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States taking the lead in laws to curb drug costs

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Several states are tackling high prescription drug prices, an issue that's important to the public but has not yet been aggressively addressed by Congress.

Massachusetts has the boldest proposal so far. It includes allowing the state's Health Policy Commission to set price caps on some of the most expensive medications. No state currently has that ability.

Massachusetts and at least six other states — California, New York, North Carolina, Oregon, Pennsylvania and Texas — have introduced legislation to force transparency on the part of drug companies. Manufacturers would be required to publish costs for research, production and marketing. A hearing on the Massachusetts bill is scheduled for October.

Clare Krusing, spokeswoman for America's Health Insurance Plans, a health insurance lobbying group that supports the legislative efforts and believes Massachusetts has a strong plan, said transparency bills are the current focus at the state level.

“Stakeholders have few ideas of how prices are determined,” she said.

The transparency ideas are well supported by patients, employer groups, hospitals and doctors. There is strong push-back from the pharmaceutical industry, however, she said. The pharmaceutical and health products industry, according to Open Secrets, spent $124,832,898 on lobbying efforts this year.

Federal legislation addressing prescription medicine costs is unlikely any time soon, she said.

In May, Sen. Bernie Sanders, I-Vt., and Rep. Elijah Cummings, D-Md., introduced legislation that would require manufacturers of generic drugs to pay a rebate to Medicaid when prices jump more than inflation, but there are no plans for it to be heard in committee. They've also been asking drugmakers for information about significant price increases in an effort to understand the reasons.

Priscilla Vanderveer, senior director of communications for PhRMA, the drug manufacturers' lobby group, said it is difficult to determine the research and development costs for a single drug because manufacturers try so many different formulas and approaches, many of which are not successful. Also, most drug companies already report financial information to the U.S. Securities and Exchange Commission.

Drugs can prevent high-cost hospital stays and procedures, but this value is not considered in most legislation, she said. There is also no accounting for insurers, pharmacy benefit managers and government health care programs, Ms. Vanderveer added.

“It's quite a political move,” she said. “These are being driven by the insurance industry. They're sort of saying, 'Look over there, it's not us.'”

Recent surveys by the Kaiser Family Foundation have shown a large public concern over prescription drug prices, as well as support for transparency requirements and price limiting abilities.

About 72% of people surveyed said prescription drug costs are unreasonable.

Brian Rosman, research director of Health Care for All, which helped draft the Massachusetts legislation, said some people are wary of meddling in the marketplace and controlling what a private company can charge. But the market analogy doesn't hold up because there is not robust competition among drug companies and they get strong patent protection.

“The pure market in health care was gone long, long ago,” he said.

Other ideas for bringing down drug prices include changing patient cost-sharing and giving doctors objective information about medication that includes pricing, he said.

Mr. Rosman is optimistic that legislation will be successful and that state laws will have national implications later on, he said.

“There's an enormous public interest because these are life-saving medications,” he said.

Shannon Muchmore writes for Modern Healthcare, a sister publication of Business Insurance.