From the Dispatch

Preventing Loss of Medicaid Drug Rebate Funds for States

Enzo Pastore — Thu, 01 Jul 2010 15:31:24 +0000

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.

Changes in Federal and State Rebate Share: On the positive side, the Affordable Care Act now requires greater discounts in Medicaid rebates by increasing the minimum rebate level from 15% to 23.1% for most brand name medications. This increase, which also applies to manufacturers of generics, is projected to raise $36 billion over 10 years. Under the old policy, states sent Washington a proportion equal to the share of Medicaid funding the federal government paid. But now, the new federal reform law allows the federal government to keep 100 percent of the rebate that falls within the 15.1 to 23.1 percent range. Any rebates above 23.1 percent will continue to be shared. According to the office of Senate Majority Leader Harry Reid the change was necessary to help pay for a $434 billion 10-year increase in federal Medicaid funding.

Some States Stand To Lose Millions: Based on 2009 Medicaid data, states received average rebates of 38.5 percent a year ago, well above the previously required 15 percent, so the change will cost them dearly. California, for instance, could lose as much as $50 million next year alone because of the changes. Indiana predicts losses of $400 million over the next 10 years. And because the new policy is retroactive to 2010, Vermont stands to lose $2.3 million in fiscal year 2010 and $4.2 million in FY 2012.

What States Can Do: If states move quickly, they can secure both federal best price rebates and state supplemental rebates that can realize Medicaid rebates as high as 40-50%- increasing the rebate portion states hold onto and offsetting losses.

One key step is to secure clear state data on base prices from which rebates are calculated. Currently, the federal government is barred by a court order from sharing data on the Average Manufacturer Price (AMP) and federal Best Price with the states, so since states don’t get this price data reported to them, state laws need to be in place to require drug companies to report AMP and best price directly to them.

Only Maine and Vermont have apparently passed such reporting laws. To respond to this emergency, Maine Rep. Sharon Treat, who also serves as Executive Director of the National Legislative Association on Prescription Drug Prices (NLARx), recommends that State Medicaid directors and State Legislatures need to immediately review their preferred drug lists. They need to make changes from a clinical perspective to reflect retroactive changes in rebate policies that will affect their budgets this year. States also need to pass a state drug price reporting law.

See also model AMP/best price legislation to address this data reporting issue.

Medicaid Rebates Now Available for Medicaid Managed Care Plans: One more twist on the changes affecting Medicaid rebates is that another provision of the federal law will help to offset the loss of rebate dollars in some of the states. For the first time, drug rebates will be allowed for drugs sold to State Medicaid managed care plans. Forty-one states use managed care plans and in total this accounts for about 70 percent of Medicaid enrollees across the country. However, only 16 of them depend on the managed care programs to administer drug benefits, while others have opted to pay for many drugs directly to get rebates. Clearly the new managed care policy strongly favors those 16 states. The provision will encourage more states to use managed care plans for drug coverage, which could lead to a reduction in drug spending. Arizona is one of the states that will see a major benefit. Its entire Medicaid program is run through managed care plans, so the state did not benefit in the past from the federally required rebates.

Resources
CMS - National Drug Rebate Agreement
Kaiser Health News - States' Medicaid Funds Tapped For Federal Health Overhaul
National Legislative Association on Prescription Drug Prices - Special Report: States Must Act Now to Preserve Medicaid Drug Rebates!
National Legislative Association on Prescription Drug Prices - Model Law: Manufacturer Drug Price Reporting
Inside Health Reform - States Upset With Guidance On Medicaid Dug Rebates, Still Have Questions
Inside Health Reform - Reid Bill Would 'Recapture' $20 Billion In Medicaid Rebates From States

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New Health Insurance Rules Hailed as Patient's Bill of Rights

Enzo Pastore — Thu, 24 Jun 2010 17:33:49 +0000

Marking the 90 day anniversary of the signing of the Affordable Care Act, President Obama used the occasion to announce the implementation of a Patient’s Bill of Rights. After meeting privately with health insurance CEOs and state insurance commissioners, the White House sent a signal to insurers and to the public that the President intends to monitor how the insurance industry responds to the law’s implementation. In warning industry executives to refrain from using the law as an opportunity to boost unjustifiable rate increases, the Administration unveiled new regulations that will govern how new consumer protection provisions are implemented.

The Patient’s Bill of Rights rules are designed to clamp down on some of the most notorious practices of the insurance industry. After September 23rd,

Insurers are prohibited from denying coverage to kids with pre-existing conditions.
Certain annual and all lifetime limits on benefits would be prohibited.
Insurers would no longer be allowed to drop coverage when policy holders get sick.

The rules also ensure the ability choose a primary care doctor or pediatrician, lift the requirement of needing a referral to see an OB-GYN and dismiss the need for prior approval if out of network emergency care is needed.

While the new law does not grant the federal government authority to regulate premiums, Obama pointed to states such as Maine, Pennsylvania and New York that are investigating sudden spikes in health insurance rates. Pennsylvania is investigating the state's nine largest health insurers over rate increases that Governor Ed Rendellcalls exorbitant. California officials have investigated WellPoint's proposed 39% increases that the insurer later called a mistake.

The 196 pages of new regulations were simultaneously released by the Departments of Labor, Treasury and Health and Human Services and come on the heels of findings from a Kaiser Foundation survey that premiums for the policies most recently bought by individuals have increased by an average of 20 percent.

Resources
Health Care for America Now (HCAN) - Insurance Industry Inflates Rates While Falsely Blaming New Health Care Law
The White House - Background and Fact Sheet on the New Patient's Bill of Rights
Kaiser Family Foundation - Survey of People Who Purchase Their Own Insurance
New York Times - Obama Says Health Law Shouldn't Be Excuse to Raise Rates
Reuters - Obama warns health insurers not to hike rates
Federal Register - Interim Final Rules - Patient Protection and Affordable Care Act: Preexisting Condition Exclusions, Lifetime and Annual Limits, Rescissions, and Patient Protections

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Anticipating Federal Reform, States Move on Reining in Insurance Abuses and Implementation

Enzo Pastore — Thu, 18 Mar 2010 17:29:47 +0000

Highlighting the outrage at insurance industry abuses pushing Congress towards a final decision on federal health care reform, state legislators continue to advance their own insurance reforms, even as they lay the groundwork for implementing the policies that will emerge in a federal bill.

Here is a summary of just some of the developments taking place across the country where states are enacting and proposing legislation that will complement some of the anticipated federal reforms. Other bills include establishing a state universal coverage program and creating commissions to examine how to best implement the many provisions within a federal reform bill.

Stopping Insurance Abuses: Addressing consumer anger over continued discrimination and abuses leading to bankruptcy in many cases due to medical bills, state chambers continue to enact new reforms on insurance companies:

The Maine House recently voted to pass a first in the country law that would eliminate lifetime and annual caps from health insurance plans in the state. LD 1620, "An Act to Protect Health Care Consumers from Catastrophic Medical Debt” passed by a 99-38 vote.
New Mexico’s Governor signed SB 148 into law on March 9^th. The new law prohibits gender rating in insurance policies by phasing out the allowed differential between men and women. New Mexico joins eleven other states that currently prohibit or restrict gender rating in the individual market, including Maine, Massachusetts, Minnesota, Montana, New Hampshire, New Jersey, New York, North Dakota, Oregon, Vermont, and Washington.
Colorado stands on the verge of joining its southern neighbor by enacting House Bill 1008, which passed the House in February and was approved by the Senate this week, which will prohibit carriers from using gender as a basis for varying individual premium rates and declaring premium rates based on gender to be unfairly discriminatory.

Implementing Federal Reforms: While a few conservative state leaders are promoting symbolic opposition to federal reform, most states are preparing to take action to implement federal reforms in anticipation of increasing consumer choice, reducing abuses by providers and expanding coverage:

In California, Assembly bill 1595 and Senate bill 890 establish the intent of the Legislature to enact legislation that would implement federal health care reform in this state. The Senate bill specifies that the Legislature shall enact and enforce health insurance market reform, expand Medi-Cal coverage to adults and modifying the Major Risk Medical Insurance Program in order to make the state eligible for federal funding.
An Iowa bill, Senate File 2356, received Senate approval by a bipartisan vote of 45 to 5 on March 1^st. This health care reform bill sets the groundwork for how potential federal health care funding may be used to benefit Iowans. The bill includes an insurance exchange and it also expands the state’s unofficial public option program for adults below 200% FPL. The legislation is based on recommendations approved unanimously by the bipartisan Legislative Health Care Coverage Commission that included Democratic and Republican legislators as well as representatives of insurers, health care providers and consumers.
In Illinois, SB 3047 stands on the verge of being approved by the full Senate. The bill establishes the bipartisan Health Care Justice Implementation Task Force whose mission goals are: 1) to monitor the implementation of the federal health care reforms and make recommendations per state implementation; 2) assess current state programs and how they interface with the federal reform and 3) develop a plan regarding additional reforms needed to ensure affordable health care.
Two bills introduced in Minnesota in 2009, HB 1564 and SB 1473 establish the Minnesota Health Insurance Exchange that will provide individuals with greater access, choice, portability, and affordability of health insurance products.
A Missouri bill, HB 2295, establishes the "KidCare Co-op Program" that will provide affordable health insurance coverage for all children up to nineteen years of age. The KidCare Co-op will operate as a public option nonprofit health insurance cooperative.
While in Nebraska, LR 372, is a resolution that would set up a study committee to study the potential effect of national health care reform proposals on Nebraska and analyze policy options for responding to and implementing health care reform measures.

Universal Health Care: A number of states are already anticipating building on the frame of federal reform to move towards a more universal health care for all system:

Rhode Island introduced companion bills in February, HB 7560 and SB 2552, that would establish a state-sponsored system of universal health care which also creates the “HealthRight Authority” insurance exchange.
The Vermont Legislature is considering several bills that address aspects of health care reform. This week, SB 88 passed in the Health and Welfare Committee and now sits in the Appropriations Committee. SB 88 and HB 100 are companion state single payer bills that establish VermontCare to provide universal access to essential care for all residents, financed through state taxes and other sources, including a potential waiver for using Medicaid funds, while maintaining other federal public health programs. Other pending legislation includes SB 181 (hospital global-budgeting bill), HB 491(single payer) and HB 510 (public option).
California's Universal Health Care Act (S.810) -- which passed the Senate in January - would enact a single-payer health care system for the state and create a commission to decide how to pay for the plan and then submit the funding plan to voters through a ballot initiative.
Pennsylvania: Single payer bills are also making significant progress in Pennsylvania. SB 400 and HB 1660, the "Family and Business Healthcare Security Act," also have the promised signature of the Governor and, most notably, the active support of Republican leaders in both chambers.

Resources:
Health Care for America Now - Health Insurers Falsely Claim Rising Costs Justify Soaring Premiums
Families USA - February 2010 Issue Brief, Medical Loss Ratios: Making Sure Premium Dollars Go to Health Care-Not Profits
Progressive States Network - Letter to President Obama urging the passage of comprehensive health care reform
Progressive States Network - Health Care Reform Resources
State Coverage Initiatives - The Impact of Health Care Reform on State Operations, a February 2010 issue brief that examines a wide range of health care reform initiatives implemented over the past few years in five states - Massachusetts, New Mexico,Tennessee, Vermont and Wisconsin - and offers recommendations that are applicable to all states.
State Coverage Initiatives - Webinar held on March 11, 2010 on the potential roles of a health insurance exchange. This follows their recent brief, Preparing for Health Reform: The Role of the Health Insurance Exchange, that discusses state-specific issues to be considered before establishing an exchange and the different ways in which an exchange might be structured and operated.

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How States Fare Under Obama’s Health Reform Blueprint

Enzo Pastore — Thu, 25 Feb 2010 16:16:42 +0000

This week, President Obama released his blueprint for comprehensive health care legislation. The plan 's release means Obama can outline the specifics of what he wants to see in a final bill for the first time. Many political observers see the decision to outline specifics as not only a jump start to move health care reform across the finish line but also as a stamp of approval for the Senate to use a majority vote through the reconciliation process, a strategy which appears to be gaining momentum.

Largely following provisions in the Senate bill passed in December, the President's plan will:

Establish state exchanges rather than creating one national insurance exchange;
Extend coverage to 31 million people who are currently uninsured, at a cost over 10 years of $950 billion — more than the $872 billion the Senate would have spent, but less than the $1.05 trillion for the version passed by the House;
Exclude a public option.

The President’s proposal does decrease the states’ share of Medicaid costs:

The Senate bill provides federal support for state Medicaid programs but does so in a way that would vary from one state to the next. The President’s proposal replaces this with uniform 100% federal support for all States for newly eligible individuals from 2014 through 2017. It then moves the federal support to 95% for 2018 and 2019, and to 90% for 2020 and subsequent years. This approach resembles that of the House bill, which provides full support for all States for the first two years, and then 91% federal support thereafter.
States that have already made investments in helping the uninsured by expanding Medicaid to adults with income below 100% of the poverty level will, beginning in 2014, also receive an increased matching rate on certain health care services by 8 percentage points.
Obama’s plan also provides additional assistance to the Territories, raising the Medicaid funding cap by 35% rather than the Senate bill’s 30%.

