States take lead on drug-cost cuts

In the epic national debate over how Americans will pay for prescription drugs, states are suddenly the center of the action – and they're increasingly using tough tactics to force pharmaceutical firms to lower prices.

With prescription drugs playing a growing role in healthcare, the cost issue has the attention of politicians nationwide. But Congress recently battled to a standstill on the issue. So now it's places like Maine, Michigan, and Florida that are at the forefront.

Prodded by skyrocketing Medicaid costs as well as popular outrage, states are moving to take on pharmaceutical firms as greedy Goliaths who need to be strong-armed into lowering prices.

"For years, the pharmaceutical manufacturers have been able to bet on the passivity of states," says Kevin Concannon, head of Maine's Department of Human Services. But in the past year or so, "that's all changed."

The state-level steps are far-reaching:

• The Maine Rx program would include every resident, regardless of age or income, in a purchasing pool that would give the state more leverage as a buyer from drug firms. Furthermore, it would impose price caps if manufacturers don't give deep discounts.

• Florida and Michigan – home to Republican governors hardly known for taking on big business – are pioneering a carrot-and-stick strategy. If drug companies want access to the states' big markets, they have to offer deep discounts on drugs. Many firms are balking – and arguing the states are blocking citizens' access to the latest medicines.

• Vermont just passed a first-in-the-nation law that requires drug-company representatives to disclose gifts or junkets they give doctors in promoting drugs. According to one study, the industry spends $22,000 per doctor per year marketing drugs.

• Massachusetts, in a move paralleled in other states, plans to employ comparison shopping to lower its Medicaid drug bill. The program will increasingly opt for low-cost medicines.

The ferment over pharmaceuticals stems from the fact that Americans are using more and more of these remedies, and the newest pills are pricey. Between 1992 and 2000 the average number of prescriptions per person rose from 7.3 to 10.8. And between 1990 and 2000 the average cost of a retail prescription jumped 48 percent, according to the Kaiser Family Foundation.

This has led to recent state Medicaid increases of roughly 6 percent per year. Already Medicaid – the federal-state healthcare program for the poor – is often a state's second-largest budget item, after education.

Indeed, almost every state faces high drug costs, but the fact that two of the nation's most-aggressive price-fighting states are in New England is perhaps not surprising. They are close to Canada – home of cut-rate, top-quality drugs. On four recent bus trips to Canada, groups of Maine seniors saved a total of about $150,000 on drugs.

And there's the kind of Boston Tea Party indignation that still pervades the region. "This is the greatest injustice in the capitalist world," intones state Sen. Peter Shumlin, a key player in Vermont's prescription-drug fight.

In Maine, a powerful coalition of unions and senior activists has pushed the state to challenge the pharmaceutical industry. When Maine Rx was working its way through the state legislature in 2000, legions of seniors descended on the state capitol – often staying until midnight to guard the bill's progress. The US Supreme Court has agreed to hear a challenge to the law next year.

Maine's ferment over the issue has given rise to the nation's only campaign for the US Senate based almost entirely on prescription-drug prices. Chellie Pingree is a former state senator who championed the Maine Rx law. Though trailing Republican incumbent Susan Collins, she's making a credible run.

Many other candidates are talking prescription drugs, too. Democrat Erskine Bowles in North Carolina and Republican Norm Coleman in Minnesota are among those making the issue a cornerstone of their Senate campaigns. Indeed, the industry points out that many of its biggest critics also happen to be running for office – hinting they may be grandstanding on the issue.

But for Ms. Pingree it's clearly a passion. "If there's enough action in the states," she says, "maybe we'll embarrass Congress into actually doing something."

That may not be so easy.

The industry argues Maine is unconstitutionally trying to supersede federal Medicaid laws. A similar Vermont plan was already struck down in court.

Vermont's new disclosure law could also face court challenges. Drug firms argue that educating doctors about new products is crucial. They say they spend an average of $802 million developing each drug – and must market them to recoup costs. The industry also recently set ethical-marketing standards.

Florida and Michigan face legal hurdles, too. The states are crafting lists of preapproved drugs that Medicare patients are given easy access to. Drugs on the list see brisk sales. But to be on the list, drugs must be offered at big discounts.

Patient-advocate groups are suing Florida – arguing the program prevents residents from using the best drugs. And the drug industry is suing the federal government to get it to stop allowing such state programs.