States Take Action on Drug Prices - Continued

Although the legislature didn’t agree, it did make a key change, as part of the budget process this spring, capping yearly increases in overall drug spending in Medicaid. Under the new formula, price hikes would have been too high in recent years.

Now, when spending looks about to trigger the cap, regulators will ask for more rebates. They may then evaluate the value of drugs case by case — is it worth the cost? The industry opposes this kind of review, and New York hopes to use its big buying power to push companies to offer more discounts instead.

In Ohio, voters rejected the idea of capping drug prices in its state medical programs at no more than the lowest VA price. The industry outspent advocates on television advertising by about 5 to 1.  

Californians also rejected a VA price for the state in a referendum, after the industry spent more than $100 million, making this one of the most costly ballot battles ever.

In Maryland, a new law takes a different approach and treats price gouging as a civil offense. The state’s attorney general may challenge any increase of 50 percent or more in a generic drug in a single year, taking drug-makers to court, where they face fines. The industry filed a lawsuit saying the rule was beyond state power — so far, a federal court judge has denied a request for an injunction that would have stopped the law from going into effect. The $10,000 fine is a tap meant to make a point, observers say.

Note that the law only applies to generics. Some of them have little competition and have become a problem. But generics are a better target for states because these drugs are no longer covered by federal patent law.

“Transparency” is a popular idea: In the Kaiser poll, 86 percent of respondents said that drug companies should release information explaining prices. After the California referendum failed, the legislature passed a rule that requires drug-makers to give 60 days’ notice of price hikes — and justify any increase of more than 16 percent over two years. Nevada approved a rule along those lines for insulin. Vermont’s 2016 law requires justification for rising drug prices that hit state budgets hard.

Consumer advocates, sometimes helped by insurers, began introducing these bills in state legislatures in 2015, over stiff opposition from the industry. That fight appears live in 2017 in Massachusetts, Rhode Island, Tennessee, and Montana, among other spots. The industry argues that these laws will add red tape but won’t help consumers, as they won’t accurately capture what patients pay or the full costs to the industry.

To respond to political and public anger, several big drug companies — including Allergan, AbbVie, Takeda, and Novo Nordisk — have pledged to keep their annual price hikes low. But at the same time, cancer drug prices are rising much faster than inflation. Celgene has hiked prices for one drug by 14 percent over past year, and 11 percent for another — to offset losses elsewhere.

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