State Strategies: Expanding Prescription Drug Access

1. State Strategies: Expanding Prescription Drug Access Dee Mahan Families USA November 1, 2002

2. U.S. Insurance Coverage for Drugs: A Patchwork Non-Elderly Population Medicare Population Source: Prescription Drug Trends, Kaiser Family Foundation (November 2002)

3. With Individuals Paying Much of the Cost Percent of US Drug Expenditures by Payer, Projected 2000 43.9% 34.3% 21.8% Source: Prescription Drug Trends, Kaiser Family Foundation (November 2002)

4. State Coverage Programs Help • Medicaid • State/Federal funded program for low-income individuals • All states currently cover prescription drugs • Several states offer pharmacy assistance programs • 34 states have authorized or enacted programs; programs operate in 27 states • Eligibility usually limited to Medicare beneficiaries

5. But States Aren’t Addressing All Needs • Variations in income eligibility: examples of state pharmacy assistance programs • Kansas: $11,961 • Connecticut: $20,000 • New York: $35,000 • Variations in coverage: examples of state pharmacy assistance programs • Kansas: 30% co-payment, max covered $1,200/yr • New Jersey: $5 co-payment for low-income program

6. And Drug Spending Increases are Squeezing States and Individuals • Prescription drug spending rose 17.1% in 2001 • From 1997 to 2000, Medicaid spending on prescription drugs rose at twice the rate of total Medicaid spending • In a survey, 44 states list prescription drugs as one of the 3 most important factors increasing Medicaid costs in 2002 Source: Prescription Drug Expenditures in 2001, National Institute for Health Care Management (May 2002); Medicaid Spending Growth, Kaiser Commission on Medicaid and the Uninsured (September 2002).

7. Factors Contributing to Rising Drug Spending • Increased utilization • More drugs being prescribed • Increased use of higher cost drugs • Physicians switching patients • Increased drug prices • Lack of true competition in the market

8. Factors Contributing to Rising Drug SpendingDrug Company Spending and Profits, 2001(Dollars in Millions) Source: Profiting from Pain, Families USA (July 2002) “Marketing” captures spending on “marketing, advertising and administration.”

9. Price Increases: A Major Part of the Spending Problem • Study of calendar year 2001 price increases for the 50 prescription drugs most frequently used by seniors • Prices rose nearly 3 times inflation • Average increase for generics was 1.8%; for brands, 8.1% • Average annual cost of brand-name drugs was $1,106 versus $375 for generics Source: Bitter Pill, Families USA (June 2002)

10. Price Reduction Strategies Targeting Manufacturers • Negotiated Manufacturer Rebates • Discount programs opened to the public; rebates paid on drugs used by program enrollees • States negotiate additional rebates in their Medicaid program • Bulk purchasing • Consolidating multiple state programs • Multi-state purchasing pools

11. Elements of Price Reduction Strategies

12. Other State Approaches • Addressing anticompetitive behavior • Attorneys General bringing pricing fraud and antitrust lawsuits • Addressing industry driven demand • Using “counterdetailing” to offset drug industry advertising • Assisting patients to access manufacturer drug cards and patient assistance programs

13. Status and Future Outlook • States likely to pursue strategies to reduce prices assuming success in court cases • Still short of real price competition, continuing need to remove barriers to generic market entry