Today’s Managing Health Care Costs Number is 11
The National Academy for State Health Policy published a white paper with 11 initiatives states could use to control health care costs. I saw this referenced in Pharmalot(part of Stat News) – NASHP is not an organization I had been following.
The national government is responsible for controlling pharmaceutical spending in other developed countries, but the federal government in the US has been unable to effectively address the problem. But it’s inefficient to ask 51 states to do this work. Frankly it’s much easier for Big Pharma to do regulatory capture on a state by state basis. See this Center for Public Integrity article about insurance company state lobbying from last month.
Here’s my take on these 11 concepts:
| Concept | Positive Elements | Challenges |
| 1. Increase drug pricing transparency (including requiring disclosure of development costs, rebates, and justification of price increases | This could embarrass the pharmaceutical companies into choosing lower price points. Anything that makes rebates and discounts less obscure could help! | This encourages misleading accounting – and do we really want drugs to be priced based on the cost of manufacture- or based on “value?” |
| 2. Oversee pharma as a public utility | Pharma has patents that offer a monopoly –so it stands to reason that government should regulate and control prices | Would likely violate the interstate commerce clause. This is a federal issue |
| 3. Bulk prices for public health drugs (immunizations, narcan, hepatitis C drugs) | This works for vaccines already – and is a genuinely good idea | Costs real $$ - so a challenge to fund. |
| 4. Use consumer protection laws (including prohibiting predatory pricing and enforcing antitrust laws) | Antitrust laws could certainly help | Seems like more of a role for the feds |
| 5. Reimport drugs from Canada | They are safe and less expensive | Canada should have lower prices since they have lower GDP AND they have price regulations. If we reimport a lot from them, their prices will go up or their supplies will shrivel |
| 6. Reform Medicaid | Medicaid could get lower prices if it could exclude drugs, and the current mandatory rebates likely raise overall costs | The proposal suggests extending the rebates to exchange plans |
| 7. States become PBMs or create purchasing pools | This could disintermediate the middle men | PBMs have built their business and business model over decades. Pharmaceutical companies might be reluctant to deal with new market entrants, and they could fail |
| 8. Pursue value pricing | Pay what a drug is really worth (including health benefits and productivity and other benefits). Consider paying only when the benefit occurs (e.g. liver transplant prevented by Harvoni) | Difficult to pursue unless the Medicaid guaranteed rebates are stopped – and most drugs (except vaccines and birth control) save lives for a reasonable price – they don’t save money |
| 9. Use Employer Group Waiver Plans (EGWP) for retirees | The federal government pays a portion of drug costs | Many states already do this – and it’s just a cost shift. |
| 10. Protect consumers from misleading marketing | Would be great to get rid of these drug coupons that help sustain high list prices | The only state that did this (MA) discontinued ban in 2012. |
| 11. Shareholder activism | States should use their $3.8 trillion pension fund to advocate for better pharma behavior | Shareholder activism rarely drives business change – and this could lower pension plan yields. |
All in, this is an interesting group of suggestions. States purchase a lot of medications themselves on behalf of state and local government employees, retirees, and to serve public heath needs. They can positively influence the pharmaceutical market through aggressive purchasing. It’s likely that this will be through pharmacy benefit managers for now, though – as setting up an alternative approach would be costly, time-consuming, and have uncertain benefits.
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