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Amidst Raucous Debate in D.C., States Quietly Take Action on Rising Prescription Drug Prices

Rising drug prices and attempts to contain drug costs continue to take center stage at the federal level – particularly in the ramp-up to the 2016 presidential election. In January 2015, a bill was introduced that would repeal the government non-interference clause and allow the Centers for Medicare & Medicaid Services (CMS) to directly negotiate Medicare Part D drug prices with manufacturers. Last fall, the Department of Health and Human Services (HHS) held a forum on prescription drug costs, which featured stakeholders from all corners of the industry, including top government officials. Most recently, the House Committee on Oversight and Government Reform (OGR) held a hearing investigating drug pricing in which OGR members criticized manufacturer drug pricing as “unsavory business practices.” And the President’s Fiscal Year 2017 Budget, released last week, is replete with proposals intended to address the rising costs of drugs.

Democrat and Republican presidential hopefuls have also jumped into the drug pricing debate. Democratic candidates are calling for more government intervention with aggressive plans to fight price hikes, including limiting consumers’ deductibles for drugs, allowing CMS to negotiate costs directly with manufacturers, and letting Americans buy drugs from other countries with lower prices. Republican candidates’ positions on solving the problem have largely focused on removing bureaucratic obstacles that slow the development of new drugs, such as reforming the FDA and increasing research funding.

Largely driven by a rising tide of public discontent, the drug pricing debate has trickled down to the states. Voter initiatives in California and Ohio to control the price of prescription medications could be on the November 2016 ballot. These initiatives require state agencies to negotiate drug prices at least as low as those paid by the U.S. Department of Veterans Affairs. The initiatives would apply to programs for which the state pays for drugs, even if those programs don’t purchase drugs directly. The pharmaceutical industry is pushing back against the ballot initiatives in California and Ohio with claims that capping prices would reduce innovation among pharmaceutical companies and could result in increasing drug prices and drug shortages.

Other states have introduced legislation focusing on price transparency rather than price controls. However, actual price controls are seeping into a few state legislatures’ efforts. For example, a Pennsylvania bill would allow insurers to refuse to pay for a drug if the manufacturer did not file the required report. And in Massachusetts, a state commission would be able to set a maximum price for a drug if it determined that the price set by the manufacturer was significantly high compared with the benefits, costs or prices in other countries. Additionally, the Massachusetts attorney general is studying whether Gilead’s pricing strategy with respect to its blockbuster treatments for Hepatitis C (Sovaldi and Harvoni) constitute unfair trade practice in violation of Massachusetts law.

Although it is too soon to know whether any of the drug price control bills or initiatives will have the support needed to pass, one thing is certain. The drug price debate at both the state and federal levels shows no signs of going away and likely will increase in intensity leading up to the 2016 elections.

©1994-2020 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.National Law Review, Volume VI, Number 47

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About this Author

Theresa Carnagie, Health Law Attorney, MIntz Levin Law Firm
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Theresa counsels health care clients on a variety of transactional, regulatory, and fraud and abuse matters.

Theresa focuses much of her practice on counseling health plans, pharmacy benefit managers, pharmacies, device manufacturers, and distributors on regulatory and compliance matters. Her practice extends to counseling on drug pricing and reimbursement issues, Medicare Advantage and Medicare Part D compliance, and the regulatory requirements under the Affordable Care Act and state health insurance exchanges. Theresa has extensive experience...

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