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Primary care doctors look at payment overhaul after pandemic disruption
For Gabe Charbonneau, MD, a primary care doctor in Stevensville, Mont., the coronavirus pandemic is an existential threat.
Dr. Charbonneau, 43, his 2 partners and 10 staff members are struggling to keep their rural practice alive. Patient volume is slowly returning to pre–COVID-19 levels. But the large Seattle-area company that owns his practice is reassessing its operations as it adjusts to the new reality in health care.
Dr. Charbonneau has been given until September to demonstrate that his practice, Lifespan Family Medicine, is financially viable – or face possible sale or closure.
“We think we’re going to be okay,” said Dr. Charbonneau. “But it’s stressful and pushes us to cut costs and bring in more revenue. If the virus surges in the fall … well, that will significantly add to the challenge.”
Like other businesses around the country, many doctors were forced to close their offices – or at least see only emergency cases – when the pandemic struck. That led to sharp revenue losses, layoffs and pay cuts.
The primary care practice of Kevin Anderson, MD, in Cadillac, Mich., is also scrambling. The practice – like others – shifted in March to seeing many patients via telemedicine but still saw a dramatic drop in patients and revenue. Dr. Anderson, 49, and his five partners are back to about 80% of the volume of patients they had before the pandemic. But to enhance their chances of survival, they plan to overhaul the way the practice gets paid by Medicare.
Jodi Faustlin, CEO of the for-profit Center for Primary Care in Evans, Ga., manages 37 doctors at eight family medicine practices in the state. She’s confident all eight will emerge from the pandemic intact. But that is more likely if the company shifts from getting paid piecemeal for every service to a per-patient, per-month reimbursement.
One of those 37 doctors is Jacqueline Fincher, MD, the president of the American College of Physicians. Dr. Fincher said the pandemic “has laid bare the flaws in primary care” and the “misguided allocation of money and resources” in the U.S. health care system.
“It’s nuts how we get paid,” said Dr. Fincher, whose practice is in Thomson, Ga. “It doesn’t serve patients well, and it doesn’t work for doctors either – ever, let alone in a pandemic.”
The efforts also aim to address long-festering problems: a predicted widespread shortage of primary care doctors in the next decade, a rising level of physician burnout and a long-recognized underinvestment in primary care overall.
No data yet exist on how many of the nation’s primary care doctors have closed up shop permanently, hastened retirement or planned other moves following the COVID-19 outbreak. An analysis by the American Academy of Family Physicians in late April forecast furloughs, layoffs, and reduced hours that translated to 58,000 fewer primary care doctors and as many as 725,000 fewer nurses and other staff in their offices by July if the pandemic’s impact continued. In 2018, the United States had about 223,000 primary care doctors.
“The majority [of primary care doctors] are hanging in there, so we haven’t yet seen the scope of closures we forecast,” said Jack Westfall, MD, a researcher at the academy. “But the situation is still precarious, with many doctors struggling to make ends meet. We’re also hearing more anecdotal stories about older doctors retiring and others looking to sell their practices.”
Three-quarters of the more than 500 doctors contacted in an online survey by McKinsey said they expected their practices would not make a profit in 2020.
A study in the journal Health Affairs, published in June, put a hard number on that. It estimated that primary care practices would lose an average of $68,000, or 13%, in gross revenues per full-time physician in 2020. That works out to a loss of about $15 billion nationwide.
One main problem, said Dr. Westfall, is that payment for telehealth and virtual visits is still inadequate, and telehealth is not available to everyone.
Reengineering primary care payments
The remedy being most widely promoted is to change the way doctors are reimbursed – away from the predominant system today, under which doctors are paid a fee for every service they provide (commonly called “fee for service”).
Health economists and patient advocates have long advocated such a transition – primarily to eliminate or at least greatly reduce the incentive to provide excessive and unneeded care and promote better management of people with chronic conditions. Stabilizing doctors’ incomes was previously a secondary goal.
Achieving this transition has been slow for many reasons, not the least of which is that some early experiments ended up paying doctors too little to sustain their businesses or improve patient care. Instead, over the past decade doctors have sought safety in larger groups or ownership of their practices by large hospitals and health systems or other entities, including private equity firms.
A 2018 survey of 8,700 doctors by the Physicians Foundation, a nonprofit advocacy and research group found, for example, that only 31% of doctors owned or coowned their practice, down from 48.5% in 2012.
Dr. Fincher predicts the pandemic will propel more primary care doctors to consolidate and be managed collectively. “More and more know they can’t make it on their own.”
A 2018 survey by the American Medical Association found that, on average, 70% of doctor’s office revenue that year came from fee for service, with the rest from per-member, per-month payments and other methods.
The pandemic has renewed the push to get rid of fee for service – in large part because it has underscored that doctors don’t get paid at all when they can’t see patients and bill piecemeal for care.
“Primary care doctors now know how vulnerable they are, in ways they didn’t before,” said Rebecca Etz, a researcher at the Larry A. Green Center, a Richmond, Va., advocacy group for primary care doctors.
Dr. Charbonneau said he’s “absolutely ready” to leave fee for service behind. However, he’s not sure the company that owns his practice, Providence Health System – which operates 1,100 clinics and doctors’ practices in the West – is committed to moving in that direction.
Dr. Anderson is embracing a new payment model being launched next year under Medicare called Primary Care First. He’ll get a fixed monthly payment for each of his Medicare patients and be rewarded with extra revenue if he meets health goals for them and penalized if he doesn’t.
Medicare to launch new payment system
The Trump administration – following in the footsteps of the Obama administration – has been pushing for physician payment reform.
Medicare’s Primary Care First program is a main vehicle in that effort. It will launch in 26 areas in January 2021. Doctors will get a fixed per-patient monthly fee along with flat fees for each patient visit. A performance-based adjustment will allow for bonuses up to 50% when doctors hit certain quality markers, such as blood pressure and blood sugar control and colorectal cancer screening, in a majority of patients.
But doctors also face penalties up to 10% if they don’t meet those and other standards.
Some private insurers are also leveraging the pandemic to enhance payment reform. Blue Cross and Blue Shield of North Carolina, for example, is offering financial incentives starting in September 2020 to primary care practices that commit to a shift away from fee for service. Independent Health, an insurer in New York state, is giving primary care practices per-patient fixed payments during the pandemic to bolster cash flow.
Meanwhile, two of the nation’s largest primary care practice companies continue to pull back from fee for service: Central Ohio Primary Care, with 75 practices serving 450,000 patients, and Oak Street Health, which owns 50 primary care practices in eight states.
“Primary care docs would have been better off during the pandemic if they had been getting fixed payments per month,” said T. Larry Blosser, MD, the medical director for outpatient services for the Central Ohio firm.
A version of this article originally appeared on Kaiser Health News, which is a nonprofit national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation that is not affiliated with Kaiser Permanente.
For Gabe Charbonneau, MD, a primary care doctor in Stevensville, Mont., the coronavirus pandemic is an existential threat.
Dr. Charbonneau, 43, his 2 partners and 10 staff members are struggling to keep their rural practice alive. Patient volume is slowly returning to pre–COVID-19 levels. But the large Seattle-area company that owns his practice is reassessing its operations as it adjusts to the new reality in health care.
