New Orleans, LA
BACKGROUND
For the fourth year in a row, health care premium increases have been in the double-digits. Increases for the year 2002 averaged 13 to 16 percent, with prescription drug costs as the primary factor. Rapidly increasing drug spending accounted for more than a quarter of the total growth in personal health care spending between 1999 and 2000 and raised pharmaceuticals' share of personal health care spending to 10.8 percent in 2000.
The escalating cost of providing prescription drug coverage to Medicaid beneficiaries and state employees has prompted many states to look for strategies to control costs by paying lower prices for pharmaceuticals through multi-state purchasing agreements and other pooling arrangements, generic substitution, and disease management programs. Most recently, states have sought Medicaid waivers that enable them to redesign the program's pharmacy benefit.
Bulk purchasing provides a means to obtain deep discounts on pharmaceuticals by
combining the pool of consumers and increasing the purchaser's bargaining power with manufacturers. To achieve this, states can form multi-state purchasing pools. Currently, there are three such multi-state coalitions.
The U.S. Department of Health & Human Services recently announced the creation of a new waiver program that pools Medicaid and Medicare dollars to provide low-income seniors with prescription drug coverage. The waiver offers states a generous matching rate. Thus far, Illinois is the only state awarded the waiver.
The state of Maine enacted legislation establishing the Maine Rx program, designed to lower the cost of prescription drugs by negotiating prescription drug prices for the uninsured or the insured who don't have drug coverage, Medicaid, and prescription drug programs for seniors. The legislation, introduced by then-State Senator Chellie Pingree, imposes profiteering penalties on manufacturers or distributors who are considered to be charging excessive prices for drugs or restricting the state's supply. And finally, if by 2003 the price of drugs bought in the program are not necessarily comparable to the lowest drug prices in the state paid by patients with discounts, then the state can begin imposing price controls. (Opposition from the drug industry has stalled the program's implementation.)
RESOLUTION
WHEREAS, runaway prescription drug costs are creating a major crisis for this country's healthcare system. Spending on drugs grew faster than spending in any other personal health category during the last three years; and
WHEREAS, the United States has the highest drug prices in the world and is the only industrialized country not to have imposed some form of price controls on prescription drugs; and
WHEREAS, American-made drugs typically sell for 15 percent to 30 percent less in Canada than in the United States;
WHEREAS, pharmaceutical inflation in 2000 accounted for 25 percent of overall increases in the cost of health care and these increases have helped to make the pharmaceutical industry the most profitable industry in the world; and
WHEREAS, the large drug manufacturers are experiencing median net profits of over 20 percent—4.5 times the median profits for the average Fortune 500 company; and
WHEREAS, employers are increasingly passing off portions of the cost increases to employees in the form of higher prescription cost-sharing provisions. Many employers have also placed restrictions on the type of pharmaceuticals covered by health plans, and in some jurisdictions, employers are capping prescription drug coverage at a specific dollar amount.
Now, therefore be it RESOLVED that the AFL-CIO and its affiliated unions:
1. Call on states to pursue a variety of avenues to control the cost of prescription drugs, including entering into multi-state purchasing pools and seeking administrative relief from the federal government under its new Pharmacy Plus Program; and
2. Advocate for federal or state legislation similar to the Fair Market Drug Pricing Act model legislation that attempts to control escalating costs by negotiating discounts and rebates; and
3. Continue to educate members on issues that affect access to affordable prescription drugs and provide information on how rising drug prices are driving up the cost of employer-sponsored health care plans for workers and retirees.