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Reducing Prescription Drug Costs

Preventing Loss of Medicaid Drug Rebate Funds for States

While the new Affordable Health Care law provides a variety of funding opportunities for states, one provision in the health law that could shift billions of dollars from cash-strapped states to the federal government.  Under the National Medicaid Drug Rebate Program created by the Omnibus Budget Reconciliation Act of 1990, drug manufacturers are required to enter into agreements that provide rebates for Medicaid purchased drugs, establishing a 15% minimum level of rebates.  Up until now, the rebates were divided between the states and the federal government.  But under the new health reform law, a significant portion of the rebates will go solely to Washington beginning this year.

Rx Policies - Cut Health Care Costs and Promote Broader Health Care Reform

One of the biggest challenges our country's leaders face as they seek to address the nation's health care crisis - a challenge faced by federal leaders and state lawmakers alike - is the ever-rising cost of health care.  A key driver of health care costs is the price of prescription drugs, which accounted for 14% of all health care spending in 2007. 

A perfect storm has arisen - of high costs, budget deficits, and a public that is frustrated with the current system and eager for a new one - making 2009 prime for bold health care reform.  An essential piece of reform involves increased scrutiny of prescription drug costs and the drug industry, which manipulates the health care system to increase its profits. On the policy front, pursuing Rx reforms will help states reduce budget gaps and achieve important health policy goals, such as reducing drug prices and achieving greater access to life-saving medications.

New Hampshire Data-Mining Ban Upheld- Blow to Drug Industry Marketing is Boon to States

Tuesday, New Hampshire’s first-in-the-nation law banning the sale of data on physician prescribing habits to drug industry marketers was upheld by a federal appeals court.  The legislation and subsequent court ruling dealt a significant blow to the drug industry and its heavy-handed marketing tactics. The 2006 New Hampshire law, sponsored by Rep. Cindy Rosenwald, will protect the privacy of physicians and their patients by banning data-mining - the process by which the drug industry uses, or mines, the prescribing habits of providers to inform direct-to-provider marketing. As Rep. Rosenwald stated in a press release, the "decision unanimously recognizes that States have the right to protect the prescriber-patient relationship and patient safety, and to try to reduce the cost of pharmaceuticals.” Maine and Vermont passed similar laws which have been held up by litigation, but will now move forward.

Health Care for All: Policy Options for 2009

Download a copy of the report in PDF format here.  View the HTML version of the report here.

OVERVIEW

The U.S. spent $287 billion on pharmaceutical drugs in 2007, representing 14% of all health care expenditures.  Driving this expense is the pharmaceutical industry, which spends $30 billion each year on marketing, often regardless of a drug's efficacy.  In fact, the drug industry spends more money marketing drugs than it spends developing new ones.  

Through direct arrangements or lack of oversight, the government is complicit in these profits. A report from Congressman Henry Waxman shows that the drug industry increased its profits by more than $8 billion in the six months after the new Medicare drug benefit went into effect, which does not allow Medicare to use its vast bargaining power to negotiate lower drug prices and a better deal for taxpayers and seniors. 

In contrast, states have been working since the 1990's to rein in the drug industry.  In 2008, at least 540 bills and resolutions have been introduced for consideration in states across the country.  This attention is partly driven by polls showing that 70% of Americans believe the drug industry puts profits ahead of people.

The Prescription Project and National Legislative Association on Prescription Drug Prices (NLARx) and Prescription Policy Choices have outlined a range of policies, from reining in abusive marketing practices to ensuring the safety of medications.

Policy Options:

Focus on Prescription Drug Reform

$287 billion -- that is how much the U.S. spent on pharmaceuticals in 2007, representing a significant driver of health care costs.  While spending on hospital and physician care surpass spending on prescriptions, drugs still account for 14% of all health care expenditures. Combine this with polls that show 70% of Americans believe the drug industry puts profits ahead of people, and it's no wonder that in 2008, at least 540 bills and resolutions are being considered by states across the country to reduce prescription drug prices, ensure the quality of medications covered by public and private health plans, and reduce the undue influence of pharmaceutical industry marketing - which itself tops out at $30 billion each year.

Health-Care-for-All On the Installment Plan

Incremental steps to improve the health care system can lay the foundation for comprehensive reform that provides health care for all. Comprehensive reforms enacted in Massachusetts, Vermont, Maine and San Francisco were, in large part, the result of pragmatic incremental steps those states had already taken. For example, a Families USA report discusses the many reforms Massachusetts put in place over the years that led to its comprehensive 2006 reform. Not every state is as far along in moving comprehensive health care reform, but each state does have numerous options for increasing access to coverage, reducing the growth of health care costs, and improving the quality of care.