While the Administration Mulls How to Curb Prescription Costs, State Legislatures Take the Lead

As the country awaits the Administration’s plan to curb Rx drug costs, states take the lead, proposing and passing legislation to lower costs, despite industry opposition.

As we await the details of President Trump’s proposals to curb escalating drug prices, states are continuing to push legislation to lower the cost of prescription drugs, despite the strong headwinds of industry opposition.

States know they are important laboratories of innovation, testing ideas that can inform the federal debate. This year, more than 160 bills that address drug costs were introduced in 42 states, despite short legislative sessions in most of them. Sixteen states have already adjourned and another 16 will do so by the end of May. There will be more to report for those still in session, but even as many legislatures wind down, it is clear that the issue of drug costs has saliency in red, blue, and purple states and legislators appear positioned for a long-term engagement, recognizing that challenging the pharmaceutical industry and making major changes can take time.

The most common approach advanced in state legislatures this year addressed pharmacy benefit managers (PBM). These middlemen administer the prescription drug part of health insurance plans and they can have intricate relationships with drug manufacturers and pharmacies. Eighty-eight PBM bills were introduced and to date nine have been enacted. They included a range of interventions, such as banning “gag clauses” imposed by PBMs that prohibit pharmacists from disclosing to consumers that lower prices are available.

Other bills require PBMs to disclose manufacturer discounts to insurers and be licensed by the state. This issue has been in the forefront of lobbying by the pharmaceutical industry, which has argued that high prices result from these “middlemen” and are incurred within the supply change from manufacturer to consumer. However, this widespread focus on PBMs has not detracted states from also pursuing strategies that directly address the role manufacturers play in drug pricing.

Mandating drug pricing transparency is an important first step to unlock the black box of drug pricing and provide the public with more transparent information about how and why drug prices are rising. Twenty-six transparency bills were introduced this year and two have been enacted. All eyes are currently on California and Oregon, who join Vermont and Nevada in working to bring light to the complicated world of drug pricing.

But, once prices are transparent, what can a state do to take action to curb the drug cost trajectory? Maryland has been a leader here, last year its state legislature enacted a bill that would prevent drug price-gouging by providing a legal channel to fight unconscionable price increases. Like many bills enacted by states, the industry challenged it and a recent decision has stopped the law in its tracks, pending a decision by Maryland’s attorney general to appeal that decision.

Nevertheless, anti-price-gouging bills were introduced in 12 states this year and Maryland took an even bolder step, introducing rate-setting legislation designed to set a cost ceiling on how much payers in the state would need to pay for certain high-cost drugs. The bill made it through Maryland’s House, but the legislative session ended before the state Senate floor vote occurred. A rate-setting bill was also introduced in Minnesota.

Bills allowing importation of certain prescription drugs were introduced in nine states. In Utah, when a bill passed the House and failed in the Senate, legislative leaders wrote to the Department of Health requesting a study of the proposal, which is scheduled to be reported back to Utah lawmakers by Oct. 1, 2018, detailing how to implement an importation program. Vermont’s importation bill passed the Senate and is making its way through the House and a bill in Louisiana remains under active consideration.

State legislative leaders who are advancing these reforms have confronted significant opposition by the pharmaceutical industry’s lobby. Advocates know that the industry is likely to appeal any enacted law in the courts. Yet, the campaigns waged in support of these proposals have educated the public and their elected officials and spurred many to action. Leaders are taking stock, reflecting on the debates that have taken place in their states, and are repositioning for more action in 2019.