In the current debate that pits states against the prescription drug industry, pharmaceutical firms look to some like a proverbial big bad wolf--they huff and they puff and they keep raising prices. In an interview with Stateline.org, Marjorie Powell, who serves as Assistant General Counsel for the Pharmaceutical Research and Manufacturers of America (PhRMA), tells the drug company side of the story -- in the court room, laboratory and across the country.
STATELINE.ORG: How has your job changed over the past few years, in terms of the legal responses PhRMA has issued against states and the federal government?
Powell: With the increased focus on drug pricing issues in the last few years, I have spent much more time dealing with state legislative proposals to implement price controls at the state level and PhRMA has, for the first time in several years, ended up suing a state. States would be better off looking for ways to provide their citizens with access to drug coverage, rather than trying to create and implement state-level price control schemes. It always seems to me like this is a diversion from solving the problem of access and it's a diversion at the state legislative level, at the state administrative level and here at PhRMA. I would much rather spend my time dealing either with regulatory issues or questions related to how access programs might be structured than I would dealing with price control issues and commerce clause issues. What do you mean by 'diversion' as far as what states are focusing on?
Powell: What is causing the concern in states is increased expenditures for prescription drugs within various state-funded programs like the state Medicaid programs and state pharmacy assistance programs for seniors. Insurance companies are using the increased expenditures for drugs as a way to justify their premium increases. Everybody assumes that if expenditures are going up, prices must be going up as opposed to recognizing that what's happening is we're buying more, we're not paying more for what we already buy.
STATELINE.ORG: How do you characterize drug prices these days?
Powell:Over the last few years, drug prices have increased at approximately the rate of inflation. What's happened is that there are new drugs for conditions that were not treatable by drugs in the past. For example, there are now drugs to rebuild bone density to prevent women from developing serious osteoporosis and having broken hips and so on. So we're now paying for those drugs for some number of women who were not treated in the past. The same thing [goes for] cholesterol-lowering drugs. Unfortunately, at the same time we're paying for those treatments now, we are paying for the absence of those treatments in the past by paying the medical expenses of people who have heart attacks or strokes because of high cholesterol, or who end up in nursing homes because of broken hips. So in a sense, we're paying twice now because we're paying for the new drugs to treat conditions that weren't treatable before.
STATELINE.ORG: Are manufacturers worried about what's happening in states right now?
Powell: Although I'm not privy to company internal research decisions -- and if somebody tried to share those kinds of decisions with me, I'd have to remind them that under the anti-trust laws, they can't do that -- I would think that companies would be looking very carefully at where they invest their research money and how much of their money they invest in research.
The other thing that's happened in the last few years that has brought attention to drug pricing issues is back in 1997, FDA decided its rules on direct-to-consumer (DTC) advertising were resulting in consumer confusion. At that time, FDA said you can have one of three kinds of ads on television. You can tell people about a disease and that they should call their doctor (without naming the drug) and you can tell people that they should take their drug without telling them what condition it's prescribed for. If you tell them about both the drug and the condition, you have to read to them on the air what FDA calls 'the brief summary,' which is the second page in the print ads. Manufacturers were unwilling to do that, because it would take a couple minutes.
FDA realized consumers were getting really confused by ads that did not name both the disease and the drug, so they said that manufacturers who were doing broadcast advertising could provide a short statement of both the benefits and the risks, as long as those were fairly balanced and as long as they provided four sources of information that consumers could go to--an 800 number, typically a web page, 'Ask Your Doctor' and 'See Our Advertisement In...' a comparable print ad. If you're advertising on a TV channel that was oriented towards sports people, your print ad had to be in a sports-related magazine.
With that change, companies started doing direct-to-consumer advertising for additional products. That's resulted in an increase in [such] advertising. There are still very few products subject to DTC advertising [rules], but every legislator has seen ads and they have reached what we think is a wrong conclusion, that the print ads drive up the cost.
We think DTC advertising actually encourages patients to learn more about their conditions and go to see their doctor. We think it's really important that people, particularly with undiagnosed conditions, actually go in to see their doctor and get their condition diagnosed. Pfizer has some information about the number of men who went to the doctor for the first time in five or ten years to get a prescription for Viagra, who were diagnosed with diabetes or heart problems, so they think it's been really helpful to have all the Jay Leno jokes, as well as the advertising.