Dr. Charbonneau has been given until September to demonstrate that his practice, Lifespan Family Medicine, is financially viable – or face possible sale or closure.
“We think we’re going to be okay,” said Dr. Charbonneau. “But it’s stressful and pushes us to cut costs and bring in more revenue. If the virus surges in the fall … well, that will significantly add to the challenge.”
Like other businesses around the country, many doctors were forced to close their offices – or at least see only emergency cases – when the pandemic struck. That led to sharp revenue losses, layoffs and pay cuts.
The primary care practice of Kevin Anderson, MD, in Cadillac, Mich., is also scrambling. The practice – like others – shifted in March to seeing many patients via telemedicine but still saw a dramatic drop in patients and revenue. Dr. Anderson, 49, and his five partners are back to about 80% of the volume of patients they had before the pandemic. But to enhance their chances of survival, they plan to overhaul the way the practice gets paid by Medicare.
Jodi Faustlin, CEO of the for-profit Center for Primary Care in Evans, Ga., manages 37 doctors at eight family medicine practices in the state. She’s confident all eight will emerge from the pandemic intact. But that is more likely if the company shifts from getting paid piecemeal for every service to a per-patient, per-month reimbursement.
One of those 37 doctors is Jacqueline Fincher, MD, the president of the American College of Physicians. Dr. Fincher said the pandemic “has laid bare the flaws in primary care” and the “misguided allocation of money and resources” in the U.S. health care system.
“It’s nuts how we get paid,” said Dr. Fincher, whose practice is in Thomson, Ga. “It doesn’t serve patients well, and it doesn’t work for doctors either – ever, let alone in a pandemic.”
The efforts also aim to address long-festering problems: a predicted widespread shortage of primary care doctors in the next decade, a rising level of physician burnout and a long-recognized underinvestment in primary care overall.
No data yet exist on how many of the nation’s primary care doctors have closed up shop permanently, hastened retirement or planned other moves following the COVID-19 outbreak. An analysis by the American Academy of Family Physicians in late April forecast furloughs, layoffs, and reduced hours that translated to 58,000 fewer primary care doctors and as many as 725,000 fewer nurses and other staff in their offices by July if the pandemic’s impact continued. In 2018, the United States had about 223,000 primary care doctors.
“The majority [of primary care doctors] are hanging in there, so we haven’t yet seen the scope of closures we forecast,” said Jack Westfall, MD, a researcher at the academy. “But the situation is still precarious, with many doctors struggling to make ends meet. We’re also hearing more anecdotal stories about older doctors retiring and others looking to sell their practices.”
Three-quarters of the more than 500 doctors contacted in an online survey by McKinsey said they expected their practices would not make a profit in 2020.
A study in the journal Health Affairs, published in June, put a hard number on that. It estimated that primary care practices would lose an average of $68,000, or 13%, in gross revenues per full-time physician in 2020. That works out to a loss of about $15 billion nationwide.
One main problem, said Dr. Westfall, is that payment for telehealth and virtual visits is still inadequate, and telehealth is not available to everyone.
Reengineering primary care payments
The remedy being most widely promoted is to change the way doctors are reimbursed – away from the predominant system today, under which doctors are paid a fee for every service they provide (commonly called “fee for service”).
Health economists and patient advocates have long advocated such a transition – primarily to eliminate or at least greatly reduce the incentive to provide excessive and unneeded care and promote better management of people with chronic conditions. Stabilizing doctors’ incomes was previously a secondary goal.
Achieving this transition has been slow for many reasons, not the least of which is that some early experiments ended up paying doctors too little to sustain their businesses or improve patient care. Instead, over the past decade doctors have sought safety in larger groups or ownership of their practices by large hospitals and health systems or other entities, including private equity firms.
A 2018 survey of 8,700 doctors by the Physicians Foundation, a nonprofit advocacy and research group found, for example, that only 31% of doctors owned or coowned their practice, down from 48.5% in 2012.
Dr. Fincher predicts the pandemic will propel more primary care doctors to consolidate and be managed collectively. “More and more know they can’t make it on their own.”
A 2018 survey by the American Medical Association found that, on average, 70% of doctor’s office revenue that year came from fee for service, with the rest from per-member, per-month payments and other methods.
The pandemic has renewed the push to get rid of fee for service – in large part because it has underscored that doctors don’t get paid at all when they can’t see patients and bill piecemeal for care.
“Primary care doctors now know how vulnerable they are, in ways they didn’t before,” said Rebecca Etz, a researcher at the Larry A. Green Center, a Richmond, Va., advocacy group for primary care doctors.
Dr. Charbonneau said he’s “absolutely ready” to leave fee for service behind. However, he’s not sure the company that owns his practice, Providence Health System – which operates 1,100 clinics and doctors’ practices in the West – is committed to moving in that direction.
Dr. Anderson is embracing a new payment model being launched next year under Medicare called Primary Care First. He’ll get a fixed monthly payment for each of his Medicare patients and be rewarded with extra revenue if he meets health goals for them and penalized if he doesn’t.
Medicare to launch new payment system
The Trump administration – following in the footsteps of the Obama administration – has been pushing for physician payment reform.
Medicare’s Primary Care First program is a main vehicle in that effort. It will launch in 26 areas in January 2021. Doctors will get a fixed per-patient monthly fee along with flat fees for each patient visit. A performance-based adjustment will allow for bonuses up to 50% when doctors hit certain quality markers, such as blood pressure and blood sugar control and colorectal cancer screening, in a majority of patients.
But doctors also face penalties up to 10% if they don’t meet those and other standards.
Some private insurers are also leveraging the pandemic to enhance payment reform. Blue Cross and Blue Shield of North Carolina, for example, is offering financial incentives starting in September 2020 to primary care practices that commit to a shift away from fee for service. Independent Health, an insurer in New York state, is giving primary care practices per-patient fixed payments during the pandemic to bolster cash flow.
Meanwhile, two of the nation’s largest primary care practice companies continue to pull back from fee for service: Central Ohio Primary Care, with 75 practices serving 450,000 patients, and Oak Street Health, which owns 50 primary care practices in eight states.
“Primary care docs would have been better off during the pandemic if they had been getting fixed payments per month,” said T. Larry Blosser, MD, the medical director for outpatient services for the Central Ohio firm.
A version of this article originally appeared on Kaiser Health News, which is a nonprofit national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation that is not affiliated with Kaiser Permanente.
For Gabe Charbonneau, MD, a primary care doctor in Stevensville, Mont., the coronavirus pandemic is an existential threat.
Dr. Charbonneau, 43, his 2 partners and 10 staff members are struggling to keep their rural practice alive. Patient volume is slowly returning to pre–COVID-19 levels. But the large Seattle-area company that owns his practice is reassessing its operations as it adjusts to the new reality in health care.
Dr. Charbonneau has been given until September to demonstrate that his practice, Lifespan Family Medicine, is financially viable – or face possible sale or closure.
“We think we’re going to be okay,” said Dr. Charbonneau. “But it’s stressful and pushes us to cut costs and bring in more revenue. If the virus surges in the fall … well, that will significantly add to the challenge.”
Like other businesses around the country, many doctors were forced to close their offices – or at least see only emergency cases – when the pandemic struck. That led to sharp revenue losses, layoffs and pay cuts.