New Federal Entity to Oversee Insurer Rate Increases: No doubt influenced by the shocking premium increases in California and in other states, the President’s plan would establish a new process for reviewing increases in health plan premiums. If a rate increase is deemed unreasonable or unjustified, the insurer would be required to lower premiums, provide rebates or take other actions to make premiums affordable. A new Health Insurance Rate Authority would provide federal oversight, help states determine how rate review will be enforced, and monitor insurance market behavior. Like the Senate bill, the White House proposal would provide grants to states to support efforts to review and approve premium increases.

While at least 25 states have some “form of a prior approval process for premium increases,” state governments often lack the resources or political will to keep insurers in check, so the new federal authority is both politically and substantively significant in helping protect consumers from unreasonable rate increases. The provision will kick in immediately and will also prohibit insurers from dramatically increasing rates during the period between the passage of comprehensive reform and implementation.

Today, we will all be witness to the bipartisan summit on health reform. But regardless of the outcome, state legislators can keep the pressure on for reform by moving state proposals that highlight health insurer abuses and exorbitant profits, expand access and affordability, and reduce costs to both states and consumers.

Resources:
White House.gov - President Obama's Health Care Reform Proposal
Kaiser Family Foundation - Side-by-Side Comparison of Major Health Care Reform Proposals
Families USA - A Closer Look at Republican Health Care Proposals
Families USA - The Facts About Prior Approval of Health Insurance Premium Rates
Commonwealth Fund - States Wait for Word on Federal Medicaid Help
Herndon Alliance - Consensus Message Document on Fixing Health Care
Center for American Progress Action Fund - Wellpoint Raising Rates by Double Digits in at Least 11 States
Health Care for American Now - Health Reform Provides Critical Long-Term Help to States

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Targeting Insurance Abuses as a Path to Federal Health Reform

Enzo Pastore — Tue, 16 Feb 2010 18:13:13 +0000

As comprehensive health care reform has been stalled for several weeks now, progressive legislators, advocates and health care consumers across the country have been feeling a deep sense of frustration and outrage. The insurance industry and their conservative allies in Congress have used every tactic available to shift public debate away from the core reason insurance reform was needed in the first place: the denial of coverage to those with preexisting coverage, and the out-sized profits and administrative waste by insurance companies that has priced health care out of the reach of millions of Americans. Last year, there were 900,000 families that faced bankruptcy due to medical costs, and remarkably, of those 900,000, 75% (675,000) had insurance coverage.

State legislative leaders across the country are using state campaigns against these insurance abuses to refocus public debate on the need for comprehensive reform. While fixing a few of those problems at the state level will help, almost all state leaders pushing these bills also recognize that long-term action on health care needs the support of federal reform for success.

These state campaigns — coordinated across multiple states with the support of the Progressive States Network, Health Care for America Now (HCAN) and other allies—can remind voters of those long standing abuses by health insurance companies and why the public supported reform in the first place. And this campaign will make it clear to health insurance companies that if they try to defeat federal reform, they will just face a new burst of regulations at statehouses across the country.

This Dispatch will: highlight a few of the state insurance reform campaigns underway and the health insurance problems they highlight; detail how to message these campaigns to support federal reform; provide a roundup of policy options and model bills for other states interested in moving similar insurance reforms; and end with a set of resources on the campaign, including national policy organizations, key reports, and bills moving across the country.

Table of Contents:

- Campaigns Taking Action Against Insurance Company Profiteering

- How State Insurance Reform Campaigns Can Help Pass Federal Reform

- Key Policies and Models for Reform

- Resources Supporting State Insurance Reform Campaigns

- Current State Legislative Proposals

- Conclusion

Campaigns Taking Action Against Insurance Company Profiteering

Putting their time and resources behind legislation to curb insurance abuses is not something new, but state legislators sense a window of opportunity and momentum both because of how close federal reforms are to being realized, but also as a tool to help get federal reform efforts back on track. Expectations were raised and state legislators are turning their outrage into action.

One of the messages lost in all of the debate has been the fundamental abuses by the insurance companies that outrage all Americans. Abuses in the insurance industry continue unimpeded, as the most recent rate hike from Anthem Blue Cross clearly amplifies. They announced an immediate rise in premiums charged to hundreds of thousands of individual customers in California by as much as 39%—even though their parent company's profits spiked to a record $4.7 billion last year. But it’s just not California. Insurance companies in at least four states are raising their premiums for individual policies by 15% or more.

The Costs of Continuing the Status Quo: Health insurers will continue to deny coverage to people because of pre-existing conditions, health status or age, continue to discriminate against women and continue to cancel coverage when people become sick. One real life example of the abominable behavior of health insurance companies is illustrated by the story of Ian Pearl. The 37 year old Mr. Pearl, born with muscular dystrophy, has been in and out of southern Florida hospitals his entire life. However, in December 2008, New York based Guardian Life Insurance notified Ian and his family that it was dropping his coverage.

Upon filing a lawsuit, Ian’s attorneys uncovered insurance company documents confirming that Ian was clearly a target of discrimination. The documents revealed Guardian had compiled a "hit list" of its costliest members, including patients with muscular dystrophy, multiple sclerosis, brain injury, and paralysis. Guardian executives referred to them as "dogs" and "train wrecks," and debated how and when to dump individuals with serious chronic health problems from the rolls. Guardian eventually reversed its decision, but this only came about because of the widespread media frenzy the case received.

However, Ian is just one among millions of Americans. Over 46 million people in our country have no insurance, a number that continues to climb upward. The 900,000 families that faced bankruptcy due to medical costs last year is just the tip of the iceberg of families denied coverage or finding that loopholes in legal language leave them financially liable for care they thought was covered by insurance.

Fattened Insurance Company Profits at the Expense of Health Care Consumers: The insurance industry continues to accumulate staggering amounts of wealth, to the tune of $800 billion per year in premium revenue that results in skyrocketing company profits and reserves. In 2008, the total revenue of the seven largest companies totaled more than $250 billion.

At the same time insurance companies savor their profits, family insurance premiums continue to skyrocket as well, with a 78% increase from 2002 to 2007, far surpassing the 17% increase in the rate of inflation and a 19% increase in wages. In the US, administrative costs - as a share of total health care spending - are 30% to 70% higher than in countries with public/private universal systems. Employers, especially small businesses vital to job creation in this economy, face escalating insurance costs that undermine their ability to expand and thrive.

Taking Action: In Wisconsin, insurance reforms targeted at reducing wait periods for preexisting conditions and establishing independent reviews of rescissions (A100 and A108) were introduced last year, resulting in the Governor inserting changes to the individual insurance regulations into the state budget, including:

Require insurers to report how many individual policies they write and the number they rescind each year.
Limit the "look-back period" for preexisting medical conditions to 12 months.
Require the insurance department to develop a standard application for individual insurance.
Establish an independent review board responsible for examining claims denials and policy rescissions.

Connecticut responded to consumer demands for comprehensive reforms, such as moving towards a public option, industry transparency, coverage denials and an end to discrimination in risk adjusted premiums by enacting SustiNet in 2009.

Health care consumers and voters are especially angry at health insurance companies and cite rising premiums, higher out-of-pocket costs, less coverage, and hassles dealing with claims departments. In response to this anger, legislators in Pennsylvania (SB 400 and HB 1660, the "Family and Business Healthcare Security Act) and California (California Universal Health Care Act (S.810) are taking bold progressive steps by promoting single payer systems as a means of bringing long needed accessibility and affordability to residents in their states.

Iowa is also moving in the right direction by recently introducing a bill to create a public option. SB 2092 would establish the Iowa Choice Exchange to serve as an information clearinghouse where businesses and consumers could compare health insurance policies.

In Vermont, HB 510 was introduced in January 2010 as a means of politically channeling voter frustration toward changes that resolve systemic flaws in the health system. The bill creates a public health coverage option and prohibits the denial of coverage for pre-existing conditions. A Maine bill (LD 1620, An Act to Protect Health Care Consumers from Catastrophic Medical Debt), that enjoys bipartisan support would eliminate annual and lifetime benefit caps from private insurance policies, a practice that prevents people with severe disabilities and chronic illnesses from receiving the necessary care they cannot live without.

Still other states like New Mexico (HB 31 and HB 96), Illinois (Senate 2493, House 3754, House 5508) and Florida (companion bills, SB 1002 and HB 703) tap into consumer discontent by highlighting adverse actions that have become routine for private insurers. These bills all work to curb the unfair insurance industry practices of no coverage for pre-existing conditions, denying coverage because of health status, administrative waste, more reporting requirements and stricter oversight of cancellation practices.

More details on these bills and other states introducing insurance reforms are found in the Resource Section at the end of this article.

How State Insurance Reform Campaigns Can Help Pass Federal Reform

The White House and Congressional leaders continue to debate how to put health care reform back on track—with a bipartisan summit planned for February 25^th and many progressives urging House members to pass the Senate bill combined with use of reconciliation to improve the final product.

Whatever process is used in D.C., the fundamental need is to reengage the public in why reform is needed. This must also highlight the core insurance reform provisions in the federal bills that polling shows the public supports. Responses to a January 2010 CBS News poll reveal that federal reform doesn’t go far enough in regulating insurance companies by a margin of nearly 2 to 1. By introducing bills mostly mirroring individual components of regulations contained in the federal bills being debated in Congress, such a campaign will help reinforce the argument for federal reform in a number of key ways:

Refocus public debate back on abuses of insurance companies: A combination of lies by opponents and focus on the Senate’s “process” has largely distracted the public and media from one of the core reasons we need reform—abuses by the private insurance industry. Encouraging debates on individual components of reform in the states will work to engage the media on those specific abuses. Community rating and gender discrimination bills will push debates on age and gender discrimination in insurance prices. Bills that address medical loss ratio will stir debate on wasteful management spending. Policies that ban rescissions will focus on insurance company abuses against their own customers.
Highlight positive features of the federal bill: In addition, these state campaigns will focus on some of the more popular aspects of the federal bills, calling attention to their presence in federal reform, and help to “sell” a comprehensive bill. While the right-wing has tried to keep the focus on unpopular (or imaginary) problems with the federal reform bill, these state campaigns will allow progressives to refocus attention on these popular reforms. This will not only help build support for passage of the federal bill, but also will help sell the importance of federal bill to voters for the 2010 elections and beyond in order to protect federal reform from attack and/or repeal.
Pressure the insurance industry to agree to a federal bill or face dealing with fifty different state regulatory systems: By moving reforms in the states, progressives will send a clear warning message to the insurance industry that killing federal reform will not let them escape regulation. If a federal bill is not enacted, insurance companies can expect to face a complex, 50-state patchwork of different laws and regulations, ultimately more burdensome to them than a more uniform set of federal regulations.
Show that opposition to reform is not just to the federal bill, but to any serious reforms: These state campaigns will also highlight that opposition to reform is not just to the federal bill but to any reforms period. If conservative groups and legislators try to block these popular individual reforms in the states, it will emphasize that conservatives don’t oppose just the overall federal bill; they oppose all the individual parts of reform as well, including ones extremely popular with the public. That opposition to individual state bills will demonstrate that conservative obstruction of reform is not based on objections to individual mandates or the federal bill’s cost, but is part and parcel of protecting insurance industry profits at the expense of the American public.

Introduction of a series of these bills in states, and passage in some, would promote public debates that highlight why these insurance reforms are needed. Since conservative opposition and obstruction of these reforms at the state level will serve progressive messaging goals, even campaigns in conservative states with little chance of passage will be useful in undercutting right-wing attacks on the federal bill. In such conservative states, allied legislators could promote reforms as amendments to ALEC-sponsored “anti-mandate” bills, thereby directly contrasting progressive insurance reforms versus right-wing non-solutions.

Key Policies and Models for Reform

To outline some of the specific reforms that these state campaigns will focus on, progressive state legislators will be targeting the following elements of health insurance policies and practices.

Medical Loss Ratios (MLRs): Because the U.S. lacks a coordinated health care system that achieves coverage for all Americans, U.S. administrative costs — as a share of total health care spending - are 30 to 70 percent higher than in countries with public/private universal systems. Medical Loss Ratios (MLRs) are state regulations that require insurance companies to spend a certain percentage of premiums on health care providers for treatment. Bringing attention to these ratios will help ensure transparency and accountability in the insurance industry. Increasing these ratios will work to guarantee that more premium dollars go to actual health care rather than insurance company profits, bloated executive pay and wasteful administrative expenses.

With administrative expenses for private insurance 2.5 times as high as for public programs, MLRs are a tool to rein in wasted administrative costs and profiteering. In fact, a survey of state insurance regulators conducted in 2008 by Families USA found some insurance plans spent as little as 60 percent of premiums on medical care in the individual market.

Model Policy: Massachusetts Senate Bill 593 — An Act Relative to Promoting the Efficient Use of Health Care Revenues, would set a 90 percent minimum medical loss ratio. The Senate health reform bill (HR3590) provides rebates to consumers for ratios less than 85% in the large group market and 80% in the individual and small group markets.

