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In Support of An Act Establishing the Massachusetts Prescription Fair Pricing Program (HB 2683)
Chairman Fargo, Chairman Koutoujian, and members of the Committee on Public Health
My name is Deirdre Cummings and I am the consumer program director with the Massachusetts Public Interest Research Group. MASSPIRG is a non-profit, non-partisan consumer and environmental advocacy organization with over 50,000 members across the state. MASSPIRG strongly supports this critical consumer health care initiative; HB 3283, An Act Establishing the Massachusetts Prescription Drug Fair Pricing Program filed by Representatives Jehlen, Blumer and Cabral among others, which would make prescription drugs more affordable to many Massachusetts residents. This bill is identical to SB 399, filed by Senator Montigny, which was sent to the Elder Affairs Committee. There are 76 legislative supporters to this proposal.
Lower Prescription Drug Costs
We all know prescription drug prices are high and getting higher all the time. In fact, a recent report by AARP released in April of this year found that the average increase in the price manufacturers charge for band name prescription drugs significantly outpaced inflation for the 5th straight year. The study found that the average price increase during 2004 was 7.1%, compared to the average inflation rate of 2.7%, marking the biggest one year jump over that time. Since the end of 1999, Rx drug manufacturers of the 150 drugs surveyed have raised their prices over two and a half times the rate of inflation, 35.1% compared to the general inflation rate for that time period of 13.5%.
In 2003, Americans spent a record $203 billion on prescription drugs an increase of $20.4 billion from the previous year. But how high is too high?
We know, too, that Americans pay much more for prescription drugs than citizens of other countries. That’s why so many seniors are buying their drugs from Canada.
We also know that some Americans pay more than others. For example, if you’re a veteran, you can get your prescription drugs for about one-half of what the typical uninsured resident in Massachusetts has to pay.
Massachusetts is not exempt from these cost increases. Current estimates put the Commonwealth’s spending at $1.2 billion per year on prescription drugs. The results of these growing prescription drug costs are more people without access to necessary drugs, higher premiums for those fortunate enough to have prescription drug coverage, and an increasing burden on the state and other programs to assist those who cannot pay for drugs themselves.
As many as 1 million Massachusetts residents, are at a dual disadvantage when it comes to paying for prescription drugs. Because they either have no prescription drug insurance, or are “underinsured” they have to pay out of pocket for their medications AND they are often charged more than double what many of the insured pay.
According to a report MASSPIRG released in October 2004, “Paying the Price, A 19- State Survey of the High Cost of Prescription Drugs”, consumers without prescription drug coverage are being charged much higher prices for prescription drugs than the “best available prices”. The “best available prices” were those drug prices the federal government negotiates for some of its programs like the Veterans Affairs Administration, commonly know as the Federal Supply Schedule (FSS) or from a retailer in Canada.
Late last summer, MASSPIRG and state PIRGs across the country surveyed nearly 500 pharmacies in 19 states and Washington, DC in order to determine how much more uninsured consumers pay for 12 commonly prescribed medications than the federal government--one of the pharmaceutical industry’s “most favored” customers. While many previous studies have focused on drugs commonly prescribed to senior citizens, MASSPIRG’s study examined the prices consumers pay for a range of prescription drugs widely used by Americans under 65—from an antibiotic used to treat temporary acute infections, to a long-term medication used to reduce the risk of heart attack.
Among the key findings of the report were the following:
- On average, uninsured consumers in Massachusetts are charged 89% more than the federal government for 12 common prescription medications. This is slightly higher than the national average of 78%. The price differences in Massachusetts ranged from 50 percent more for Ambien to 162 percent more for Synthroid.
- Uninsured consumers in Massachusetts pay 87% more for Zithromax-- the most commonly dispensed antibiotic in America—than the federal government pays for the same medication. Zithromax is an antibiotic prescribed to treat various bacterial infections, including pneumonia.
- Many of the drugs featured in the MASSPIRG survey treat chronic conditions – meaning that even small savings add up quickly. An uninsured person regularly taking Allegra to control their allergies, for example, would pay on average $1201 for a year’s supply of Allegra. The government, on the other hand, would pay only $657 for the same quantity of Allegra – a savings of $544.
