BOSTON — The cost of prescription drugs through the state's Medicaid program has soared to more than $1.9 billion a year, cutting deep into the budget and threatening to crowd out spending on other crucial health care programs.
On Beacon Hill, policymakers are debating several price control proposals to rein in the growth of prescription drug spending in MassHealth, which serves 1.9 million low- and moderate-income people. But the proposals face mounting opposition from the pharmaceutical industry, which argues that price controls would stifle the development of life-saving medications.
Gov. Charlie Baker, a Republican and former health care executive, pitched a plan earlier this year as part of his proposed budget that would allow the Executive Office of Health and Human Services to publicly post the "value" of a drug if it is found to be unreasonably priced and if there is no agreement on supplemental rebates with the manufacturer.
His plan would require drug companies to participate in public hearings and report pricing information to state agencies. Those that don't cooperate could be sued by the attorney general's office.
Baker administration officials expect the changes would save the state's Medicaid program an estimated $80 million in the next fiscal year alone.
The Senate agreed with many of Baker's proposals as part of the budget it adopted, but the House passed a scaled-down version stripping out many of the price controls.
Lawmakers from both chambers are meeting behind closed doors in an attempt to reach agreement on the drug pricing plans and other sticking points in the nearly $43 billion budget.
Advocacy groups, such as the Boston-based as Health Care for All, say they favor Baker’s and the Senate's more aggressive approaches to reining in costs.
"We think publicly posting the price of a drug is critical because it provides incentives for the drug manufacturers to come to the table to engage in negotiations," said Alyssa Vangeli, co-director of policy and government relations for the group. "It also ensures that the pharmaceutical industry is doing its fair share to help address MassHealth costs."
Vangeli said the likelihood that a company's drug prices could be posted online for competitors and other states to see will compel them to lower the cost of those medicines.
But Zach Stanley, a spokesman for the Massachusetts Bio-technology Council, said drug price controls will throttle innovation and hinder the development of new drugs.
"At the end of the day, this feels like they're trying to punish manufacturers for success," he said. "If you're a company that produced a drug that turns out to be successful and helps sick people, the government is essentially saying we're not going to pay you in the way you feel you should be rewarded, but whatever the government thinks the drug is worth."
The group, which represents the state's thriving life and bio-science sectors, opposes drug price controls but favors the House approach over Baker's plan and the Senate version.
"We believe the public hearing language in the governor's bill is solely designed to publicly shame manufacturers into lowering their prices," Stanley said.
The debate over price controls has national implications, as many other states are wrestling with the high costs of health care, especially prescription drugs.
Earlier this week, a national political action committee launched an advertising campaign backing Baker's proposal to rein in the state's Medicaid drug costs.
"Massachusetts residents are suffering under relentless prescription drug price hikes," said David Mitchell, founder of Patients For Affordable Drugs Now, which is largely funded by a Houston couple, in a statement. "The status quo gives drug companies carte blanche to dip into state coffers and patients’ pockets, and it’s time for change."
A leading trade group, the Pharmaceutical Research and Manufacturers of America, has also weighed into the state-level debate, claiming Baker's proposal would "put cutting-edge treatments out of reach for Massachusetts’ most vulnerable patients."
"While we all want to increase value for patients, improve quality, reduce waste and lower costs, this proposal misses the mark because it lets the government define 'value,' which leads to a one-size-fits-all solution," Tiffany Haverly, a spokeswoman group, said in a statement.
"If this policy becomes law, it will insert the government between patients and their doctors, impeding individualized treatments and discouraging innovation," she added.
The price controls being considered as part of the budget are among dozens filed this session that seek to lower MassHealth spending, which consumes roughly 40% of the budget.
Rep. Lenny Mirra, R-West Newbury, has filed a proposal that would allow for importing cheaper generic drugs from Canada to offset costs to the Medicaid program.
"We all want drug prices to be transparent, and we need Medicaid to negotiate lower prices because it’s eating away at the state budget," said Mirra, a member of the Legislature's Joint Committee on Health Care Financing. "But price controls never work. What we need is more competition."
Drug pricing studies
A report last year by the Pioneer Institute, a Boston-based think tank, found that many drug pricing transparency laws do not lower consumer out-of-pocket costs, and that expensive and onerous compliance rules would likely put upward pressure on prices.
The report recommended that policymakers focus on value-based reimbursements for drugs, where the cost of a specific medicine is tied to its overall effectiveness.
Others suggest that drug costs are rising along the supply chain, marked up by private agreements between pharmaceutical companies and third-party administrators.
A new report from the state's Health Policy Commission claims that pharmacy benefit managers — private companies that act as third-party administrators of commercial health plans like MassHealth — charge much more than what Medicaid might reasonably expect to pay for many popular generic drugs.
"Everyone is paying for these drugs," David Seltz, the commission's executive director, said at a meeting of the HPC's market and transparency committee Wednesday. "There are drugs where the cost of the drug is decreasing over time, and yet the prices charged by the (pharmacy benefit managers) have been increasing during that same time period."
Industry groups have criticized the commission’s report, saying the methodology was flawed. They’ve argued that reimbursement rates have been decreasing in recent years.
In Congress, House Speaker Nancy Pelosi is reportedly working on a new drug pricing proposal that would allow Medicare to negotiate drug prices and authorize a third-party administrator to set the price of a drug if Medicare and the drug company do not agree. That proposal hasn't been filed yet.
Reining in prescription drug costs was a key issue for national Democrats in the last year’s congressional campaigns and likely will be a major issue in the 2020 elections.
Christian M. Wade covers the Massachusetts Statehouse for The Salem News and its sister newspapers and websites. Email him at email@example.com.