State Initiatives

3 New England States Prescribe Innovative Ways To Cut Drug Prices

Bob Carlson

It's too soon to tell whether Maine's prescription drug price control law will survive a legal challenge by the Pharmaceutical Research and Manufacturers of America (PhRMA). But private efforts and another innovative strategy — a plan by Maine, Vermont, and New Hampshire to purchase prescription drugs jointly — are moving ahead.

The Maine Rx program, enacted earlier this year, is scheduled to be implemented on Jan. 1, 2001. It requires pharmaceutical manufacturers to negotiate rebate agreements with the Maine Department of Human Services or face "prior authorization" of their products for Medicaid beneficiaries. In effect, that would force physicians to switch to competing drugs from manufacturers who negotiate rebates.

On Oct. 26, U.S. District Judge D. Brock Hornby in Portland, Maine, granted PhRMA a preliminary injunction that stopped the program in its tracks. The injunction was promptly appealed to the U.S. Court of Appeals for the First Circuit in Boston. According to Assistant Attorney General Andrew Hagler, Maine's position is that the interests of the uninsured citizens in Maine who cannot afford prescription drugs outweigh any harm the drug companies might sustain as a result of prior authorization.

Whatever the First Circuit decides about the injunction, the merits of the case will be argued in Hornby's court. In his preliminary ruling, Hornby agreed with PhRMA's argument that Maine's attempt to reduce the prices of drugs from out-of-state wholesalers violates the interstate commerce clause of the U.S. Constitution, and that prior authorization conflicts with the intent of Congress when it enacted Medicaid. Maine has chosen to fight back, and has made appropriate legal filings to do so.

As the pharmaceutical industry's trade association, PhRMA brings substantial resources to this faceoff. The state gained an ally when the Maine Citizen Leadership Fund, a public interest group, requested in early November to intervene as a codefendant.

The fund, which participated in a friend-of-the-court role in the first hearing, will represent four parties — the Maine Council of Senior Citizens; a physician with many uninsured patients; an uninsured mother of four; and an elderly Maine resident who was active in the passage of Maine Rx. Executive Director Arn Pearson promises the fund will dedicate resources to find experts on the commerce clause and on Medicaid law to help the state's case.

"We have jumped in because this law is essential," says Pearson. "We have documented all sorts of people who are skipping their medications, or splitting pills, or just not filling their prescriptions."

Tristate buying co-op

Maine is trying to address drug prices on a number of fronts. It is participating with Vermont and New Hampshire in an innovative three-state prescription drug purchasing pool to be managed by a pharmacy benefit manager. Conceived by Govs. Howard Dean of Vermont, Jeanne Shaheen of New Hampshire, and Angus King of Maine, the goal is to reduce the cost of drugs for Medicaid recipients, state employees, and the uninsured — about 1.3 million people.

The co-op issued a request for proposals in October. Bids are due Jan. 9. The RFP is set up so that such services as drug utilization review and claims processing can be purchased by the states on an a la carte basis.

Myron Winkelman, R.Ph., a principal with Health Management Associates, the Michigan consultant managing the selection process, says program management, fraud-and-abuse controls, and better deals from drug makers are among the methods states can use to save money.

"Frankly, potential savings is one of the things we're asking the bidders to help us figure out," says Winkelman. "The elements of this equation are complex because pharmaceutical costs are rising 17 percent a year, and states need to curb this growth."

The initiative will complement such individual state efforts as Maine's Rx program, which is open to any resident without existing prescription coverage. There is no equivalent in the other two states, but Vermont was granted a waiver by the Health Care Financing Administration last month to include Medicare beneficiaries in its Medicaid pricing structure starting Jan. 1. New Hampshire has applied for a similar waiver. PhRMA opposes these waivers, but has not indicated if it will take legal action.

Theoretically, savings should increase as the volume being purchased increases, so small businesses, large corporations, and even health insurers could participate in the buying pool if it saved them money. States also expect to realize substantial savings by managing utilization, possibly through a web-based tool that alerts physicians to less expensive alternatives.

"The idea is to dial down utilization by combating the detailing that pharmaceutical companies do to persuade doctors to prescribe expensive drugs," says Peter Van Vranken, the Vermont governor's health policy analyst.

Canada at your door

Unless the Maine Rx program gets the green light in court, and until the tristate buying pool is up and running, the best bet for people who pay for prescriptions out of pocket may be to get them from Canada. That means having a prescription written by a Canadian physician or by an American physician with a border license, then driving to Canada to have it filled.

Eastern Maine Healthcare, in Bangor, expects to provide mail delivery of prescription drugs from a pharmacy in New Brunswick to consumers in Maine by the first of the year. Eastern Maine Healthcare operates five hospitals in northeast Maine.

"The problem is of such magnitude that we want to help people now," says Miles Theeman, executive vice president and chief operating officer of Affiliated Healthcare Services, Eastern Maine's subsidiary that will operate the service.

President Clinton signed a law in October that permits bulk reimportation of prescription drugs from Canada and specified other countries (see cover story), but it will take at least two years to implement the law. By then, says Theeman about his mail-order operation, "It'll be our pleasure to go out of business."

Julia Arnold, M.D., practices family medicine in Whiting, Maine, about 50 miles south of the border. She has a border license, and has seen an increasing number of patients who have their prescriptions filled in Canada, thus saving 25 to 60 percent compared to American prices.

"I knew we were talking about drugs that had just come out in the past two or three years, but I have patients telling me they're getting substantial price breaks on generic drugs that have been out for decades. I was shocked," says Arnold. "It raises questions about the excuse that pharmaceutical manufacturers are using, that they have to recoup development costs."

Responding to Arnold's concern about the price differential on generics, PhRMA spokesman Jeff Trewhitt says only about 40 percent of all generic drugs come from subsidiaries of PhRMA member companies. PhRMA's solution for high prescription drug costs continues to be more comprehensive insurance coverage.

"I'm not opposed to the pharmaceutical industry being profitable or having money for research," says Chellie Pingree, state Senate majority leader and author of the Maine Rx law. "But unless the industry shares some of the burden, like doctors who discount their fees under Medicaid and hospitals that absorb huge losses under Medicare, we're forced to increase taxes to pay for these pharmaceuticals."

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