As Oregon lawmakers consider new measures to curb the costs of prescription drugs, the state board that may be tasked with setting price caps is coming to grips with the challenges ahead.
Last week, members of the Oregon Prescription Drug Affordability Board discussed a consultant’s report outlining approaches to setting price caps on prescription drugs the board has determined are unjustifiably expensive for government and commercial health plans.
The price caps would be central to a proposed “upper payment limits” program which, if approved by lawmakers, would be only the fourth of its kind in the country. But as the report lays out, the details of what drugs are capped and in what way risks ripple effects on different parts of the drug supply chain, and could spark backlash.
“This is like kicking a hornet’s nest,” board member Robert Judge, chief client officer of pharmacy services for Moda Health, said at the board meeting last week. “And you’ve got to be very, very thorough and very, very cautious and very, very thoughtful in terms of how we approach these because we know this is groundbreaking stuff.”
A price cap also may not guarantee lower drug prices, according to the report, but is very likely to draw opposition that includes a lawsuit from the pharmaceutical industry.
“We can’t expect someone with cancer to be told, ‘You have a very serious form of cancer, and your medicine is going to cost you $11,000 a month.’ That's untenable. We’ve got to do better by Oregonians.”
“The industry has used the complexity of its business model to make the point in court that virtually any state law is onerous for them, upends their standard commercial operations, resulting in excessive burdens on business,” the report states.
Despite the difficulties outlined in the report, state Sen. Deb Patterson, a Salem Democrat who chairs the Senate Health Care Committee, told The Lund Report she intends to press ahead with a bill in the 2025 session that would give the board the authority to enact drug price caps.
“It’s too important not to do it,” she said. “We can’t expect someone with cancer to be told, ‘You have a very serious form of cancer, and your medicine is going to cost you $11,000 a month.’ That's untenable. We’ve got to do better by Oregonians.”
Patterson backed a bill passed by the Legislature in 2023 that directed the board to study price caps and come up with a plan to implement them in Oregon.
The board’s report on the plan was due to lawmakers in September, but the deadline was pushed to November to allow for additional public outreach.
Challenges for price caps
Oregon is among 11 states that have set up prescription drug affordability boards, with varying roles and powers. Boards in Maryland, Minnesota, Washington and Colorado have the authority to enact price caps on prescription drugs, yet none have successfully used it.
Colorado’s board voted in February to consider setting a price cap on Enbrel, an increasingly costly injectable drug used to treat autoimmune disorders. Amgen, the maker of the drug, responded swiftly with a lawsuit challenging the constitutionality of the board’s price cap.
The board earlier contracted with the consulting firm, Myers and Stauffer, to gather feedback from different segments of the drug supply chain that would be affected by the price cap. Every group consulted cited concerns, according to the report.
Pharmacies “were extremely concerned” that a price cap would cut into already thin margins. Safety net clinics worried that a price cap would mean less money from the federal 340b program, which subsidizes them with discounted drugs. Patients fretted that drugmakers would pull out of their market in response to a price cap.
Drugmakers have opposed price caps and have been highly critical of the board’s work. Representatives from drugmaker Johnson & Johnson and pharmaceutical manufacturer trade group submitted letters to the board earlier this month warning that a price cap would have unintended consequences while failing to lower drug prices for consumers.
“The industry has used the complexity of its business model to make the point in court that virtually any state law is onerous for them, upends their standard commercial operations, resulting in excessive burdens on business.”
Patient groups, which often receive funding from the industry, have chimed in with similar messages.
Earlier this year, the executive director of the board, Ralph Magrish, publicly lashed out at such messages, blasting the industry and its “proxies” as engaging in “fear-mongering.
“It literally is Chicken Little, the sky is falling,” he said at the time. “It’s a fairy tale trying to create a hysterical or mistaken belief that disaster is imminent.”
Methodology matters
The draft report outlined a range of different methods the state could use to establish price caps on drugs deemed as overly expensive, noting that the board may need additional technical expertise.
“Potential savings and costs are indeterminate at this time,” the report states. “Savings and costs will be impacted by the drugs selected for (the price cap) and the methodologies chosen to establish the (price cap).”
A common issue for the methodologies is how to account for rebates paid by drug manufacturers to middlemen companies used by health insurers called pharmacy benefit managers. Critics say the rebates drive higher prices and add more obscurity to already nebulous negotiations over drug prices.
“And you’ve got to be very, very thorough and very, very cautious and very, very thoughtful in terms of how we approach these because we know this is groundbreaking stuff.”
A recent state report on health care costs found that prescription drugs purchased by patients at pharmacies represent a primary driver of cost hikes.
John Mullin, the board president for the Oregon Coalition for Affordable Prescriptions, told The Lund Report that his group has not taken a position on a potential price cap, saying that it needs to be shown to reduce costs for insurers and consumers.
But Mullins, whose coalition includes mostly insurers and unions, said the price cap could be an important tool and encouraged the board to continue their work.
“Complexity should not halt them in their tracks,” he said.
I don't believe anything Big Pharma publishes in the media. That having been said, the FDA needs to begin the process of affordability by requiring all pharmaceuticals applying for approval to include their true cost of R/D for that medication - and back it up with tax filing information - and a true estimate based on their pricing of how long it will take to recoup it. Each year, they should have to file an update showing where they are on that cost recovery and an updated estimate on how long it will take to recoup it - again with tax filing information to back it up. Once they've recouped their R/D costs, they should only be allowed to charge an industry standard amount (production cost + 15% max) AND the medication should be made in a generic format 3 years post R/D recovery. Of course, there are other games they can play to restart the clock (tiny formula changes saying it's a 'new drug' when it actually isn't)....but that's another argument for another day. Innovation in treatment options is a wonderful thing....but profiteering should not be allowed. Think I'm kidding? Two words: COVID Vaccines. Our tax dollars paid for ALL of it (including millions of wasted doses) ....yet Pfizer, Moderna, and others still charge over $100 per dose for them to help 'recover their costs'.....often more than insurance companies will reimburse.