States are Taking Action to Rein in Prescription Drug Prices

With Democratic proposals for lowering prescription drug prices stalled in the evenly split U.S. Senate, several states have been going forward with their own ideas. This includes a bill in the New Jersey Legislature that would be the first to cap how much consumers in the state have to pay for insulin, epinephrine auto-injector devices and prescription asthma inhalers.

“Federal intervention and action haven’t quite taken place, so in the interim it’s going to be more and more important for state policymakers to address rising drug costs for consumers,” Natasha Murphy, health policy director of the liberal Center for American Progress told Route Fifty. 

In a blog post published Wednesday outlining the state-level efforts around drug pricing, Murphy wrote that “strategies such as copay caps help lower the cost for many individuals.”

The New Jersey bill, sponsored by Democratic state Sen. Joe Vitale, would cap how much people have to pay for 30-day supplies of insulin at $35, epinephrine auto-injector devices used by people experiencing severe allergic reactions at $25 and prescription asthma inhalers at $50.

The bill is set to be heard by the state Assembly’s healthcare committee and the Senate budget committee next week. 

If passed, New Jersey would join more than 20 states that have set price caps for certain prescription drugs, Murphy wrote. Colorado, Illinois, Maine and West Virginia have laws restricting cost-sharing for insulin, for instance. The New Jersey bill would be the first to cap the cost insurers can charge customers through cost-sharing for insulin and other medical devices.

“New Jersey is going above and beyond by including EpiPens and asthma inhalers,” Murphy said. 

But, as the National Conference of State Legislatures noted in a 2019 analysis of actions being taken around the country, critics of price caps worry they will lead to insurers raising premiums.

Still, Murphy argued in her blog post that “policymakers should consider limiting consumer out-of-pocket costs for prescription drugs—including copayments, coinsurance, and deductibles—to alleviate the financial burden on individuals who are struggling to afford the steadily rising costs of medication, thereby improving affordability and access.”

The New Jersey proposal comes as Democrats’ drug pricing efforts remain stalled in Congress. 

President Biden’s broader Build Back Better plan, which called for billions in social and environmental spending, also included prescription drug provisions. But it too has derailed, with Senate Democrat Joe Manchin of West Virginia withholding support.

A proposal by House Democrats would have allowed Medicare to negotiate drug prices, and then required drug companies to offer the same lower rates to private insurers.

In addition, Biden is proposing to set a $35 monthly cap on how much consumers have to pay out of pocket for insulin. The president also wants to create an overall $2,000 annual cap on out-of-pocket costs for people 65 or older, and penalize companies that raise prices for certain pharmaceutical drugs beyond the inflation rate. 

Drug companies, though, argue that limiting their profits will take money away from being able to develop new treatments.

In addition to limiting prices, Murphy said states have taken other approaches to reduce drug costs.

Fourteen states have enacted transparency laws requiring entities across the drug supply chain to report pricing information to state officials, including making drug companies explain why prices are being raised. At times, states have had to make adjustments, Murphy noted.

Oregon’s 2018 Prescription Drug Price Transparency Program requires pharmaceutical companies operating there to submit a report to the state before raising prices by 10% or more for drugs already costing above $100.

Murphy pointed out in her post that drug companies responded by raising prices by smaller increments multiple times during a year to avoid the reports. State lawmakers are considering responding by requiring reports if a drug company makes a “series” of price increases.

States have also taken action to reduce the profits of pharmacy benefit managers, which serve as middlemen between insurers and pharmacies. The companies have been criticized for helping drive up prices by pocketing the difference between what insurers pay and what pharmacies charge, instead of passing on savings to consumers. 

According to Murphy, 12 states have passed pharmacy benefit manager oversight legislation to curb what’s known as “spread pricing.” Other states like New Jersey and Hawaii are considering similar bills. The New York State Senate estimated its 2022 elimination of the practice for Medicaid patients will save taxpayers more than $43 million, Murphy wrote.

In addition, Murphy’s post says that many states are reducing the price they pay for drugs by banding together to buy medication for Medicaid and other state health plans.

In 2019, for instance, 31 states participated in one of three interstate Medicaid purchasing programs: the National Medicaid Pooling Initiative, the Top Dollar Program, and the Sovereign States Drug Consortium. According to an NCSL study, the states were able to save between 3% and 5% on prescription drugs by purchasing this way.