State Discount Rx Drug Programs ‘Challenge’ Industry

State governments nationwide are launching programs to reduce prescription drug prices, moves that pose a "serious challenge" to the pharmaceutical industry's "mighty lobbying machine -- and to its profits," the Wall Street Journal reports. "The state litigation is unique to the last few years, because states are becoming more aggressive in trying to regulate pharmaceutical prices," Marjorie Powell, assistant general counsel for the Pharmaceutical Research and Manufacturers Association, said. Using lawsuits and lobbying campaigns, drug makers are challenging discount programs in Florida, Maine and Michigan, and the industry has moved to "stamp out similar movements" in Louisiana, Missouri, Indiana and Maryland. The Journal reports that courtroom challenges "have had a chilling effect" on several states. Iowa and California, for example, have launched campaigns to encourage drug companies to "voluntarily" offer discounts to seniors, "partly because mandatory price-cut programs have sparked industry lawsuits." However, some industry observers said state campaigns to reduce drug prices "may be reaching a critical mass" that challenges the industry. Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured, said, "Alone, they can be picked off, but if they stand together, they can win."

The Journal reports that state drug discount programs could cost pharmaceutical companies "potentially billions of dollars in sales" to public health programs nationwide and also to the private health insurance industry, a market "often influenced" by state policy. "Equally worrisome to the industry," the Journal reports, the new state programs "signal that the battle has shifted away from Washington -- where pharmaceutical giants have cultivated great influence -- and to state capitals around the country, where it can be harder to fight back." The Journal reports that "influential" Republican governors with "close ties to the White House," including President Bush's brother Florida Gov. Jeb Bush (R) and Michigan Gov. John Engler (R), have launched the "most damaging salvos" against the drug industry. "The political winds have changed," Arkansas Medicaid Director Ray Hanley said. The "changing climate" began as the economy "sputtered" in March, reducing tax revenues for states and forcing them to "confront the escalating cost" of prescription drugs for their Medicaid programs. States will spend about $25 billion on Medicaid drugs this fiscal year. Last year, their purchases represented about 12% of total drug industry sales. In addition, the Journal reports that Congress' failure this year to pass a prescription drug benefit under Medicare has "disappointed" states. Although states do not "foot the Medicare bill," most have programs to help seniors cover the cost of prescription drugs. For states, the Journal reports, prescription drugs have risen from a "footnote" in their budgets to a "major line item" (Gold et al., Wall Street Journal, 12/7).