Paying for drugs

The largest disparity between the regular retail price of popular prescription drugs and the price to preferred customers is 1,400 percent for a hormone-replace drug called Synthroid. The average difference in the retail vs. preferred customer price in Maine is approximately 100 percent. So when the Legislature considers a bill that establishes a voluntary program for prescription drug manufacturers that would reduce prices on a few drugs by 20 percent, it is hard to be enthusiastic.

Certainly, there is nothing particularly wrong with LD 2082, a bill proposed by the King administration with bipartisan support, but it hardly is the final word on the debate over drug prices. Assuming drug manufacturers decide to participate, they would make rebates to the state for sales to people without insurance coverage for prescription drugs. In turn, the state would advertise the names of these companies as preferred providers.

Of the 400 manufacturers with which the Department of Human Services contracts, only 14 have signed onto the state’s Elderly Low-Cost Drug Program, which is similar to the proposed legislation. One indication of the potential for signing on drug companies under LD 2082 came from their lobbying organization, Pharmaceutical Research and Manufacturers of America, which opposed the proposal on the grounds that it was “price fixing.” It was not explained how a voluntary program that has been virtually ignored when tried elsewhere could fix prices.

With 400,000 Mainers lacking coverage for precription drugs, costs already so high that many are forced to choose between taking their medicine or buying food and increases from the drug industry on the order of 12 percent per year, small measures simply will not make an appreciable difference in this problem.

To get at the core of the problem, legislation must recognize that people who pay out-of-pocket for drugs help pay costs for everyone else. That’s because the discounts offered by manufacturers to HMOs and other large buyers of drugs must be made up somewhere — the industry didn’t make profits of $24 billion last year because it gave away its product. And these discounts don’t stop at the U.S. border. A study done for Rep. Tom Allen by the staff of the Committee on Government Reform and Oversight found that the average prices senior citizens in Maine pay are 72 percent higher than those paid in Canada and 102 percent higher than the average prices that Mexican consumers pay. Same companies, same drugs, very different prices.

The oversight committee concluded that, “It appears that drug companies are engaged in a form of `discriminatory’ pricing that victimizes those who are least able to afford it. Large corporate and institional customers with market power are able to buy their drugs at discounted prices. Drug companies then raise prices for sales to seniors and others who pay for drugs themselves to compensate for these discounts to their favored customers.”

Maine doesn’t need a voluntary program; it needs buying power to leverage discounts for residents without drug coverage. In Congress, Rep. Allen has proposed that Medicare use its buying power to get significant discounts for seniors. His bill has 108 cosponsors, all Democrats, and has been introduced in the Senate, where Republicans have also stood united in ignoring it.

That is both puzzling and unfortunate. Rep. Allen’s bill merely asks that government be run like a business — it uses, in fact, the health-care business as its model. An HMO tells a drug manufacturer that in exchange for providing a large customer base, it wants a lower price on drugs. The Allen bill does the same thing, only the customers are represented by the U.S. government instead of an HMO. His bill lets the market work while saving money for seniors.

It is understandable that Maine legislators are reluctant to make this state the test case for dramatically lower drug prices. The problem, ultimately, is of a national scale and demands a national response. A solution could come this year for seniors, if congressional Republicans decide that prescription-drug prices are a serious enough problem to demand their intervention. Or it could take several years of rising prices before the problem has their attention.

That won’t help Mainers without coverage who might need a prescription in the near future, but then, neither would LD 2082.