Baker planning pharmacy pricing legislation

Sudders calls manufacturer drug rebates ‘smoke and mirrors’

THE BAKER ADMINISTRATION is developing a legislative proposal to rein in pharmacy prices or at least shed more light on what’s fueling the rising cost.

Marylou Sudders, the governor’s secretary of health and human services, said her agency is crafting legislation that would allow the state to negotiate prices directly with drug manufacturers, call them in for hearings when warranted, and increase overall transparency in the pricing process.

Federal regulators in June shot down a waiver request from the Baker administration that would have allowed the state to set its own policies about which drugs would be covered. Normally, Medicaid drug programs cover all medications with only minor restrictions.

At cost-trend hearings before the Health Policy Commission on Wednesday, many of the commission members expressed frustration at the convoluted system for drug pricing, which features a host of middlemen, including wholesalers and pharmacy benefit managers, operating between manufacturers and patients.

Pharmacy costs have been rising quickly. For commercial health insurance plans, pharmacy spending, net of rebates from manufacturers, has grown faster on a percentage basis than medical spending over the last three years. For the state’s MassHealth insurance program, pharmacy spending has grown $900 million over the last five years, even though rebates have increased dramatically over that period.

Sudders, who is a member of the commission, was skeptical of the entire rebate process. She said if pharmacy prices were fair and adequate, there would be no need for rebates. “It’s smoke and mirrors,” she said.

Stuart Altman, the chairman of the commission, said the rebate process needs to be reviewed. “We have no idea what’s going on and neither does anybody else,” he said.

Daniel Tsai, the assistant secretary of MassHealth, said his agency has been aggressive in pursuing rebates (he cited savings of $320 million annually) and found success where there is competition among drug makers.

He noted a drug with the potential to cure hepatitis C cost $70,000 when it was first introduced by Gilead Sciences, but the price started dropping when competition developed. He said the price fell from $70,000 in 2014 to $51,000 in 2015, $46,000 in 2016, $38,000 in 2017, and $18,000 this year.

Tsai said a significant number of drugs have been developed since 2014 and have little competition. He said the cost of those drugs, after rebate, had increased $202 million during a recent year, which represented a 1.25 percent increase in overall MassHealth spending. That percentage increase is nearly half of the state’s overall cost increase benchmark.

Gov. Charlie Baker, in remarks on Tuesday to the commission, said 30 drugs account for $600 million, or 30 percent, of total pharmacy spending at MassHealth. He said some drugs cost more than $1 million per year per MassHealth member.

Both Sudders and Baker said they are looking to the experience of other states as they craft pharmacy legislation. Trish Riley, executive director of the National Academy for State Health Policy, offered some insight to the commission on what other states are doing. She said 20 states have passed 31 laws dealing with pharmacy benefit managers and seven states (including Connecticut, Maine, New Hampshire, and Vermont in New England) have passed laws requiring increased transparency in pharmacy pricing. Maryland passed a law barring price gouging on generic drugs and Vermont has approved legislation allowing the state to seek federal approval to import drugs from Canada, where prices tend to be lower.

A panel of experts testified before the Health Policy Commission on Wednesday regarding pharmacy prices, but there was little consensus. One panelist, Rochelle Henderson, vice president of research at Express Scripts, a leading pharmacy benefit manager that works as an intermediary between health insurance plans and pharmacies, was asked if her company had considered waiving copays for drugs to treat chronic diseases. Some analysts have suggest copay waivers would prompt greater use of the drugs and help reduce a patient’s overall health care costs.

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Bruce Mohl

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About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

Henderson said Express Scripts had researched waiving copays for certain drugs and concluded the money given up by waiving copays would not be offset by savings elsewhere. She also said the research indicated patients were willing to pay as much as $150 per prescription before they stopped purchasing a prescribed drug.

That comment prompted objections from the other panelists and many members of the commission. “You obviously don’t know what public servants get paid,” Sudders said.