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Pooling Prescription Price Controls

The cost of prescription drugs is soaring. For many states, it is the fastest-growing health care expense, with prescription drugs doubling over the past six years in some states and costs for Medicaid prescription drugs increasing 15 percent annually in several states.

The cost of prescription drugs is soaring. For many states, it is the fastest-growing health care expense, with prescription drugs doubling over the past six years in some states and costs for Medicaid prescription drugs increasing 15 percent annually in several states. The U.S. Congress has been unable so far to pass legislation to temper prices or provide full coverage for large groups of the uninsured.

That, in short, is why a handful of New England states are taking the problem into their own hands, jointly. "The regional approach has tremendous potential," says Peter Shumlin, the Vermont Senate president. "There's strength in numbers. There's potential to solve this problem."

In a meeting hosted by Vermont, legislative leaders from Vermont, New Hampshire, Massachusetts and Maine met in December to look into a variety of possible steps to lower drug costs for state programs, as well as for senior citizens and others who don't have adequate prescription-drug coverage. The strategies range from multi-state purchasing pools to Canadian-style price controls--prescription drugs in the U.S. are on average 50 percent higher than the same drugs sold in Canada--to physician education about writing drug prescriptions.

By getting together to talk about possible regional approaches, the participating states shared ideas about what is going on in their own states that the coalition could build on. "Just getting together is helpful," says Massachusetts state Senator Richard Moore. "We're learning what other states are doing, where the successes are."

Massachusetts, for instance, is exploring the purchasing-pool approach. Legislators there passed a mandate last year to develop a drug-purchasing program that could include 25 percent of the state's population. It would pool Medicaid recipients; low-income senior citizens; state, county and municipal employees; and uninsured or underinsured populations. By aggregating consumers, the state would be able to do what health plan pharmacy-benefit managers do for large health maintenance organizations: negotiate steep discounts on drug purchases. According to estimates, such pooling could save $150 million a year, plus it would save the state another $20 million for Medicaid recipients. The secretary of administration and finance is studying the issue.

As to the Canadian tactic, Vermont is looking at price controls and working out deals with Canada to get Canadian drug prices. State legislators introduced a joint resolution to build a multi-state or regional coalition of New England states and maybe some Canadian provinces as well. "This is not rocket science. Every other country in the world is doing this," Shumlin says.

Jeffrey Trewhitt, a spokesman for the Pharmaceutical Research and Manufacturers of America, doesn't quite see things that way. He contends that with drug prices kept artificially low, Canadians, who rely on U.S. pharmaceutical products, lose out in other ways. For instance, new medicines developed in the U.S. often don't make it across the border for another year, on average.

Vermont has also begun looking into a physician-education strategy that deals with the fact that physicians learn much of what they know about prescription drugs from the pharmaceutical companies, which send representatives to doctors' offices. The practice is called "detailing," and Vermont legislators are exploring methods for "counter-detailing," such as sending non-pharmaceutical company representatives to inform doctors about generic drugs or alternatives that are just as good at a fraction of the cost. "No one is in a position to say no to a prescription a doctor gives you. It's not a normal consumer marketplace. You get one name, one drug and you pay what it costs," says Vermont state Senator Jan Backus.

Legislators at the four-state meeting agreed to divvy up responsibility for investigating the cost-controlling strategies and to present their findings at a follow-up meeting in Boston, to which Connecticut, New York and Rhode Island are also invited.

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