The primary care practice of Kevin Anderson, MD, in Cadillac, Mich., is also scrambling. The practice – like others – shifted in March to seeing many patients via telemedicine but still saw a dramatic drop in patients and revenue. Dr. Anderson, 49, and his five partners are back to about 80% of the volume of patients they had before the pandemic. But to enhance their chances of survival, they plan to overhaul the way the practice gets paid by Medicare.
Jodi Faustlin, CEO of the for-profit Center for Primary Care in Evans, Ga., manages 37 doctors at eight family medicine practices in the state. She’s confident all eight will emerge from the pandemic intact. But that is more likely if the company shifts from getting paid piecemeal for every service to a per-patient, per-month reimbursement.
One of those 37 doctors is Jacqueline Fincher, MD, the president of the American College of Physicians. Dr. Fincher said the pandemic “has laid bare the flaws in primary care” and the “misguided allocation of money and resources” in the U.S. health care system.
“It’s nuts how we get paid,” said Dr. Fincher, whose practice is in Thomson, Ga. “It doesn’t serve patients well, and it doesn’t work for doctors either – ever, let alone in a pandemic.”
The efforts also aim to address long-festering problems: a predicted widespread shortage of primary care doctors in the next decade, a rising level of physician burnout and a long-recognized underinvestment in primary care overall.
No data yet exist on how many of the nation’s primary care doctors have closed up shop permanently, hastened retirement or planned other moves following the COVID-19 outbreak. An analysis by the American Academy of Family Physicians in late April forecast furloughs, layoffs, and reduced hours that translated to 58,000 fewer primary care doctors and as many as 725,000 fewer nurses and other staff in their offices by July if the pandemic’s impact continued. In 2018, the United States had about 223,000 primary care doctors.
“The majority [of primary care doctors] are hanging in there, so we haven’t yet seen the scope of closures we forecast,” said Jack Westfall, MD, a researcher at the academy. “But the situation is still precarious, with many doctors struggling to make ends meet. We’re also hearing more anecdotal stories about older doctors retiring and others looking to sell their practices.”
Three-quarters of the more than 500 doctors contacted in an online survey by McKinsey said they expected their practices would not make a profit in 2020.
A study in the journal Health Affairs, published in June, put a hard number on that. It estimated that primary care practices would lose an average of $68,000, or 13%, in gross revenues per full-time physician in 2020. That works out to a loss of about $15 billion nationwide.
One main problem, said Dr. Westfall, is that payment for telehealth and virtual visits is still inadequate, and telehealth is not available to everyone.
Reengineering primary care payments
The remedy being most widely promoted is to change the way doctors are reimbursed – away from the predominant system today, under which doctors are paid a fee for every service they provide (commonly called “fee for service”).
Health economists and patient advocates have long advocated such a transition – primarily to eliminate or at least greatly reduce the incentive to provide excessive and unneeded care and promote better management of people with chronic conditions. Stabilizing doctors’ incomes was previously a secondary goal.
Achieving this transition has been slow for many reasons, not the least of which is that some early experiments ended up paying doctors too little to sustain their businesses or improve patient care. Instead, over the past decade doctors have sought safety in larger groups or ownership of their practices by large hospitals and health systems or other entities, including private equity firms.
A 2018 survey of 8,700 doctors by the Physicians Foundation, a nonprofit advocacy and research group found, for example, that only 31% of doctors owned or coowned their practice, down from 48.5% in 2012.
Dr. Fincher predicts the pandemic will propel more primary care doctors to consolidate and be managed collectively. “More and more know they can’t make it on their own.”
A 2018 survey by the American Medical Association found that, on average, 70% of doctor’s office revenue that year came from fee for service, with the rest from per-member, per-month payments and other methods.
The pandemic has renewed the push to get rid of fee for service – in large part because it has underscored that doctors don’t get paid at all when they can’t see patients and bill piecemeal for care.
“Primary care doctors now know how vulnerable they are, in ways they didn’t before,” said Rebecca Etz, a researcher at the Larry A. Green Center, a Richmond, Va., advocacy group for primary care doctors.
Dr. Charbonneau said he’s “absolutely ready” to leave fee for service behind. However, he’s not sure the company that owns his practice, Providence Health System – which operates 1,100 clinics and doctors’ practices in the West – is committed to moving in that direction.
Dr. Anderson is embracing a new payment model being launched next year under Medicare called Primary Care First. He’ll get a fixed monthly payment for each of his Medicare patients and be rewarded with extra revenue if he meets health goals for them and penalized if he doesn’t.
Medicare to launch new payment system
The Trump administration – following in the footsteps of the Obama administration – has been pushing for physician payment reform.
Medicare’s Primary Care First program is a main vehicle in that effort. It will launch in 26 areas in January 2021. Doctors will get a fixed per-patient monthly fee along with flat fees for each patient visit. A performance-based adjustment will allow for bonuses up to 50% when doctors hit certain quality markers, such as blood pressure and blood sugar control and colorectal cancer screening, in a majority of patients.
But doctors also face penalties up to 10% if they don’t meet those and other standards.
Some private insurers are also leveraging the pandemic to enhance payment reform. Blue Cross and Blue Shield of North Carolina, for example, is offering financial incentives starting in September 2020 to primary care practices that commit to a shift away from fee for service. Independent Health, an insurer in New York state, is giving primary care practices per-patient fixed payments during the pandemic to bolster cash flow.
Meanwhile, two of the nation’s largest primary care practice companies continue to pull back from fee for service: Central Ohio Primary Care, with 75 practices serving 450,000 patients, and Oak Street Health, which owns 50 primary care practices in eight states.
“Primary care docs would have been better off during the pandemic if they had been getting fixed payments per month,” said T. Larry Blosser, MD, the medical director for outpatient services for the Central Ohio firm.
A version of this article originally appeared on Kaiser Health News, which is a nonprofit national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation that is not affiliated with Kaiser Permanente.
States pass record number of laws to reel in drug prices
Whether Congress will act this year to address the affordability of prescription drugs – a high priority among voters – remains uncertain. But states aren’t waiting.
So far this year, 33 states have enacted a record 51 laws to address drug prices, affordability, and access. That tops the previous record of 45 laws enacted in 28 states set just last year, according to the National Academy for State Health Policy, a nonprofit advocacy group that develops model legislation and promotes such laws.
Among the new measures are those that authorize importing prescription drugs, screen for excessive price increases by drug companies, and establish oversight boards to set the prices states will pay for drugs.
“Legislative activity in this area is escalating,” said Trish Riley, NASHP’s executive director. “This year, some states moved to launch programs that directly impact what they and consumers pay for high-cost drugs.”
And more laws could be coming before year’s end. Of the handful of states still in legislative session – including California, Massachusetts, Michigan, New Jersey, Ohio, and Pennsylvania – debate continues on dozens of prescription drug bills. In New Jersey alone, some 20 proposed laws are under consideration.
“Both Democrat and Republican leaders have shown a willingness to pursue strong measures that help consumers but also protect state taxpayer dollars,” said Hemi Tewarson, director of the National Governors Association’s health programs.
Ms. Riley, Ms. Tewarson, and others note, however, that states can go only so far in addressing rising drug prices, and that federal legislation would be necessary to have a major effect on the way the marketplace works.
