State Legislatures Magazine: January 2001

Editor's Note: This article appeared in the January 2001 issue of NCSL's magazine, State Legislatures. To order copies or to subscribe, contact the marketing department at (303) 364-7700.

States' Rx for Drug Costs

Skeptics West and East
Opponents Right and Left
What's Next?

State Actions on Prescription Drugs

Highlights of Recent State Action

States' Rx for Drug Costs

With skyrocketing costs of prescription drugs creating real hardships for the elderly and the uninsured, some states acted quickly to expand access.

By Richard Cauchi
If it wouldn't have been for the cost of the drugs, I wouldn't have had to go back to work," says 67-year-old Paulette Beaudoin. She spends $469 per month on daily medications, ranging from Celebrex for arthritis to Ambien for insomnia. A popular ulcer drug, Prilosec, costs her another $110 a month. Some months ago, she had to spend another $145 for a temporary illness. She has gone back to a three-day-a-week job in Biddeford, Maine, to pay these bills.

With no drug coverage plan, Florida retiree Elaine Kett scrimps each month to pay for her Prilosec ($114.99 a month), Pulmicort for her lungs ($117) and 10 other prescription drugs she requires. The total runs to a little more than $10,000 a year. "I'm a widow on a fixed income, and this is killing me because my income is just a bit more than double the cost of these drugs," she says.

"I was paying astronomical amounts for eye medications. And I couldn't afford them after a while. I'm very independent, but, really, it was ridiculous," says Barbara Henry, a 69-year-old former teacher in Maine.

These cases mirror the policy debate in America today. Public programs spend almost $20 billion on prescription drugs, yet millions of people lack required medicines.

Maine found one answer: Its newly expanded Low Cost Drugs for the Elderly Program came to the rescue in late 1999 and now pays 80 percent of the price of drugs such as those Henry and Beaudoin need.

The state gained international attention last May when the Legislature enacted the nation's first law that includes price controls on prescription drugs. The bill also created a new "Maine Rx" program that allows any resident without prescription coverage, who enrolls, to purchase drugs at a discount based on the Medicaid rate. That program, which could cover up to one-fourth of the state's population, begins this month.

The law, however, has been challenged in federal court by the pharmaceutical industry. "Everybody's trying to figure out a way to do this," says Maine House Minority Leader Joseph Bruno, a Republican who runs a chain of 10 pharmacies in the state. "If it's a problem in Maine, it's a problem everywhere."

A federal judge issued a preliminary injunction Oct. 26 that prevents Maine from enforcing parts of its new prescription drug law until a hearing is conducted on its constitutionality. In his ruling, Justice D. Brock Hornby was sympathetic to what Maine is trying to do. "The Maine Legislature has sound reasons for wanting to assist its uninsured citizens who must cope with astronomical prescription drug prices," Hornby said. "But in our country, under our Constitution, states cannot legislate outside their boundaries. ... the Interstate Commerce Clause will not permit it." The state may implement other portions of the law, while legislators consider a possible amendment this year.

Maine was one of the first states to create a pharmacy assistance program 26 years ago. Last year, policymakers expanded coverage for eligible seniors to include couples with incomes up to $20,400. "Disease has no partisanship, and we shouldn't be partisan when we approach it," pointed out Maine Senator Paul Davis.

While Congress generated headlines about prescription drugs, states have taken bold action. The first programs expanding access to reasonably priced drugs for began in 1975; as of December 1999, 16 states had authorized pharmacy assistance programs for seniors.

Year 2000 saw an unexpected torrent of attention and activity. At the end of the sessions, 22 states had some type of program authorized by law to provide prescription drug assistance. Four states have initiated new subsidy programs. In several others, lawmakers added funding and raised maximum income eligibility high enough to change the nature of their programs to serve middle-income consumers.

Meanwhile, the governors in Iowa, New Hampshire, Washington state and West Virginia are initiating discount or "buyers' club" programs without waiting for legislative action.

And Maine, New Hampshire and Vermont announced a novel tri-state prescription drug-buying pool aimed at saving millions of dollars for state health care budgets. The three states issued a joint "request for proposals" in late October for an administrative company that would negotiate with drug manufacturers and suppliers on their behalf.

The "pharmacy benefits manager" would also create educational programs for physicians and patients highlighting the least expensive medical regimes that would still be effective. The first phase would cover Medicaid beneficiaries. In later phases, the initiative would also produce savings for citizens who lack health insurance that covers prescription drug costs, according to the administration proposal.

One Vermont official said that for a $10 to $20 program fee, participants who now lack prescription drug coverage might save up to 30 percent off retail pharmaceutical prices. The goal is to have the program operational by July 1, 2001.

SKEPTICS WEST AND EAST
While some states did act to help citizens find reasonably priced drugs, it would be wrong to conclude that state-based programs are simply "sweeping the country." In a number of states, from South Dakota to Washington to Mississippi, West Virginia, Colorado and Wisconsin, proposed pharmacy assistance programs were turned down or "put on hold" by legislatures. The steep cost of funding and maintaining such programs entirely with state money is the most commonly cited reason. Some legislators remain leery of new entitlement programs, especially when they hear widespread reports about future miracle drugs and the expanding elder demographics-estimated to add another 18 million people over age 65 by 2020.

OPPONENTS RIGHT AND LEFT
Even those who support reasonable drug prices, especially for the uninsured and those on fixed incomes, disagree about state solutions. Families USA, a liberal consumer group based in Washington, D.C., labeled some state initiatives as "putting a bandage on a tumor," and noted that the issue "is better dealt with at the federal level." Last September the White House domestic policy adviser, Chris Jennings, said "We think it's a flawed model to start with [state programs] ... historically there has been very low participation rates amongst the elderly who are even eligible for these programs."

