By Howard Fischer
Capitol Media Services
PHOENIX -- Gov. Katie Hobbs is defending her call for lawmakers to impose caps on prescription drug price hikes despite a lack of specifics.
"Arizonans deserve access to more affordable medication,'' she said Thursday.
But the plan she first trotted out in her budget proposal last week still lacks many details, including what drugs would be subject to state regulation. That, said press aide Christian Slater, would be determined by a yet-to-be named board.
In fact, the plan doesn't even say what interests would be represented on that board.
And as to how the board would determine what is a fair price increase, that, too, would be left to the board.
Hobbs also wants regulation of pharmacy benefit managers, the companies that purchase drugs for insurance companies that eventually wind up in the hands of their customers.
The governor said she wants rules to prevent what she calls "gouging.'' And that, she said, means excessive mark-up of the prices for the simple act of handling those drugs.
But this, too, would be left up to that board.
While Hobbs had no specifics Thursday, she said there is a role for the state in telling private drug manufacturers what they can charge for the medications they invent and produce.
"Arizonans today have to choose between life-saving medication and paying for rent,'' she said. "This makes drugs more affordable for them.''
What the governor wants, according to Slater, is a law with some teeth to set costs for consumers.
"They'll be determined by the Prescription Drug Affordability and Transparency Board,'' he said.
"The board will consider factors including the demand for the drug from consumers as well as the necessity of the drug,'' Slater said. "So a drug like insulin is a drug that is really commonly used and it is also a life-saving medication.''
That, however, still leaves the question of how to determine what consumers will be charged which, by extension, means deciding how much is a reasonable margin of profit.
"A lot of these questions, I think, are going to get determined by the Prescription Drug Affordability and Transparency Board,'' Slater said.
"But, at the end of the day, we need cheaper prescription drugs for everyday Arizonans,'' he said. "And that's what this plan will deliver.''
What that also means, Slater acknowledged, is trying to get the Republican-controlled Legislature to approve the plan with no specifics of exactly how all this would work.
"We can trust the affordability board to take a holistic look at this,'' he said. "And we look forward to having those conversations with the Legislature.''
So who will be on this board?
"That's to be determined,'' Slater said. "As we move through the legislative process, that'll be a topic of conversation.''
All that assumes it gets that far.
"Generally speaking, I'm not a fan of price caps and don't believe I've seen them work -- unless you consider stifled innovation a good thing,'' said Sen. T.J. Shope, R-Coolidge, who chairs the Senate Committee on Health and Human Services. "I want to continue seeing advancements in modern medicine.''
And there's a related question of what happens if the state sets a maximum price for a drug and a company decides it's unwilling to sell to Arizonans at that price.
"That's not going to happen,'' Slater insisted. If nothing else, he said, that will become part of what the board considers as part of its determination of whether price caps would be not just affordable but also available.
That's exactly what happened in Colorado which has a system that Slater said is probably the closest to what Hobbs wants.
Since its establishment, that board has picked five medications for review. But in its first-ever vote last month, its members rejected a bid to limit the price of Trikafta, a four-year-old medication for cystic fibrosis that has been proven to cut the risk of death by 72%.
The board acknowledged that out-of-pocket costs nearly doubled in one year, to more than $8,900. But The Colorado Sun reports that members also heard from residents who feared that if the state were to take what was believed to be a first-in-the-nation action to set an upper limit, the company would simply pull it off the market.
That issue of "price gouging,'' Slater said, is different from price caps on commonly used drugs, and would not apply to manufacturers. Instead it would be focused on those pharmacy benefit managers.
"The Prescription Drug Affordability and Transparency Board will look at the cost to the PBMs of filling and dispensing a prescription drug and make sure that they're not overcharging for their services, and making sure that they're not jacking up prices, just like a middle man, when they're filling drugs for consumers,'' he said.
And Slater said the governor believes that the state has a role in determining what is an acceptable margin of profit.
Beyond the issue of price controls, whether for the drugs themselves or the mark-up costs for benefit managers, Slater said what the governor wants has another component: transparency.
"It would also require advance notice of price increases for medications so Arizonans aren't hit with new surprise costs,'' he said, regardless of whether it is subject to price caps.
While there is no evidence that any state has successfully capped the price of a prescription drug, there are indications that transparency may help curb increases.
AARP reports that Vermont, which passed the nation's first drug price transparency law in the nation in 2016, showed a nearly 80% decline in the number of drugs that saw price increases of 15% or more for its Medicaid program between 2016 and 2020. The organization also says there was a 70% drop in Oregon of price hikes of more than 10% for drugs priced at $100 or more between 2019 and 2020.
Aside from Colorado, there are some other models out there for Arizona to consider if the state wants to make a stab a controlling drug prices.
Legislators in the state of Washington, for example, voted in 2022 to create a five-member Prescription Drug Affordability Board.
According to the Washington State Health Care Authority, the board can conduct "affordability reviews'' on selected drugs and determine whether a prescription drug is unaffordable for consumers in that state. If that is the case, the board can set an upper payment limit.
But the Washington State Hospital Association reports that while the board has created an initial list of drugs to review, it has yet to actually conduct any such studies.
A similar board in Maryland also has yet to establish any price caps.
The National Academy for State Health Policy reports that other states, like Maine and New Hampshire have similar oversight boards. But they lack any authority to set payment limits but instead focus on leveraging public purchasing power to lower drug costs.
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