Federal lawmakers are keeping a close eye on the state initiatives, Ms. Tewarson said, to gauge where legislative compromise may lie – even as Congress debates more than a dozen bills that target drug costs.
The pharmaceutical industry has opposed most – though not all – state bills, said Priscilla VanderVeer, a spokeswoman for the Pharmaceutical Research and Manufacturers of America, the industry’s main trade group.
“We agree that what consumers now pay for drugs out-of-pocket is a serious problem,” said Ms. VanderVeer. “Many states have passed bills that look good on paper but that we don’t believe will save consumers money.”
Limiting gag rules for pharmacists
At least 16 states have enacted 20 laws governing the behavior of pharmacy benefit managers. The so-called PBMs serve as middlemen among drugmakers, insurance companies, and pharmacies, largely with pharmaceutical industry support.
Those laws add to the 28 passed in 2018. Most of the new laws ban “gag clauses” that some PBMs impose on pharmacists. The clauses, written into pharmacy contracts, stop pharmacists from discussing with customers whether a drug’s cash price would be lower than its out-of-pocket cost under insurance.
With widespread public outrage over gag clauses pushing states to act, federal lawmakers got the message. In October, Congress passed a federal law banning such clauses in PBM-pharmacy contracts nationwide and under the Medicare Part D prescription drug benefit. The Senate passed it 98-2. Even so, many of this year’s PBM laws contain additional gag clause limitations that go beyond the 2018 federal law.
Importing cheaper drugs
Four states – Colorado, Florida, Maine, and Vermont – this year have enacted measures to establish programs to import cheaper prescription drugs from Canada and, in Florida’s case, potentially other countries. Six other states are considering such legislation.
Medicines in Canada and other countries are less expensive because those nations negotiate directly with drugmakers to set prices.
“This is an area where states once feared to tread,” said Jane Horvath, a consultant who has advised Maryland and Oregon, among other states, on prescription drug policy. “Now both Republicans and Democrats view it as a way to infuse more price competition into the marketplace.”Hurdles remain, however. A 2003 law allows states to import cheaper drugs from Canada but only if the federal Health & Human Services Department approves a state’s plan and certifies its safety. Between 2004 and 2009, the federal government halted nascent drug import efforts in five states.
Even so, momentum for importation has built in recent years in states and Congress as drug prices have continued to rise. And the Trump administration this summer threw its support behind the idea.
Florida Gov. Ron DeSantis, a Republican and close ally of President Trump, signed his state’s measure into law on June 11, claiming he did so after Trump personally promised him the White House would back the initiative.
On July 31, HHS announced an “action plan” to “lay the foundation for safe importation of certain prescription drugs.” The plan includes a process to authorize state initiatives. It also requires formal regulatory review, including establishing Food and Drug Administration safety criteria. That process could take up to 2 years.
Two big problems remain: In the weeks since the announcement, the Canadian government has opposed any plan that would rely solely on Canada as a source of imported drugs. The pharmaceutical industry also opposes the plan.
Creating drug affordability boards
Maine and Maryland enacted laws this year that establish state agencies to review the costs of drugs and take action against those whose price increases exceed a certain threshold.
Maryland’s law establishes a five-member board to review the list prices and costs of drugs purchased by the state and Maryland’s county and local governments. The board will probe drugs that increase in price by $3,000 or more per year and new medicines that enter the market costing $30,000 or more per year or over the course of treatment.
If approved by future legislation, upper payment limits on drugs with excessive price increases or annual costs would take effect in January 2022.
“My constituents have signaled loud and clear that bringing drug prices down is one of their top priorities,” said state Sen. Katherine Klausmeier, a Democrat representing Baltimore, who sponsored the legislation.
Maine’s law also establishes a five-member board. Beginning in 2021, the board will set annual spending targets for drugs purchased by the state and local governments.
Increasing price transparency
This year, four states – Colorado, Oregon, Texas, and Washington – became the latest to enact laws requiring drug companies to provide information to states and consumers on the list prices of drugs and planned price increases.
The majority of states now have such transparency laws, and most post the data on public websites. The details vary, but all states with such laws seek to identify drugs with price increases above 10% or more a year, and drugs with price increases above set dollar values.
Oregon’s new law, for example, requires manufacturers to notify the state 60 days in advance of any planned increase of 10% or more in the price of brand-name drugs, and any 25% or greater increase in the price of generic drugs.
“That 60-days’ notice was very important to us,” said Rep. Andrea Salinas, chair of the Oregon House’s health committee, who represents Lake Oswego. “It gives doctors and patients advance notice and a chance to adjust and consider what to do.”
AGA Resource
AGA advocates that drug affordability should be focused on decreasing out-of-pocket expenses for patients, maintaining reasonable incentives for innovation, increasing cost transparency, promoting shared decision making, and boosting competition. Learn more about our drug affordability principles at https://www.gastro.org/advocacy-and-policy/issues-and-news/top-issues/drug-affordability-principles.
Kaiser Health News is a nonprofit national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation that is not affiliated with Kaiser Permanente.
Whether Congress will act this year to address the affordability of prescription drugs – a high priority among voters – remains uncertain. But states aren’t waiting.
So far this year, 33 states have enacted a record 51 laws to address drug prices, affordability, and access. That tops the previous record of 45 laws enacted in 28 states set just last year, according to the National Academy for State Health Policy, a nonprofit advocacy group that develops model legislation and promotes such laws.
Among the new measures are those that authorize importing prescription drugs, screen for excessive price increases by drug companies, and establish oversight boards to set the prices states will pay for drugs.
“Legislative activity in this area is escalating,” said Trish Riley, NASHP’s executive director. “This year, some states moved to launch programs that directly impact what they and consumers pay for high-cost drugs.”
And more laws could be coming before year’s end. Of the handful of states still in legislative session – including California, Massachusetts, Michigan, New Jersey, Ohio, and Pennsylvania – debate continues on dozens of prescription drug bills. In New Jersey alone, some 20 proposed laws are under consideration.
“Both Democrat and Republican leaders have shown a willingness to pursue strong measures that help consumers but also protect state taxpayer dollars,” said Hemi Tewarson, director of the National Governors Association’s health programs.
Ms. Riley, Ms. Tewarson, and others note, however, that states can go only so far in addressing rising drug prices, and that federal legislation would be necessary to have a major effect on the way the marketplace works.
Federal lawmakers are keeping a close eye on the state initiatives, Ms. Tewarson said, to gauge where legislative compromise may lie – even as Congress debates more than a dozen bills that target drug costs.
The pharmaceutical industry has opposed most – though not all – state bills, said Priscilla VanderVeer, a spokeswoman for the Pharmaceutical Research and Manufacturers of America, the industry’s main trade group.
“We agree that what consumers now pay for drugs out-of-pocket is a serious problem,” said Ms. VanderVeer. “Many states have passed bills that look good on paper but that we don’t believe will save consumers money.”
Limiting gag rules for pharmacists
At least 16 states have enacted 20 laws governing the behavior of pharmacy benefit managers. The so-called PBMs serve as middlemen among drugmakers, insurance companies, and pharmacies, largely with pharmaceutical industry support.
