SALEM — An ambitious attempt to try rein in prescription drug prices on about a third of Oregon health insurance plans has run into a buzz saw of opposition in the Capitol.
The concept of curbing fast-growing drug costs is very popular with voters nationally, polls show. Democratic and Republican state lawmakers say high prices are a problem.
But the experience of House Bill 2387 this session illustrates strong differences of opinion about how to cut prices.
It also shows how two well-funded lobby groups — the pharmaceutical industry and health insurance companies — have aggressively tried to shift the policy discussion to their advantage. The drug industry opposes the bill, but many insurers like it.
Two groups with ties to the pharmaceutical industry are running unusual full-page ads in several Oregon newspapers, including The Register-Guard, attacking the bill, which is stuck in committee.
HB 2387 would apply to health insurance plans provided by small businesses and some larger companies to their employees, as well as insurance the state of Oregon offers to state government workers and K-12 public school teachers. It wouldn’t apply to people who buy their own insurance, are covered through Medicaid or Medicare, or are insured through big self-insured companies.
Rep. Rob Nosse, a Portland Democrat, wrote HB 2387 after months of meetings with representatives of both industries as well as a patient advocacy and consumer protection groups. No state has ever passed a law like it. But supporters say states need to act now because the federal government for years has failed to control drug costs.
Originally, Nosse conceived a simple maximum amount, either $250 or $500, that patients on all state-regulated private insurance plans and some public employees would pay out-of-pocket for prescriptions every year.
But in a key concession to the health insurance industry, Nosse then added an unusual component to his bill: if a drug company charges a patient in Oregon more for a pharmaceutical than an average price for that drug in other developed countries, the drug company must pay — or “rebate” — the difference directly to the health insurer. The bill doesn’t specify how the insurer must use that rebate money.
Essentially, the bill would try to peg what drug companies are paid for drugs in Oregon, to what they are paid in other developed countries, many of which cap or otherwise control drug prices.
Nosse said that “the pretty robust rebate” component to insurance companies is what makes the bill work. Otherwise, he said, health insurers would just respond to a cap on how much consumers pay for prescriptions by upping the overall premiums for their plans.
“Then the bill would just end up being a shift in health care costs,” Nosse said.
Crucially, the addition of the rebate section won support for the bill from many Oregon health insurers.
Unlike a “standalone” co-pay dollar cap, “HB 2387 is a sustainable solution that requires shared accountability by (drug) manufacturers and insurers,” Jacob Thompson of Providence Health Plans wrote to lawmakers, in a hearty endorsement of the bill.
But, for the pharmaceutical industry, Nosse’s sweetener for insurers opened up a new line of attack on the bill — beyond the traditional arguments that price controls reduce patient access to medicine and revenue for the research and development of new drugs.
Pharma representatives soon began arguing that the “rebate” would give a “windfall” to health insurers.
More unexpectedly, several national groups that claim to advocate for the sick came out against the bill as well.
One Washington D.C.-based nonprofit, Caregivers Voices United, is running a newspaper and radio ad campaign against the bill in Oregon. Caregivers United calls the bill a “big insurance bailout.”
The group is a subsidiary of the Caregiver Action Network, whose top funder is the Pharmaceutical Research and Manufacturers of America. Other corporate partners include pharma firms Allergan, Genentech, and GlaxoSmithKline, according to its website.
John Schall, the group’s CEO, said he opposes HB 2387 because “it was never clear to us how the savings (from the rebate) would be passed on to the consumer.”
Schall declined to say what share of his group’s $1 million-a-year budget comes from pharmaceutical firms, but he added the drug industry “has no control at all over our editorial content, which comes from caregivers.”
“Nonprofits always exist on donations from individuals and corporations,” he said.
Another national group, The Partnership to Fight Chronic Disease, has submitted written testimony against the bill. That nonprofit, which didn’t respond to Register-Guard requests for comment, has yearly revenues of over $3 million.
While it doesn’t disclose individual donations, the nonprofit’s funders include a half-dozen pharmaceutical companies. Its executive director, Ken Thorpe, has an annual salary of $480,000 a year and he also serves as a paid consultant for California-based Vivus Pharmaceuticals.
Other ads have been paid for by PILMA — the Pharmaceutical Industry Labor-Management Association — a coalition of labor unions and pharma interests. The unions who are part of the group build and maintain pharmaceutical research and development facilities.
The attacks are frustrating for Jesse Ellis O’Brien, of consumer advocacy group OSPIRG, which supports HB 2387.
“It’s not unreasonable to say that they’re coming from front groups” for the pharmaceutical industry, he said.
More than 80 percent of patient advocacy groups nationwide receive at least some funds from pharmaceutical or medical device firms, according to a recent study in The New England Journal of Medicine.
“People are not aware of it at all,” Ellis O’Brien said, about the ads that claim to represent patient interests, “or of the broader ties between some patient advocacy groups and pharma.”
Ellis O’Brien said the fears about HB 2387 benefiting insurance companies through the rebate mechanism are being “dramatically overstated.”
Insurers would take a financial hit from the mandated cap on prescription co-pays, he said. And any excess money they collect from drug company rebates would be apparent when insurers went before the Oregon’s insurance commission annually to get their premium rates reviewed and approved, he argued.
“We are confident that the state’s regulators will take action to reduce premiums, if necessary, rather than allow insurers windfall profits,” Ellis O’Brien said.
Still, he acknowledged the bill doesn’t contain language explicitly mandating that insurers pass on the full value of the rebates to patients.
Insurance companies’ support for HB 2387 “is an interesting aspect of the politics here,” Ellis O’Brien said.
But the rebate provision is also raising eyebrows among more credible, Oregon-based patient advocacy groups. Many are noticeably taking a neutral stance on HB 2387 or pursuing other, typically more modest, bills.
Peter Parisot, with the Cascade Aids Project, said his group supports Nosse’s “effort to find compromise” in going after drug prices that “are really out-of-whack.”
But “my concern is: where does the rebate money go? Does the bill achieve its objective?” he said.
Nosse said he still stands behind the rebate idea.
The “insurance industry made a concession by agreeing to the co-pay cap. That’s how negotiations are supposed to work,” he said. “But these pharma guys have offered nothing about how to actually control their costs.”
Nosse said he is now weighing changes to HB 2387, due to strong Republican opposition and to gee up support in the more moderate Oregon Senate. The policy still has momentum, however, in part because powerful House Speaker Tina Kotek, a Portland Democrat, has made tackling prescription costs a priority of hers this session.
GOP Rep. Knute Buehler of Bend said in House Healthcare Committee hearing this week that “the excessive profits” in pharmaceuticals “need to be fixed.”
“Good intentions aren’t enough,” however, he added. “Price controls (on prescriptions) are like heroin. That first dose feels great. ... But the market will always find a way around those controls.”