Why a State-By-State Approach to Lowering Drug Prices Doesn't Work

Why a State-By-State Approach to Lowering Drug Prices Doesn’t Work


A majority of Americans don’t tend to agree on much, but the one thing we can probably all agree on is that prescription drug prices are too high. While every entity in the prescription drug supply chain makes a hefty profit, consumers are left paying the bill to an ever-larger extent. In response, states have adopted numerous strategies. But the state-by-state approach doesn’t work.

Thank heavens for online properties like Canada Pharmacy. They supply cheaper Canadian prescription drugs through land-based pharmacies licensed by the Canadian government. If it weren’t for the online Canadian pharmacy model, some Americans wouldn’t be able to afford their prescription medications.

As for the state-by-state approach to lowering prices, it cannot work for the simple fact that there is no cohesiveness. States look at the problem in different ways. And as long as they see things differently, their solutions will also be different. That is no way to attack the behemoth that is runaway prescription drug prices.

Going After PBMs

One of the more popular approaches to lowering prescription drug prices is to go after pharmacy benefit managers (PBMs). Michigan is one of the states choosing this angle. Under legislation now making its way through state legislative chambers, PBMs would be prohibited from engaging in spread pricing and charging certain fees. They would also have to follow a number of regulatory steps before they could raise prices.

More closely regulating PBMs is not necessarily a bad idea. PBMs are essentially intermediaries who negotiate prices between pharmaceutical companies and retail pharmacies. They set retail prices and then add a little bit extra for their profit. They are further incentivized by pharmaceutical companies to negotiate the highest possible wholesale prices. Reining them in would be good.

Capping State Prices

Another approach, capping state prices, is currently being entertained by Maine lawmakers. There, the state hopes to control drug prices by capping the amount state agencies, insurance companies, and other entities pay for prescription drugs. Maximum prices would be determined by looking at Canadian prices for the same drugs. Those covered by the legislation would not be allowed to pay more than the price in Canada the previous year.

Joining State Pools

Yet another approach is one being entertained by New Jersey: joining state pools to increase purchasing power. New Jersey hopes to join a number of other states who already work together to negotiate lower prescription drug prices. Unfortunately, this approach is limited by its very nature.

Joining a state pool only affects prices paid by state agencies and then passed on to consumers. It has no effect on private insurance plans, PBMs, or retail pharmacies. So unless patients obtain their medications through state programs, New Jersey joining a state pool does not benefit them.

Playing the Individual States

It is clear that the state-by-state approach to lowering drug prices doesn’t work. If it did, we wouldn’t be constantly having the discussion of how to bring price down. Unfortunately, big Pharma and their many allies maintain the status quo by playing individual states to their own benefit.

By contrast, the Canadian system gives the federal government more influence over prescription drug prices. For right or wrong, Ottawa can put price caps on both wholesale and retail drug prices. They do, by the way. Their ability to control prices stems from the fact that they utilize a single-payer healthcare system.

Americans do not necessarily want to embrace a single-payer system. We also don’t want to give Washington the authority to dictate pricing. But that doesn’t mean we have to continue utilizing a fractured state-by-state approach. If the majority of states unified and came up with a solid plan, they could force big Pharma to cut prices.

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