1. State Strategies: Expanding Prescription Drug Access Dee Mahan Families USA November 1, 2002

2. U.S. Insurance Coverage for Drugs: A Patchwork Non-Elderly PopulationMedicare Population Source: Prescription Drug Trends, Kaiser Family Foundation (November 2002)

3. With Individuals Paying Much of the Cost Percent of US Drug Expenditures by Payer, Projected 2000 43.9% 34.3% 21.8% Source: Prescription Drug Trends, Kaiser Family Foundation (November 2002)

4. State Coverage Programs Help Medicaid –State/Federal funded program for low-income individuals –All states currently cover prescription drugs Several states offer pharmacy assistance programs –34 states have authorized or enacted programs; programs operate in 27 states –Eligibility usually limited to Medicare beneficiaries

5. But States Aren’t Addressing All Needs Variations in income eligibility: examples of state pharmacy assistance programs Kansas: $11,961 Connecticut: $20,000 New York: $35,000 Variations in coverage: examples of state pharmacy assistance programs Kansas: 30% co-payment, max covered $1,200/yr New Jersey: $5 co-payment for low-income program

6. And Drug Spending Increases are Squeezing States and Individuals Prescription drug spending rose 17.1% in 2001 From 1997 to 2000, Medicaid spending on prescription drugs rose at twice the rate of total Medicaid spending In a survey, 44 states list prescription drugs as one of the 3 most important factors increasing Medicaid costs in 2002 Source: Prescription Drug Expenditures in 2001, National Institute for Health Care Management (May 2002); Medicaid Spending Growth, Kaiser Commission on Medicaid and the Uninsured (September 2002).

7. Factors Contributing to Rising Drug Spending Increased utilization –More drugs being prescribed Increased use of higher cost drugs –Physicians switching patients Increased drug prices –Lack of true competition in the market

8. Factors Contributing to Rising Drug Spending Drug Company Spending and Profits, 2001 (Dollars in Millions) Source: Profiting from Pain, Families USA (July 2002) “Marketing” captures spending on “marketing, advertising and administration.”

9. Price Increases: A Major Part of the Spending Problem Study of calendar year 2001 price increases for the 50 prescription drugs most frequently used by seniors –Prices rose nearly 3 times inflation –Average increase for generics was 1.8%; for brands, 8.1% –Average annual cost of brand-name drugs was $1,106 versus $375 for generics Source: Bitter Pill, Families USA (June 2002)

10. Price Reduction Strategies Targeting Manufacturers Negotiated Manufacturer Rebates –Discount programs opened to the public; rebates paid on drugs used by program enrollees –States negotiate additional rebates in their Medicaid program Bulk purchasing –Consolidating multiple state programs –Multi-state purchasing pools

11. Elements of Price Reduction Strategies Reasons to ConsiderConsiderations - Targeting manufacturers can mean better discounts than targeting pharmacists - Drugs are made more affordable - Additional rebates for Medicaid can mean other cuts are avoided - Rebate programs generally include some limits on drugs from mfrs that don’t offer rebates; consumer protections required - Discounts are not insurance coverage - The drug lobby has brought lawsuits to halt the programs

12. Other State Approaches Addressing anticompetitive behavior –Attorneys General bringing pricing fraud and antitrust lawsuits Addressing industry driven demand –Using “counterdetailing” to offset drug industry advertising Assisting patients to access manufacturer drug cards and patient assistance programs

13. Status and Future Outlook States likely to pursue strategies to reduce prices assuming success in court cases Still short of real price competition, continuing need to remove barriers to generic market entry