Prescription costs will continue to climb until transparency is brought to pharmaceutical pricing

Access to affordable health care, which all Mainers deserve, must include access to affordable prescription drugs. Medication is a critical component of health care; From antibiotics and blood thinners to highly specialized treatments for rare diseases, pharmaceuticals treat a broad range of health conditions. Many are literally life-savers.

Today, access to prescription medication is being compromised by soaring prices in Maine and around the country. It’s been difficult for policymakers to address increasing unaffordability without adequate information and transparency about the cause of price spikes.

So, several states have passed laws to facilitate data collection and provide important information to the public about why drug prices are increasing. Mainers have the opportunity learn more about the reasons behind increasing drug costs, through LD 1406, An Act To Promote Prescription Drug Price Transparency, a bill likely to move through the Legislature this week.

Prescription drug costs are driving up the cost of health care

Data show that overall health care costs are increasing much faster than Mainers’ incomes. Per-person health care spending by Mainers more than doubled, in real terms, between 1991 and 2014. Over the past 20 years, the amount of money spent on health care in Maine has gone from one in every seven dollars spent to just under one in every five. When a greater share of family budgets is consumed by health care costs, there’s less available for necessities such as food and shelter, and less money on the goods and services that drive economic growth.

Available data indicate that prescription drug costs are the largest contributor to this overall increase in health care spending. Between 1991 and 2014, the cost of prescription drugs nearly tripled in real terms: In 1991, Mainers spent an average of $403 per person per year on prescriptions. By 2014, they were spending $1,159.

Source: MECEP analysis of US Centers for Medicare & Medicaid Services, National Health Expenditure Data, 1991-2014. 2014 was the last year data was collected at the state level. Spending on “prescription drugs” in this dataset also includes spending on “other nondurable medical products.”

Price hikes put medicine out of reach

Faced with these soaring costs, Mainers, especially those with low or limited incomes, are forced into impossible choices. National data show that many Americans can’t afford their prescriptions. One in eleven (9%) nonelderly adults don’t take their medication as prescribed because they can’t afford it. Some try to reduce the dose, or skip doses, to save money. Others don’t fill the prescription at all. Low-income and uninsured Americans are much more likely to resort to these strategies. One in seven (14%) nonelderly adults below, or just above, the poverty line report doing so.

For low-income seniors on fixed incomes, the impact of increasing drug prices can be especially severe. A recent congressional report found that the costs of the 20 most commonly-prescribed drugs for seniors had increased 10 times faster than the cost of inflation since 2012. That means costs for these drugs were increasing at ten times the rate of Social Security adjustments (the main source of income for seniors) as well.

We know that the rising cost of prescription medications isn’t due to increased use of medications, but increased cost of individual drugs. The issue of drug companies hiking the prices of medications has gained national attention recently, from relatively well-known medications such as the EpiPen and insulin, to specialized drugs for rare conditions. The Centers for Medicare and Medicaid Services analyzed data from those two programs and found significant price increases in the cost of many drugs, common and rare. MECEP analysis of Maine Medicaid data shows a similar trend. For example:

  • The cost of Humalog, a common band-name insulin medication, more than tripled from $171 per prescription in 2007 to $538 in 2017
  • The average cost of a prescription for Methylphenidate (aka Ritalin), a drug used to treat attention deficit hyperactivity disorder, increased 39% between 2012 and 2017.
  • Prescriptions for Proventil, a medication used in asthma inhalers, cost more than two-and-a-half times as much in 2017 ($84) than in 2007 ($33).

Price increases like this cause Maine’s private insurance premiums to increase and cost public health care coverage programs like Medicare and Medicaid millions of dollars every year. Under normal market conditions we would expect the price of goods to decline over time; The price of a new iPhone is higher when it is first released than it is several months later. The fact that the price of some drugs is moving in the opposite direction is extremely troubling.

So why are drug prices rising, and why are they rising so dramatically? A lack of transparency makes the answer difficult to find.

Transparency a needed tool in fight against price spikes

To try to find answers, Maryland, California and Oregon have all passed laws to require drug manufacturers to justify their price increases. California has already started gathering and providing information showing that the price of a generic glaucoma medication is about to be raised by 63 percent, and that one the world’s largest generic drug makers plans to increase the price of an asthma inhaler by 49 percent next month. Massachusetts is considering legislation like those enacted in Maryland, California and Oregon.

LD1406 could help shed light on increasing drug costs to Maine people. The hope is that more information, including pharmaceutical companies’ justifications of price increases, will empower the public and its elected officials to craft policy solutions to reduce price surges.

There are two amended versions of LD 1406 moving through the Maine Legislature:

  • The version of the bill recommended by a majority of the Judiciary Committee would require the Maine Health Data Organization to annually identify medications with the largest price increases and gather other information about these drugs, including the total production costs, research and development costs and marketing and advertising costs. This proposal would empower Office of the Attorney General to investigate the cause of the price spike. This plan also specifies clear dates when data is supposed to be collected and shared and imposes a penalty on drug manufacturers who don’t provide the information.
  • Another version of LD 1406, supported by a minority of the committee, requires only that information about how other states are collecting the data be provided to legislators next year, with no next step required to have the data collected in Maine. This minority amendment authorizes very little that the Legislature could not already do, and does nothing to increase drugmakers’ accountability to Mainers.

Neither version of LD 1406 will solve the problem of surging drug costs. It would be naïve to think such a silver bullet could be contained in one piece of legislation. But only one proposal brings policymakers closer to a solution.

The Legislature cannot appropriately tackle any problem without information. The majority  recommendation would bring prerequisite transparency to the skyrocketing cost of prescription medicine. It would give lawmakers the tools they need to craft solutions to make health care more affordable for Mainers. It’s a crucial first step, and one the full Legislature should endorse.