Prior Approval or Rate Setting Regulations: Rather than let insurance companies raise rates at will, many states are toughening "prior approval" rules where insurance companies must submit proposed rates to insurance regulators and justify increases before putting them into effect. States can require health insurance companies to obtain “prior approval” of health insurance rates from insurance commissioners who can ensure that premiums are spent on medical care rather than profits and administration.

Regulators are authorized to reject unfair and unjustifiable rates and are most effective when combined with more transparency of insurer finances, including claims paid, profits, and administrative expenditures. There are 33 states with some form of “prior approval” law, to the great benefit of consumers. One example of how states can rein in health care costs is in New Hampshire, where prior approval enabled regulators to reduce a proposed 100 percent rate increase down to 12.5 percent.

Model Policies: The 2008 Colorado Fair Accountable Insurance Rates Act (FAIR Act, HB 1389) and Washington state’s 2008 law (SB 5261), which requires insurers to receive "prior approval" from the commissioner before rates go into effect and allows the commissioner to reject unfair and unjustifiable increases.

Community Rating: Most Americans find it outrageous that discrimination in health care coverage based on a person's age, gender, health status, and other factors is routine for many insurance companies. Establishing community rating rules creates more consistency in health insurance rates across insured populations. Pure community rating sets the same rate for an entire insured population, regardless of demographic factors. Modified community rating, the more common form, sets a rating band which limits variations within which insurers can vary rates based on certain factors. Removing health status, sex, and age as allowable categories from rating decisions is a key step in eliminating discrimination by health insurance companies and bringing fairness to health insurance.

Model Policies: In 2007, Colorado strengthened small group community rating by removing health status as a factor in setting premiums (HB 1355) and New York’s community rating law, Article 32 § 3231.

Guaranteed Issue: A complement to community rating, guaranteed issue prevents insurers from excluding individuals from receiving coverage because of health status, age, gender or other factors. Guaranteed issue prevents discrimination against people with a history of medical illness. This is especially important in the individual market, where many states allow insurers to cherry-pick customers and reject others. While federal law requires guaranteed renewal of health insurance, meaning that insurance companies must continue a health insurance policy except for a few circumstances, insurers in most states can refuse to sell a policy for any number of reasons, including an applicant’s medical history or for being pregnant.

Model Policies: Five states have laws that require insurers to sell coverage to all applicants. (Maine, Massachusetts, New Jersey, New York and Vermont)

Coverage for Pre-Existing Conditions: If you buy individual insurance and have any kind of pre-existing condition, even a pregnancy, you will likely not have coverage for your immediate health care needs. In all states, health insurance companies in the individual market can refuse coverage for pre-existing conditions for a set amount of time after a policy begins. More than half of all states limit coverage exclusions to nine or 12 months. Only Massachusetts and New Mexico go further and limit exclusions to less than 6 months. To create fairness, states can outlaw pre-existing condition exclusions or limit exclusion periods to three months. Additionally, states can limit how far back insurers can look to mine a member's medical history when determining exclusions and rescissions. States can also employ “objective standards" when determining what qualifies as a pre-existing condition.

Model Policy: US House health reform bill (HR 3962) prohibits individual and group health plans from placing pre-existing condition exclusions in the individual market, in the Exchange, and in the small group market.

Regulating Coverage Rescissions (Cancellations): Another policy option is to regulate the rescission, or cancellation, practices of insurance companies. Reports that California insurers were canceling health insurance policies after members received costly medical care or severe medical diagnoses prompted lawmakers to clamp down on the way insurers rescind, or cancel, a policy. Several insurers were re-examining applications for minor inconsistencies and delving further into medical histories to justify canceling a policy after a member incurred an expensive claim.

HealthNet, for one, was exposed for awarding employee bonuses based on how many policies they had rescinded. As reported in the Los Angeles Times, critics claim that insurers purposefully use confusing applications so that when a member begins filing claims, the insurer can go back and find mistakes in the application to justify a rescission. Many insurers have been fined by the state for their abusive rescission practices, including Blue Shield of California and Anthem Blue Cross, which were fined $13 million and required to offer new health plans to 2,220 residents whose coverage had been unjustly rescinded.

Model Policies — 2008 California bills, restricting rescissions, or cancellations, of a health insurance policy to the first six months (AB 2549); outlawing employee compensation based on rescissions (AB 1150); and requiring state approval for rescissions (AB 1945).

More Competition through a Public Option: States should make a public health insurance plan option available to people in the small-group and individual health insurance markets. Currently, three or fewer insurers hold at least 65 percent of market share in 36 states. A public plan would provide competition and could use its size and efficiencies to gain quality improvements from providers and bargain for efficient rates. A public health insurance plan would also have lower administrative expenses, as with Medicare, Medicaid and other public programs, and would not be out to make a profit, thereby achieving important cost savings for enrollees and further pushing the private market to be more efficient and competitive.

Model Policy: The state of Connecticut developed a plan to cover every state resident, called SustiNet, which included a new public health insurance plan option. SustiNet would build a new plan from health coverage already funded by Connecticut taxpayers, such as such as its HUSKY Medicaid program, into a self-insured pool. The self-insured, uninsured and smaller businesses (along with larger businesses eventually) would be eligible to enter the new plan.

State health insurance reform campaigns will highlight the difficulties and frustration voters have with private insurance. These state campaigns will bolster public support for comprehensive reform and advance important protections for families and small businesses in states that have historically provided the only routine oversight of the private health insurance industry.

Resources Supporting State Insurance Reform Campaigns

As states build campaigns to rein in these abuses by the insurance industry, the following resources can assist state leaders:

Supporting Organizations: Several allies and affiliated organizations have done extensive work on these issues. Of particular note, the following groups have provided the intellectual framework for this initiative and produced extremely insightful and comprehensive resources on the subject.

Reports and Polling: The following polls and other resources will help in constructing these campaigns and mobilize voter anger toward the insurance industry.

Herndon Alliance - Health Insurers: The Need for Leadership, A fact sheet that identifies reasons why voters are angry with health insurance companies.
Lake Research Partners - Memo: Voter Support for a Public Health Insurance Plan
Health Care for America Now - Health Insurance Company Abuses, How the Relentless Drive for Profits Endangers Americans, a compilation of published accounts and personal stories submitted to HCAN by patients and families (June 2009).
The Commonwealth Fund - American Health Care: Why So Costly? Testimony for the Senate Appropriations Subcommittee, testimony at a hearing before the US Senate Appropriations Committee on health care access and affordability, including cost containment strategies (June 11, 2003).

Ending Waste and Profiteering: "Care Share" or Medical Loss Ratios

Families USA - Medical Loss Ratios: Evidence from the States (including sample legislation)
HCAN - Health Insurers Break Profit Records as 2.7 Million Americans Lose Coverage (February 2010)
Health Reform Program at the Boston University School of Public Health - Health Care for All Will Require Cost Containment

Accountability: Rate Review, Prior Approval and Oversight

Families USA - The Facts about Prior Approval of Health Insurance Premium Rates
WA Insurance Commissioner - Fact Sheet: Restoring authority in the individual health market
WA Insurance Commissioner - Myths and Facts: Insurance Rate Regulation
WA State Sen. Karen Keiser - Letter to the Colorado State Finance Committee
Colorado HB 1389 - The Fair Accountable Insurance Rates Act

Fairness: Regulating Coverage Rescissions (or Cancellations)

Families USA - Fighting Revocations and Limitations of Health Insurance Policies

Access: Ending Health Insurance Discrimination — Guaranteed Issue, Community Rating and Coverage for Pre-Existing Conditions

Families USA- Empty Promise: Searching for Health Insurance in an Unfair Market
Georgetown University - State Consumer Guides for Getting and Keeping Health Insurance
Community Catalyst - A Consumer Guide to State Health Reform

Public Option, State Exchanges and Implementing Reforms

Herndon Alliance - The Choice of a Public Health Insurance Plan: It’s about Choice + Competition
The Urban Institute - Can a Public Insurance Plan Increase Competition and Lower the Costs of Health Reform?
State Coverage Initiatives - Preparing for Health Reform: State-Based Health Insurance Exchanges
State Coverage Initiatives - Health Care Reform Implementation
State Coverage Initiatives - Considering a Health Insurance Exchange: Lessons from the Rhode Island Experience

Current State Legislative Proposals

Connecticut: Legislators in Connecticut are ahead of the comprehensive health care reform curve. In July 2009, the state legislature overrode their Governor’s veto to enact SustiNet. As a comprehensive health reform plan to be phased in over 5 years, included in the legislation are provisions where every patient will have a medical home, rating will not be based on age, gender or health status, and coverage will be guaranteed for chronic or pre-existing conditions. Through an independent information clearinghouse, the SustiNet program will also increase transparency to the health care system.

California: At the end of January, the California Senate passed a bill that would establish a single payer, government run health care system. The California Universal Health Care Act (S.810) now waits for action by the State Assembly. Of course instituting a single payer system essentially removes the involvement of private insurers and puts an abrupt end to all their abuses in one fell swoop.

Florida: Two companion bills, SB 1002 and HB 703 state that if any medical loss ratio is less than 85%, the managed care organization and its subcontractors shall immediately pay to the state an amount equal to the difference between 85 percent of total revenue from their monthly premium payments and their corresponding expenditures for direct health care benefits.

Illinois has a number of proposals for reining in the industry:

Senate 2493 amends the Illinois Health Insurance Portability and Accountability Act to provide that a group health plan or a health insurance issuer offering group or individual health insurance coverage may not impose any preexisting condition exclusions.
House 3754, the Individual Health Insurance Fairness Law, provides that no insurer issuing small group coverage may deny coverage to applicants based on health status. The bill also creates the Health Insurance Financial Transparency Law and provides that all insurers shall maintain a minimum medical loss ratio of 85% or higher.
House 5508 provides that an insurance policy may not be rescinded or cancelled under the provisions concerning approval of health insurance rescissions more than 2 years after the effective date of the policy. It also stipulates that an insurer must receive approval from the Director of Insurance for policy rescissions or cancellations.

Iowa: Recently introduced SB 2092 would create a state public option by establishing the Iowa Choice Exchange to serve as an information clearinghouse where businesses and consumers could compare health insurance policies. The other major provision, IowaCare Plus, would subsidize health care for working poor people. Those making up to 300 percent of the Federal Poverty Level (FPL) would get subsidies for their premiums, while workers making up to 400 percent of FPL could get help buying more restricted health insurance. This proposal could cost $200 million to $300 million a year, with most of the money coming from the federal government.

Maine: A bill with bipartisan support has been introduced to eliminate annual and lifetime benefit caps from private insurance policies (LD 1620, An Act to Protect Health Care Consumers from Catastrophic Medical Debt).

Missouri: A bill to establish the Missouri Universal Health Assurance Program providing a publicly financed, statewide insurance program was introduced on January 13. The goals of HB 1641 are to provide timely access to health services for all residents, to provide adequate funding for health care, and to lower health care spending through streamlined administration and uniform payments.

New Mexico: HB 31 and HB 96 would establish guaranteed issue regardless of any preexisting conditions and limit coverage for a preexisting condition to 6 months.

Ohio: A concurrent resolution, HCR 32, is pending that requests that all of the members of the General Assembly support the public option as part of national health care reform.

Pennsylvania: Single payer bills are also making significant progress in Pennsylvania. Last week, the Pennsylvania Democratic State Committee unanimously endorsed a resolution calling for passage of single payer healthcare. SB 400 and HB 1660, the "Family and Business Healthcare Security Act,“ also have the promised signature of the Governor and, most notably, the active support of Republican leaders in both chambers.

Texas: The Texas House has established a House Select Committee on Federal Legislation, with a specific emphasis on implementing health care reform efforts. The chair will be Rep. John Zerwas and the Vice Chair will be Rep. Garnet Coleman, who also serves as co-chair of the Progressive States Network Board.

Vermont: On January 13, 2010, House Bill 510 was introduced to establish “Green Mountain Care”, a public health coverage option. The intent of this bill is to provide comprehensive, affordable, quality health care coverage for all Vermont residents regardless of income, assets, health status, or availability of other health insurance. Among its consumer protections, the bill establishes a minimum medical loss ratio of 90% for small group and individual policies and prohibits the denial of coverage for pre-existing conditions.

Washington: A bicameral concurrent resolution would create a joint select commission to study the implications of health reform implementation to coordinate policy discussions between the state's legislative and executive branches to identify dedicated resources, establish clear authority and accountability, a detailed timeline, a critical path analysis, resources and analysis of needs, and a communication strategy.

Conclusion

The state legislators and advocates who work with PSN and HCAN understand the important challenge of standing up to powerful interests like the insurance industry.

By promoting the insurance reform parts of the federal health care reform bill that are popular, state legislators are actively debating policies that address health insurance abuses. The goal is not only to pass good reforms but to elevate policymaker and media attention to the insurance practices that exploit and manipulate both consumers and the health system.