While consumers and the Commonwealth struggle to pay for the high cost of needed prescription drugs, the drug industry continues to post record profits. In 2001, according to Fortune Magazine the pharmaceutical industry ranks first in profits as a percentage of revenues, as a percentage of assets, and as a percentage of shareholders’ equity. This placed the pharmaceutical well above computer, banking and household product industries. The drug industry has consistently been among the top two most profitable industries for the past 30 years.
Much of the debate about increasing much needed prescription drug coverage misses the main problem – pharmaceutical companies are charging the state and consumers too much for prescription drugs. We must get lower prices from drug companies, not pay them even more.
AN ACT ESTABLISHING THE MASSACHUSETTS PRESCRIPTION THE PRESCRIPTION DRUG FAIR PRICING PROGRAM HB 2683
Although the prescription drug crisis is complex, simple policy options do exist and could be immediately implemented. HB 2683 will lower the cost of prescription drugs through the following mechanisms.
Creates A Prescription Drug Buying Pool
A prescription drug-buying pool allows businesses, the state government and individuals to use their combined buying power to negotiate lower drug prices, similar to what is done by the federal government and big health insurance providers. This would:
- Give the state government the ability to negotiate substantial rebates from drug companies and discounts from retailers, saving participants money.
- Provide tools to help persuade drug companies to negotiate prices in good faith, including public disclosure of uncooperative companies.
This pool would use a uniform preferred drug list (PDL) (see below) to move market share, negotiate rebates from pharmaceutical companies, and reduce administrative hassles for providers and patients. These groups include:
- Medicare-eligible individuals above 188% of the federal poverty level without insurance that covers prescription drugs.
- Any individual below 300 percent of the poverty level without insurance that covers prescription drugs, by creating the Healthy Massachusetts Discount Card Program based on Maine’s successful “Healthy Maine Prescription Program” which will provide negotiated lower prices through a discount card to residents without coverage or with inadequate prescription coverage.
- State Agencies including: Div of Medical Assistance, EOEA, Group Insurance Commission (GIC), Div of Employment Training, DPH, DMH, DMR and Dept of Corrections.
- Any private or public health plan or state that wishes to opt-in.
The bill also provides consumer protections like no longer than a 10-minute wait for emergency prior authorization drug requests. The bill also bans pharmaceutical company marketing gifts and paves the way for our participation in multi-state efforts to reduce the cost of prescription drugs.
Expand Use of Preferred Lists
Panels of experts develop Preferred Drug Lists (PDL) by evaluating similar medications and placing the cheaper, but equally effective, medications at the top of the list. Health care providers and state governments use these PDLs when making purchasing decisions, ensuring that patients get the most cost-effective drugs available while encouraging drug manufacturers to offer competitive prices.
Increase the Transparency of PBMs
Pharmacy Benefit Managers (PBMs), the pharmaceutical “middlemen”, manage the prescription drug care for millions of Americans. PBMs negotiate deals from pharmaceutical companies on behalf of insurers, state health programs, and large businesses. These deals, however, are shrouded in secrecy and are the basis for misconduct. We must increase transparency and accountability for PBMs.
This bill requires the use of a nonprofit Pharmacy Benefits Manager (PBM) that discloses its revenue sources.
Ban Pharmaceutical Marketing Gifts
This bill prohibits gifts from pharmaceutical industry representatives to physicians who are licensed in Massachusetts. Specifically it would;
- Prohibits all gifts, including travel, lodging, meals, and entertainment.
- Excludes drug samples exclusively for use by a physician’s patients.
We have made some steps forward in providing prescription drug price relief for some consumers in the state we ought to and need to do more. The high cost of prescription drugs effects us all – through higher health care premiums and co payments, restrictive formularies, higher taxes both state and federal as we provide drug relief for the poor, and in our own lives as many of us or ones we care about can not afford their needed medication and risk jeopardizing their health or financial well being in order to pay for the drugs.
HB 2683 employs a basic economic principle to lower prescription drug costs. Large drug buyers will leverage a significant discount from drug manufacturers the more drugs they buy. Most other countries, negotiating on behalf of their residents, has left US consumers paying the highest drug prices in the world.
While MASSPIRG supports measures to lower drug prices for all Americans, HB 2683 will go a long way to making drugs more affordable for many while at the same time demonstrating how government can and should leverage better and more equitable drug prices for everyone.
I have enclosed a copy of our report on prescription drug prices with my testimony for your files. I hope you will pass this bill favorably from your committee.
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