Every State Puts Forward Legislation Addressing Prescription Drug Affordability

November 14, 2019|10:58 a.m.| ASTHO Staff

High-cost prescription drugs have a clear budgetary impact for public and commercial payers and consumers alike. Prescription drug costs represent approximately 9.8 percent of total healthcare expenditures, and accounted for $333.4 billion spent on prescription drugs in 2017 (compared to $236 billion only a decade prior). In addition, Medicaid spending on outpatient drugs increased by 21 percent between 2014 and 2015, from $45.9 million to $55.6 million, and by a further 11 percent to $61.9 million in 2016 and is expected to continue growing.

Expensive prescription drugs can result in poor health outcomes. A February 2019 Kaiser Family Foundation survey found that 29 percent of adults reported not taking medication as prescribed at some point in the past year due to cost. Poor medication adherence leads to worsened health outcomes, higher mortality rates, and higher rates of avoidable hospitalizations. This is particularly true among populations with chronic conditions like diabetes and hypertension.

The ever-higher cost of prescription drugs is a policy priority for state lawmakers, both to improve access to care and to reduce overall healthcare spending. In 2019, all 50 states, the District of Columbia, Guam, and Puerto Rico introduced legislation aimed at studying or reducing prescription drug prices, and 43 states enacted legislation addressing prescription drug affordability. This continues a trend from 2018, when 44 states enacted legislation on the topic.

This year, Maryland became the first state to enact legislation (HB 768) authorizing the creation of a prescription drug affordability board. Maryland’s board will study pharmaceutical costs and make recommendations on strategies to reduce costs, such as volume purchasing or setting upper payment limits. Four other states have formed similar boards through legislative authorization. Nevada and Maine established prescription drug affordability boards, with Maine’s board ultimately required to make recommendations on pharmaceutical spending targets for all public payers. New Hampshire’s study committee, authorized by HB 656, focuses on the impact of financial initiatives on commercial insurance beneficiaries. Indiana enacted HB 1029 to create an interim study committee to review issues consumers face related to pharmaceutical cost and access.

To improve prescription drug cost transparency, states are also requiring manufacturers and pharmacy benefit managers to report costs to the state. In May, Washington State’s governor signed into law HB 1224, which requires manufactures to report wholesale cost increases above a certain level to the state and requires health insurance carriers to report utilization data from the previous calendar year. In June, Texas enacted HB 2536, which requires manufacturers to submit an annual report on the wholesale costs of FDA-approved drugs, to be shared online with the public. Wyoming (HB 63), Nebraska (LB 316), and South Carolina (S 359) have pursued another legislative strategy to improve transparency by protecting pharmacies’ ability to disclose cost information to patients without facing penalties from pharmacy benefit managers.

States have also pursued legislation aimed at improving state purchasing power. New Mexico enacted SB 131, which establishes the Interagency Pharmaceuticals Purchasing Council to review and coordinate cost-containment strategies and bolster state agency purchasing power. The legislation identifies strategies for review, including benchmarking pharmacy benefits and pharmaceutical prices to Medicaid, establishing a common formulary for all plans offered by state agencies, requiring a single purchase agreement for all state agencies, consolidating purchasing power or pooling risk among agencies, and maximizing the use of generic pharmaceuticals. The council, which first met in August 2019, includes New Mexico Secretary of Health Kathy Kunkel and Deputy Health Secretary Abinash Achrekar, MD. Similarly, Delaware passed HCR 35 to establish an interagency study committee to make recommendations on how to leverage the state’s bulk purchasing power to negotiate lower prices. Oregon also introduced HB 2679 to direct the Oregon Prescription Drug Program to cooperate with California in interstate bulk purchasing, and California’s legislature followed suit by passing resolution ACR 105 to encourage the governor to cooperate with Oregon and Washington state to purchase pharmaceuticals in bulk.

The federal government is paying close attention to this issue and putting forward related proposals, such as the 2018 Trump administration blueprint to lower drug prices and out-of-pocket costs for consumers. This blueprint yielded a record number of FDA approvals for generic drugs in July 2019, a workgroup to study short-term drug importation, publication of drug price increases on a Centers for Medicare and Medicaid Services drug dashboard, a finalized rule requiring manufacturers to disclose drug prices above $35 for a monthly supply in TV advertisements, and efforts to improve negotiation within Medicare Advantage.

In July, the U.S. Senate Finance Committee passed the bipartisan Prescription Drug Pricing Reduction Act, which would cap Medicare beneficiaries’ out-of-pocket prescription drug costs starting in 2022. In September, House Democrats released a proposal to establish an international price index, penalize pharmaceutical companies that refuse to negotiate with the government or who raise prices more rapidly than inflation, and cap out-of-pocket costs for Medicare beneficiaries.

As state and territorial health officials advocate for better access to healthcare services, it will be important to continue to acknowledge how prescription drug costs impact purchasers’ and consumers’ ability to afford care and manage chronic and acute conditions. ASTHO will continue to track state and federal strategies focused on improving prescription drug affordability.