Grassroots activists converged on the capitol steps in Annapolis, Maryland on April 3 to protest the General Assembly’s consideration of measures that would restrict the availability of prescription drugs.
The rally, sponsored by Citizens for a Sound Economy (CSE), drew scores of Marylanders from across the state. Chanting “politicians make lousy doctors,” they protested against plans to impose price controls on prescription drugs and limit their availability to Medicaid beneficiaries.
Prior to the rally, activists heard from State Senator Alex Mooney (R-Frederick), who warned that the prescription drug controls advocated by State Senator Chris Van Hollen (D-Montgomery) and State Delegate Rushern Baker (D-Prince George) would have unintended consequences and could increase overall health care spending in the state.
Restricting Rx Availability
Since 1990, federal Medicaid law has required that pharmaceutical firms provide each state’s Medicaid program with all of its drugs at the lowest price available in the state, or at a 15.1 percent discount off the average manufacturers’ price, whichever is lower. Now, state legislatures across the country are considering “supplemental rebate” measures that would require the drug companies to discount their products even more deeply. (See “States Declare War against Prescription Drugs,” Health Care News, April 2002.)
Maryland’s supplemental rebates proposal would require an additional 10 percent discount from manufacturers who want their drugs placed on the Medicaid formulary—the list of drugs approved for Medicaid patients. Firms unwilling or unable to offer the additional discount would be effectively barred from the Medicaid market, which represents between 9 and 13 percent of the overall market for pharmaceutical drugs in Maryland.
Three states—California, Florida, and New Mexico—have already adopted supplemental rebate programs. Many others are considering them.
In late February, the state director of CSE’s North Carolina chapter testified against prior authorization and supplemental rebate programs pending before the state legislature.
“Prior authorization and supplemental rebates are hidden taxes on manufacturing,” warned Jonathan Hill. “Consumers will ultimately pay the price, through reduction of services and lack of availability of life saving drugs.”
Hill reminded the hearing’s participants of the importance of pharmaceutical manufacturing in North Carolina. “Senator Purcell, I was in Laurinburg last week at one of our meetings with 250 people. Their number one concern was the loss of hundreds of pharmaceutical jobs in Scotland County. Representative Wright is exactly right about the importance of manufacturing jobs in North Carolina: 42,000 jobs.”
Restricting access to prescription drugs destroys incentives for innovation, creates supply shortages, and limits consumer choice—all of which would cripple the state’s pharmaceutical industry. “When was the last time a new drug was developed in Canada?” asked Hill, noting that country’s tight price controls over prescription drugs.
A Battle Lost
While the fate of prescription drug controls in Maryland and North Carolina remains to be seen, CSE activists had to admit defeat in Oregon last summer.
Despite the Oregon chapter’s repeated warnings about the negative consequences of prescription drug price controls and formularies, the state legislature—on the last day of the 2001 legislative session—passed HB 3300, the Oregon Prescription Drug Formulary Plan.
“HB 3300 is going to establish price controls on prescription drugs sold in Oregon and create another bureaucratic agency,” explained Russ Walker, Oregon CSE director. “Worst of all, this bureaucratic agency, called the Health Resources Commission, will group similar drugs together and then recommend that the cheapest of the drugs be prescribed in nearly all circumstances. plan. Plain and simple, there is no choice and no competition within this bill.”
Oregon CSE was the only grassroots organization to fight against formulary plan. Through frequent club and town hall meetings, the group educated and mobilized a grassroots army. The height of the mobilization occurred on Oregon CSE Day at the Capitol, when over 200 activists stormed to lobby legislators on the bill and other core issues. Over 400 individual lobby visits were conducted.
In the end, Walker predicted, “With additional resources, we could have put up a stronger fight, involved more Oregonians, and possibly changed the outcome of this piece of legislation.” He urged activists in Oregon and across the country to “remain vigilant, get involved … and never give up.”
The War Goes On
The annual budget bill Minnesota lawmakers sent to Gov. Jesse Ventura (I) calls for the state’s Medicaid program to develop a list of more expensive drugs and require physicians to get approval from state health officials before prescribing them. Drug makers could essentially “buy their way” off the restricted list by providing the state with additional price discounts for Medicaid beneficiaries.
Ventura had vetoed the overall budget proposal, which included the drug list provision, but state lawmakers are working to override the veto. Even if they are unsuccessful, the drug measure is expected to resurface in a later compromise bill. Minnesota officials estimate the restricted list, which will likely target about 10 classes of drugs, would save the state roughly $1.5 million in the first year.
Similar bills restricting access to pharmaceutical drugs were introduced in some 20 states in 2001-2002, and many were pending at the time this issue of Health Care News went to press. Often introduced by legislators claiming they would help reduce the rapid rise in Medicaid spending, experts warn the bills would have the opposite effect.
Medicaid rebates force pharmaceutical manufacturers to reduce discounts offered to HMOs and other group purchasing groups, causing prices to rise for persons not eligible for Medicaid. This leads to higher insurance premiums, which in turn cause some people to lose their private insurance coverage. The Congressional Budget Office reports that every 1 percent increase in the cost of health insurance causes 200,000 people to drop their coverage.
Discouraging access to drugs also has the unintended consequence of making other, often more expensive, types of health care necessary. Hospitalizations and surgeries that could have been avoided by medication means overall spending is higher, not lower, thanks to drug price controls.
“Opposition to drug price controls is poorly organized and funded in most states,” says Joseph Bast, president of The Heartland Institute, publisher of Health Care News. “Unless health care consumers organize and make their voices heard, the war against life-saving drugs will continue … posing a genuine threat to the health of millions of Americans.”
Diane Carol Bast is vice president of The Heartland Institute and editor of Health Care News. Jason M. Thomas is staff economist with Citizens for a Sound Economy.