There are a number of state legislatures that are looking at bills that are essentially aimed to encourage manufacturers to take those ads off the air. Most state legislators realize that there's a First Amendment free speech right and that a state bill that prohibited DTC advertising would not stand up to legal challenges, so [policymakers] are trying different approaches. We think those are all misguided because it's really important for consumers to be able to learn about drugs as well as other issues related to health.
STATELINE.ORG:Last December, you said in a release that the industry wants to work with state governments to increase access to medicines. What's being done in that area, and what do you foresee happening in that area in the future?
Powell:We've been trying to find ways that we can share with states that are creative solutions to the issue of access. For example, we've been telling other states about the Washington State program that Gov. Locke has initiated, where he's gotten the company that provides the state employee's drug benefit to agree to enroll uninsured people in the state in the equivalent program for an administrative fee, and give them access to the discounts that [have been] negotiated with both manufacturers and pharmacies. We've also been sharing with states information about the Nevada insurance program for prescription drugs, where the state is providing a subsidy for low-income people for the premium for the drug insurance, but higher income people can buy in with their own money, and it's a private sector insurance program, which we think provides access without the state getting into the price control business.
The other thing we've done is we are working with a couple of consultants who've been meeting with state Medicaid agencies, finding ways to analyze the data [so] that the agency can work to make sure the drug budget is being used effectively and efficiently. Sometimes the Medicaid agency will find that a couple of nursing homes will have a very high percentage of [patients] taking nine or more drugs. In general, pharmacists and doctors will tell you if a senior is taking nine or more drugs at the same time, there may be a risk of drug interactions or over-medication. So if you can identify nursing homes where that's apt to happen, you can then send a specialist in to review care for the patients and see if it's appropriate. Some times the care is appropriate, but what this does is help the state identify places where it might be able to provide better care by going back and looking at what's happening at the patient-specific level.
STATELINE.ORG:In addition to creating programs that increase access to medicines for groups like the elderly, states have begun to set up purchasing pools that function like Pharmacy Benefit Managers (PBMs) and states are also exploring prior authorization programs. What are you thoughts on states venturing into what some might view as a business side of health care?
Powell: It seems to us that businesses are used to doing business kinds of negotiations. State agencies may not have the background in administrative skills to negotiate as effectively in a complicated area like health care. The state could more efficiently contract with one or more PBMs to do that work, because then they're capitalizing on the skills the PBMs already have, as opposed to getting state employees into that task. We think it's very important that if a state is going to get into that role that the state role as a private sector purchaser be distinguished from the state's role as a government regulator. That's why we object when the state uses Medicaid and its role as the regulator of the Medicaid program to try and force rebates in a non-Medicaid program, which is essentially what Maine was doing. We think that's mixing the role of regulator and private sector purchaser and that it also violates the federal Medicaid law.
STATELINE.ORG:What's the status on the legal challenge that PhRMA brought against the Health Care Financing Administration (HCFA) for granting Vermont a waiver to expand a prescription drug program?
Powell:The district court ruled that they would not give us a preliminary injunction because manufacturers wouldn't suffer any harm until the rebates were due at the end of June. We have appealed that decision, oral argument is scheduled for April 10 on our appeal.
We've asked the appellate court to give us a decision before the end of June. We've also asked the district court to direct the state of Vermont not to send any invoices for this new program and for the court to direct HCFA not to exclude from Medicaid nationwide any company that might decide not to honor a Medicaid rebate invoice from Vermont. Because under federal Medicaid law, if a manufacturer does not pay that rebate, HCFA has to kick them out of Medicaid nationwide. That would mean all the patients on Medicaid throughout the country would lose access to that manufacturer's drugs.
STATELINE.ORG:What type of a step was this legal challenge, considering that PhRMA is challenging a federal agency on its authority?
Powell:We actually have challenged federal agencies before, this was not the first time. We take any litigation very seriously. It's a decision that our board has to make. We felt in this case that HCFA had exceeded its authority. This risks the entire federal Medicaid program in terms of both the rebate issue and in terms of the Vermont provision that these people who are now Medicaid-eligible people have to pay something more than a nominal co-payment. We think that's a very bad precedent.
STATELINE.ORG:What are your thoughts on HCFA's approval of Maine's request for a waiver similar to that of Vermont, in the waning days of the Clinton Administration?
Powell:If you look at the political timing of both approvals, I find it very interesting. The Vermont waiver was approved three days before Gov. Dean was facing what he considered a difficult election in November and the Maine waiver was approved if not in the last 24 hours, in the last 36 hours of the Clinton Administration. I find that very interesting.