency

This year, four states — Colorado, Oregon, Texas and Washington — became the latest to enact laws requiring drug companies to provide information to states and consumers on the list prices of drugs and planned price increases.

The majority of states now have such transparency laws, and most post the data on public websites. The details vary, but all states with such laws seek to identify drugs with price increases above 10% or more a year, and drugs with price increases above set dollar values.

Oregon’s new law, for example, requires manufacturers to notify the state 60 days in advance of any planned increase of 10% or more in the price of brand-name drugs, and any 25% or greater increase in the price of generic drugs.

“That 60-days’ notice was very important to us,” said Rep. Andrea Salinas, chair of the Oregon House’s health committee, who represents Lake Oswego. “It gives doctors and patients advance notice and a chance to adjust and consider what to do.”

Kaiser Health News is a nonprofit news service covering health issues. It is an editorially independent program of the Kaiser Family Foundation, which is not affiliated with Kaiser Permanente.