One of the most important elements in measuring how successful progressive legislators will be in attacking insurance abuses comes down to numbers. The more states that become engaged in addressing insurance reforms, the greater the likelihood that meaningful reforms will be implemented at the federal level. For this reason, legislators are strongly encouraged to pick up the insurance reform torch and run with it. If you have questions, or would like more information, please contact PSN's Health Policy Specialist Enzo Pastore at epastore@progressivestates.org or by phone at (212) 680-3116 x205.

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Rx Reforms to Address Budget Deficits and Ensure Quality of Medications

Adam Thompson — Mon, 23 Nov 2009 18:06:41 +0000

Rx Reforms to Address Budget Deficits and Ensure Quality of Medications

As part of our Shared Multi-State Agenda, the Progressive States Network is working with legislators, advocates and leading experts to promote Rx reforms in 2010 that will reduce health care costs for consumers, businesses, and state and local governments, and will help ensure access to safe and effective medications. Through coordinated, strategic support, PSN and our allies will be working to introduce and advance Rx reforms that will help address state budget deficits and improve access to quality medications in as many states possible; providing model legislation, policy analysis, messaging and more - all of which has been gathered and will be constantly updated on our Prescription Drug Reform Shared Agenda web page.

Our policy staff are also available to answer questions and supply information not on the website. Legislators and advocates can contact us about supporting Rx Reform campaigns through our website or by emailing rxreform@progressivestates.org.

Table of Contents:

- Summary of Rx Reform Policies and Why They Matter

- Messaging on Prescription Drug Reforms

- Building Rx Reform Campaigns

- Additional Models and Key Facts on Prescription Drug Reforms

- PSN Support in Your State

Summary of Rx Reform Policies and Why They Matter

Faced with state budget deficits in 2010 and years to come, reduced spending on prescription drugs can be an important source of savings. In 2007, the U.S. spent $287 billion on pharmaceutical drugs, representing 14% of all health care expenditures and a significant driver of health care costs. Driving this expense is the drug industry, which spends $30 billion on marketing each year, with $6.7 billion spent on physicians in 2007. The industry habitually markets the most expensive drugs over less expensive, yet equally or more effective medications, like generics. In fact, drug manufacturers spend more money marketing drugs than developing new ones, resulting in 70% of Americans saying the industry puts profits before people. As a result of high costs, 1 in 7 Americans reportedly went without prescribed drugs in 2007, up from 1 in 10 in 2003.

The following model policies, divided into two categories - Marketing and Safety and Cost Savings, represent the leading edge of prescription drug reforms to rein in the industry's inappropriate marketing practices and to reduce drug costs, while helping to increase access to life-saving medications.

Bill Summaries:

- Summary of Bill to Lower the Costs of Prescription Drugs

- Summary of Bill to Ensure Safety and Accuracy in Prescribing

Model Legislation:

- Model Legislation to Lower Prescription Drug Costs and Protect Against Unfair Prescription Drug Practices

- Model Legislation for an Act to Ensure Safety and Accuracy in the Prescribing of Prescription Drugs and Medical Devices

Key Provisions include

Gift Ban and Disclosure: Require the industry to disclose information about advertising and marketing spending, and prohibit gifts and payments to health care practitioners from pharmaceutical and medical device manufacturers. Studies show that even small gifts create an unconscious "demand for reciprocity." Disclosure laws have exposed millions of dollars spent on payments to physicians and conflicts of interest. A review of Minnesota data showed that, as payments to psychiatrists increased, so did the writing of prescriptions for drugs made by those companies.
Evidence-Based Prescribing: Establish a Prescriber Education Program, or “academic detailing” initiative, for the dissemination of scientific and clinical data about the effectiveness and costs of pharmaceuticals and medical devices. Studies of existing state programs, like Pennsylvania’s Independent Drug Information Services, which is a partnership between the state and Harvard Medical School, show that every dollar invested in these programs results in $2 in savings. States have several options for funding education programs outside of the general fund, including a fee on manufacturers and federal grants.
Access Reduced Drug Prices: Create a task force to study and report how best to maximize participation in 340B pricing, a provision of the Federal Public Health Act that authorizes discounted drug prices (below Medicaid levels) for certain populations and safety net health care providers, like many rural hospitals, federally qualified health centers and prison populations. States have numerous options to ensure that populations and programs eligible for 340B pricing are receiving the reduced prices, resulting in savings for state budgets and consumers.
Regulate Pharmacy Benefit Managers (PBMs): Regulate PBMs, who act as middlemen between drug manufacturers and public and private health plans, negotiating prices for prescription drugs. The PBM industry is highly corruptible and lax oversight of PBM practices has resulted in ethical lapses and instances of PBMs pocketing discounts they negotiated for health plans, rather than forwarding discounts through to clients. Require transparency, a fiduciary relationship, and annual audits of all PBMs to ensure that the full value of negotiated discounts, rebates, or other financial considerations are passed through.

Messaging on Prescription Drug Reforms

The Public Strongly Supports Rx Reforms: Lawmakers can tap into the public's frustrations with and perceptions of the drug industry to build support for these initiatives.

74% of the American public believes the pharmaceutical industry makes too much profit, according to a November 2009 Associated Press poll.
A June 2008 survey found 68% of Americans support requirements on the drug industry to disclose gifts to physicians; 86% would ban free dinners; 80% support a ban on speaking fees; 71% support “provider education programs” that provide unbiased clinical non-commercial information about drugs to physicians.
9 in 10 Americans support the government using its buying power to negotiate lower prices form drug companies, which many states are already doing, according to a recent Kaiser Family Foundation/Harvard poll,

The Industry Keeps Increasing Prices: The pharmaceutical industry is raising its prices at the fastest rate since 1992. Critics identify this as an attempt to wedge in higher prices before Congress passes health reform that may clamp down on exorbitant drug prices and begins expanding coverage to millions of Americans. Leading up to the creation of the Medicare Part D drug benefit, which notably lacked authority for Medicare to flex the taxpayers' purchasing power and enter into direct negotiations with the industry for lower prices, drug manufacturers raised their prices at the widest margin in 6 years. The industry has so far protected its profits by spending more than almost all other lobbies in Washington, DC.

Rx Industry Markets More Expensive and Often Less Effective Medicines: To reap its record profits, the pharmaceutical industry, as news reports indicate, habitually markets the latest and most expensive drugs over those that are less expensive and often equally or more effective.

The Rx Industry Leverages Relationships With Doctors to Drive Up Rx Costs: Studies show that industry gifts to physicians, in the form of lunches or all-expense paid trips to resort conferences, create an unconscious “demand for reciprocity”. The industry uses traditional advertising, but gets the greatest bang for their buck by developing personal relationships with physicians through gifts and by providing biased information on a drug’s efficacy.

In 2007, the industry spent $6.7 billion on direct-to-physician marketing.
On average, $8,800 in marketing is spent on each physician in the US. The industry sends out 90,000 sales reps, or detailers, and fellow physicians paid by the industry to pitch the newest “celebrity” drugs in doctor’s offices and hospitals, armed with an expensive meal, office supplies with the company logo, and drug samples.
94% of doctors have received industry incentives and studies show that even small gifts create an unconscious "demand for reciprocity."
"Doctors who have close relationships with drug makers tend to prescribe more, newer and pricier drugs" regardless of a drug’s value compared to less expensive medications, as the New York Times reported in 2007.

Protecting the integrity of the patient/doctor relationship from the profit-motive of drug industry marketers will improve health care quality and reduce consumers’ costs: States can intercede by providing physicians with unbiased clinical information on drugs and eliminating the “quid pro quo” created by the exchange of gifts that are the hallmark of the industry’s sales strategy.

Evidence-Based Prescribing Can Improve Medical Care and Save Money: Prescriber education programs, also known as "academic detailing", aim to provide better information to medical providers and consumers about which drugs are the most effective and have the least adverse effects, as well as the costs of these drugs. Unlike drug company detailers, who are in fact salespeople who focus on a particular drug sold be the salesperson’s company, these programs provide objective, clinical information on a range of treatments including non-pharmaceutical options.

Academic detailing saves money by supporting chronic disease management and reducing purchases of unnecessary or more costly pharmaceuticals that have the same — or lesser — degree of efficacy, or medicinal value.
A formal cost-benefit analysis of a 4-state Medicaid study involving 435 doctors showing savings of $2 for every $1 the program cost, based on just Medicaid paid claims data.

State 340B Pricing Reforms Can Cut Drug Prices: 340B pricing, a provision of the Federal Public Health Act, authorizes discounted drug prices (below Medicaid prices) for certain populations and safety net health care providers, like federally qualified health centers, prison populations, hospitals that serve a disproportionately large Medicaid and uninsured population, and clinics for homeless people. The Senate health reform bill would expand discounts to include inpatient drugs and extend eligible participation to critical access and sole community hospitals, cancer hospitals, and other providers.

Under 340B, drug prices are 19% below the average Medicaid best price net or rebates, 39% below the average reimbursement from insurers, and 51% less than average wholesale price (AWP).
Texas saves $10 million per year using 340B pricing for its prison population
Hospitals that are eligible for and are utilizing 340B pricing save state Medicaid programs an average of $300,000 per year
340B pricing can make specialty drugs more accessible for patients, and more affordable for states and providers. Examples include medications for Multiple Sclerosis, Cancer, Antivirals, and Rheumatoid Arthritis.

Regulating Pharmacy Benefit Managers (PBMs) Can Ensure that Consumers Get the Best Deal: To get a drug on a health plan's benefit list or formulary, drug companies make payments to PBMs that are proportionate to how often the drug is prescribed. PBMs boost their profits by pocketing some or all of these payments instead of passing them along as savings to their customers. Consumers benefit by requiring transparency, a fiduciary relationship, and annual audits of all PBMs to insure that the full value of negotiated discounts, rebates, or other financial considerations are passed through. Several states have enacted PBM transparency laws, but Texas, Maine, Maryland, and the District of Columbia have the strongest.

Possible Federal Action Creates Potential for States to Go Further: Federal reform may set the state for states to greatly expand their Rx reform initiatives, most notably those included in this Agenda. While the House reform bill authorizes Medicare to negotiate with the drug industry for reduced prices, a key and necessary reform, the Senate bill simply calls for a study of Medicare Part D drug prices. Importantly, both bills require greater marketing transparency and disclosure of gifts to prescriber, called "sunshine" provisions. The strongest language is in the House bill and both would prohibit states from collecting the same information. However, states would not be prohibited from collecting additional information or prohibiting gifts, which the federal bills fail to do.

Additionally, both bills greatly expand the 340B price discount program by, in part, including inpatient settings and expanding eligibility for the discounts to include children's hospitals, certain cancer and rural hospitals, like critical access hospitals. And, the Senate bill and House bill, which has stronger language, both require greater PBM transparency and reporting, including instances where a PBM switches a covered individual from a less expensive to a higher cost drug. This would help shine a light on PBM practices and ensure that these decisions are clinically-based, rather than an unethical agreement between the PBM and a drug manufacturer. If federal reform passes this year or early next, and includes these provisions, it will be incumbent upon states to act quickly to maximize participation in these programs and regulations and to build on them.

Building Rx Reform Campaigns

PSN is working with its allies, notably the National Legislative Association on Prescription Drug Prices (NLARx), so state leaders can tap resources from those groups to help them in their legislative work. We will be working with those allies to strengthen communication between legislators and organizational allies across the states working on Rx reforms, while providing other technical support as needed during policy campaigns. Key organizations are listed below along with critical resources for waging a campaign.

National organizations working on Rx reforms include: National Legislative Association on Prescription Drug Prices (NLARx), Prescription Policy Choices, National Physicians' Alliance, American Medical Students Association, Community Catalyst, and Pew's Prescription Project.

Key Resources: These and other organizations provide a number of key resources for Rx reform campaigns, including:

Polling: See Pew and Community Catalyst's public opinion survey on American's concerns about drug industry gifts and other ties to physicians and a recent Kaiser Family Foundation/Harvard/NPR survey on the public's opinion of the role of health care interest groups in health reform.
Policy and Legislation - NLARx provides testimony, legal analysis, bill drafting, examples of successful legislation, campaign strategy, and other support, and serves as an industry watchdog with its PhRMA Watch program. NLARx staff regularly travel to states to visit with legislative caucuses to discuss a state's Rx reform opportunities. Prescription Policy Choices has best practices on a medley of Rx reforms and is a recognized leader in supporting prescriber education programs with its Academic Detailing Toolkit. Community Catalyst provides fact sheets, model legislation and policy summaries, and campaign support including legislative strategy and organizing. Pew's Prescription Project provides similar resources and tracking of Rx news and successes.
Fact Sheets: Key policy resources can be found in PPC's Best Practices, NLARx's Model Legislation with policy details and examples of successful campaigns, Pew's State Public Policy with fact sheets, and Community Catalyst's Prescription Access and Quality with fact sheets and other policy details.
Physicians - Physicians are among the most trusted voices in the health care reform debate. The National Physicians Alliance, can help identify local physicians to participate in campaigns, become spokespeople, and testify in support of legislation. NPA is a membership organization representing doctors and is actively engaged in reducing the drug industry's marketing influence in the exam room. In fact, the organization does not accept donations from the pharmaceutical industry. The American Medical Student Association is a similar membership organization representing our nation's future health care practitioners and concerned with the inappropriate influence of drug manufacturers over the prescribing decisions of medical professionals. AMSA can help identify future medical leaders to participate in campaigns as spokespeople and organizers.

