News Release
Now More than Ever: The Importance of Getting the Best Price on Prescription Drugs
By State Senator Dede Feldman
(January, 2002) Declining state revenues and escalating Medicaid
costs are in the news in New Mexico as 2002 state lawmakers grapple with
a key problem: how to ensure basic health care for those who can least
afford it, while slowing the financial hemorrhaging of both private and
public health care programs. A look at the Byzantine world of prescription
drugs, which the Health and Human Services Committee has been taking for
two years now, gives us a peek at both the problem-- and the solution.
The cost of prescription drugs has been increasing 10-15% each year since
1995. The hike is three times the rate that other health care costs are
rising. The cost increases have hit seniors and others without prescription
drug coverage the hardest. Low-income seniors now pay one third of their
income for health care, including prescriptions, doctor bills, and premiums,
according to a study completed by Dr. Steven Crystal, of Rutgers University.
And without some action from the state, the situation is going to get
worse.
With the spiraling price of prescription drugs taking a bigger and bigger
bite out of both consumer and state Medicaid budgets, now more than ever
we need to be sure that we are getting the "best price" possible
from drug companies for lifesaving drugs. But what is the best price?
That’s a question even a college professor has trouble answering,
given the tiered price structure and the dizzying array of discounts available
to almost everyone—except, that is, seniors and people without insurance,
who get hit with the highest possible price.
Under federal law, drug manufacturers sell the exact same pharmaceuticals
to different purchasers at different prices. For example if the retail
cost for a particular dosage and quantity of a brand name prescription
drug is $100, Medicaid and large HMOs pay, on average $65; federally qualified
health centers pay $54 (under the "340 B program"); the Department
of Defense and Veterans Administration pay $46 or less. Un-insured residents
pay the full, retail price.
The price differentials allow room for negotiation, but, for the most
part, states and even the federal government have been no match for the
drug companies. Even the recent negotiated price reduction for the anti-anthrax
drug, Cipro, that Sec. Tommy Thompson won from Bayer Corp. (.95 a pill
rather than the retail $4-5 a pill) was more than the .43 a tablet that
hospital and clinics now pay for the same medication. And it is ten times
what the pill sells for in India and other countries. To make matters
worse—in a move that would make even the slickest car salesman blush--
the drug companies have done their utmost to shield the exact discounts
and true price of these lifesaving drugs from public view.
Using the free market, New Mexico and other states, all of them huge
purchasers of prescription drugs, can save millions by negotiating supplemental
discounts from drug companies for their Medicaid programs, state employees,
retirees, prisoners, and the uninsured-- who need help the most. For example,
New Mexico could save as much as 17% in its fee-for-service Medicaid program
if it went beyond the "Medicaid Best Price" to the lower price
now paid by hospitals and clinics. And it could save millions more through
better bulk purchasing, utilization of preferred drug lists and generics.
That’s precisely what the Health and Human Services Interim Committee
is recommending this year through a bipartisan backed package of bills
and memorials set for introduction in January (see below).
Several other state including Florida and Michigan, both led by Republican
Governors, and pushed by fiscally strapped legislatures, are negotiating
with drug companies for deeper discounts in return for inclusion of their
products on preferred Medicaid drug lists. And the 31 states that already
have pharmaceutical assistance programs for low-income seniors (New Mexico
is not one of them) are striking harder bargains for their clients as
well.
In every state where these efforts have been made, the Pharmaceutical
Research and Manufacturers of America (PHARMA) has filed suit seeking
to block price reductions. But they have not always been successful. And
they will not deter legislators in states like hard- pressed New Mexico,
where there are almost 500,000 people (approximately 70,000 of them seniors)
are without prescription drug coverage.
Here are highlights from the package of bills and memorials the Health
and Human Services Committee is introducing this year:
- A bill to establish a senior pharmacy assistance program for low income
seniors
- A Fair Market Drug Pricing Act to provide broader Medicaid discounts
- A bill to carefully manage a formulary for Medicaid permitting preferential
listing of drugs based on the manufacturer’s voluntary agreement
to provide greater discounts, and on better prescribing patterns
Expansion of pharmacies at rural clinics to assist low-income patients in getting federally discounted or free drugs
- A bill to require transparent pricing of pharmaceutical products in
New Mexico
- A memorial to request the Governor’s office to explore and participate
in multi and intrastate bulk purchasing efforts
- A memorial to study how to utilize the federal 340B program to maximize
discounts
- A memorial to request the NM Medical Society, the Pharmaceutical Association and the State Agency on
- Aging develop a voluntary program for "brown bag assessments"
and notification of generic and therapeutic alternatives to individual
patients to bring down costs
- A memorial to explore potential for reuses of unused, packaged prescription
drugs from nursing homes
- A memorial requesting pharmaceutical companies develop a simplified,
uniform application for free drugs for indigent populations
- A memorial requesting Congress establish one standard, uniform federal best price to eliminate disparities in discounts among federal purchasers
It will require a concerted effort to get these proposals through the
process this year, although the need is even greater than before. If you
support one or more of these measures, please call or write your legislator
at 505-986-4300, starting Jan. 15, 2002. To keep tabs on these and other
issues you can access the legislative web site at www.legis.state.nm.us.
Better yet, make arrangements to visit Santa Fe and tell your story.
Sen. Dede Feldman is the Vice Chair of the Legislature’s Health and
Human Services Committee