Those laws add to the 28 passed in 2018. Most of the new laws ban “gag clauses” that some PBMs impose on pharmacists. The clauses, written into pharmacy contracts, stop pharmacists from discussing with customers whether a drug’s cash price would be lower than its out-of-pocket cost under insurance.
With widespread public outrage over gag clauses pushing states to act, federal lawmakers got the message. In October, Congress passed a federal law banning such clauses in PBM-pharmacy contracts nationwide and under the Medicare Part D prescription drug benefit. The Senate passed it 98-2. Even so, many of this year’s PBM laws contain additional gag clause limitations that go beyond the 2018 federal law.
Importing cheaper drugs
Four states – Colorado, Florida, Maine, and Vermont – this year have enacted measures to establish programs to import cheaper prescription drugs from Canada and, in Florida’s case, potentially other countries. Six other states are considering such legislation.
Medicines in Canada and other countries are less expensive because those nations negotiate directly with drugmakers to set prices.
“This is an area where states once feared to tread,” said Jane Horvath, a consultant who has advised Maryland and Oregon, among other states, on prescription drug policy. “Now both Republicans and Democrats view it as a way to infuse more price competition into the marketplace.”Hurdles remain, however. A 2003 law allows states to import cheaper drugs from Canada but only if the federal Health & Human Services Department approves a state’s plan and certifies its safety. Between 2004 and 2009, the federal government halted nascent drug import efforts in five states.
Even so, momentum for importation has built in recent years in states and Congress as drug prices have continued to rise. And the Trump administration this summer threw its support behind the idea.
Florida Gov. Ron DeSantis, a Republican and close ally of President Trump, signed his state’s measure into law on June 11, claiming he did so after Trump personally promised him the White House would back the initiative.
On July 31, HHS announced an “action plan” to “lay the foundation for safe importation of certain prescription drugs.” The plan includes a process to authorize state initiatives. It also requires formal regulatory review, including establishing Food and Drug Administration safety criteria. That process could take up to 2 years.
Two big problems remain: In the weeks since the announcement, the Canadian government has opposed any plan that would rely solely on Canada as a source of imported drugs. The pharmaceutical industry also opposes the plan.
Creating drug affordability boards
Maine and Maryland enacted laws this year that establish state agencies to review the costs of drugs and take action against those whose price increases exceed a certain threshold.
Maryland’s law establishes a five-member board to review the list prices and costs of drugs purchased by the state and Maryland’s county and local governments. The board will probe drugs that increase in price by $3,000 or more per year and new medicines that enter the market costing $30,000 or more per year or over the course of treatment.
If approved by future legislation, upper payment limits on drugs with excessive price increases or annual costs would take effect in January 2022.
“My constituents have signaled loud and clear that bringing drug prices down is one of their top priorities,” said state Sen. Katherine Klausmeier, a Democrat representing Baltimore, who sponsored the legislation.
Maine’s law also establishes a five-member board. Beginning in 2021, the board will set annual spending targets for drugs purchased by the state and local governments.
Increasing price transparency
This year, four states – Colorado, Oregon, Texas, and Washington – became the latest to enact laws requiring drug companies to provide information to states and consumers on the list prices of drugs and planned price increases.
The majority of states now have such transparency laws, and most post the data on public websites. The details vary, but all states with such laws seek to identify drugs with price increases above 10% or more a year, and drugs with price increases above set dollar values.
Oregon’s new law, for example, requires manufacturers to notify the state 60 days in advance of any planned increase of 10% or more in the price of brand-name drugs, and any 25% or greater increase in the price of generic drugs.
“That 60-days’ notice was very important to us,” said Rep. Andrea Salinas, chair of the Oregon House’s health committee, who represents Lake Oswego. “It gives doctors and patients advance notice and a chance to adjust and consider what to do.”
AGA Resource
AGA advocates that drug affordability should be focused on decreasing out-of-pocket expenses for patients, maintaining reasonable incentives for innovation, increasing cost transparency, promoting shared decision making, and boosting competition. Learn more about our drug affordability principles at https://www.gastro.org/advocacy-and-policy/issues-and-news/top-issues/drug-affordability-principles.
Kaiser Health News is a nonprofit national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation that is not affiliated with Kaiser Permanente.
Whether Congress will act this year to address the affordability of prescription drugs – a high priority among voters – remains uncertain. But states aren’t waiting.
So far this year, 33 states have enacted a record 51 laws to address drug prices, affordability, and access. That tops the previous record of 45 laws enacted in 28 states set just last year, according to the National Academy for State Health Policy, a nonprofit advocacy group that develops model legislation and promotes such laws.
Among the new measures are those that authorize importing prescription drugs, screen for excessive price increases by drug companies, and establish oversight boards to set the prices states will pay for drugs.
“Legislative activity in this area is escalating,” said Trish Riley, NASHP’s executive director. “This year, some states moved to launch programs that directly impact what they and consumers pay for high-cost drugs.”
And more laws could be coming before year’s end. Of the handful of states still in legislative session – including California, Massachusetts, Michigan, New Jersey, Ohio, and Pennsylvania – debate continues on dozens of prescription drug bills. In New Jersey alone, some 20 proposed laws are under consideration.
“Both Democrat and Republican leaders have shown a willingness to pursue strong measures that help consumers but also protect state taxpayer dollars,” said Hemi Tewarson, director of the National Governors Association’s health programs.
Ms. Riley, Ms. Tewarson, and others note, however, that states can go only so far in addressing rising drug prices, and that federal legislation would be necessary to have a major effect on the way the marketplace works.
Federal lawmakers are keeping a close eye on the state initiatives, Ms. Tewarson said, to gauge where legislative compromise may lie – even as Congress debates more than a dozen bills that target drug costs.
The pharmaceutical industry has opposed most – though not all – state bills, said Priscilla VanderVeer, a spokeswoman for the Pharmaceutical Research and Manufacturers of America, the industry’s main trade group.
“We agree that what consumers now pay for drugs out-of-pocket is a serious problem,” said Ms. VanderVeer. “Many states have passed bills that look good on paper but that we don’t believe will save consumers money.”
Limiting gag rules for pharmacists
At least 16 states have enacted 20 laws governing the behavior of pharmacy benefit managers. The so-called PBMs serve as middlemen among drugmakers, insurance companies, and pharmacies, largely with pharmaceutical industry support.
Those laws add to the 28 passed in 2018. Most of the new laws ban “gag clauses” that some PBMs impose on pharmacists. The clauses, written into pharmacy contracts, stop pharmacists from discussing with customers whether a drug’s cash price would be lower than its out-of-pocket cost under insurance.
With widespread public outrage over gag clauses pushing states to act, federal lawmakers got the message. In October, Congress passed a federal law banning such clauses in PBM-pharmacy contracts nationwide and under the Medicare Part D prescription drug benefit. The Senate passed it 98-2. Even so, many of this year’s PBM laws contain additional gag clause limitations that go beyond the 2018 federal law.
Importing cheaper drugs
Four states – Colorado, Florida, Maine, and Vermont – this year have enacted measures to establish programs to import cheaper prescription drugs from Canada and, in Florida’s case, potentially other countries. Six other states are considering such legislation.
Medicines in Canada and other countries are less expensive because those nations negotiate directly with drugmakers to set prices.