Additional Models and Key Facts on Prescription Drug Reforms

The following are a few more examples of policies and facts to support reform campaigns:

Gift Ban and Disclosure - Examples of Policies:

Minnesota, in 1993, became the first state to limit gifts from the drug industry to physicians, banning gifts of more than $50, and to require companies to disclose payments to physicians in excess of $100. A review of Minnesota data showed that, as payments to psychiatrists increased, so did the writing of prescriptions for drugs made by those companies.
In 2008, Massachusetts enacted S2526, limiting industry gifts to medical professionals and requiring public disclosure of gifts valued at more than $50.
In 2009, Vermont enacted the strongest law to date, S48. As NLARx reports, the Vermont law sets a "nationally significant standard" by banning all gifts to physicians, including meals and travel, with few exceptions. For allowable gifts, such as payments for speaking, consulting, or research, the law requires strict reporting and public disclosure. Starting in 2011, Vermont will publish the disclosures through a searchable website.

Academic Detailing and Prescriber Education Programs Approaches:

Sources of Funding: A state's surest way to finance a prescriber education program is to assess a fee on manufacturers. This is a small way to hold the industry accountable for promoting the most expensive drugs regardless of their efficacy. Other sources of revenue include Medicaid match and federal grants. For a limited time, ARRA funds are available as part of the stimulus' promotion of comparative effectiveness research initiatives. The Agency on Health Research and Quality (AHRQ) is accepting applications until December 16, 2009, for funding of up to $1.5 million per project. Annual costs for these programs range from $1 million in Pennsylvania to $50,000 in Vermont.
Examples of Policies: Pennsylvania’s model program, called Independent Drug Information Services, is a partnership between the state and Harvard Medical School. Vermont’s program is run by the University of Vermont Medical School and Maine’s program is a collaboration between the Maine Medical Association and the State. Massachusetts (HB 4900), New Hampshire (HB 1513), and New York are also implementing systems.

Access Reduced Drug Prices- Examples of Policies: In addition to our model legislation creating a task force to identify how best to expand 340B in your state, other best practices include:

TX: SB 347, enacted in 2001, creating a program to utilize 340B pricing for the prison population, resulting in annual savings of $10 million.
VT: Public Act 71 of 2005, an appropriations bill, created more opportunities for 340B pricing by expanding the number of Federally Qualified Health Centers in the state and creating a purchasing co-op for the joint purchasing of medications through 340B. This initiative was the result of a task force report authorized by the legislature on how best to expand 340B pricing in the state.
MA: H 2243 would require eligible health care centers to participate in 340B pricing.

Facts on Pharmacy Benefit Manager:

Three PBM companies administer 80% of all private prescription coverage and each pocket annual revenues exceeding $15 billion.
The three largest PBM companies manage the drug benefits for 95% of Americans with prescription drug coverage.
From 1997 to 1999, Medco Managed Care, then a subsidiary of Merck, was paid $3.5 billion in rebates it negotiated from manufacturers, the majority of which were not passed through to health plans and consumers.
Illinois has estimated it could save $10 million annually by directly negotiating prescription drug prices for the state employee health plan instead of using a PBM.
The University of Michigan saved $8.6 million in 2003 by downsizing from 5 to 1 PBMs and better regulating the single remaining manager.
Several states have enacted PBM transparency laws, but Texas, Maine, Maryland, and the District of Columbia have the strongest.

PSN Support in Your States

PSN has already begun working with legislators and advocates to provide support for them as they introduce drug industry reform policies around the country. We'd like to work with many more!

As bills are introduced and sessions begin, PSN will provide ongoing resources and updates on Rx Reform legislation, as well as help coordinate strategy and information sharing with our partners among sponsors and advocates.

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Privatization Update: Schools, Prisons, Mental Health -- and What States are Doing to Hold Contractors Accountable

Nathan Newman — Mon, 30 Mar 2009 16:24:25 +0000

Privatization Update: Schools, Prisons, Mental Health -- and What States are Doing to Hold Contractors Accountable

Given the central role of private contractors in delivering public services, this Dispatch continues our series of Privatization Updates (see November's edition). Today we focus on current privatization debates in the education, prison and mental health sectors -- and what states are doing to increase accountability for contractors.

Table of contents

- Education Privatization

- Prison Privatization

- Georgia's Proposed Privatization of Mental Health Services

- Chicago Privatizes Parking Meters

- Privatization Not Delivering Savings

- States Taking Action on Privatization Abuses

Education Privatization

Even as the right wing has been losing in the polls on promoting school vouchers, privatization has still been penetrating school systems through charter programs and support services. However, both teachers and governments have increasingly spotlighted problems and the failed promises of many school privatization contractors.

Rejection of School Vouchers: When Utah voters didn't support a school voucher ballot initiative in November 2007, it was the eleventh state referendum -- all defeated -- on various proposals for publicly-funded school voucher programs since 1972. After the state legislature approved a voucher program earlier in the year, opponents took the issue to the ballot where it was rejected by more than 60% of the vote.

Based on a few pilot projects, the number of students using vouchers has increased to 61,700 in the current school year, up 9% from last year, and nearly double the level in 2002 when the U.S. Supreme Court upheld the use of vouchers in religious schools. But the Utah defeat is just one part of broader legislative and administrative changes likely to reverse those trends:

Congress in March voted to stop funding a voucher program for the District of Columbia.
Two other prominent voucher programs -- in Milwaukee and Cleveland -- are facing statehouse efforts to impose rules that could prompt some private schools to stop taking voucher students. In both states, the governors have proposed requiring private schools to administer state achievement tests to all of their student.
The stimulus bill Obama signed in February bars its funds from being used to provide financial aid to students attending private schools.
And the Arizona Supreme Court has ruled that two state voucher programs for foster children and disabled students violate Arizona's constitution.

Debate on Charter Schools: As voucher systems are failing or being scaled back across the nation, charter schools sited within public schools continue to make gains. On March 10, President Obama called on states to lift charter school caps, a move that could usher in a large number of charter school openings if states follow the President's recommendation. Currently, 26 states and the District of Columbia now have caps. States began to respond immediately, as was reflected in a bill filed in the North Carolina House to lift the state's cap of 100 schools. "

Yet even as President Obama called for expanding the number of charter schools, he also recognized the problem of charter schools that are not delivering on their promises of higher student achievement. In states across the country, from Wisconsin to Texas, failing charter schools have been closed. On the other hand, in Louisiana, public schools are increasingly being turned over to private groups. Six of eight identified failing schools in the East Baton Rouge parish will become charter schools.

Increasingly, teachers at the charter schools themselves are identifying serious problems and demanding more of a voice, both in their own treatment and that of the students. The recent unionization of the KIPP AMP school in Brooklyn by the United Federation of Teachers (UFT) is only one example. Currently, 18 of New York's 115 charter schools have their own unions and similar schools, such as Green Dot in Los Angeles, are also unionized. Founders of the charter school movement have often been vocal opponents of teachers’ freedom to form unions, underlined by teacher complaints that KIPP administrators were intimidating teachers interested in unionizing. Teachers of the KIPP AMP School express confidence that unionization will lead to greater teacher retention, benefiting students by maintaining institutional knowledge.

Failures and Costs of School Support Contracts: The large, multi-state companies that schools most frequently employ to provide bus, school lunch, and custodial services dominate the market by buying out smaller businesses. Yet most communities are seeing few economic benefits and often just end up the losing party in bad contracts negotiated by these multi-state players.

For instance, the acquisition of Laidlaw Education Services by FirstGroup ensured that FirstGroup is now responsible for operating 12% of school buses in the US and Canada. The anti-trust implications of the FirstGroup takeover were so clear that the company was forced into an anti-trust consent decree in 2007 after lawsuits by eleven states gave states some options to take over leases and separate ownership of bus depots from the bus service contracts. One particularly questionable trend in school privatization is the responsibility of the state to purchase replacement equipment that, by contract, the contractor will own. Often, after fleets are sold to the contractor, the firm quickly requests new bus purchases, even when the old buses still meet thorough state inspection requirements. In Oregon, the Lake Oswego district was contractually bound to buy new buses requested by Laidlaw Transit (now FirstGroup), which led to no savings for the state and debts owed to the contractor. Similarly, a Minnesota report found that school districts pay an average of 10 percent more per student to outsource student transportation — and those higher prices come with higher rates of driver turnover, less experienced drivers, more accidents and a less reliable service.

For food service, Aramark has what is often seen as the worst record in serving public schools. The company provided such poor services in Pennsylvania, Michigan, and Connecticut that all three states canceled their contracts with the corporation. In New Haven, CT Aramark employees alleged dangerous and hostile work environments, poor menus, and Aramark’s purchasing of low quality, even dangerous, equipment. School officials, students, and parents have agreed with charges of unhealthy and unappetizing food. One parent commented, "Our kids think the food comes from vending machines, and are calling it green eggs and ham." Aramark has also received publicized complaints in Illinois, New Jersey, and Maryland.

Resources
NEA - School Vouchers
Edwize - Charter Schools
Labor Education and Research Center: University of Oregon - All Costs Considered: A New Analysis on the Contracting Out of School Support Services School Support Services in Oregon
SEIU Local 284 -Safe, from Home to School: The need for student transportation reform in Minnesota

Prison Privatization

The national spotlight has focused recently on privatized prisons after two judges in Pennsylvania pled guilty to receiving kickbacks for finding young offenders guilty of minor charges. They accepted $2.6 million to send an estimated 5,000 juvenile offenders to privately owned prisons. The two judges held high ranking positions in overseeing the juvenile court system, which allowed them to work in tandem to convince the state to send youth to new detention centers owned and operated by the private prison firms PA Child Care and partner Western PA Child Care. The judges' ill deeds clearly demonstrated that private profits can drive injustice and costly inmate expansions, and how the lack of state oversight allowed the problem to persist for years.

Rising Inmate Populations, Rising Profits: Private prisons hold 7.4% of the country's 1.59 million incarcerated adults. California has shipped more than 5,100 inmates to private prisons in other states since late 2006.While prison privatization sometimes appears to save states money, there is question as to whether company profits lead to costs down the road. Judy Greene, policy specialist at Justice Strategies argues, "Profit is still a motive and it's structured into the way these prisons are operated. Just because the system has expanded doesn't mean there is evidence that conditions have improved." And private prisons are, indeed, making a good deal of profit. Corpwatch reported that in February, GEO Group reported a $20 million quarterly profit with an annual 2008 profit of $61 million, a $23 million increase from 2007.

Cost Cutting at the Expense of Quality and Inmate Safety: Profits appear to come through cost cutting such as low quality or rotten food. Similarly, there have also been complaints of poor quality health care at detention centers operated by Corrections Corporation of America (CCA) and GEO Corporation. In 2008, state officials discovered that a mentally ill CCA inmate had not left his cell for a shower or recreation for nine months. CCA commented that they did not believe that showers were related to health care. Later in the year, a man died of pneumonia after receiving inadequate treatment from a CCA doctor he had seen the prior day. In February, prisoners rioted at a federal prison run by GEO to protest poor health care and an earlier report found that another GEO facility violated international and domestic laws, denying inmates food, due process, and humane treatment. As Deborah Golden, an attorney with the DC Prisoners Project observes, "When you try to run prisons as money makers what you do is cut back on the most expensive thing you can, which is medication and medical care."

Leaving States in the Lurch: Private companies operate to make a profit and when they find that they are not meeting projections, they break contracts. Contractors sometimes end a relationship with a state with little warning, leaving states scrambling to find new providers. In the autumn of 2008, GEO and Aramark broke contracts with prisons in Pennsylvania and Florida respectively. This was particularly problematic for the Florida system, which had only 120 days to find a new food provider for their 92,000 inmates, the third largest prison population in the nation. Furthermore, breaking contracts is not usually an option for dissatisfied states.

Resources
CorpWatch - GEO Group, Inc.: Despite a Crashing Economy, Private Prison Firm Turns a Handsome Profit
OneAmerica - Voices from Detention: A Report on Human Rights Violations at the Northwest Detention Center in Tacoma Washington
AFSCME - Prison Privatization Resources

Georgia's Proposed Privatization of Mental Health Services

Georgia's Department of Human Resources (DHR) is considering privatizing much or all of its public mental health hospital network and closing its mental health facilities in cities like Savannah and Augusta. State officials say that no final decisions have been made, but DHR is considering privatization as a solution to problems that have plagued state-run hospitals and that led to a U.S. Department of Justice investigation of the quality of care provided. DHR provided advocates and providers with an outline of its plan to consolidate the seven mental health hospitals into two and to rely more heavily on community-based services.

