As States Take the Lead to Address Drug Costs, Federal Action Follows

*Update: On Oct. 10, 2018, President Trump signed two bills designed to increase prescription drug price transparency by prohibiting gag clauses, which prevent pharmacists from disclosing lower-cost drug options to consumers. One bill prohibits gag clauses under Medicare Part D starting in 2020 and the other affects private insurance markets and goes into effect immediately.

As states take the lead implementing dozens of innovative laws to curb the rising costs of prescription drugs, the federal government is following with a recent wave of proposed bills and rule changes designed to rein in drug costs nationally.

This year, state legislatures approved an unprecedented number of measures to curb crippling drug costs, from enacting drug price transparency laws in seven states to addressing objectionable pharmacy benefit manager (PBM) business practices in 20 states. Vermont recently passed a measure enabling the state to pursue federal certification for a wholesale importation program from Canada.

The momentum and range of activity at the state level has parallel, emerging federal action — serving as a reminder of the vital role states play as incubators for innovation. The federal government has recently taken the following action:

    • Following passage of Vermont’s wholesale importation law (Act 133), the US Department of Health and Human Services announced in July it would form a work group to study importation of off-patent (generic) drugs. This federal study is not expected to directly impact Vermont’s importation plan. A regulatory channel that permits the Vermont program to move forward already exists within federal law (Section 804 of the Federal Food, Drug, and Cosmetic Act). This provision requires a state to certify the safety and cost-savings of its importation program. Vermont is poised to be the first applicant for federal certification for wholesale importation and, if approved, would serve as the state model for this approach.
    • On Aug. 30, 2018, a federal judge dismissed the trade group Pharmaceutical Research and Manufacturers of America’s (PhRMA) complaint against California’s drug price transparency law (SB 17). The court decided PhRMA did not provide sufficient evidence to back its claim that the law attempted to “dictate national health care policy.” The law requires all drug price hikes of 16 percent or more over a two-year period to be subject to state transparency law review. PhRMA now has 30 days to submit new evidence to back its claims. The National Academy for State Health Policy (NASHP) will report updates on court action related to this lawsuit.
    • Following in the footsteps of 17 states that have passed laws banning gag clauses in PBM contracts, which prohibit pharmacists from disclosing lower-cost drug options to consumers, the US Senate last week unanimously passed a bipartisan bill to ban gag clauses that impact patients enrolled in Medicare Advantage and Medicare Part D.
    • In a parallel move, last week the House Energy and Commerce’s health subcommittee also unanimously advanced their own bill banning PBM gag clauses.
    • To underscore that drug prices are a bipartisan issue, in May the Trump Administration released its Blueprint to Lower Drug Costs and recently Congressional Democrats released their own Better Deal proposal that includes many drug price control measures already implemented by states, including:
      • Anti-price-gouging legislation that fines manufacturers for “unconscionable” price increases, similar to what Maryland (MD 631) passed, and
      • Transparency legislation, similar to what seven state legislatures have approved, which requires manufacturers to justify large price increases.
  • NASHP is also tracking the recent release of a Centers for Medicare & Medicaid Services proposed rule, Regulation to Require Drug Pricing Transparency, and will publish more information about the proposal as it becomes available.

The recent federal legislation and policy proposals demonstrate that when states lead and create innovative policy on important issues such as drug prices, federal action often follows. Learn more about state action on drug prices at NASHP’s Center for State Rx Drug Pricing, a warehouse for resources such as model legislation and legal analysis.