We need better tools to control pharma prices

With many drug makers facing no competition, the market isn't working

FROM THE BEGINNING of the Baker-Polito Administration, managing MassHealth has been a top priority.  We are pleased with the progress made to date, including its first major systems overhaul in 20 years, implementing strong internal controls, and reducing the growth rate from double digit numbers. However, it is evident that additional major structural reforms are required going forward in order to sustain that momentum. One major cost driver is MassHealth pharmacy spending.  Over the past five years, pharmacy costs have doubled from $1 billion to $2 billion even as enrollment has decreased from 1.91 million to 1.86 million members.

While the pharmaceutical industry cites low national drug cost growth across all insurance, for MassHealth, our reality is that we have experienced a 20 percent increase in per member drug costs since 2015.  High-cost drugs with little or no competition are driving overall MassHealth growth.  We have utilized every tool available under current statutory and federal authorities; this administration’s aggressive rebate negotiations have led to over $320 million in annual rebates by achieving an increase in rebate level from 34 percent to 51 percent over five years.  In fact, Massachusetts was one of the very first states to use competitive procurements for hepatitis C therapy to expand universal access while driving down net costs. However, the rise in high-cost drug prices that have no competition is outpacing our ability to keep MassHealth sustainable.  We need the tools to negotiate fair and transparent drug prices.

New drugs launched since 2014, many of which are high-cost with no competition, have added significant costs. In fact, in fiscal 2018 MassHealth spent $205 million after rebates on these new drugs.  Just 19 high-cost drugs pending FDA approval or recently approved are expected to add another $80 million after rebates per year. These drugs lack adequate, or in many cases any, market competition, so manufacturers have no incentive to negotiate value-based payments.  While some states have begun work on specific value-based payment tools, including Oklahoma and New York, it remains unclear whether they will be successful at getting high cost drug manufacturers to reach fair prices. In fact, in Oklahoma few manufacturers have come to the table and none have negotiated value-based payments.

So what should MassHealth do about this?  We have proposed and will continue to pursue the negotiation tools necessary to reduce drug spending while ensuring patient access and protections. MassHealth, a jointly funded state and federal program, submitted a proposal to the federal government aiming to obtain authority which would have been most effective in deploying a value-based payment model. The proposal would have required manufacturer transparency and provided negotiating tools, including potential formulary exclusion. It is not surprising that almost every major pharmaceutical company filed an objection to our state’s request. Our proposal incorporated best practices from the commercial market but unfortunately the Trump administration denied the request.

Moving forward, MassHealth will continue to push hard for drug purchasing reform at the federal and state levels while ensuring strong consumer protections for our members.  We need transparency to understand what’s driving prices and profit margins, flexibility to negotiate cost effective and value based arrangements, and negotiation leverage and consequences to ensure we can achieve fair prices from high-cost drug manufacturers with no competition.

Meet the Author

Marylou Sudders

Secretary of health and human services, Baker administration
Our members deserve access to life saving medications, bio-tech companies deserve to be compensated for the research and development into these medications, and the taxpayers deserve to know that they are getting the best pharmacy rates through a transparent and honest rate setting process.

Marylou Sudders is the Baker administration’s secretary of health and human services.