Addressing the Prescription Drug Affordability Crisis: a Golden Opportunity for State Lawmakers

FAMILIESUSA.ORG Addressing the Prescription Drug Affordability Crisis: A Golden Opportunity for State Lawmakers Prescription drug affordability is a top concern for U.S. voters across the political spectrum and throughout the nation. While the federal government and Congress continue to debate the issue, state lawmakers can and should take the matter into their own hands. Establishing an independent body to assess such as groceries or heating in the winter.2 The prescription drug affordability is a new option for problem has become so acute that nearly one in states that has the potential to significantly curtail three adults does not take the medicine they need prescription drug pricing abuses and lower costs for due to costs, and many individuals even report cutting families, taxpayers, and businesses. Lawmakers in a dose in half or not filling a prescription.3 Maine and Maryland already have enacted versions of In the last 12 months, considerable media attention such legislation. has focused on potential action by Congress to This fact sheet provides a brief overview of the urgent address abusive drug pricing, including through need for state action on prescription drug prices, and Medicare negotiation.4 The outcome of federal efforts, key insights about this potentially powerful approach however, remains uncertain. to tackling the issue. State lawmakers have the ability and the overwhelming support of their constituents to How the Pharmaceutical Industry’s act to solve this problem. For example, in national Extreme Prices Are Affecting Your polls, nearly nine in 10 voters support allowing Constituents the government to negotiate directly with drug Unjustified, excessive drug price increases hurt manufacturers to lower prescription drug prices, more than the patients who rely on the medications. including nine in 10 Democrats and eight in 10 Ultimately, these costs are felt by all families in the Republicans.5 State-specific polls across the nation nation as insurance premiums rise and the burden on mirror these results.6 And voters report that their taxpayers increases through public program spending support for specific lawmakers is closely tied to those on prescription drugs.1 High drug costs touch families lawmakers acting on rapidly increasing drug prices. For in urban and rural areas, and families that identify as example, in a national survey, three out of four voters conservative and progressive. These excessive prices feel less favorably toward elected officials who do not can make it hard for families to pay for necessities support legislation to lower drug prices.7 February 2020 Fact Sheet FAMILIESUSA.ORG Nearly One in Three People Say They Haven’t A State Model for Addressing Excessive Taken Their Medicine as Prescribed Due to Costs Pharmaceutical Prices A new and potentially effective way for state Percent who say they have done the following in the lawmakers to address prescription drug pricing abuses past 12 months because of cost: is to establish a body to review prescription drug affordability. Although this approach is new, it is based Not filled a prescription for on well-tested, successful state models such as utility 19% a medication rate commissions and insurance rate review processes. Taken over-the-counter In sum, the new presription affordability body reviews 18% drug instead costs of high-priced medications and could impose an upper payment limit to cap how much payers Cut pills in half or skipped 12% doses and patients are required to spend on those drugs in the state. Through payment rate setting, a state can lower costs and limit the power of middlemen Percent who did not take in the drug supply chain, which also can drive down prescription medicine as 8 29% excessive costs throughout the system. The savings directed because of the cost identified by the independent body would accrue directly to families, small business employers, and Source: KFF Health Tracking Poll (conducted February 14-24, 2019) state taxpayers through a reduction in overall health insurance premiums.9 Messaging Matters! Takeaways from Conversations with Constituents The Pharmaceutical Lobby’s Arguments Against Action Have Been Debunked Every year, the pharmaceutical industry sends hundreds of lobbyists to our nation’s capital and We need some common-sense rules of the road so that the interests of patients are statehouses throughout the country to argue against protected, not just those of drug company action to control drug prices.10 These arguments take shareholders and CEOs. many nuanced forms, but they typically boil down to — Democratic and Republican focus group three main points — all of which have been debunked: respondents in New Jersey resonated with this message. » Lawmakers don’t have the constitutional authority to act. Medicines don’t save lives if people can’t afford them. » Lowering prices will kill innovation. — Focus groups in Colorado and New Jersey » Lowering prices will kill jobs. resonated with this message. 