“This is an area where states once feared to tread,” said Jane Horvath, a consultant who has advised Maryland and Oregon, among other states, on prescription drug policy. “Now both Republicans and Democrats view it as a way to infuse more price competition into the marketplace.”Hurdles remain, however. A 2003 law allows states to import cheaper drugs from Canada but only if the federal Health & Human Services Department approves a state’s plan and certifies its safety. Between 2004 and 2009, the federal government halted nascent drug import efforts in five states.
Even so, momentum for importation has built in recent years in states and Congress as drug prices have continued to rise. And the Trump administration this summer threw its support behind the idea.
Florida Gov. Ron DeSantis, a Republican and close ally of President Trump, signed his state’s measure into law on June 11, claiming he did so after Trump personally promised him the White House would back the initiative.
On July 31, HHS announced an “action plan” to “lay the foundation for safe importation of certain prescription drugs.” The plan includes a process to authorize state initiatives. It also requires formal regulatory review, including establishing Food and Drug Administration safety criteria. That process could take up to 2 years.
Two big problems remain: In the weeks since the announcement, the Canadian government has opposed any plan that would rely solely on Canada as a source of imported drugs. The pharmaceutical industry also opposes the plan.
Creating drug affordability boards
Maine and Maryland enacted laws this year that establish state agencies to review the costs of drugs and take action against those whose price increases exceed a certain threshold.
Maryland’s law establishes a five-member board to review the list prices and costs of drugs purchased by the state and Maryland’s county and local governments. The board will probe drugs that increase in price by $3,000 or more per year and new medicines that enter the market costing $30,000 or more per year or over the course of treatment.
If approved by future legislation, upper payment limits on drugs with excessive price increases or annual costs would take effect in January 2022.
“My constituents have signaled loud and clear that bringing drug prices down is one of their top priorities,” said state Sen. Katherine Klausmeier, a Democrat representing Baltimore, who sponsored the legislation.
Maine’s law also establishes a five-member board. Beginning in 2021, the board will set annual spending targets for drugs purchased by the state and local governments.
Increasing price transparency
This year, four states – Colorado, Oregon, Texas, and Washington – became the latest to enact laws requiring drug companies to provide information to states and consumers on the list prices of drugs and planned price increases.
The majority of states now have such transparency laws, and most post the data on public websites. The details vary, but all states with such laws seek to identify drugs with price increases above 10% or more a year, and drugs with price increases above set dollar values.
Oregon’s new law, for example, requires manufacturers to notify the state 60 days in advance of any planned increase of 10% or more in the price of brand-name drugs, and any 25% or greater increase in the price of generic drugs.
“That 60-days’ notice was very important to us,” said Rep. Andrea Salinas, chair of the Oregon House’s health committee, who represents Lake Oswego. “It gives doctors and patients advance notice and a chance to adjust and consider what to do.”
AGA Resource
AGA advocates that drug affordability should be focused on decreasing out-of-pocket expenses for patients, maintaining reasonable incentives for innovation, increasing cost transparency, promoting shared decision making, and boosting competition. Learn more about our drug affordability principles at https://www.gastro.org/advocacy-and-policy/issues-and-news/top-issues/drug-affordability-principles.
Kaiser Health News is a nonprofit national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation that is not affiliated with Kaiser Permanente.
States pass record number of laws to reel in drug prices
Whether Congress will act this year to address the affordability of prescription drugs – a high priority among voters – remains uncertain. But states aren’t waiting.
So far this year, 33 states have enacted a record 51 laws to address drug prices, affordability, and access. That tops the previous record of 45 laws enacted in 28 states set just last year, according to the National Academy for State Health Policy, a nonprofit advocacy group that develops model legislation and promotes such laws.
Among the new measures are those that authorize importing prescription drugs, screen for excessive price increases by drug companies, and establish oversight boards to set the prices that states will pay for drugs.
“Legislative activity in this area is escalating,” said Trish Riley, NASHP’s executive director. “This year, some states moved to launch programs that directly impact what they and consumers pay for high-cost drugs.”
And more laws could be coming before year’s end. Of the handful of states still in legislative session – including California, Massachusetts, Michigan, New Jersey, Ohio, and Pennsylvania – debate continues on dozens of prescription drug bills. In New Jersey alone, some 20 proposed laws are under consideration.
“Both Democrat and Republican leaders have shown a willingness to pursue strong measures that help consumers but also protect state taxpayer dollars,” said Hemi Tewarson, director of the National Governors Association’s health programs.
Ms. Riley, Ms. Tewarson, and others note, however, that states can go only so far in addressing rising drug prices, and that federal legislation would be necessary to have a major effect on the way the marketplace works.
Federal lawmakers are keeping a close eye on the state initiatives, Ms. Tewarson said, to gauge where legislative compromise may lie – even as Congress debates more than a dozen bills that target drug costs. Political divisiveness, a packed congressional schedule and a looming election year could stall momentum at the federal level.
The pharmaceutical industry has opposed most – though not all – state bills, said Priscilla VanderVeer, a spokeswoman for the Pharmaceutical Research and Manufacturers of America, the industry’s main trade group.
“We agree that what consumers now pay for drugs out-of-pocket is a serious problem,” said Ms. VanderVeer. “Many states have passed bills that look good on paper but that we don’t believe will save consumers money.”
Limiting gag rules for pharmacists
At least 16 states have enacted 20 laws governing the behavior of pharmacy benefit managers. The so-called PBMs serve as middlemen among drugmakers, insurance companies, and pharmacies, largely with pharmaceutical industry support.
Those laws add to the 28 passed in 2018. Most of the new laws ban “gag clauses” that some PBMs impose on pharmacists. The clauses, written into pharmacy contracts, stop pharmacists from discussing with customers whether a drug’s cash price would be lower than its out-of-pocket cost under insurance.
With widespread public outrage over gag clauses pushing states to act, federal lawmakers got the message. In October, Congress passed a federal law banning such clauses in PBM-pharmacy contracts nationwide and under the Medicare Part D prescription drug benefit. The Senate passed it 98-2.
Even so, many of this year’s PBM laws contain additional gag clause limitations that go beyond the 2018 federal law.
Importing cheaper drugs
Four states – Colorado, Florida, Maine, and Vermont – this year have enacted measures to establish programs to import cheaper prescription drugs from Canada and, in Florida’s case, potentially other countries. Six other states are considering such legislation.
Medicines from Canada and other countries are less expensive because those nations negotiate directly with drugmakers to set prices.
“This is an area where states once feared to tread,” said Jane Horvath, a consultant with NASHP who has advised Maryland and Oregon, among other states, on prescription drug policy. “Now both Republicans and Democrats view it as a way to infuse more price competition into the marketplace.”
Hurdles remain, however. A 2003 law allows states to import cheaper drugs from Canada but only if the federal Health & Human Services Department approves a state’s plan and certifies its safety. During 2004-2009, the federal government halted nascent drug import efforts in five states.
Even so, momentum for importation has built in recent years in states and Congress as drug prices have continued to rise. And the Trump administration this summer threw its support behind the idea.
Florida Gov. Ron DeSantis, a Republican and close ally of President Donald Trump, signed his state’s measure into law on June 11, claiming he did so after Trump personally promised him that the White House would back the initiative.
