In a provocative move, New York Governor Andrew Cuomo has become the latest entrant in the escalating war over rising drug prices with a budget provision that would effectively cap prices and require drug makers to provide a raft of information about their costs.
The proposal marks yet another high-profile attempt to force the pharmaceutical industry to respond to the intensifying clamor over the cost of medicines. The issue has made its way into the presidential campaign and, next week, another in a series of congressional hearings on the topic is scheduled.
Under the proposal, which must be approved by the state legislature, the state health department would “develop a list of critical prescription drugs for which there is a significant public interest in ensuring rational pricing.” The department would then assess the value of the drugs in order to set a “ceiling price” and could require a minimum rebate to the state Medicaid program.
As part of the process, the administration wants companies to provide data about development, manufacturing, and marketing costs for drugs on this list. The proposal would also require drug makers to submit information about the prices charged other purchasers in the state and outside the United States, any rebates offered customers, and profit margins, among other things.
[UPDATE: A Cuomo spokesman told us that the plan is expected to save $30 million in fiscal year 2016-17. Of that $6 million would come from price caps, but this is a “conservative estimate,” he told us, because “we’re talking about a limited number of drugs, and we cannot know for sure what blockbuster drugs will come on the market in the coming fiscal year.” The other $24 million would come from rebates that generic drug makers would be required to offer the state Medicaid program if prices of their medicines increase faster than inflation.]
The plan won kudos from the New York Health Plan Association, which represents managed care insurers. “With pharmacy costs as one of the biggest drivers of health care costs overall, consumers need and deserve basic pricing information,” the trade group said in a statement.
Not surprisingly, a spokeswoman for the Pharmaceutical Research and Manufacturers of America, the trade group for drug makers, wrote us that its members have “significant concerns” with the proposal, which was first reported by Politico.
“Not only will implementing price controls have a very negative impact on innovation and send a signal that risk taking will not be rewarded, but also the so-called ‘transparency’ information called for in the proposals would be virtually impossible to achieve because it does not include the cost of failures inherent in the search for new treatments and cures.
“Additionally, the proposals single out the biopharmaceutical industry, when in fact, there are a variety of stakeholders involved in determining what consumers ultimately have to pay for a medicine — insurers, pharmacy benefit managers, wholesalers and government agencies,” the spokeswoman wrote. “None of these parties are addressed in these proposals.”
The objections mirror the argument the industry trade group raised recently in California, where a bill was introduced twice over the past year to require drug makers to disclose their costs in an effort to gain more transparency into pricing decisions. Last week, though, that bill stalled again. Similar efforts in a few other states, including Oregon, North Carolina and Massachusetts, have also petered out.
Other efforts are underway, however, to make it possible for state programs to obtain medicines at lower costs. In California and Ohio, consumer advocates are pushing ballot measures that would require Medicaid or prison systems, for instance, to pay no more for medicines than the US Department of Veteran Affairs. A measure will be on the California ballot, but is being challenged in Ohio.
This story was updated to reflect projected savings in the next fiscal year.