A Chance of Real Action on Prescription Drug Costs at State Level?

Lilo H. Stainton | October 21, 2019 | Roundtables, Health Care
Experts agree on need for more transparency in drug pricing but disagree on what it will take to make prescriptions more affordable
State Sen. Troy Singleton wants to give the state a stronger hand in pharmaceutical pricing.

Numbers can tell a lot of different stories when it comes to prescription costs, underlining the need for far greater transparency when it comes drug pricing. That’s according to a diverse panel of experts that gathered Friday for an NJ Spotlight roundtable on the issue of drug pricing in New Jersey.

Yet the civil but spirited 90-minute discussion also made clear there remains real disagreement on what else is needed to make these products more affordable for consumers in New Jersey and nationwide.

Patient advocates insist it is time to adapt more aggressive strategies to control the price of medications; those in charge of  health plans are looking at ways to identify the most valuable treatments to help prioritize their spending; and the pharmaceutical industry would like to change the distribution model to reduce patient costs.  (The author of this story moderated the event.)

Some speakers favored sweeping federal legislation to force system-wide changes, but all agreed that the real policy action is on the state level. Legislation has been introduced in dozens of states to improve transparency, provide greater discounts to patients, and control costs by giving government some say over price hikes; a handful of states have also passed laws enabling them to purchase drugs from Canada or Mexico, where products can cost three to 10 times less than they do in the United States.

“High prescription drug prices are not something that is only affecting patients. Absolutely everyone is affected by high drug prices,” said Leigh Purvis, director of health services research for the AARP Public Policy Institute, explaining how they also drive up the cost of health insurance and taxpayer funded coverage like Medicare and Medicaid. (AARP was a sponsor of the roundtable.)

State Sen. Troy Singleton (D-Burlington), highlighted bills he has sponsored in the General Assembly to implement versions of these ideas, including one requiring drug companies to post wholesale costs online, which he hopes will empower shoppers and increase manufacturer competition. He has also proposed measures to use overseas prices as a guide for government purchases and reduce what patients pay for medications out-of-pocket.

‘We are at a tipping point’

Singleton also hinted about his plan to introduce in the coming months another measure to give the state far greater power in determining what it pays for pharmaceutical products, something several other states are now examining. (Between Medicaid and benefits for public workers, the state of New Jersey insures more than 2.5 million people.)

“We are at a tipping point where the conversation needs to move to concrete action,” Singleton said, adding that any solution must balance consumer needs with pharmaceutical companies’ role in New Jersey. “Our state has a huge footprint in the medical sciences,” he said. “We have to find the sweet spot” with a solution that helps patients without crippling the industry, he added.

According to AARP, prescription prices rose 58% between 2012 and 2017 in New Jersey, and close to one in four residents here now skip or ration doses to save money. Total U.S. spending on prescription drugs is expected to top $600 billion in 2020, up from $380 billion in 2014, according to panelist Kris Hathaway, vice president of state affairs for America’s Health Insurance Plans, which represents insurance companies.

Kris Hathaway of America’s Health Insurance Plans said spending on prescription drugs in the United States is unsustainable.

“That’s unsustainable,” Hathaway said, noting that plans now spend more on prescriptions than anything else, including doctor visits or hospital care. “The best of drugs aren’t going to be helpful when you can’t pay for them at the end of the day.”

But Kipp Snider, national vice president of state policy for PhRMA, a pharmaceutical industry group, stressed that while prescription spending may be on the rise, it has remained close to 10% of the nation’s overall health care expenditure for decades. Plus, 90% of the drugs on the market are now generics, he said, and their prices are kept low through competition.

“I’m not up here to say everything is great and we don’t have any problems,” Snider said, “but the data matters.”

‘The price of the product is what matters’

Total national spending means little to people struggling to pay for their medications however, according to Purvis and Maura Collinsgru, health care program director for New Jersey Citizen Action (another event sponsor.) “In our opinion we need to be looking at the experience of people,” Purvis said, “and not these large overarching numbers. The price of the product is what matters to them.”

As a lawmaker, Singleton said he frequently hears “an exasperation, a frustration” from constituents struggling to afford their medications. He said he has always been able to help them get free or discounted prescriptions from drugmakers, but many others don’t pick up the phone to ask for assistance.

Moreover, helping a select few citizens doesn’t lower the cost overall. “At the end of the day somebody is reaching in their pocket trying to make that payment,” Singleton said.

The event started with a video keynote from U.S. Rep. Frank Pallone (D-6th), the sponsor of a proposal that would empower the federal government to negotiate with drugmakers and peg prices for Medicare to those paid by a half-dozen other large, industrialized nations; the resulting deals would also be made available to private insurance companies.

GOP and pharmaceutical industry oppose Pallone

The measure — which was the subject of congressional review last week — faces opposition from Republicans and the pharmaceutical industry, which suggest it would cost the nation jobs (up to 100,000 lost in New Jersey alone) and would reduce the revenue drugmakers invest to develop new treatments. In 2018, the industry invested $90 billion in research and development, according to PhRMA; the federal government also funds this process.

Snider called the proposal a “hope killer” and said the federal government negotiating with these companies would be like “an alligator negotiating with a duck.” PhRMA instead prioritizes measures to increase transparency around costs and clarify the role of pharmaceutical benefit managers, companies that function as middlemen and play an enormous role in pharmacy prices.

Health insurance companies also support transparency measures but believe any federal solution needs to be bipartisan and somehow address the root causes of high prices, Hathaway explained, not just shift the costs from any one group to another. “Health care costs are like finite balloon,” she said. “When you squeeze one end, it comes out the other.”

But Purvis and Collinsgru said it is time for the type of drastic change envisioned in Pallone’s bill to create more affordability. “Transparency is often used as a weapon to minimize real reform,” Collinsgru said. “We can’t do price transparency without cost control.”