Stateline Story

Rx Cost-Cutting Puts Governors at Odds with Federal Government

Several governors using cutting-edge tactics to reduce prescription drug costs are increasingly at odds with the federal government.

In the first case: Four governors visited Capitol Hill Feb. 24 seeking support for ways to help residents buy less expensive medicines from Canada, a practice the Food and Drug Administration has repeatedly called illegal and unsafe.

The meeting came just one day after FDA Associate Commissioner William Hubbard sent a heated warning letter to Minnesota Gov. Tim Pawlenty (R) that stopped short of telling the governor to shut down his Web site, MinnesotaRxConnect.

It directs Gopher State residents to two state-inspected Canadian pharmacies that sell prescription medicines for about 35 percent less than in the United States.

Minnesota's "endorsement of foreign Internet pharmacies' is unsafe, unsound and ill-considered," the FDA letter said, urging the governor to "reconsider" his actions.

A defiant Pawlenty, however, pledged to move forward. The governor told reporters that there was nothing the FDA could say to make him change his mind and that he was prepared to be sued, if necessary. "Just because we're not following their dictates doesn't mean we haven't listened to them. We have, we just don't agree," Pawlenty said.

In a letter Feb. 26, Pawlenty asked the FDA to "rigorously review" his plan or choose Minnesota for a pilot study on re-importation. "Let's try something together, Mr. Hubbard. It's better than rhetoric and it's better than lawsuits," Pawlenty wrote.

Feeding on Minnesota's momentum, Wisconsin Gov. Jim Doyle (D) expanded a similar Web site www.drugsavings.wi.gov to include specific information about three Canadian pharmacies. Previously, the Web site only said that importation is illegal.

"This is a way that we really can help Wisconsin citizens, and I'm going to fight for that. And if they go to court, then we'll go to court. But I believe what we're doing is within the law," Doyle told Stateline.org.

In a further development, Illinois Gov. Rod Blagojevich (D) announced Feb. 26 his support of an Illinois couple that is planning to file a class-action lawsuit against federal agencies that bar re-importation. The state is not a party in the lawsuit, but the governor may file a legal brief in support of the plaintiffs, a governor's spokeswoman told the Chicago Sun-Times.

The governors' summit was also attended by Blagojevich, West Virginia Gov. Bob Wise (D) and congressional leaders including U.S. Sens. John McCain (R-Ariz.) and Byron Dorgan (D-N.D.), who said they had serious concerns about the recent nomination of FDA Commissioner Mark McClellan to take over the Centers for Medicare and Medicaid Services (CMS).

The new federal Medicare law requires that the U.S. Department of Health and Human Services conduct a study to determine whether re-importation can be done safely. The study committee will be headed by McClellan and is scheduled to release the report in December 2004.

"Please don't give up your fight because frankly I'm not sure what progress we're going to make here given the incredible influence and power of the pharmaceutical drug companies," McCain told the governors.

The FDA, HHS and drug industry officials boycotted the governors' drug summit, which re-importation opponents called one-sided and unbalanced. Instead, opponents held their own event sponsored by the Institute for Policy Innovation, a Washington think tank.

In a separate clash, Michigan Gov. Jennifer Granholm (D) expressed frustration about a bureaucratic delay of federal approval of a multi-state prescription drug purchasing pool with Vermont, and potentially other states.

States already receive deep discounts from pharmaceutical manufacturers for drugs for Medicaid recipients, but the Michigan-Vermont plan uses the states' combined populations as leverage to negotiate lower prices from drug makers.

Granholm was told earlier this week by her Washington staff that the federal government had said it was planning to reject her plan, which has been up and running for more than six months based on preliminary verbal okay from the federal government, said T.J. Bucholz, a spokesman for the Michigan Department of Community Health.

States are "united in their frustration in dealing with CMS," Granholm told reporters Feb. 23 after meeting with other governors, President Bush and Cabinet officials at the White House.

Federal officials immediately countered that the rumors of rejection were false. To end the confusion, U.S. Health and Human Services Secretary Tommy Thompson sent a letter to Granholm stating "as a matter of record" that the Michigan plan was not disapproved and that the plan was still under review.

After reading the letter, "we are pleased that it is still under review and we would be hopeful that it would ultimately be approved," said Liz Boyd, the governor's press secretary. "But as the governor has simply said, if it's not approved, we'll really be wondering why."

Michigan just wants a yes' or no' answer from the federal government, Bucholz said. "Michigan has not been like other states that have advocated very strongly for re-importation of drugs. We haven't done that. We're trying to work within the parameters of the law," he said.

Michigan officials said they haven't received a clear answer as to what the hold up is. HHS spokesman Bill Pierce said there is concern over federal contracting rules. Michigan and Vermont both contract with First Health Services, a Virginia-based pharmacy benefit administrator.

Pierce told Stateline.org he disagrees with Granholm's statements that Washington isn't being cooperative. "We're working with Michigan and we want to help them out, but there are certain contracting rules that we don't have a choice on," he said.

Other states, such as New Hampshire, Nevada and Alaska, which may want to join Michigan and Vermont, have a vested interest in the programs approval. The more states that join, the larger the bargaining power, proponents say. South Carolina abandoned efforts to join because they were met with too many federal roadblocks, Bucholz said.

Maryland, Missouri, New Mexico and West Virginia are already joined in a multi-state pool to buy prescription drugs for state employees and retirees, but not Medicaid beneficiaries, according the National Conference of State Legislatures.