By FOCUS, a Leonine Business
In 2016, a ballot measure in California had the chance to turn spending in the health care industry on its head. The measure, known as Proposition 61, would have regulated drug prices by requiring state agencies to pay no more for a drug than the U.S. Department of Veterans Affairs (VA).
This may seem insignificant at first glance, but under existing federal law, the government, through the Medicare program, is prohibited from negotiating for prices paid to drug manufacturers for their products, a fact made more significant when considering that Medicare is the single-largest purchaser of drugs in the nation. The VA, on the other hand, is not barred from entering into negotiations with manufactures, and is thus able to bargain with drug companies for better prices on their products. Medicare must pay the manufacturer’s “sticker” price, no matter the cost.
Proposition 61 sought to reduce the price the state was paying for prescription drugs by legally prohibiting the state and state agencies from paying any more for prescriptions than the VA’s negotiated rate. Leading up to the 2016 elections, Proposition 61 turned into the most expensive ballot measure campaign in both California and the nation, with supporters spending $19 million to promote a “yes” vote on the measure, while opponents, including the drug industry and pharmaceutical manufacturers, spent a whopping $109 million to oppose the measure.
Ultimately, the measure ended up failing, with 53 percent of Californians voting “no” on the measure. Despite the failure of the measure, states, emboldened by its near success, have continued to press forward on drug pricing reform. Already, Ohio has proposed an almost identical measure, known as Issue 2, that will be on the ballot November 7. Like Proposition 61, this measure would prohibit the state and any state agencies from paying more for any medication than the price paid by the VA. As with California, this measure has also attracted record contributions for a ballot measure in the state, with over $58 million in opposition, and nearly $17 million in support of the measure.
Taking a different approach from legally capping payments, Massachusetts, Republican Gov. Charlie Baker has proposed reforming the state’s Medicaid system and how drugs are covered under it. MassHealth, the state’s Medicaid program, which currently makes up 40 percent of the state budget, has requested federal approval to create its own formulary, a specific list of drugs covered by the program. Private insurers, Medicare and the VA all currently have their own formularies, but Medicaid is required to cover any FDA-approved drug. This often leads to the program shelling out for expensive drugs when lower priced alternatives are available. Creating a formulary would allow the state to cover only a less expensive alternative when multiple treatment options are available for specified medical conditions, the goal of which is to produce the same health outcomes for patients while saving the state money. The pilot program would also require at least one drug to be covered for every type of medical condition, and would require exemptions. However, it remains unclear whether the federal government will approve this request.
Meanwhile, in state legislative chambers, states have been increasingly pushing for drug manufacturers, health insurers and pharmacy benefit managers to disclose prescription drug costs and what factors are associated with determining a price. From 2015-2017, these types of bills have taken state capitals by storm; 28 states have considered such bills, while seven states have enacted them. Because prescription drug prices have been hammering state budgets indiscriminately, the issue has transcended party lines and has been taken up by both red and blue states – among those that have enacted such pricing disclosure bills are deep-red Texas and, its ideological opposite, Vermont.
While the failure of California’s Proposition 61 was a major setback for groups seeking to reign in prescription drug prices, it’s now clear that the measure was only the opening move in what will be a prolonged battle across state lines and on multiple political fronts – state legislative chambers, ballot boxes and the courts.