The only concrete step the state has taken toward enacting this plan has been to issue a request for proposals (RFP) to potential contractors to take over a unit at the mental hospital currently located in Savannah. Dena Smith, a spokesperson for the DHR, said, "If through that RFP process, it's found that it's not the best way to move forward, then it won't happen." However, the outline of the agency's plan indicates that the state is moving rapidly to close down its institutions and to switch to private providers. By the end of June 2009, the state intends to issue RFPs for new hospitals in Atlanta and South Georgia, both scheduled to open by the end of 2011, and will close the Savannah hospital. The mental health hospital in Columbus would close by July 2011, and by the end of the following fiscal year, public facilities in five other cities would likely close down.

Doubts about Cost Savings: Mental health advocates, state legislators, and members of Gov. Sonny Perdue's mental health commission have expressed concerns over the possibility of privatization, emphasizing that there is little evidence that having private companies take over state hospitals will save taxpayers money or improve the quality of patient care. They believe that more public participation in the DHR's privatization plans is necessary. Furthermore, they question the viability of turning state mental health hospitals over to for-profit companies. Most patients who end up in state institutions have exhausted all private insurance coverage, and there is no way to cost-shift the burden of caring for uninsured patients by treating insured patients. Given these limitations, private companies may resort to reducing staff and services in order to make a profit.

Problems in Other States fromPartial Mental Health Privatization: No other state has privatized its entire psychiatric hospital network, and states that have privatized some of their mental health services have not realized their intended results. In Florida, private facilities operate at only a slightly less expensive rate than state institutions, and they have not been able to demonstrate improvements in patient outcomes. In North Carolina, auditors found that the state wasted $400 million by allowing unqualified private companies to provide many mental health services. In a Texas private mental health clinic, poor staffing led to patients violently assaulting others, inadequate cleaning, and incorrect doses of medicine dispensed to patients.

Resources:

State board looks at privatizing mental hospitals

Don't rush to privatize mental health services

Mental health plan is big shift to privatization

Chicago Privatizes Parking Meters

On Thursday, December 4th, the Chicago City Council approved (by a 40-5 vote) Mayor Richard Daley's proposal to privatize Chicago's parking meters for the next 75 years. The city will receive $1.16 billion upfront from a Morgan-Stanley backed group in exchange for the rights to manage its parking-meter system. The city plans to use $325 million from the deal to balance the budget through 2012 and to set aside $400 million for the long-term. $100 million will be spent on social programs, and the rest will be used to stabilize the city's financial situation until the economy improves.

Rates are expected to increase each year over the next five years. By 2013, it will cost $6.50 an hour to park in the Loop (currently $3.00 an hour), $4.00 to park downtown (currently $1.00 an hour), and $2.00 to park in the neighborhoods outside the downtown area (currently $0.25 to $0.75 an hour). Many critics worry that the agreement was approved without appropriate transparency and government oversight measures in place, and as a result, taxpayers will not get a fair deal in the long run. The arrangement may alleviate current budget shortfalls, but at the expense of future revenue that could be used for essential public services. Chicago has a history of privatizing public assets for short-term gains. The city received nearly $5 billion upfront for leasing the Chicago Skyway, and it is in the process of privatizing Midway Airport.

Resources:

It's official: Chicago parking meters will be private, pricier

Chicago Banks on Private Parking

Meter Mania: 1 Hour Parking = 26 Quarters By 2013

Progressive States Network - Privatization Update: Recent News from Across the Country (11/25/08)

Privatization Not Delivering Savings

On Monday, November 24th, the Government Accountability Office released a report which revealed that the Labor Department understated the expense of contracting out its employees' work to private firms in the numbers it has previously provided to Congress. "DOL's savings reports are not reliable: a sample of three reports contained inaccuracies, and others used projections when actual numbers were available, which sometimes resulted in overstated savings," the GAO report said. "Because of these and other weaknesses, DOL is hindered in its ability to determine if services are being provided more efficiently as a result of competitive sourcing." The full report is available here.

On Monday, December 8th, Virginia's Joint Legislative Audit and Review Commission (JLARC) released a report stating that Virginia's $2 billion transition to privately run information technology services has been slow and difficult and has not yet saved the taxpayers money. In 2005, Virginia agreed to a 10-year deal with Northrop Grumman to oversee the purchase and upkeep of computers, software, Internet access, and other IT needs. JLARC and Northrop Grumman dispute the extent to which the private firm has upheld the terms of the contract. This report comes on the heels of recent the high-profile IT privatization failures in Texas and Indiana that were profiled in our last Privatization Update.

Resources

GAO: Labor Dept. Misled Congress

Department of Labor: Better Cost Assessments and Departmentwide Tracking Are Needed to Effectively Manage Competitive Outsourcing Program

IT deal no money saver yet for state

States Taking Action on Privatization Abuses

States are increasingly getting tough with contractors found to have ripped off the public purse:

Terminating Contracts: In 2008, a Texas elder care program under the direction of UnitedHealth Group that served 74,000 senior citizens was fined more than $1 million by the state for delayed or refused medical care. In March 2009 the Texas Health and Human Services Commission terminated the contract, citing late treatment and 1,300 complaints filed against the company in 2008.
Taking on Private Prisons: Recognizing problems with CCA prison staffing, the Oklahoma Department of Corrections denied $589,000 in payments to CCA until their private prisons were fully staffed, particularly in health services. Officials decided to fine CCA after reading the findings of an audit requested by the state legislature. However, the auditors noted that oversight is expensive and takes time, saying that "[the process is] somewhat cumbersome in that it requires multiple levels of consideration by executive staffs." This indicates that any purported savings from private prisons may just be disguising the hidden costs of oversight not budgeted in most contracts.
Putting Welfare Privatization on Hold: In Indiana, after listening to months of complaints from constituents and health care providers, two committees of state lawmakers - the Medicaid Oversight Commission and the Health Finance Commission - called for a temporary halt in the privatization of social services until problems are resolved. Representative Suzanne Crouch and Senator Vaneta Becker (both Republicans) drafted HB 1691 to prevent Indiana's Family and Social Services Administration from extending the welfare privatization into the remaining 33 counties until a complete review of existing services is conducted. The Indiana House in February passed the bill and the Senate is now considering it.

Putting in Place Systemic Contracting Reforms: Ultimately, these piecemeal approaches to punishing privatization failures after the fact are not enough. A few states have enacted some individual reforms to better evaluate contracts before they are issued and put in place accountability measures However, a number of national organizations, including Progressive States Network, have highlighted model bills being proposed in Oregon, HB 2037 and HB 2867, which would establish unparalleled transparency and responsible contracting rules for state and local contractors in the state. Together, the policies in the bills would:

Require agencies to post information online regarding bidding processes, costs of contracts, amendments, wages paid and the number of jobs created under each contract.
Create standards of quality expectations for contracts.
Eliminate the practice of contracting the oversight of primary contractors to other contractors.
Prevent "revolving-door" conflicts of interest by barring public employees who work with a contracting firm from joining the firm within a year of leaving the public service.
Mandate a cost analysis of contracts over $25,000 to ascertain whether the same work could not be done as efficiently and effectively in house.
Expand responsible bidder guidelines to include a bidder's poor performance in prior contracts using such yardsticks as cost overruns and delays.
Require that agencies review the credentials of contractors on its prequalification list at least every three years.

Progressive States Network's Nathan Newman testified in Oregon earlier this month on behalf of these proposals. Putting contracting reform in the context of national recovery spending across the country, Newman argued, "Every state needs this data so that they can take money away from contractors who aren’t serving the public interest and give it to programs that are. It’s the best way to ensure that the recovery funds go into the hands of working families who have been hit the hardest by the recession.”

Resources

Oregon HB 2037 and HB 2867

Progressive States Network - National Experts Visit Oregon to Testify in SUpport of Precedent-Setting Transparency Legislation

AFSCME - Stop Bad Contracts and Protect Public Jobs: Sample Legislative Language

Partnership for Working Families - Policies & Tools

Center on Policy Initiatives - Good Government: Do It Right

oregongovernmentaccountability.com

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

Adam Thompson — Mon, 26 Jan 2009 18:40:46 +0000

- Harness Public Opinion to Rein in Drug Industry Political Power
- Change Prescription and Purchasing Rules to Lower Costs
- Stop the Corruption of Industry Gifts to Providers
- Protect Prescription Privacy and Cut Costs - Ban “Data-Mining”
- Drug Quality and Safety - Prescriber Education Programs
- Conclusion

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.

Putting the Drug Lobby on the Defensive: Politically, state leaders can increase the scrutiny of prescription costs and the drug industry itself to highlight the need for broader health care reform and tap into the public's growing frustrations with the drug industry. This will strengthen the political support for comprehensive reform at the federal and state levels. If nothing else, such state campaigns will force the industry to spend its resources defending its own abuses, rather than using them to undermine comprehensive state and federal reforms.

This Dispatch highlights the favorable political climate around Rx reform and lays out numerous policies available to state lawmakers to cut drug spending without limiting access to safe and effective medications. These policies, from bulk purchasing to clamping down on PhRMA marketing tactics, will help states fill budget gaps and cut health care costs for families and businesses, as well as hospitals and other drug purchasers.

Resources for Policy Changes: A leading resource for state Rx policy sourced throughout this Dispatch is the National Legislative Association on Prescription Drug Prices (NLARx), led by Maine State Rep. Sharon Treat, a longtime state health care reform expert. NLARx works directly with state lawmakers across the country to write legislation, provide expert testimony, and help move legislation to enactment. The NLARx website - www.reducedrugprices.org - has the latest news and analysis on state Rx policy, as well as model legislation. Other important Rx policy resources include Prescription Policy Choices and The Prescription Project - its state public policy page has both model policies and fact sheets which can be turned into testimony and op-eds.

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Harness Public Opinion to Rein in Drug Industry Political Power

In many cases the pharmaceutical industry has abused its position to drive up costs to the consumer -- and the public is angry. While progressive leaders face the challenge of a well-financed lobby, they also have public opinion on their side. Progressive state leaders can link campaigns for lower prescription costs to the urgent need to balance state budgets and efforts to promote transparency and ethics reforms in government.

Faced with Rising Costs, Public Supports Rx Reform: The public is clamoring for state and federal lawmakers to rein in drug costs and the drug industry. A new survey from the Kaiser Family Foundation and Harvard School of Public Health finds that 52% of Americans believe there isn't enough government regulation of the price of prescription drugs. And 9 in 10 support allowing the federal government to use its buying power to negotiate lower prices from drug companies, something which states are increasingly doing. According to a 2005 Kaiser Family Foundation poll, 70% of Americans believe the drug industry puts profits ahead of people and almost 60% of Americans blame the drug industry for rising health care costs. The public's perceptions are not unfounded.

In 2007, the U.S. spent $287 billion on pharmaceutical drugs, as stated earlier, representing 14% of all health care expenditures and a significant driver of health care costs. Driving this expense is the drug industry, which spends $30 billion a year on marketing - often pitching the most expensive drugs over less expensive yet equally or more effective medications, like generics. At least $7 billion of PhRMA's money is targeted directly at physicians. In fact, the drug industry spends more money marketing drugs than it does developing new medications, according to a 2005 report from the Center for Public Integrity, Drug Lobby Second to None: How the pharmaceutical industry gets its way in Washington.

As a result, costs are rising for states, employers, families, hospitals, and insurance companies. These spiraling costs mean more Americans are unable to fill their prescriptions. The New York Times reports that 1 in 7 Americans went without prescribed drugs in 2007, up from 1 in 10 in 2003. Even working adults who have private employer-based insurance are being hit, with 1 in 10 unable to pay for their medications. As the Times reports, higher health care and prescription costs and the economic downturn are hurting low-income Americans the most, with 3 in 10 unable to fill a prescription because of the cost. Even 1 in 4 adults on Medicaid or other state programs said they had difficulty paying for medications.

PhRMA's Shifting Tactics: A recent presentation from Prescription Policy Choices details many of the emerging strategies that PhRMA - the Pharmaceutical Research and Manufacturers of America - is using to increase drug industry influence over the prescribing decisions of providers. While some of these are worthy endeavors, such as disease management and improving patient/doctor communication, PhRMA's involvement is a bit too much "fox in the henhouse" and raises serious concerns around conflicts of interest and patient privacy. In response, states should be on the look-out for the growing presence of the drug industry in the provision of medical care. Lawmakers should strengthen standards for third-party contracts, HIPAA protections, anti-trust regulations and other steps to prevent PhRMA from gaining an even stronger foothold into doctor's offices and the patient/doctor relationship.

PhRMA is also ramping up its presence in state houses. As NLARx reports on 2008 state Rx activity, at least 25 states worked industry-sponsored legislation that would restrict generic drug prescribing for epilepsy, five of which were enacted. In 2003 and 2004, according to the Center for Public Integrity, PhRMA spent $44 million in state lobbying to prevent sensible Rx reforms. Washington State Rep. Jamie Pedersen, who in 2008 sponsored a ban on data-mining by pharmaceutical marketers (HB 2664), attributes the failure of the bill in the House to the "intense lobbying... by the industry creating enough doubt and confusion" after passing the Senate.