The most vocal opponent to state activity is the pharmaceutical industry, which in 1999 was the most profitable sector among the Fortune 500 firms. The day before Maine's law was to take effect last August, the Pharmaceutical Research and Manufacturers of America (PhRMA) filed a federal lawsuit against the state, saying it hinders interstate commerce and conflicts with federal laws. PhRMA wants a federal solution instead of a patchwork of state initiatives, which would create chaos among the drug makers trying to sell the drugs, the industry says. "They don't take into account the high and rapidly growing cost of pharmaceutical research.''

In fact, America's pharmaceutical companies point out in a recent advertising campaign that the money they must spend on research, development and testing of new medicines allows people, especially those diagnosed with chronic disease, to "laugh, love and pursue life's wonderful adventures" through the benefits of newer and more effective medicines.

WHAT'S NEXT
Popular topics often shift from year to year-remember universal health, then medical savings accounts, followed by children's health? Perhaps privacy or genetics will replace prescription costs as this year's "hot topic."

In 21 states, however, legislators already have announced intentions to file legislation calling for lower or controlled prices. The second year of tobacco settlement funds will provide a likely source of revenue for one or more new subsidy programs. For example, in both Alabama and Iowa, which did not debate pharmacy bills in 2000, at least two measures have been drafted for the new year.

Maine's former Senate Majority Leader Chellie Pingree, summed up, "I don't know that every one will go exactly for the Maine bill. In fact, we hope that each state gets a little more creative and finds another way to go about doing this. I think we'll see a lot of different proposals out there come January."

Editor's Note: For recent details see the NCSL Web page at:

www.ncsl.org/programs/health/drugaid.htm.

Richard Cauchi is NCSL's expert on prescription drug issues.

State Actions on Prescription Drugs

Several states passed laws in 1999 and 2000 to ease prescription drug costs for seniors and people with disabilities.

Delaware, Florida, Indiana, Kansas, Missouri, Nevada, North Carolina and South Carolina created new programs to assist low-income seniors.
Connecticut, Illinois, Maine, Maryland, Massachusetts, Michigan, New Jersey, New York and Rhode Island expanded programs to assist low-income seniors and others.

Unique pharmaceutical laws passed in 1999 and 2000:

California and Florida require retail pharmacies to sell prescription medications to senior citizens at the same discounted rate they charge the state Medicaid program.
Maine provides discounted drug prices for up to 325,000 residents who lack drug coverage, permits alliances with other states, authorizes penalties for drug manufacturers that charge excessive prices, and allows the state to establish maximum retail prices if other factors don't lower them by July 2003.

Massachusetts created a state bulk purchasing program that would coordinate discounted drugs for up to 1.6 million people including state workers and retirees, Medicare and Medicaid beneficiaries, those with state pharmaceutical assistance and uninsured people.
Missouri offers tax credits for low-income seniors to offset prescription drug costs.
Nevada provides a subsidy up to $480 per year for residents age 62 and over to purchase private prescription drug health insurance.
Vermont provides drug price discounts to many more senior citizens through a novel Medicaid waiver approved by the federal government in November 2000.

Highlights of Recent State Action

States, often the innovators of public policy, have been working at making prescription drugs more affordable for several years.

New York was one of the early leaders with its Elderly Pharmaceutical Insurance Coverage program, started in 1987. It served more than 110,000 elders with incomes under $18,500 in 1999. Beginning this month, income levels will be raised to $35,000 for individuals and $50,000 for couples.
Indiana last year created a new program with $20 million of the state's tobacco settlement money to help low-income elderly pay for their prescriptions. At a rally the governor summed up the feelings of many: "We want to help those who are above the Medicaid level, but below that point where they have insurance. Many, many of them make tough choices. They need to buy prescriptions, but they've also got to buy food and pay their heating bill. They shouldn't have to make that choice."
Kansas also created a new senior citizen prescription drug program last year. Because of financial concerns, the original plan to cover people age 62 and over was scaled back to cover those 67 and over. The Kansas bill stipulates that if Congress acts, the state program would be repealed. The new law will begin this July, to allow needed funds to accumulate in a special trust fund.
South Carolina has a new program for those age 65 and over, with annual incomes that do not exceed 200 percent of poverty. The program will take effect this June.

Illinois took advantage of state budget surpluses and tobacco funds to expand eligibility for its Pharmaceutical Assistance Program. Last year the maximum income was $16,000; now it will go up to $28,480 for a couple, with lower copayments and deductibles. The state also added four categories of drugs to the formulary. The legislature has committed an additional $35 million to fund the changes.
Florida created a new program for those over 65 who are considered "dually eligible" for Medicaid and Medicare, but who don't have pharmaceutical coverage. The state subsidy covers $80 per month, and participants are responsible for a 10 percent copayment. A $15 million state appropriation funds the first year of operation. The same bill also established a discounted program for others on Medicare, based on the existing Medicaid reimbursement prices. The savings are estimated at 5 percent to 10 percent for most prescription drugs.
Massachusetts legislators adopted a new approach that will allow every senior, 65 or older, regardless of income, to sign up for a redesigned Catastrophic Prescription Drug Insurance Program. It is based on sliding scale premiums, deductibles and copayments for those over 188 percent of the poverty level. When fully in effect, it could be the nation's first universal elder prescription drug subsidy program. The state also enacted a Pharmacy Outreach Program designed to get free products available from manufacturers to consumers.

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