Baker joins Lamont to push drug pricing proposal

MASSACHUSETTS GOV. Charlie Baker teamed up with Connecticut Gov. Ned Lamont on Tuesday to advocate for a policy both have proposed that would curb the growth in prescription drug prices. The two governors said the plan would provide some predictability for individuals and the health care system in the prices of common pharmaceuticals and rejected criticism that the plan would stifle innovation without significantly benefitting consumers.

Baker said the policies proposed in both states “will help protect consumers and increase accountability for drug manufacturers.”

Lamont said the proposal allows states and individuals to plan their budgets “and makes sure we know what our costs will be going forward.” He added, “I’d like to think over the long term it will bring down prices of pharmaceuticals overall.”

The governors, along with officials from each state’s health departments, spoke and took questions from reporters for around 40 minutes via Zoom. While neither plan is new – Baker introduced his plan as part of his fiscal 2022 budget proposal in January and Lamont introduced a similar proposal in February – the event allowed Baker to call renewed attention to it weeks before the Massachusetts House is set to release its own version of the state budget. It also lets Baker, a Republican, frame the issue as a bipartisan one by joining with Lamont, a Democrat.

The focus is likely to alarm drug companies, who have been lobbying against the plan.

“In practice, this policy would do nothing to reduce costs for patients but would inhibit the biopharmaceutical industry’s ability to develop innovative, life-changing treatments and cures – like the COVID-19 vaccines, which Massachusetts residents are currently benefitting from,” said Zachary Stanley, executive vice president of MassBio, which represents life sciences companies.

The proposal, which Baker first made in 2019, would impose a financial penalty on drug manufacturers who increase the price of a drug by more than the consumer price index plus 2 percent in one year. So if the consumer price index, a measure of inflation, is 1 percent, a drug maker could raise the drug’s price by 3 percent. If the price goes higher than that, the manufacturer would have to pay a penalty of 80 percent of the excess cost.

Baker’s budget estimates that drug companies would have to pay $70 million in penalties the first year the policy goes into effect. He has suggested earmarking $47.5 million to help community health centers and community hospitals, while depositing the rest into the general fund.

No other state has imposed these types of caps on drug price growth. A similar policy was introduced in Congress as part of a drug pricing bill proposed by House Democrats.

Critics of the plan say lowering drug companies’ profits means they will have less money for research and development – which could stifle the development of new drugs. They worry that price drops will not necessarily trickle down to consumers, but rather direct more money to insurers or middlemen like pharmacy benefit managers. Some have also questioned whether limiting price growth would incentivize companies to set initial prices high.

“Allowing the government to arbitrarily set prices on life-saving medicines could slow innovation and make it harder for patients to get the medicines they need,” said Priscilla VanderVeer, vice president of public affairs at PhRMA, the pharmaceutical company lobbying group. “Rather than lowering out of pocket costs by fixing the system that forces many patients to pay more for their medicines than their insurer, these governors are trying to make Connecticut a test case for a dangerous and misguided proposal that has failed to get support in Massachusetts several times.” 

In the question and answer session, Baker and Lamont addressed these concerns. Both governors said they understood the importance of encouraging scientific innovation to develop new drugs, but their proposals were primarily about curbing price increases on generic drugs that have been on the market for years, like EpiPens. “It seems to me this is a perfectly appropriate case of sending a message that says if you want to spend significant resources on research and development to chase really hard to solve problems, by all means,” Baker said. “But to have a circumstance where year over year the increase in generics has gone up 20 to 40 percent, that shouldn’t happen.”

Baker said the work being done by biotech is “critically important,” particularly in areas like COVID-19 vaccine development. But, he said, “That’s a lot different than the issue we’re talking about here – a market where the vast majority of products sold every day have been on the market for years, and in many cases decades.”

Lamont said the cost of research and development could still be baked into the initial price of a drug. “All we’re doing is capping the increase going forward,” he said.

Baker said while the list price of the drug is not the final price – which involves rebates and negotiations with insurance companies and other middlemen – the standard practice in pharmaceutical pricing is to base these discussions on the list price. So a lower list price generally translates to a lower price paid by consumers, and ultimately, lower prices paid for insurance premiums. “If you have a mechanism in place to deal with list prices, some of the stuff that goes on with respect to the list price gets clearer and easier, and that flows through to what the insurance company is paying for medicine and what the insured or uninsured patient is paying as well,” Baker said.

According to the most recent report by the Center for Health Information Analysis, pharmacy spending in Massachusetts was $8.3 billion in 2019 after accounting for prescription drug rebates, an increase of 3 percent from 2018. Not counting rebates, which are negotiated payments that drug manufacturers pay insurers, prescription drug spending was $10.7 billion, an increase of 7.2 percent.

At the press conference, individuals living with chronic conditions talked about the enormous stress placed on them by the high cost of prescription drugs. Karolina Chorvath, a Boston-based journalist living with Crohn’s disease, recalled getting a $100,000 bill to cover the cost of chemotherapy, a treatment sometimes used to treat Crohn’s. “The number hit me in the chest. How could anyone afford that?” Chorvath said. “It’s unacceptable to leave any patient wondering if they can afford to live.”