Gov. Cuomo proposes plan of attack against rising drug prices

Jan. 20--Tweet

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With the future of health care uncertain, all eyes are on lawmakers on both sides of the aisle to make coverage more affordable and cost-effective.

One focus of Gov. Andrew M. Cuomo's recently unveiled 2017-18 Executive Budget is the ever-rising prices of prescription drugs.

"The skyrocketing costs of prescription drugs is an issue that the nation has been grappling with for years and as we have so many times before, New York is prepared to show the path forward," Gov. Cuomo said in a public statement. "Perpetually rising drug costs hurt the wallets of taxpayers and the bottom lines of businesses, but for those who desperately need lifesaving medicine and cannot afford it, the consequences can be dire."

In recent decades drug prices have grown exponentially, especially for branded and specialty drugs -- including those used to treat relatively common diseases such as diabetes, lupus and atrial fibrillation. According to Gov. Cuomo's office, despite 85 percent of all drugs prescribed in the U.S. being generic, branded drug sales grew from a $10 billion industry in 1984 to $200 billion in 2015.

While specialty drugs only account for 1 percent of prescriptions, they account for 73 percent of total drug cost growth in the last five years.

In an effort to address unjustified cost increases and sudden price spikes, like the 500 percent increase in the cost of the EpiPen between 2007 and 2016, Gov. Cuomo has announced a three-pronged approach:

--Create a ceiling to stop the price-gouging of Medicaid: In the last three years, taxpayers in New York alone subsidized a $1.7 billion drug-related cost increase to the Medicaid program.

Gov. Cuomo hopes to reduce the taxpayer burden by creating a state Drug Utilization Review Board, which would set benchmark prices for drugs reimbursed under Medicaid. Manufacturers of any drug priced above that benchmark would then be required by the state to rebate Medicaid for any costs beyond its threshold.

--Penalize manufacturers price-gouging the private market: Pharmacy expenses accounted for 26 percent of total premiums in New York in 2015, making drug prices the biggest driver of commercial insurance premium increases. In comparison, in-patient hospitalizations accounted for only 18 percent of premium costs.

The governor's second prong would impose a penalty on companies selling drugs on the private market above the state benchmark prices. The penalty would be a surcharge of 60 percent of the amount in excess of the price cap. The surcharge proceeds are then to be held in a dedicated fund and reallocated to insurers to lower insurance premiums throughout the state.

--Protect consumers from unfair business practices. Nearly 77 percent of Americans say they can't afford their current medications and chose to forgo their prescriptions.

In response, Gov. Cuomo proposes requiring Pharmacy Benefit Managers, or prescription drug brokers, to register and be licensed through the state. These brokers negotiate the prices of drugs for insurance plans and self-insured employers, and are often accused of corruption.

Under this proposal, Pharmacy Benefit Managers would be regulated and required to disclose any financial incentives or benefits they receive for promoting certain drugs. The state Department of Financial Services would have the authority to suspend or revoke a broker's license for deceptive, unfair or abusive business practices.

"Reining in the cost of prescription drugs is another first for the state of New York. This is a major problem for seniors, it's a major problem for middle-class families, and it's just an abuse of the consumer. Some of the increase in prescription drugs is just abusive," Gov. Cuomo said at his fiscal year briefing in Albany. "No other state in the country has done it. It is creative, it is aggressive, we believe it's legal, and we believe it will make a major difference in people's lives."

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