Reining in Prescription Drug Costs

The last few years have seen a cascade of books and reports detailing the waste and obscene profits of the prescription drug industry.  Even as they rake in large profits, most of their spending goes to marketing, advertising, and administration-- rather than research and development of new drugs as their public relations claims.

With so much fat to cut, states have been finding a range of tools to save money for both consumers and taxpayers.  Building on this success, lawmakers from a number of states have formed the National Legislative Association on Prescription Drug Prices to promote best practices in cutting drug costs, including:

Preferred Drug Lists & Encouraging Generic Drugs:  Using the latest clinical evidence, new Preferred Drug List (PDL) laws have helped encourage doctors to prescribe lower-cost and often more effective drugs for Medicaid patients -- and created savings of up to 53% in some categories of drugs.

Drug Price and Marketing Disclosure: To reduce fraud and better help both Medicaid regulators and consumers negotiate better prices, a number of state laws require companies to disclose the wholesale prices of their drugs and detail the marketing tactics and gifts they give to doctors they may compromise the integrity of the prescribing process.

Bulk Purchasing and Importation: By negotiating bulk prices and working together through multistate purchasing pools, states have cut drug costs anywhere from 25-50%, creating savings for both taxpayers and other health consumers allowed to buy drugs through discount cards. If states were given clear authority to import drugs from Canada or other countries, where prescription drugs are even cheaper, the costs savings would be even more significant.

Pharmacy Benefit Manager (PBM) Regulation: To cut down on PBM "middle men" conflicts of interest, a number of states have required PBM companies to disclose any deals with particular drug companies, pass on such special pricing deals to health plans, and create an ethical fiduciary duty by PBMs to serve the interests of the health plans which hire them, not pad their own pockets at the expense of their clients.

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