On July 31, HHS announced an “action plan” to “lay the foundation for safe importation of certain prescription drugs.” The plan includes a process to authorize state initiatives. It also requires formal regulatory review, including establishing Food and Drug Administration safety criteria. That process could take up to 2 years.
Two big problems remain: In the weeks since the announcement, the Canadian government has opposed any plan that would rely solely on Canada as a source of imported drugs. The pharmaceutical industry also opposes the plan.
Creating drug affordability boards
Maryland and Maine enacted laws this year that establish state agencies to review the costs of drugs and take action against those whose price increases exceed a certain threshold.
New Jersey and Massachusetts are debating similar legislation this year.
Maryland’s law establishes a five-member board to review the list prices and costs of drugs purchased by the state and Maryland’s county and local governments. The board will probe drugs that increase in price by $3,000 or more per year and new medicines that enter the market costing $30,000 or more per year or over the course of treatment.
If approved by future legislation, upper payment limits on drugs with excessive price increases or annual costs would take effect in January 2022.
“My constituents have signaled loud and clear that bringing drug prices down is one of their top priorities,” said state Sen. Katherine Klausmeier, a Democrat representing Baltimore, who sponsored the legislation.
Maine’s law also establishes a five-member board. Beginning in 2021, the board will set annual spending targets for drugs purchased by the state and local governments.
Increasing price transparency
This year, four states – Colorado, Oregon, Texas, and Washington – became the latest to enact laws requiring drug companies to provide information to states and consumers on the list prices of drugs and planned price increases.
The majority of states now have such transparency laws, and most post the data on public websites. The details vary, but all states with such laws seek to identify drugs with price increases above 10% or more a year, and drugs with price increases above set dollar values.
Oregon’s new law, for example, requires manufacturers to notify the state 60 days in advance of any planned increase of 10% or more in the price of brand-name drugs, and any 25% or greater increase in the price of generic drugs.
“That 60-days’ notice was very important to us,” said state Rep. Andrea Salinas, a Democrat and chair of the Oregon House’s health committee, who represents Lake Oswego. “It gives doctors and patients advance notice and a chance to adjust and consider what to do.”
Kaiser Health News is a nonprofit national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation that is not affiliated with Kaiser Permanente.
Whether Congress will act this year to address the affordability of prescription drugs – a high priority among voters – remains uncertain. But states aren’t waiting.
So far this year, 33 states have enacted a record 51 laws to address drug prices, affordability, and access. That tops the previous record of 45 laws enacted in 28 states set just last year, according to the National Academy for State Health Policy, a nonprofit advocacy group that develops model legislation and promotes such laws.
Among the new measures are those that authorize importing prescription drugs, screen for excessive price increases by drug companies, and establish oversight boards to set the prices that states will pay for drugs.
“Legislative activity in this area is escalating,” said Trish Riley, NASHP’s executive director. “This year, some states moved to launch programs that directly impact what they and consumers pay for high-cost drugs.”
And more laws could be coming before year’s end. Of the handful of states still in legislative session – including California, Massachusetts, Michigan, New Jersey, Ohio, and Pennsylvania – debate continues on dozens of prescription drug bills. In New Jersey alone, some 20 proposed laws are under consideration.
“Both Democrat and Republican leaders have shown a willingness to pursue strong measures that help consumers but also protect state taxpayer dollars,” said Hemi Tewarson, director of the National Governors Association’s health programs.
Ms. Riley, Ms. Tewarson, and others note, however, that states can go only so far in addressing rising drug prices, and that federal legislation would be necessary to have a major effect on the way the marketplace works.
Federal lawmakers are keeping a close eye on the state initiatives, Ms. Tewarson said, to gauge where legislative compromise may lie – even as Congress debates more than a dozen bills that target drug costs. Political divisiveness, a packed congressional schedule and a looming election year could stall momentum at the federal level.
The pharmaceutical industry has opposed most – though not all – state bills, said Priscilla VanderVeer, a spokeswoman for the Pharmaceutical Research and Manufacturers of America, the industry’s main trade group.
“We agree that what consumers now pay for drugs out-of-pocket is a serious problem,” said Ms. VanderVeer. “Many states have passed bills that look good on paper but that we don’t believe will save consumers money.”
Limiting gag rules for pharmacists
At least 16 states have enacted 20 laws governing the behavior of pharmacy benefit managers. The so-called PBMs serve as middlemen among drugmakers, insurance companies, and pharmacies, largely with pharmaceutical industry support.
Those laws add to the 28 passed in 2018. Most of the new laws ban “gag clauses” that some PBMs impose on pharmacists. The clauses, written into pharmacy contracts, stop pharmacists from discussing with customers whether a drug’s cash price would be lower than its out-of-pocket cost under insurance.
With widespread public outrage over gag clauses pushing states to act, federal lawmakers got the message. In October, Congress passed a federal law banning such clauses in PBM-pharmacy contracts nationwide and under the Medicare Part D prescription drug benefit. The Senate passed it 98-2.
Even so, many of this year’s PBM laws contain additional gag clause limitations that go beyond the 2018 federal law.
Importing cheaper drugs
Four states – Colorado, Florida, Maine, and Vermont – this year have enacted measures to establish programs to import cheaper prescription drugs from Canada and, in Florida’s case, potentially other countries. Six other states are considering such legislation.
Medicines from Canada and other countries are less expensive because those nations negotiate directly with drugmakers to set prices.
“This is an area where states once feared to tread,” said Jane Horvath, a consultant with NASHP who has advised Maryland and Oregon, among other states, on prescription drug policy. “Now both Republicans and Democrats view it as a way to infuse more price competition into the marketplace.”
Hurdles remain, however. A 2003 law allows states to import cheaper drugs from Canada but only if the federal Health & Human Services Department approves a state’s plan and certifies its safety. During 2004-2009, the federal government halted nascent drug import efforts in five states.
Even so, momentum for importation has built in recent years in states and Congress as drug prices have continued to rise. And the Trump administration this summer threw its support behind the idea.
Florida Gov. Ron DeSantis, a Republican and close ally of President Donald Trump, signed his state’s measure into law on June 11, claiming he did so after Trump personally promised him that the White House would back the initiative.
On July 31, HHS announced an “action plan” to “lay the foundation for safe importation of certain prescription drugs.” The plan includes a process to authorize state initiatives. It also requires formal regulatory review, including establishing Food and Drug Administration safety criteria. That process could take up to 2 years.
Two big problems remain: In the weeks since the announcement, the Canadian government has opposed any plan that would rely solely on Canada as a source of imported drugs. The pharmaceutical industry also opposes the plan.
Creating drug affordability boards
Maryland and Maine enacted laws this year that establish state agencies to review the costs of drugs and take action against those whose price increases exceed a certain threshold.
New Jersey and Massachusetts are debating similar legislation this year.
Maryland’s law establishes a five-member board to review the list prices and costs of drugs purchased by the state and Maryland’s county and local governments. The board will probe drugs that increase in price by $3,000 or more per year and new medicines that enter the market costing $30,000 or more per year or over the course of treatment.
If approved by future legislation, upper payment limits on drugs with excessive price increases or annual costs would take effect in January 2022.
“My constituents have signaled loud and clear that bringing drug prices down is one of their top priorities,” said state Sen. Katherine Klausmeier, a Democrat representing Baltimore, who sponsored the legislation.
