PNHP

Supreme Court upholds government’s right to negotiate drug prices for all of us (2003 decision)

Remember the MaineRx

By Robert Kemp

Applied Health Economics and Health Policy, February 2014

Abstract

In 2000, Maine became the first state in the US to enact a law to establish maximum retail prices for prescription drugs for all qualified state residents—MaineRx. The purpose was to lower prescription drug prices for all eligible residents of the state. The state was to have the ability to negotiate manufacturer rebates and pharmacy discounts. Major drug manufacturers, represented by the Pharmaceutical Research and Manufacturers of America, challenged MaineRx in the courts, going to the Supreme Court where it was upheld in 2003. Fifteen other states enacted, proposed, or filed price-control bills in their state legislatures. The result would have been downward pressure on prices outside of the public programs, and the first instance of state-sponsored monopsony power in the US. MaineRx is viewed as one of the proximate causes of the pharmaceutical industry’s successful lobbying effort to implement Medicare Part D in 2004. Medicare Part D is administered through private Pharmacy Benefit Managers (PBMs); it made administration via state government PBMs illegal. The lower prices that could have resulted from MaineRx-type laws did not occur and the magnitude of these reductions is commented upon.

Conclusion

Politics play an important role in health policy. In this case, pharmaceutical companies, represented by the PhRMA, were able to influence Congress to introduce a national solution to the threat of state-run PBMs and the negotiation of positive lists. The companies were instrumental in formulating Medicare Part D and lobbying for its passage. It is speculated that Medicare Part D came about to put a stop to state rebate programs such as MaineRx in fear of reduced profits for the pharmaceutical companies. Thus, Medicare Part D terminated the existence of state-run PBMs. The historical importance of MaineRx is that it was an attempt of the state trying to contain healthcare cost and expand prescription coverage. Had MaineRx been implemented, it might have been a milestone on the path to reduced healthcare cost.

Robert Kemp, Ph.D. is Associate Professor, Clinical and Administrative Sciences, School of Pharmacy, The University of Louisiana at Monroe

http://link.springer.com/article/10.1007/s40258-013-0076-3

Comment:

By Don McCanne, M.D.

Government works for the benefit of the people, sometimes. The government of Maine almost brought under control our outrageous drug pricing in the United States. The Supreme Court even upheld Maine’s legislation that would do so. But then, with the conservatives in charge, Medicare Part D was enacted which prohibited Maine or any other state, or even the federal government itself, from using its monopsony power to demand fair pricing of drugs by the pharmaceutical firms. This time the government worked to the benefit of the plutocrats rather than the people. We have to change that.

Supreme Court upholds government’s right to negotiate drug prices for all of us (2003 decision)

Remember the MaineRx

By Robert Kemp

Applied Health Economics and Health Policy, February 2014

Abstract

In 2000, Maine became the first state in the US to enact a law to establish maximum retail prices for prescription drugs for all qualified state residents—MaineRx. The purpose was to lower prescription drug prices for all eligible residents of the state. The state was to have the ability to negotiate manufacturer rebates and pharmacy discounts. Major drug manufacturers, represented by the Pharmaceutical Research and Manufacturers of America, challenged MaineRx in the courts, going to the Supreme Court where it was upheld in 2003. Fifteen other states enacted, proposed, or filed price-control bills in their state legislatures. The result would have been downward pressure on prices outside of the public programs, and the first instance of state-sponsored monopsony power in the US. MaineRx is viewed as one of the proximate causes of the pharmaceutical industry’s successful lobbying effort to implement Medicare Part D in 2004. Medicare Part D is administered through private Pharmacy Benefit Managers (PBMs); it made administration via state government PBMs illegal. The lower prices that could have resulted from MaineRx-type laws did not occur and the magnitude of these reductions is commented upon.

Conclusion

Politics play an important role in health policy. In this case, pharmaceutical companies, represented by the PhRMA, were able to influence Congress to introduce a national solution to the threat of state-run PBMs and the negotiation of positive lists. The companies were instrumental in formulating Medicare Part D and lobbying for its passage. It is speculated that Medicare Part D came about to put a stop to state rebate programs such as MaineRx in fear of reduced profits for the pharmaceutical companies. Thus, Medicare Part D terminated the existence of state-run PBMs. The historical importance of MaineRx is that it was an attempt of the state trying to contain healthcare cost and expand prescription coverage. Had MaineRx been implemented, it might have been a milestone on the path to reduced healthcare cost.

Robert Kemp, Ph.D. is Associate Professor, Clinical and Administrative Sciences, School of Pharmacy, The University of Louisiana at Monroe

http://link.springer.com/article/10.1007/s40258-013-0076-3

Government works for the benefit of the people, sometimes. The government of Maine almost brought under control our outrageous drug pricing in the United States. The Supreme Court even upheld Maine’s legislation that would do so. But then, with the conservatives in charge, Medicare Part D was enacted which prohibited Maine or any other state, or even the federal government itself, from using its monopsony power to demand fair pricing of drugs by the pharmaceutical firms. This time the government worked to the benefit of the plutocrats rather than the people. We have to change that.