Historically, PhRMA's focus has been on Washington DC - in 2002 Public Citizen reports that PhRMA deployed 7 lobbyists for each US Senator. In 2003 PhRMA spent $141 million and dispatched over 1,000 lobbyists to push a law which prevents Medicare from using its massive bargaining power to negotiate lower prices from the industry. In 2007, the Center documents in Pushing Prescriptions that the industry spent a record $168 million lobbying Congress, successfully furthering its agenda. With President Obama's support of Medicare price negotiations with the drug industry and continued Rx reform in state legislatures, PhRMA is assuredly preparing a heavy lobbying push across the country.

Blunting the Political Power of the Drug Industry: The following are political strategies and regulatory steps states can take to reduce the influence of PhRMA lobbyists and their cash in state legislatures.

Enact Campaign Finance and Ethics Reform: Arizona, Maine and Connecticut all now allow for public financing of state legislative campaigns. This helps to take the money out of politics and reduce the influence lobbyists and campaign contributors have over state policy. It is arguably no accident that Maine, which has the longest history with clean elections, has repeatedly enacted path-breaking policies to restrain the drug industry, since its elected leaders are not reliant on industry donations for their elections.
Promote Ethical Standards at Medical Schools and Professional Medical Societies: As RxP reports, states can take action to help medical schools and teaching hospitals play a central role in establishing ethical standards for relationships between medicine and industry. Recently, the Oregon Academy of Family Physicians, the largest medical society in the state, announced that it will no longer accept industry support for its organizational or educational programming. Unfortunately, almost two-thirds of medical schools lack institutional standards to prevent conflicts of interest. The RxP works directly with medical center leaders to address these issues and reports that in several states policy change has been stimulated by state legislators who have taken an interest in this area and started asking medical centers to account for their current policies.
Use Physicians as Spokespeople: Just as the industry recruits physicians to pitch new drugs to their peers, physicians are strong spokespeople for promoting legislation to reduce PhRMA influence in exam rooms. In Washington State, initial success in the House of Rep. Jamie Pedersen's ban on data-mining (HB 2664), was due in part to the Coalition for Prescribing Integrity, which includes the Washington State Medical Association, the Healthy Washington Coalition, AARP, the State Labor Council, the National Physician's Alliance and others.

As the following sections of the Dispatch emphasize, state leaders are promoting a wide range of policies to effectively reduce the costs of prescription drugs.

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Change Prescription and Purchasing Rules to Lower Costs

Through changing the rules for prescribing drugs, reviewing costs in state purchasing systems like Medicaid, and changing bulk buying patterns within those public programs, states can significantly lower the costs for prescription drugs and find significant savings for state budgets.

Generics: As NLARx reports, generic drugs cost $45 less on average than brand name drugs, or from 30% to 80% less than their brand name counterparts. Over the next 4 years, $38 billion worth of sales of brand name drugs are going to lose their patents, meaning generics will flood the market. According to Prescription Policy Choices (PPC), another leading source for Rx policy, Massachusetts saved more than $150 million annually by emphasizing generics over brand name drugs and Texas saved $223 million by making it easier for doctors to prescribe generics. In fact, the growth in US Rx spending in 2007 experienced the lowest rate of increase in more than 30 years. This is attributed in part to greater use of generic medications. Now is a good time to promote the use of equally, or more effective generics over brand name celebrity drugs.

As part of Medicaid and other public programs, states can require that, when available, equally or more effective generics must be prescribed over more expensive celebrity drugs. Rules should allow treating physicians to overrule this requirement.

The brand-name drug industry is actively sponsoring legislation to curb the use of generic medications. NLARx reports that at least 25 states had bills during the 07-08 biennium to restrict generic drug prescribing for epilepsy, five of which were enacted, and other bills to "carve out HIV-related conditions and mental health treatments from preferred drug lists, or generally to limit generic drug substitutions."

Preferred Drug Lists (PDL): States can reduce drug costs by prioritizing drugs that are safe, highly effective, and typically less expensive than brand name drugs. As Prescription Policy Choices reports, at least 40 states have some sort of PDL regulating physicians' prescribing practices. Maine's PDL has kept Medicaid drug cost increases to below 3% annually. During the same period, the federal government saw increases of 13%. Texas' PDL saved the state's Medicaid and SCHIP programs $116 million in 2007. Preferred Drug Lists, are a good way to expand the use of generic medications and to steer providers to drugs that have a longer track record.

Prescriber Review Systems: As Rep. Sharon Treat described during an interview, Maine saved many millions of dollars through better state review of prescribing practices within Medicaid. For instance, when a certain number of brand name drugs per month per person are prescribed, there is an automatic review and if generics are available the state suggests them to the prescriber. This process is in addition to a Preferred Drug List, and is not a hard cap, yet it can save millions of dollars. Maine's review system allowed the state to save $3.5 million last year in a small Medicaid waiver program, enabling the state to preserve the benefit instead of eliminating it, which was the original budget proposal.

Electronic Prescribing: A new study from the federal Agency for Healthcare Research and Quality shows that complete use of electronic prescribing systems could reduce drug spending by up to $3.9 million per 100,000 patients each year. While such universal use of effective e-prescribing systems may take awhile to implement across the country - and privacy must be protected as e-records make it easier to transfer personal data - there are numerous options available to state legislatures this year for reducing costs for states and other drugs purchasers, while increasing access to life-saving medications.

Price Negotiations and Bulk Purchasing — As NLARx documents, pooling the bargaining power of drug purchasers, like state Medicaid and state employee health plans, increases their individual leverage to negotiate cheaper prices from the industry.

Multi-State Purchasing Pools: To achieve greater economies of scale and reduce costs, several states have teamed up to negotiate lower prices from drug companies. As NLARx reports, Iowa, Maine and Vermont created the Sovereign States Drug Consortium and Oregon and Washington created the Northwest Prescription Drug Consortium. In 2006, it was estimated that the purchasing pool would save Maine $5 million in state and federal Medicaid costs. As PPC reports, Oregon could save $17 million annually if it combined the drug purchasing of all its state programs. There are at least five multi-state bulk purchasing pools.
Discount Programs: Maine Rx negotiates with drug companies to bring more affordable drugs to residents living below 350% of the poverty line. The program, as NLARx reports, achieves average savings of 25-50% on generic and brand name drugs. The program uses the leverage of the state's Medicaid program to negotiate lower prices for residents not eligible for Medicaid, who get an Rx card for the purchase of medications. Hawaii, California and Massachusetts have similar laws.
Pharmacy Benefit Managers (PBMs): PBMs negotiate rebates and manage drug benefit programs on behalf of public and private health plans and many self-insured businesses. However, the PBM industry is highly corruptible. To get their drug on a health plan's benefit list or formulary, drug companies make payments to PBMs that are proportionate to how often the drug is prescribed. PBMs boost their profits by pocketing some or all of these payments instead of passing them along to their customers. Three PBM companies administer 80% of all private prescription coverage and pocket annual revenues exceeding $15 billion. Model legislation compiled by PPC and NLARx requires greater transparency of negotiations, disclosure of conflicts of interest, and new ethical standards. PBM laws in Maine and DC have been upheld by the federal courts. State laws regulating the business practices of PBMs can be found here and lessons about the problems of state purchasing practices can be gleaned from the Texas State Auditor's report on PBM contracts in the state, presented at a December 2008 NLARx conference.

As Rep. Treat mentioned during an interview, legislators need to ask more questions about public programs and their purchasing practices, including Corrections. Rep. Treat is authoring legislation to require a state purchasing specialist for all prescription drug contracts in state government as well as registration of PBMs and regular audits of state contracts. Maine already has a PBM transparency law but it isn’t being followed. This bill comes out of reviewing the Texas audit report.
Pricing Reforms: Worries about price gouging and artificial price inflation on celebrity drugs are driving states to shed light on the pricing practices of pharmaceutical companies. Wisconsin and Colorado law requires disclosure of manufacturer prices and "best price," and West Virginia created the Pharmaceutical Cost Management Council in 2004 (HB 4084) to continually examine the cost of prescriptions and develop ways to reduce prices in the state. Model legislation compiled by NLARx includes the Excessive Drug Pricing Act and the Drug Retail Price Disclosure Bill.
340B: An obscure name, but "340B" represents a tremendous source of lower prices for drugs. Federal law allows certain "safety-net" programs to purchase prescriptions at significant discounts, often below what Medicaid pays for drugs. Eligible entities include community health centers, hospitals that serve a disproportionately large Medicaid population, and programs that serve populations with costly medical needs, like AIDS clinics. States have options to ensure that populations and programs eligible for 340B pricing are receiving the reduced prices. Legislation in Massachusetts (H 2243) would require eligible health care centers to participate in 340B pricing and Vermont's comprehensive prescription reform act of 2007 requires the state to inform residents of the availability at 340B pricing.

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Stop the Corruption of Industry Gifts to Providers

The drug industry spends $7 billion directly influencing the prescribing decisions of physicians through catered lunches, "educational" conferences at vacation resorts, and other gifts. As the Prescription Project reports, "94% of doctors have received such incentives" and studies show that even small gifts create an unconscious "demand for reciprocity." A recent and exhaustive series of reports from the Milwaukee Journal Sentinel details the financial ties between physicians and the drug industry - including one pediatrician who led a clinical trial funded by Merck while receiving between $35,000 and $70,000 over several years to work as a speaker and consultant for the company. Stories like this abound, including one of Dr. Frederick Goodwin who hosted a popular NPR radio program while receiving $1.3 million from the drug industry to give marketing lectures to drugmakers - a relationship not previously disclosed on his radio program, which regularly covered topics reflecting the financial interests of his sponsors.

Compounding this inappropriate influence over physicians' prescribing decisions is the fact that the industry habitually markets the most expensive drugs over medicines that are cheaper and often equally or more effective, as the New York Times reported in 2007. This drives-up costs for state Medicaid programs, families, businesses and private insurance. A June 2008 survey by the Prescription Project finds that Americans are wary of drug industry ties to physicians. A majority believe that drug industry gifts influence how physicians make prescribing decisions. Key findings include:

68% support requirements on the drug industry to disclose gifts to physicians
86% would ban free dinners and 80% support a ban on speaking fees
71% support “provider education programs” that provide unbiased clinical non-commercial information about drugs to physicians.

The Federal Physicians Payment Sunshine Act, designed to bring greater public review of these relationships, has been reintroduced in 2009. As NLARx's Sharon Treat says, legislators should contact their congressional delegation to be sure the law does not pre-empt stricter state disclosure and gift limit laws, such as:

Model Policy: Minnesota, in 1993, became the first state to limit gifts from the drug industry to physicians, banning gifts of more than $50. Minnesota also requires companies to disclose payments to physicians in excess of $100. In 2008, Massachusetts enacted limits (S.2526) on drug industry gifts to medical professionals and will require public disclosure of gifts valued at more than $50. Several other states have enacted disclosure - or "sunshine laws" - including Vermont, Maine, West Virginia and the District of Columbia. Disclosure laws have exposed millions of dollars spent on payments to physicians and conflicts of interest. A review of Minnesota data showed that, as payments to psychiatrists increased, so did the writing of prescriptions for drugs made by those companies.

Model Legislation: Compiled by the Prescription Project and the National Legislative Association on Prescription Drug Prices — The Drug and Medical Device Marketing Restrictions and Disclosure Act

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Protect Prescription Privacy and Cut Costs - Ban “Data-Mining”

A particularly manipulative marketing tactic by the drug industry is collecting physicians' prescribing history and using the data to tailor marketing and sales to individual physicians. Called “data-mining”, the practice allows drug companies to exploit physicians’ prescribing habits for profit-gains, resulting in higher health care costs for consumers, businesses and public and private health plans. Drug makers use the information to design marketing pitches for their newest and most expensive drugs, often ignoring less expensive but more effective medications.

Data-mining is increasingly a concern for medical-privacy advocates, particularly as the practice expands to patient records. A 2008 report by the Washington Post shows that the industry is “mining” patient records to provide insurance companies with a health “credit report”, based on a patient’s use of prescription drugs, which is used to charge consumers higher insurance rates or to deny coverage entirely. Little is being done to regulate this practice and preserve the privacy of patient records.

Model Policy — In 2006, New Hampshire became the first state to ban data-mining with passage of HB 1346. Maine and Vermont soon passed similar bans on data-mining. A November 2008 federal appeals court ruling upheld the New Hampshire law. Earlier in 2008, the Washington State Senate passed SB 6241 to ban the use of prescribing history for marketing use. Although the measure failed in the House, the effort is part of a growing trend among states and the District of Columbia to protect prescription privacy and reduce PhRMA's undue influence on the prescribing habits of physicians. The Prescription Project provides an excellent "myths and rebuttals" fact sheet on data-mining and a legal analysis on the "Constitutional Battle over State Regulation of Data Mining." Washington DC has passed first-in-the-nation legislation regulating drug company detailers, establishing a certification and licensing process and a code of ethics for industry detailers.