Maine’s law also establishes a five-member board. Beginning in 2021, the board will set annual spending targets for drugs purchased by the state and local governments.
Increasing price transparency
This year, four states – Colorado, Oregon, Texas, and Washington – became the latest to enact laws requiring drug companies to provide information to states and consumers on the list prices of drugs and planned price increases.
The majority of states now have such transparency laws, and most post the data on public websites. The details vary, but all states with such laws seek to identify drugs with price increases above 10% or more a year, and drugs with price increases above set dollar values.
Oregon’s new law, for example, requires manufacturers to notify the state 60 days in advance of any planned increase of 10% or more in the price of brand-name drugs, and any 25% or greater increase in the price of generic drugs.
“That 60-days’ notice was very important to us,” said state Rep. Andrea Salinas, a Democrat and chair of the Oregon House’s health committee, who represents Lake Oswego. “It gives doctors and patients advance notice and a chance to adjust and consider what to do.”
Kaiser Health News is a nonprofit national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation that is not affiliated with Kaiser Permanente.
Whether Congress will act this year to address the affordability of prescription drugs – a high priority among voters – remains uncertain. But states aren’t waiting.
So far this year, 33 states have enacted a record 51 laws to address drug prices, affordability, and access. That tops the previous record of 45 laws enacted in 28 states set just last year, according to the National Academy for State Health Policy, a nonprofit advocacy group that develops model legislation and promotes such laws.
Among the new measures are those that authorize importing prescription drugs, screen for excessive price increases by drug companies, and establish oversight boards to set the prices that states will pay for drugs.
“Legislative activity in this area is escalating,” said Trish Riley, NASHP’s executive director. “This year, some states moved to launch programs that directly impact what they and consumers pay for high-cost drugs.”
And more laws could be coming before year’s end. Of the handful of states still in legislative session – including California, Massachusetts, Michigan, New Jersey, Ohio, and Pennsylvania – debate continues on dozens of prescription drug bills. In New Jersey alone, some 20 proposed laws are under consideration.
“Both Democrat and Republican leaders have shown a willingness to pursue strong measures that help consumers but also protect state taxpayer dollars,” said Hemi Tewarson, director of the National Governors Association’s health programs.
Ms. Riley, Ms. Tewarson, and others note, however, that states can go only so far in addressing rising drug prices, and that federal legislation would be necessary to have a major effect on the way the marketplace works.
Federal lawmakers are keeping a close eye on the state initiatives, Ms. Tewarson said, to gauge where legislative compromise may lie – even as Congress debates more than a dozen bills that target drug costs. Political divisiveness, a packed congressional schedule and a looming election year could stall momentum at the federal level.
The pharmaceutical industry has opposed most – though not all – state bills, said Priscilla VanderVeer, a spokeswoman for the Pharmaceutical Research and Manufacturers of America, the industry’s main trade group.
“We agree that what consumers now pay for drugs out-of-pocket is a serious problem,” said Ms. VanderVeer. “Many states have passed bills that look good on paper but that we don’t believe will save consumers money.”
Limiting gag rules for pharmacists
At least 16 states have enacted 20 laws governing the behavior of pharmacy benefit managers. The so-called PBMs serve as middlemen among drugmakers, insurance companies, and pharmacies, largely with pharmaceutical industry support.
Those laws add to the 28 passed in 2018. Most of the new laws ban “gag clauses” that some PBMs impose on pharmacists. The clauses, written into pharmacy contracts, stop pharmacists from discussing with customers whether a drug’s cash price would be lower than its out-of-pocket cost under insurance.
With widespread public outrage over gag clauses pushing states to act, federal lawmakers got the message. In October, Congress passed a federal law banning such clauses in PBM-pharmacy contracts nationwide and under the Medicare Part D prescription drug benefit. The Senate passed it 98-2.
Even so, many of this year’s PBM laws contain additional gag clause limitations that go beyond the 2018 federal law.
Importing cheaper drugs
Four states – Colorado, Florida, Maine, and Vermont – this year have enacted measures to establish programs to import cheaper prescription drugs from Canada and, in Florida’s case, potentially other countries. Six other states are considering such legislation.
Medicines from Canada and other countries are less expensive because those nations negotiate directly with drugmakers to set prices.
“This is an area where states once feared to tread,” said Jane Horvath, a consultant with NASHP who has advised Maryland and Oregon, among other states, on prescription drug policy. “Now both Republicans and Democrats view it as a way to infuse more price competition into the marketplace.”
Hurdles remain, however. A 2003 law allows states to import cheaper drugs from Canada but only if the federal Health & Human Services Department approves a state’s plan and certifies its safety. During 2004-2009, the federal government halted nascent drug import efforts in five states.
Even so, momentum for importation has built in recent years in states and Congress as drug prices have continued to rise. And the Trump administration this summer threw its support behind the idea.
Florida Gov. Ron DeSantis, a Republican and close ally of President Donald Trump, signed his state’s measure into law on June 11, claiming he did so after Trump personally promised him that the White House would back the initiative.
On July 31, HHS announced an “action plan” to “lay the foundation for safe importation of certain prescription drugs.” The plan includes a process to authorize state initiatives. It also requires formal regulatory review, including establishing Food and Drug Administration safety criteria. That process could take up to 2 years.
Two big problems remain: In the weeks since the announcement, the Canadian government has opposed any plan that would rely solely on Canada as a source of imported drugs. The pharmaceutical industry also opposes the plan.
Creating drug affordability boards
Maryland and Maine enacted laws this year that establish state agencies to review the costs of drugs and take action against those whose price increases exceed a certain threshold.
New Jersey and Massachusetts are debating similar legislation this year.
Maryland’s law establishes a five-member board to review the list prices and costs of drugs purchased by the state and Maryland’s county and local governments. The board will probe drugs that increase in price by $3,000 or more per year and new medicines that enter the market costing $30,000 or more per year or over the course of treatment.
If approved by future legislation, upper payment limits on drugs with excessive price increases or annual costs would take effect in January 2022.
“My constituents have signaled loud and clear that bringing drug prices down is one of their top priorities,” said state Sen. Katherine Klausmeier, a Democrat representing Baltimore, who sponsored the legislation.
Maine’s law also establishes a five-member board. Beginning in 2021, the board will set annual spending targets for drugs purchased by the state and local governments.
Increasing price transparency
This year, four states – Colorado, Oregon, Texas, and Washington – became the latest to enact laws requiring drug companies to provide information to states and consumers on the list prices of drugs and planned price increases.
The majority of states now have such transparency laws, and most post the data on public websites. The details vary, but all states with such laws seek to identify drugs with price increases above 10% or more a year, and drugs with price increases above set dollar values.
Oregon’s new law, for example, requires manufacturers to notify the state 60 days in advance of any planned increase of 10% or more in the price of brand-name drugs, and any 25% or greater increase in the price of generic drugs.
“That 60-days’ notice was very important to us,” said state Rep. Andrea Salinas, a Democrat and chair of the Oregon House’s health committee, who represents Lake Oswego. “It gives doctors and patients advance notice and a chance to adjust and consider what to do.”
Kaiser Health News is a nonprofit national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation that is not affiliated with Kaiser Permanente.
