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Nosse and Steiner Hayward Back Mandatory Rebates for High-Cost Drugs

The Oregon Department of Consumer and Business Services would step in if a drug exceeded $10,000 or had cost increases greater than 3.4 percent. State regulators would index a price according to what other countries have negotiated for the drugs. Consumers would also see a cap on costs that they pay out-of-pocket.
February 10, 2017

Rep. Rob Nosse, D-Portland, touted his aggressive and innovative approach to tackling uncontrolled pharmaceutical costs on Thursday, calling on Oregon to lead where Congress has failed and other state-based reforms have fallen short.

Nosse supports House Bill 2387, which would cap the amount that consumers must pay out of pocket and rebate health insurers for blockbuster drugs with costs set significantly higher in Oregon than in other developed countries. The legislation also moves to curtail prices for individual drugs at a rate that outstrips inflation.

“States are laboratories for innovation. Often it’s faster to get something through a state government than Congress,” Nosse said.

The vice-chairman of the House Health Committee was joined at the podium by Oregonians for Affordable Drug Prices, an unlikely coalition that includes such strange bedfellows as Tom Holt of Regence BlueCross BlueShield and Jesse O’Brien of the Oregon State Public Interest Research Group. The coalition also includes major hospital systems and labor unions, including the Oregon Nurses Association.

“We do not want pharmaceutical companies to be unable to make a fair profit. But I can’t think of any other product where prices continually go up well after they’ve been on the market,” said Sen. Elizabeth Steiner Hayward, D-Beaverton, accusing the drug companies of “unconscionable profiteering.” She’s the leading supporter of pharmaceutical price reform in the Senate.

Health insurers, Medicare drug plans, coordinated care organizations and consumers have all been racked in recent years by exploitive behavior by drug companies on two fronts.

For years, the pharmaceutical companies have charged Americans many more times than what they get away with in other developed countries for drugs, where prices are carefully negotiated. These drugs don’t operate in a free market because they often have no competition for patients who desperately need their medications.

More recently, hedge fund managers, private equity firms and other Wall Street profiteers have started buying up so-called “orphan drugs” and jacking up the price by several times the previous cost. These are drugs that have been available for years, even decades, but are only manufactured by one company, often because they are dispensed at low volumes or treat niche disorders.

Nosse has attempted to curtail both of these unfair trade practices by authorizing the Department of Consumer & Business Services to regulate drug prices and mandate a rebate if the drug costs more than $10,000 or rises in annual cost by more than 3.4 percent.

The state agency would index a reasonable price according to the prices set in other member countries of the Organization of Economic Cooperation and Development, a group of 35 industrialized countries with standards of living similar to the United States. Nosse said he would seek an amendment that would tailor the index towards the non-U.S. countries with the most expensive drug prices -- which would still be much lower than Americans are forced to pay.

The price triggers would affect the Oregon-regulated private insurance market, the Public Employees Benefit Board and the Oregon Educators Benefit Board, but not Medicare, Medicaid, federally regulated large-employer health insurance plans or people buying drugs without insurance.

The insurer would get a rebate on the price difference between that index and the price forced on them by drug companies. A separate bill, House Bill 2388, would provide relief  to pharmacy benefit managers, who often negotiate on behalf of insurers.

The bill also includes transparency requirements that would compel pharmaceutical companies to explain the need for the high prices of blockbuster medications, including research,  development and marketing costs.

Rep. Mitch Greenlick, D-Portland, said he had backup legislation that would create an assessment on high-cost drugs and a risk-pool to help insurers to pay for them, but he preferred Nosse’s more comprehensive approach.

“If we can actually get it done, it will show the country how to get those costs down,” said Greenlick, who tasked Nosse with steering a prescription drug task force a year ago.

California was defeated at the ballot box in its efforts to drive down pharmaceutical costs by linking payments for drugs to what’s paid by the Veterans Affairs Department. Proposition 61 was defeated 54-46 in November despite the support of presidential candidate Bernie Sanders.

The backing of such heavy hitters as Regence BlueCross BlueShield, Kaiser Permanente and Providence Health & Services gives heart that Nosse, Greenlick and Steiner Hayward may have the political capital to pass House Bill 2387, but the clout of the Pharmaceutical Research and Manufacturers Association of America is formidable, largely because they use their enormous profits to bankroll the political campaigns of the politicians who write legislation to regulate them.

On Capitol Hill last month, Sen. Corey Booker of New Jersey, a Democrat with presidential ambitions, led the defeat of a measure that aimed to help Americans import cheaper drugs from Canada, citing drug industry talking points about the safety of Canadian drugs. The amendment had support from 12 Republicans, including Sen. John McCain of Arizona and Sen. Ted Cruz of Texas, but it was defeated with the support of 13 Democrats, most of whom led Congress in the receipt of campaign contributions from pharmaceutical companies.

In Oregon, drug companies collectively often outspend other healthcare industry players, and have been very successful in defeating even modest legislation to curtail their power. With Oregon’s lack of limits on political campaign contributions, Democratic and Republican legislators alike often rake in thousands of dollars from these companies.

Chris can be reached at [email protected].