Model Legislation — Compiled by the Prescription Project and the National Legislative Association on Prescription Drug Prices — Prescription Record Privacy Act

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Drug Quality and Safety - Prescriber Education Programs

To help physicians stay on top of the latest scientific information about drug quality and effectiveness and to reduce the industry’s influence over physicians' prescribing decisions, states are establishing “Prescriber Education Programs”, or "academic detailing" initiatives.

The drug industry spends an average $8,800 directly marketing to each of the 817,000 physicians in the US. 90,000 sales reps, or detailers, and fellow physicians paid by the industry pitch drugs directly to physicians. This is called "detailing". As the New York Times reported in 2007, "doctors who have close relationships with drug makers tend to prescribe more, newer and pricier drugs" regardless of a drug’s value compared to less expensive medications. The adverse consequences of industry marketing can be costly, and deadly. As The Prescription Project reports, $209 million was spent marketing the pain-killer Vioxx. This drove up utilization even though Vioxx was not clinically proven more effective than existing, less expensive drugs and before the medical community had a full understanding for the drug's side effects, resulting in 139,000 people suffering heart attacks.

Model Policy — Prescriber education programs help save lives and reduce costs. To counter drug industry "detailing", prescriber ed programs send highly-educated medical professionals to doctors' offices with scientific and unbiased information about which drugs are right for a given situation. Pennsylvania has established a model program, called Independent Drug Information Services, which is a partnership between the state and Harvard Medical School. Studies have found that every dollar spent on prescriber ed programs results in two dollars saved. Prescription Policy Choices’ new report profiles a multi-state collaborative between Maine, New Hampshire and Vermont, and discusses best practices for creating a prescriber education program. The collaborative became possible after Maine (Public Law Chapter 327) and New Hampshire (HB 1513) joined Vermont in passing legislation creating prescriber ed programs. Elsewhere, New York, Massachusetts, and Washington DC are creating similar programs.

Model Legislation — Model Act to Create an Evidence Based Prescriber Education Service , provided by the Prescription Project and Pennsylvania's Independent Drug Information Services program.

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Conclusion

Promoting Rx reforms serves multiple goals for state leaders by:

Cutting costs for states, families and businesses while ensuring access to life-saving medications
Helping states address budget deficits
Tapping into the public's frustrations with the drug industry and shining a light on the need for bold health care reform in states and Washington DC in 2009

Progressive leaders can use these campaigns to highlight the abuses of the prescription drug industry, challenge the credibility of their lobbyists, and force the industry to spend their lobbying dollars defending those practices rather than undermining health care reform efforts. It's a strategic campaign that is both good policy and good politics.

Resources

Change Prescription and Purchasing Rules to Lower Costs

NLARx — State Policy Options: Savings from Generic Drugs
NLARx - West Virginia's Savings from Greater Generic Uptake
Prescription Policy Choices — Preferred Drug Lists, Prior Authorization, and Promoting Generics
NLARx — Generics and Patents: Policy Background
NLARx — Discount Plans and Purchasing Pools
NCSL — Sovereign States Drug Consortium and Northwest Prescription Drug Consortium

Stop the Corruption of Industry Gifts to Providers

The Prescription Project — Survey finds Americans want to know about physician payments
The Prescription Project — Control Pharmaceutical Marketing to Improve Health Care Quality and Cost: Recommendations for State Policymakers
The Prescription Project — Regulating Industry Payments to Physicians: Identifying and Minimizing Conflicts of Interest
NLARx — Minnesota Gift Ban and Disclosure Laws

Protect Prescription Privacy and Cut Costs - Ban “Data-Mining”

Progressive States Network — NH Data-Mining Ban Upheld: Blow to Drug Industry Marketing is Boon to States
The Prescription Project — Data Mining: Myths and Rebuttals
NLARx — The District of Columbia Proposes Pharmaceutical Detailer Regulations

Drug Quality and Safety - Prescriber Education Programs

Prescription Policy Choices — A template for establishing and administering prescriber support and education programs: A collaborative, service-based approach for achieving maximum impact
Prescription Policy Choices — Science vs. Sales: Academic Detailing Offers Objective Prescription Drug Information for Your Doctor
The Prescription Project — Fact Sheet - Academic Detailing: Evidence-Based Prescribing Information
The Prescription Project — Cost-Effectiveness of Prescriber Education ("Academic Detailing") Programs
New York Times, March 21, 2007 — "Doctors’ Ties to Drug Makers Are Put on Close View"
Prescription Policy Choices — Cheerleaders vs. Clinicians: Where Do You Want Your Doctor Getting Information on Prescription Drugs?

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"Gentleman's Agreement" Drives Health Care Costs in Massachusetts, Highlights Need for "Public Plan" Option in Health Reforms

Adam Thompson — Thu, 15 Jan 2009 20:04:57 +0000

In 2000, the CEOs of the largest hospital system and largest insurance company in Massachusetts shook hands on a plan to manipulate the health care market and ensure each other greater profits and market-share, an extensive report by the Boston Globe has revealed. Under the wink-and-a-nod handshake deal, Blue Cross insurance agreed to raise reimbursement rates to Partners HealthCare - the largest hospital system and private employer in the state - in exchange for Partners' insistence that other insurers pay them at least the same rates paid by Blue Cross.

The agreement enabled Partners to secure higher reimbursements from all insurers and gave Blue Cross a competitive advantage in the market. Since the agreement, Blue Cross has raised its payment rates to Partners by 75%, far more than it pays to other hospitals, helping Partners hospitals earn 30% more than other teaching hospitals - resulting in hundreds of millions in extra payments to Partners each year, as the Globe reports. Blue Cross, for its part, dominates with 60% of the health insurance market and has seen profits soar from $82.7 million in 2002 to more than $200 million each year since. Consumers in Massachusetts have faced ever-rising premiums, with individual insurance premiums raising 9% each year, twice the rate of the late 1990's, before the handshake deal.

In response to the Globe report and as part of lawmakers' efforts to sustain the Massachusetts health care reforms, Gov. Deval Patrick is considering hearings into insurance premiums and hospital charges, as well as tougher regulations. Some insurers have expressed support for the hearings, which could shed additional light on the 2000 Partners/Blue Cross side-deal and the extent to which it artificially increased profits and health care costs. Additionally, a new legislatively created commission on payment reform is getting extra billing in light of the Globe report. The commission will look at how to shift provider reimbursement to pay for healthy outcomes, rather than based merely on the number of tests and procedures performed.

The Public Plan Option - Increasing Choice and Value in Health Care, and Preventing Industry Collusion: This kind of collusion between insurers and providers to keep costs up is chronic across the nation. In a report by the New York Times, Linda J. Blumberg, a health economist at the Urban Institute, said:

Large insurers do not seem to use their market power to drive hard bargains with health care providers. The presence of a well-run public plan could constrain private spending because private insurers would have to compete on price, in a way they do not often do today.

In short, the profit-motive in the health care sector is too strong and fails to keep costs down. Part of the solution would be the creation of a public plan option to offer families and businesses greater choice in health care and to compete with private insurers. Such a plan would vigorously negotiate for lower costs and give families and employers an alternative to high-priced private insurance plans. The idea is gaining momentum among advocates for progressive national reform and in state proposals across the country, including Healthy Wisconsin, the Washington Health Partnership, New York Health Plus, emerging legislation in Iowa, and a new proposal from the Universal Health Care Foundation of Connecticut which builds on legislation vetoed by Gov. Rell in 2008 that would have opened the state employee health plan to small businesses and towns.

National Political Fault Lines Over Public Plan Option: In Congress, it is emerging as a partisan and ideological fault-line in the brewing reform debate. Proponents of some sort of public plan option, including President-Elect Obama, Senators Ted Kennedy and Max Baucus and Rep. Pete Stark - each of whom will be instrumental in fashioning any health care reform package this year - argue that a public plan could use its purchasing power to negotiate better value for families, businesses, and taxpayers. Former Senate Majority Leader Tom Daschle, who has been tapped by President-Elect Obama as his health secretary and to spearhead his health care reform efforts, says:

Together with traditional Medicare, this new program would have tremendous clout to bargain for the lowest prices from providers and push them to improve the quality of care.

In voicing opposition to the idea, Congressional Republicans and conservative insurer and business organizations express an ideological allegiance to free-market principles and argue that private insurers would not be able to compete with a government plan. A recent USA Today opinion, however, deconstructs the arguments opposing a public plan and, in part, points out that a public plan would "test the [conservative] notion that private health insurance plans operate more efficiently than government." In short, conservatives fear that a public plan would expose the failings of private insurance.

Short of a new and coordinated health care system that eliminates the manipulative profit-motive from health care, the Massachusetts experience and Globe report offer many lessons for lawmakers and regulators. Along with creating a public plan option, these include: government to serve as a watchdog; increased oversight and transparency of premiums, payment rates, quality metrics, and other financial arrangements; and greater public review and control over hospital mergers, as a 1993 merger created the Partners behemoth.

Resources

Progressive States Network - Stop Health Care Industry Profiteering
Change.gov - The Office of the President-Election - Agenda: Health Care
Boston Globe - A Handshake that Made Healthcare History
Institue for America's Future - The Case for Public Plan Choice in National Health Reform, by Jacob Hacker, PhD
AFSCME - Health Care for America

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

Adam Thompson — Fri, 21 Nov 2008 20:09:59 +0000

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.

The Federal Appeals Court's ruling will open the flood-gates of reform in other states. Sharon Treat, a Maine State Representative and Director of the National Legislative Association on Prescription Drug Prices (NLARx), reports that 12 states in 2008 introduced similar bills. But, largely “because of the pending litigation challenging the New Hampshire, Maine and Vermont laws, these bills were withdrawn or did not pass. Now that legislators have been given the green light in this unanimous and clear victory, we can expect that these and other states will consider resubmitting this legislation.”

The drug industry spends at least $7 billion each year marketing directly to physicians — pitching the latest "celebrity" drug and driving up health care costs for states, businesses, and consumers. As the New York Times explains, with “data describing which doctors prescribe what drugs, pharmaceutical sales forces are better able to identify which doctors might use their products and be receptive to their sales pitches. They can also focus on persuading doctors who do not write many prescriptions for their products to change their minds.”

In Tuesday’s unanimous ruling, the court called the data-mining process “mind-boggling.” Stating, “[t]he record contains substantial evidence that, in several instances, detailers armed with prescribing histories encourage the overzealous prescription of more costly brand-name drugs regardless of both the public health consequences and the probable outcome of a sensible cost/benefit analysis.”

Resources

NLARx — Federal Court Upholds New Hampshire Drug Marketing Restrictions
Progressive States Network — Reducing Prescription Drug Costs and Rein in Abusive Drug Industry Marketing Practices
US Court of Appeals — IMS Health and Verispan vs. State of New Hampshire

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From the Dispatch

Preventing Loss of Medicaid Drug Rebate Funds for States

New Health Insurance Rules Hailed as Patient's Bill of Rights

Anticipating Federal Reform, States Move on Reining in Insurance Abuses and Implementation

How States Fare Under Obama’s Health Reform Blueprint

Targeting Insurance Abuses as a Path to Federal Health Reform

Campaigns Taking Action Against Insurance Company Profiteering

How State Insurance Reform Campaigns Can Help Pass Federal Reform

Key Policies and Models for Reform

Resources Supporting State Insurance Reform Campaigns

Current State Legislative Proposals

Conclusion

Rx Reforms to Address Budget Deficits and Ensure Quality of Medications

Rx Reforms to Address Budget Deficits and Ensure Quality of Medications

Summary of Rx Reform Policies and Why They Matter

Messaging on Prescription Drug Reforms

Building Rx Reform Campaigns

Additional Models and Key Facts on Prescription Drug Reforms

PSN Support in Your States

Privatization Update: Schools, Prisons, Mental Health -- and What States are Doing to Hold Contractors Accountable

Privatization Update: Schools, Prisons, Mental Health -- and What States are Doing to Hold Contractors Accountable

Prison Privatization

Georgia's Proposed Privatization of Mental Health Services

Chicago Privatizes Parking Meters

Privatization Not Delivering Savings

States Taking Action on Privatization Abuses

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

Harness Public Opinion to Rein in Drug Industry Political Power

Change Prescription and Purchasing Rules to Lower Costs

Stop the Corruption of Industry Gifts to Providers

Protect Prescription Privacy and Cut Costs - Ban “Data-Mining”

Drug Quality and Safety - Prescriber Education Programs

Conclusion

Resources

Change Prescription and Purchasing Rules to Lower Costs

Stop the Corruption of Industry Gifts to Providers

Protect Prescription Privacy and Cut Costs - Ban “Data-Mining”

Drug Quality and Safety - Prescriber Education Programs

"Gentleman's Agreement" Drives Health Care Costs in Massachusetts, Highlights Need for "Public Plan" Option in Health Reforms

Resources

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

Resources

Protect Prescription Privacy and Cut Costs - Ban “Data-Mining”

Protect Prescription Privacy and Cut Costs - Ban “Data-Mining”