Drug price controls face legal hurdles

PITTSBURGH – Legislators from eight Northeastern states seeking to lower prescription drug costs were warned Friday that an interstate proposal to control prices faces serious legal hurdles.

William von Oehsen, a Washington, D.C., lawyer, told the Northeast Legislative Association on Prescription Drug Prices that federal law was murky about the legality of multistate drug purchasing. He warned legislators that an interstate prescription drug program would have to be delicately crafted to avoid violating interstate commerce laws.

“Tying in-state prices to out-of-state prices is a violation if it has the practical effect of regulating out-of-state prices,” von Oehsen said in his report to the association, which met in Pittsburgh.

The association, composed of senators and representatives from the six New England states plus New York and Pennsylvania, invited von Oehsen to explain legal issues associated with creating a multistate pool of pharmaceutical users that would be large enough to influence prices.

“Multistate purchasing has serious commerce problems and you need to develop in such a way that you maximize your protection,” von Oehsen said.

“We are lawmakers, we don’t do anything without a lawyer,” quipped Vermont state Sen. Peter Shumlin, a Democrat and president of the association.

One hurdle would be deciding how to pool the states’ Medicaid beneficiaries with public employees and possibly private employer groups to buy prescription drugs in bulk.

“The real message is you can’t do bulk processing across all groups,” said Connecticut state Sen. Catherine Cook.

The association Friday adopted a resolution that indicated the group was leaning toward negotiating lower prescription prices for a few drugs at a time as a test of whether their plan would work.

The lawmakers unanimously approved a resolution from Vermont state Sen. John Bloomer, a Republican, to create a committee to study a so-called preferred drug list of heart disease and cancer medications.

Before the resolution, the lawmakers heard about prescription drug programs in Maine and Florida that use the drug lists to control prices.

The programs attempt to control health care costs by requiring drug makers to give rebates if they want to be on the states’ lists of preferred drugs.

In Florida, drug makers must agree to give the state a 10 percent rebate on top of those required by federal law.

Florida fought off legal challenges that stated the lists, also known as “formularies,” violated federal law.

A pharmaceutical trade group argued Florida could not prevent drugs not on a state list from being given to patients. Florida argued that its preferred drug list is legal because doctors can get permission from the state to offer drugs not on the list.

The drug makers not on Florida’s list say doctors aren’t likely to go through the hassle of prescribing drugs not on the list and say their market shares have fallen since the list was created.

State health care officials have said they can save more than $200 million with the new requirement.

“You’ve got to create a competitive environment. Companies like to compete. It is human nature to compete,” said George Kitchen, head of Florida’s Medicaid pharmacy services program.

The association said the preferred drug list committee, made up of doctors, lawyers and representatives from each of the eight states, should have a report ready for its next meeting in March.