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Pharmaceutical industry mounts opposition to state’s effort to curb drug costs

Elise Amendola/Associated Press

As they finalize rules to control the cost of prescription drugs, state officials are meeting new resistance from the pharmaceutical industry.

Legislators and Governor Charlie Baker approved a change in law this summer that allows the administration to curb drug costs in the state Medicaid program, or MassHealth, by negotiating discounts directly with drug companies. If negotiations are unsuccessful, the administration can establish a “target value” for certain high-cost drugs, hold a public hearing, and refer the matter to the Health Policy Commission, a watchdog agency, for further review.

Then, the commission can demand more information from drug makers, but that information would remain out of public view.


Administration officials and the Health Policy Commission have been drafting detailed regulations to implement the law. But the Massachusetts Biotechnology Council, which represents biopharmaceutical companies, said the proposed regulations go too far.

“We have strong concerns,” said Zachary Stanley, a spokesman for MassBio. “We think they are going beyond what the enabling law allows them to.”

Stanley said drug makers are particularly worried that the administration wants to publicly post the “target value” of drugs. And they’re troubled by the amount and type of information that the Health Policy Commission plans to require from companies that are undergoing a review. For example, companies don’t want to disclose the net prices that various insurance companies pay for their drugs or share their research and development costs.

The Pharmaceutical Research and Manufacturers of America, or PhRMA, raised similar issues, telling state officials it is “deeply concerned” about several aspects of the proposed regulations.

Baker first proposed a plan to tackle drug costs in MassHealth in January and drew immediate fire from pharmaceutical lobbyists. The proposal made for a lengthy debate at the State House. In late July, state lawmakers finally approved a version of Baker’s plan but softened some of the language. At the time, MassBio called it a “good compromise.”


“At this point, we want to make sure the law is enacted faithfully to what the Legislature intended,” Stanley said.

Drug company lobbyists have argued that controls on prices could stifle innovation, particularly in the biotech hub of Massachusetts, where research labs represent an important piece of the economy.

But as drug costs continue rising — for patients and for state governments — policy makers have continued to target pharmaceutical companies.

In October, Baker filed a sweeping health care bill that would subject high-cost drugs to further state oversight and penalize companies that raise the price of any drug too sharply.

And in November, the Senate passed a bill that allows state officials to determine fair values for expensive medicines and to cap out-of-pocket costs for insulin.

House leaders are expected to introduce health care legislation in the new year.

Many organizations, including the consumer group Health Care For All, support stronger controls on prescription prices.

A coalition including Health Care For All, AARP Massachusetts, the Greater Boston Interfaith Organization, the Massachusetts Medical Society, and other groups told state officials this month that the proposed MassHealth regulations “will save money for the state and taxpayers, while also protecting the 1.8 million residents who rely on the MassHealth program for their health care.”

Some of the new MassHealth drug pricing provisions are already in effect. Since the law was enacted this summer, MassHealth officials said they already have negotiated discounts with five drug companies for 11 drugs, saving about $10 million.


Before discounts, the cost of drugs in MassHealth has grown to about $1.9 billion per year.

The administration and the Health Policy Commission plan to finalize their regulations over the next several weeks.

At a recent public hearing, Dr. John Christian Kryder, a board member of the Health Policy Commission, noted the difficult task for state officials.

“The tradeoffs here are enormous if we don’t get it right and create an environment where drug development does not occur,” he said.

Priyanka Dayal McCluskey can be reached at priyanka. Follow her on Twitter @priyanka_dayal.