2 FAMILIESUSA.ORG Drug companies often do not invest their research dollars into new, innovative treatments. Let’s take each argument point by point. > Drug companies often do not invest their research dollars into new, innovative treatments. » Opponents falsely claim that regulating In fact, instead of innovating, these companies prescription drug costs is unconstitutional. But: mostly game patent and exclusivity laws — > Ultimately, the constitutionality of prescrip- eight of every 10 newly patented drugs are tion drug payment rate setting will be deter- variations on existing medicines.15 mined by the courts. However, the model for these proposed processes are longstanding » Opponents falsely claim that lowering drug and constitutionally permitted public service prices would be a job killer. But: commissions that set consumer payment rates for electricity, natural gas, and telecom- > High pharmaceutical costs typically do not munications in all 50 states.11 create jobs. Instead, they eat away at the > Unlike other proposals that relate to sales profitability and financial health of most of our across state lines, and that have been struck nation’s businesses. Each year, pharmaceuti- down in court, the independent body does cal prices escalate and account for a greater not regulate sales that typically occur outside and greater share of health insurance premi- the state, such as those between wholesalers ums. In the past five years, prescription drug and manufacturers.12 costs have increased by more than double the annual rate of inflation.16 And in 2018, a star- » Opponents falsely claim that lowering drug tling 23% of health insurance premium dollars prices will stop companies from developing paid for prescription drugs.17 new, lifesaving drugs. But: > Drug makers can recover revenues – and even prosper – after a price reduction. According > Drug companies reap some of the highest to a head of global research at Bayer, which is profits of any industry and take in worldwide famous for its blood pressure and heart med- 13 revenue in excess of $1 trillion. Their profit ications, when the company “significantly” margins are so high that drug companies reduced the price of a best-selling drug in the spend more on advertising than on research- Chinese market because of government pres- ing and developing new medicines. An anal- sure, it took less than a year for the volume of ysis by The Washington Post found that nine sales to “more than compensate for the price of the 10 largest drug companies spent more reduction.”18 than twice as much on advertising as they did > As one of the most profitable industries in 14 on research and development (R&D). the world,19 there is plenty of margin within 3 FAMILIESUSA.ORG the pharmaceutical industry. Therefore, it is > In Oregon, a similar coalition worked to pass unlikely that price reductions would be the legislation on prescription drug transparency in main driver of large layoffs. In fact, some drug 2017. That coalition included hospitals, insurers, companies with the worst records for raising small businesses, and health care providers.23 prices lay off workers even as they increase prices and profits grow.20 This range of stakeholders can capture multiple voices, > AstraZeneca announced recently it will invest including those within the health care industry, and another $520 million in manufacturing in unify them around the issue of high drug prices. When France, a country with price controls.21 This is health care consumers, providers, hospitals, and other a clear indicator that drug companies are not segments of the health care sector unify with a broader afraid to invest in areas where governments coalition that includes businesses, labor unions, and have taken a stand on prescription drug costs. faith groups, it becomes much more difficult to accept the views espoused by drug makers alone. Strategies to Pass Affordability Legislation Make Sure the Legislation Includes Key Recently, two states have enacted prescription drug Features to Produce Real Reductions in affordability initiatives that are in the early stages of Drug Costs development (see “Two States Have Already Passed a The work of other states provides lessons about how to Form of Drug Price Affordability Legislation” on p. 5). design prescription drug affordability entities to ensure We’ve provided key insights from these efforts to help they have a real impact. Key design features include: ensure success as lawmakers pursue similar plans in other states. » Establish a price threshold to trigger review. A price threshold, or trigger, should automatically Build a Strong Outside Coalition That Brings qualify drugs for affordability review. Brand-name Consumers, Businesses, and the Health Care drugs and biologics, which are typically sold at Sector Together higher prices, should have different thresholds Passing legislation to make prescription drugs more than generics and biosimilar products. Prices for affordable requires the backing of a strong outside brand-name drugs routinely increase every year coalition that represents the voices of multiple at rates much greater than the rate of inflation.

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