Next week is expected to kick off yet another round in Massachusetts’ continuing battle to control health care costs, a prime driver of the state budget and family budgets alike. This time, health regulators are taking a hard look at drug costs — an overdue target for scrutiny if there ever was one — but already Big Pharma and the local biotech industry are pushing back.
Total health care spending in Massachusetts rose 3.1 percent to $60.9 billion in 2018, outpacing inflation (2.9 percent) and wage growth (2.8 percent), according to the latest report of the Center for Health Information and Analysis (CHIA) released last week. That was $2.1 billion more than the previous year.
The report found, “As in prior years, gross prescription drug spending accounted for the majority of the growth” in total health care spending. The $9.9 billion in pharmacy spending in Massachusetts was up 5.8 percent — but, as the drug industry is fond of pointing out — 3.6 percent after rebates.
For its part, the industry says that focusing only on drug prices would be a mistake. In a statement, Massachusetts Biotechnology Council President Robert Coughlin maintained that policy makers should look at the “real drivers” of health care costs, like premiums and “health insurance out-of-pocket costs.” A spokesperson for PhRMA said that rebates are retained by pharmacy benefit managers, the third-party middlemen who arrange drug programs for insurers.
Sorting it all out will be up to the state’s Health Policy Commission, which plans to get under the hood of those numbers during two days of hearings next week. The hearings come as the Baker administration begins implementing the latest reform aimed at controlling the costs of a relative handful of the most expensive drugs purchased for MassHealth clients. That modest reform, allowing the administration to negotiate supplemental rebates, was approved as part of the current state budget — and not without a fight.
But that provision is only a beginning and certainly not a cure-all. HPC Executive Director David Seltz said at the time the commission report was released that the “findings indicate that further action and policy reforms are needed,” particularly in the area of transparency for all health care costs.
But the area most obvious — and easiest to accomplish — is in drug pricing. There is no need to reinvent the wheel here. Other states are well ahead of Massachusetts in collecting data on drug prices, providing plenty of templates the state could borrow.
California’s still new drug law requires companies to report price increases quarterly and explain the reason behind price hikes. On the theory that knowledge is power, it’s a start. Of course, the pharmaceutical industry is also suing to halt that law.
Oregon’s law, which went into effect last March, in addition to requiring reporting by drug manufacturers also encourages consumer reporting of drug price hikes, and Vermont is now in its second round of drug transparency legislation with its own consumer-friendly website.
In Massachusetts a more wide-ranging bill supported by Health Care for All includes a transparency provision modeled on the work done in all three of those states.
If Seltz means what he says about making the health care industry generally more transparent and more accountable, drug pricing is a darned good place to start. Developing life-saving drugs isn’t free and, yes, pharmaceutical companies need to recoup their costs. But disclosing and explaining their prices isn’t too much to ask.