Virginia, like other states, has struggled to regulate the pharmaceutical industry
BY: KATE MASTERS – JULY 20, 2021 3:42 PM
A Publix pharmacy manager retrieves medication. (Joe Raedle/Getty Images)
A new coalition is calling on Virginia legislators to create an oversight board aimed at lowering the cost of pharmaceuticals across the commonwealth.
“We have formed because the problem is clear and it is grave,” said Addison Hunter, a spokesperson for Freedom Virginia, one of several advocacy groups — including Doctors for America and Virginia State Conference of the NAACP — to join the new Virginians for Affordable Medicine Coalition. Like many states, Virginia has struggled to curtail the rising costs of prescription medications, which often disproportionately affect older residents and those with chronic conditions.
The coalition is urging candidates running in statewide elections this fall to generally prioritize lowering drug costs. But a more specific policy goal is for lawmakers to establish the “Prescription Drug Affordability Board,” which would be tasked with controlling the price of medications.
A handful of states, including Maryland, have already passed similar laws. The general theory is for states to regulate pharmaceuticals like a public utility, creating boards to monitor the prices of prescriptions. The boards can be structured in different ways and set their sights on different kinds of drugs, according to a report from the National Academy for State Health Policy, which first proposed the concept in 2016.
Hunter said the coalition is calling for the state to focus on medications with a wholesale cost increase of $3,000 or more over a single year. Sudden price increases would trigger a review by the board, which could set a maximum limit on what manufacturers were allowed to charge patients for the drugs.
“It would not set the prices, it would set a ceiling for what consumers would pay,” Hunter said. “There are a small number of very expensive medications that are creating very real burdens for consumers.”
Controlling drug prices has been a priority for Virginia lawmakers amid nationwide reports of patients rationing their drugs — or foregoing essential medications — due to largely unjustified price increases. During a Tuesday morning news conference, Northern Virginia resident Kat Schroeder, who’s lived with Type 1 diabetes since she was nine years old, said a gap in insurance coverage once made it extremely difficult to afford insulin. With prices that have risen to $300 or more for a single vial, she depended on a friend, who worked as a hospital nurse, to pass on opened bottles that patients didn’t take home with them.
“That’s what kept me alive for the year I was experiencing that gap,” she said. “Even with the help from my friend, I was rationing my doses because I never knew when that next vial would come.”
Regulating the hugely complicated pharmaceutical industry can be challenging, though, especially given the limits of state authority. Virginia lawmakers did pass a law in 2020 that capped the price of insulin at $50 a month. But it only applies to the roughly 24 percent of insurance plans operated and regulated in Virginia. It’s not clear if the state has any authority to bring down prices for the vast majority of plans regulated by the federal government.
It speaks to the complexity of drug pricing in the United States, said Dr. Harry Gewanter, an associate clinical professor of pediatrics at Virginia Commonwealth University. The wholesale cost of prescription medication — the price set by drug manufacturers — is generally accessible to the public. But insurance companies usually pay a different price by going through pharmacy benefit managers, which negotiate the costs with manufacturers.
PBMs also set the formularies for insurers, or the list of drugs the companies are willing to cover on their plans. As a result, many manufacturers offer rebates in exchange for preferential placement on those lists. The amount and value of those rebates is often considered proprietary, Gewanter said, making it difficult to determine the true cost of a drug.
“By the time you launder the wholesale price through rebates, fees, distribution and everything else, you don’t know what the net price is,” he said.
There is evidence that capping the wholesale cost of medications can lower prices for consumers, since those list prices are used to set copays and out-of-pocket costs. In that way, creating an affordability board is a “great first step,” according to Gewanter. But it might not help everyone in the system, especially if the scope of the board is limited only to specific high-cost drugs.
The price ceiling could apply to common medications like insulin if regulators find that prices are suddenly rising, Hunter wrote in a follow-up email. But right now, the coalition is more broadly advocating for a board focused on “drugs whose prices are exploitatively being raised.”
Lawmakers could always choose to expand the scope of the board, and some candidates are calling for additional strategies to lower the cost of prescriptions. Democratic gubernatorial candidate Terry McAuliffe has released a five-page plan for controlling drug prices, including ways to expand the state’s role in negotiating costs. Maryland’s affordability board was tasked with studying a similar initiative, and the Virginia General Assembly has also passed legislation aimed at increasing price transparency within the PBM system.
Still, the boards have been described as controversial, in part due to the potential for unintended consequences, Gewanter said. The National Academy for State Health Policy warned that manufacturers could leave markets that opt for regulatory price setting, a risk that “may be greater in smaller states with less purchasing power.”
If costs are capped on certain drugs, Gewanter said there’s also the risk they could be removed from an insurance company’s formulary, potentially affecting consumer choice and treatment.
“In concept, it’s a great idea,” he said. “The difficulty with all this is you end up mixing up health care economics with ethics and politics.”
Kate grew up in Northern Virginia before moving to the Midwest, earning her degree in journalism from the University of Missouri. She spent a year covering gun violence and public health for The Trace in Boston before joining The Frederick News-Post in Frederick County, Md. While at the News-Post, she won awards in feature writing and breaking news from the Maryland-Delaware-DC Press Association, including a best in show for her coverage of the local opioid epidemic. Most recently, she covered state and county politics for the Bethesda Beat in Montgomery County, Md.
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