July 14, 2004

Dan Kurland

Prescription drugs: West Virginia leads in fight over fair drug pricing

West Virginia can lead the nation in positive ways. We should celebrate when we do.

At one time or another, we’ve led the nation in ATV deaths, ranked last among the 50 states in local funding for libraries and scored first in the number of women smoking while pregnant. But it’s not all bad news. West Virginia has become the leader in legislative efforts to fight the high cost of prescription drugs.

Drug prices are high, and ever-rising. In the first quarter of 2003, according to a recent AARP study, prescription drug prices rose at a rate nearly three times the rate of inflation. Drug spending has increased at double-digit rates in each of the past seven years.

And West Virginia, with one of the oldest and sickest populations in the country, ranks second-highest in prescriptions per-capita. In 2002, West Virginians spent $1.3 billion (with a B) on prescription drugs.

So what’s being done about this? In the last session, the Legislature passed House Bill 4084, the Pharmaceutical Availability and Affordability Act.

On the one hand, the bill initiated a Web-based and phone-based clearinghouse of existing manufacturer drug assistance programs for low-income and uninsured citizens (www.rxforwv.org) and a new, as yet unissued, discount card for the same population.

On the broader question of affordability, the bill created the West Virginia Pharmaceutical Cost Management Council to achieve favorable drug prices for state programs and residents. The bill allows adoption of a discount pricing schedule similar to, among other models, the Federal Supply Schedule, by which various federal programs purchase drugs at roughly half retail cost. It is this final aspect of the legislation that is groundbreaking.

To their credit, the council members have set high standards for efficiency and dedication by a legislative council. They have:

• Met biweekly, both as a full committee and in subcommittees, with a number of members driving in from across the state
• Held public hearings in various locations across the state.
• Gone out of their way to provide drug manufacturers opportunities to offer and respond to proposals.

Drug prices are, admittedly, only a small portion of the problem with health care today.

Drug costs constitute only 11 percent of personal health-care spending, and drug price inflation is only one factor affecting the rise in drug spending — utilization is also up. Yet even a small savings can make the difference between being able to maintain a drug regimen and the adverse consequences of noncompliance.

With all that said, a series of grossly disproportionate numbers truly justify action:

Pricing — For every dollar Americans pay for brand-name drugs, the Swiss pay 65 cents, Italians 49 cents. Canadians typically pay half what Americans pay.

Profits — Fortune magazine reports a median net profit margin for its Fortune 500 companies of 4.6 percent. It pegs pharmaceutical manufacturers at 14.3 percent. By comparison, retail and chain pharmacies have a net profit of 1.1 percent.

Marketing — Drug manufacturers spent $3 billion a year on direct-to-consumer advertising — much of that advertising on newer, more expensive drugs that have little increased value over previous drugs, “me too” drugs, as opposed to “breakthrough” drugs. That cost is passed on to consumers.

Research costs — in 2000, America’s top 10 pharmaceutical companies spent only 14 percent of sales on R&D, compared to 36 percent on marketing, advertising, and administration.

Lobbying — Brand-name drug manufacturers spent over $78 million on federal lobbying activities in 2003. What do they have to show for it? The new Medicare prescription drug law prohibits the federal government from using its bargaining clout to negotiate lower prices, and the administration has effectively prohibited consumers from importing lower-priced drugs from foreign countries while allowing U.S. drug companies to import drugs manufactured abroad as “American” drugs.

It is with these facts in mind that the council continues to examine a wide range of options while other interim committees examine other aspects of the health-care crisis.

In so doing, the Cost Management Council has achieved national recognition. In June, the council was invited to present its efforts at a meeting of the National Legislative Association on Prescription Drug Prices, a nonprofit association of state legislators with a mission to obtain fair prescription drug prices and comprehensive pharmacy coverage for all Americans. They will return in December.

At the end of the last session, the governor indicated a desire to call a special session in the fall to assure progress on these matters. All West Virginians can look in pride on this effort. We’re leading the way!

Kurland is a Charleston artist and health action coordinator for Covenant House.