Andrew Cuomo blasts surging Rx costs as an 'outrage'

(*Note: Go to 42:05 of video for Cuomo’s discussion of prescription drug costs.)

ALBANY, N.Y. — New York Gov. Andrew Cuomo unveiled a three-pronged plan to check soaring prescription drug prices, which he called a “tremendous problem” for the state and its residents.

In his 2017 State of the State address on Wednesday, Cuomo proposed a price ceiling for certain medications in Medicaid and the private sector, new regulations on pharmacy benefit managers (PBMs), and a surcharge on drug makers for prices that exceed benchmarks set by a newly created review board. He noted that New York would be the first state to establish such a program to regulate drug pricing.

“The skyrocketing costs of prescription drugs is an issue that the nation has been grappling with for years, and as we have so many times before, New York is prepared to show the path forward,” Cuomo stated. “Perpetually rising drug costs hurt the wallets of taxpayers and the bottom lines of businesses, but for those who desperately need lifesaving medicine and cannot afford it, the consequences can be dire. The idea that in 2017 someone who has fallen ill might not have the opportunity to recover simply so someone can line their pockets with a few more dollars is unconscionable and must be stopped immediately.”

About 77% of Americans say they can’t afford their prescriptions and have opted to forgo taking their medications because of the price, the New York governor’s office reported. And over the last three years, New York taxpayers had to subsidize a $1.7 billion drug-related cost increase in the Medicaid program.

Drug costs have been the chief driver of premium rate hikes in New York’s commercial insurance market, Cuomo noted. Pharmacy expenses in 2015 were 26% of total premiums in New York, compared with 18% for in-patient hospitalization.

“The costs have been going up, and the societal costs are unbelievable,” Cuomo said.

Cuomo said his plan to institute high-cost drug price caps and surcharges on drug makers would be a first in the U.S.

In addition, he blasted price gouging behavior by some drug companies, which he said “are in a position where they can exploit the user because they need the drug, sometimes to live, and they control the price.”

“It really is an outrage — worse than an outrage,” Cuomo said. “We need a comprehensive plan to rein in the cost of prescription drugs, and that’s what we’re going to do.”

Under his plan, price caps would be set for certain high cost prescription drugs reimbursed under the Medicaid by requiring a 100% supplemental rebate for any amount that exceeds a benchmark price recommended by the state’s new Drug Utilization Review Board.

A surcharge would be imposed on drug manufacturers for any amount that those drugs exceed the review board’s benchmark when the medications are sold in the private market. Proceeds from the surcharges would be deposited into a fund held and administered by the state’s Department of Financial Services. The money collected from surcharges then would be reallocated to insurers to reduce insurance premiums for New Yorkers in the following year.

“It’s the first plan like it in the United States,” Cuomo said. “It says to the drug manufacturers, you’re not going to come in here and gouge us, we’re not going to buy it under Medicaid for an exorbitant price, and if you sell it in our state we’re going to make you pay a surcharge on the money you shouldn’t have been charging in the first place.”

Cuomo’s plan also singles out PBMs for what it described as “unfair business practices” believed to be contributing to the rising drug costs. His proposal would require PBMs to immediately register with the state and be subject to new regulations mandating the disclosure of financial incentives or benefits for promoting the use of certain drugs, plus any other financial arrangements affecting customers.

Starting in 2019, PBMs also would need to be licensed by the state’s Department of Financial Services, which would have the authority to suspend or revoke a PBM’s license for deceptive, unfair or abusive business practices or for conduct that violates standards set by the department.

Cuomo’s proposed regulations on PBMs drew criticism from the Pharmaceutical Care Management Association (PCMA), a trade group representing the PBM industry.

“This mandate would increase costs by tying the hands of employers, unions and public programs that hire PBMs to negotiate discounts on prescription drugs,” PCMA said in a statement late Wednesday. “It may also be illegal, given today’s decision in the U.S. Federal Appeals Court in the 8th Circuit.”

In that ruling, the appeals court struck down an Iowa law that PCMA said would have severely hampered the use of maximum allowable cost (MAC) lists for generic drugs and restricted PBMs’ ability to lower the cost of those medicines for the state’s employers and consumers.

The National Community Pharmacists Association (NCPA), which represents independent pharmacies, said Wednesday that it was “deeply disappointed with the outcome” in the Iowa case (Pharmaceutical Care Management Association v. Gerhart, No. 15-3292, U.S. Court of Appeals, 8th Circuit).

“The Iowa law was meant to ensure that Iowans continue to have fair access to their prescription drug benefits and bring transparency to a PBM industry that has exploited secrecy to reap record profits at the expense of hardworking Americans,” NCPA chief executive officer B. Douglas Hoey said in a statement on the decision.