Healthy Skepticism Library item: 1070

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: news

Hallam K.
Lilly, Merck, Drug Lobby Fight Price Cuts by States
2003 Apr 23

Full text:

Drugmakers such as Eli Lilly & Co. and Merck & Co. heard a blunt message last
month from the newly elected governor of Illinois.
``We are going to bring down the price of prescription drugs
once and for all,’‘ Democrat Rod Blagojevich declared in his State
of the State speech.
Drugmakers were counted among Washington’s political winners
after Republicans gained control of Congress last year and began
drafting a bill to help the elderly pay for drugs under the
federal Medicare insurance program. Now, with state treasuries
facing deficits totaling almost $70 billion, the front lines have
shifted. Blagojevich and other governors are demanding lower drug
prices as they try to contain the mounting cost of state-run
programs like Medicaid, which insures the poor.
In response, the main pharmaceutical trade group is stepping
up lobbying in states like Illinois, which plans to pressure the
companies to lower their prices for bulk purchases. Blagojevich
said he’ll consolidate drug purchasing by nine state agencies. The
state will then try to use its combined purchasing power to
negotiate lower prices for the $2 billion in medicines it buys for
the poor, the elderly and state workers.
``The states are being far more aggressive than the federal
government’‘ in controlling drug costs, said John Schroer of Itros
Capital Management, a health-care hedge fund in Denver that
oversees more than $250 million.
``The fear for long-term investors,’‘ he added, ``is that
when one state makes a move others follow, so that you have a
brick-by-brick erosion. In that sense, it’s a very big issue for
the pharma industry.’‘
August Vote
In Congress, Republicans have said they plan a vote before
August on legislation to expand prescription drug coverage under
Medicare. So far, they haven’t introduced a bill. Cost estimates
range from $400 billion to $900 billion over 10 years.
The state most closely watched by investors, Schroer said, is
Maine. Its proposed cost-control program, Maine Rx, has been
challenged in court by the trade group Pharmaceutical Research and
Manufacturers of America. If implemented, Maine Rx would extend to
as many as 325,000 uninsured people drug discounts similar to
those negotiated by the state for its Medicaid recipients.
The drugmakers’ case, now before the U.S. Supreme Court,
argues that Maine’s plan restricts interstate commerce and would
unlawfully help people not covered by Medicaid.
States are acting because budget surpluses began turning into
deficits in late 2000 as economic growth slowed and unemployment
rose, delivering less tax revenue into state coffers. The states
face an estimated 2004 budget deficit of $68.7 billion, according
to the National Conference of State Legislatures.
As governors seek to cut costs, prescription drugs are an
obvious target.