Stateline Story

States Continue Rx Onslaught

Vermont is poised to enact a landmark prescription drug law within the next few weeks, a move that adds fuel to state battles against rising prescription drug costs.

Lawmakers borrowed parts of at least five different state programs - Maine, Florida, Michigan, West Virginia and Illinois - to come up with a plan that is sweeping, and not without controversy.

If Democratic Gov. Howard Dean signs the measure, as expected, Vermont will be the first state in the country to require drug companies to disclose any gift or payment to doctors that costs more than $25. It's a striking new requirement, given allegations that the industry influences physicians to prescribe higher cost drugs for patients in exchange for lavish dinners, trips and other perks.

"Wow, that's pretty astounding. When you have reform, it (often starts) with intense reform," says Philadelphia-based federal prosecutor Jim Sheehan, who recently gave a speech in Washington, D.C. detailing potential problems on industry gifts to doctors.

"Obviously there are a number of things we have concerns about," says Bruce Lott, spokesperson for the Pharmaceutical Research and Manufacturers of America , or PhRMA, the industry trade group challenging prescription drug laws and programs in Maine, Florida and Michigan.

Vermont Senate President Peter Shumlin, a Democrat, says he has worked for 13 years to bring about oversight like this. "Lawmakers are trying to take a system of unfairness and bring about fairness (on prescription drug prices). As states, we have the courage as incubators to bring about change," he says.

If what's happened in Michigan is any guide, states are beginning to make a dent in rising drug costs, and they're getting the industry's attention in the process.

Annual expenditures for drugs now tally $1.1 billion in Michigan for Medicaid and other health programs. That figure is likely to go up, as officials say 10,000 people have been added to the Medicaid rolls each month over the last year.

Twenty-six percent of every state dollar goes into Michigan's Medicaid program, and the driving force has been prescription drug costs, says David Viele, deputy director of the state's Department of Community Health .

But Michigan appears to have halted the drug cost explosion, thanks to a controversial law that went into effect last February, when the state launched what's known as a preferred drug list. Under the program, the state decides which drugs it will cover under Medicaid.

A committee appointed by Gov. John Engler decided which drugs would make the list, and Viele says decisions on whether a drug made the cut were made based on medicines' safety and effectiveness. "We did go back to (panel members) with 10 drugs that could potentially hurt our savings," he says.

The result has state officials smiling. Average weekly pharmacy costs have dropped by nearly $500,000 since the start of the program, from a recent high of $10.9 million in February to $10.4 in April.

"Never before have we seen a decline in our state. We have not only stopped the (upward) curve, but we've dropped the curve," says Viele.

What's more, officials have already noticed increased cooperation from the industry, despite a pending legal challenge by PhRMA.

Under Michigan's Pharmaceutical Product plan, drug manufacturers whose products didn't show up on the preferred list had the chance to offer rebates to bring the state's cost in line with the hand-picked drugs.

Six manufacturers - Bristol-Myers Squibb, Pfizer, Merck, Eli Lilly, Pharmacia and Johnson & Johnson - said they wouldn't kick in any extra cash to bring their prices in line with the state-selected drugs. But companies are changing their tune, state officials say.

Two of the six drug makers are currently talking with Michigan officials about opting in, says community health department spokesperson Geralyn Lasher, who declined to give more specifics.

It's not a mystery why company officials now want to sign up. According to documents obtained by Stateline.org , Pfizer saw its market share for Zyrtec, an allergy medication that isn't on the state's preferred list, drop from 20.9 percent in March 2001 to 3 percent in March 2002.

Similarly, Merck's cholesterol-fighting medicine Zocor, which also didn't make the list saw its percentage of the market go from 15.8 percent in March 2001 to 6 percent this year.

"Manufacturers track their market share by the hour," Lasher says. "We get calls (from drug companies) ... who say, We didn't know what the program was and now we're interested,'" she says.

Viele says he is willing to help any state interested in adopting a similar plan by sharing things such as paperwork submitted to the federal government. "The more states that can get on board, manufacturers will be faced with a large share of Medicaid that they cannot ignore," he says.