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Fed up with rising drug costs, a growing number of states are pursuing a novel idea: They want to treat the pharmaceutical industry like a utility and cap what they will pay for certain medicines.

Basically, a newly created rate-setting board or an existing government agency, depending upon the state, would determine an “upper payment limit” for any prescription drug — brand-name or generic — that is considered unaffordable after reviewing cost and pricing data submitted by drug makers. In some states, such a ceiling might also apply to fully insured commercial health plans, not just state health programs. In general, the concept builds on efforts to demand more transparency from the pharmaceutical industry while mimicking how governments determine how much is paid for electricity.


The hope, of course, is to prevent budgets from being further stretched and, importantly, develop a tool to convince drug makers to compromise.

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  • The “R & D will suffer” excuse is just a huge cop-out. YES curb the egotistical abusive madness in the pharmaceutical pricing world – this is long, long, long overdue. Other countries have succeeded in this endeavour, and finally America is waking up to it – and taking ACTION !

  • I think less R&D is worth looking at, but I don’t think it is necessary at this point. Yes, any industry needs money to operate, but few, if any, have the profit margins that Big Pharma has developed. With regard to Pharmaceutical companies “playing hard ball” with states that limit what they will pay or what the company can charge them: Two can play that game, and those companies better Be Careful What They Wish For. People are mad enough as it is. If the Feds decided to play the “Nationalization” card, it would be a pretty stiff stand-off. Now, I’m not calling for nationalized medicine; but if Pharmaceutical companies refuse to be reasonable, I would support the Fed moving to Nationalize the Pharmaceutical Business. I think if those companies saw a serious move in that direction, they would fall into line. Those CEO’s Do Not want to lose their multi-million dollar paydays or bonuses.

  • Can we PLEASE stop with the argument the any action to control drug pricing automatically impacts future R&D. It’s simply not the case. As a person who played a significant role in the pricing of several new prescription products over a 30+ year industry career, I can honestly say that the question of research spending never once entered in any conversation I ever had at any of the companies that employed me regarding launch pricing. Furthermore, its a matter of public record that the industry’s SG&A spending dwarfs R&D. If industry truly cares about balancing future R&D spending with societal affordability, there is lots of room to reduce commercialization funding without compromising innovation. I urge legislators to start asking detailed economic questions and read the financial information firms disclose to the SEC before assuming that draconian trade offs between affordability and innovation are needed.

  • Ed, They almost got it right . They should treat the PBM’s like a utility ! not the price
    of the drug ! The PBM should get a transaction fee and that’s it ! West Virginia got
    rid of the PBM’s in their state. They saved 53 million dollars so far , and its only May !
    It’s really a very simple concept .

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