Joining four other states nationwide, South Dakota is wading into the choppy waters of prescription drug prices. And hospitals there are worried they'll be caught in the undertow.
A proposed state law would require drug manufacturers to sell to all wholesale buyers at the lowest rate offered in the state. The South Dakota hospital association is eager to see a draft bill from Republican Gov. William Janklow, who offered the proposal at the start of the new state legislative session earlier this month. But Dave Hewett, the hospital association's president, said the initial word on the plan is troubling for the state's 59 hospitals.
Janklow said he offered the bill because he wants local pharmacies to receive the low prices that hospitals pay for drugs. Janklow claimed the drugmakers offer hospitals not just volume discounts, which would still be allowed under his plan, but even steeper savings as a way to induce doctors to prescribe their drugs more often. Pharmaceutical companies make up the difference, Janklow said, by charging higher prices to pharmacies. The South Dakota Pharmacists Association supports the plan, saying its members would be forced by competition to pass the savings onto consumers.
Hewett said hospitals are concerned that they would end up paying more for inpatient drugs as a result.
The drug industry's main lobbying group, the Pharmaceutical Research and Manufacturers of America (PhRMA), also criticized the plan. Spokesman Jeff Trewhitt said he needed more information, but added: "Legislation like that tinkers with the competitive marketplace, which we think works pretty well."
The buying power of managed-care plans-which account for 60% of the drug market, a share expected to grow to 90% during the next seven years-leads to steep discounts, but proposals such as Janklow's interfere with that process, Trewhitt said.
Maine's drug price-control law has been the flashpoint to date in the war between states and drugmakers. The law requires manufacturers to negotiate wholesale prices with the state. If they fail to reach an agreement, Maine would impose price controls. The PhRMA filed a federal lawsuit, claiming the Maine law contradicts federal Medicaid law, and, therefore, is unconstitutional. A federal judge issued a temporary injunction against enforcing the law while the case moves through the courts. A federal appeals court in Boston has scheduled a hearing in the case for March. The law is scheduled to go into effect on April 1.
The industry also opposes Vermont's Medicaid waiver, which allows about 70,000 residents to participate in the Medicaid program only to benefit from a prescription drug discount, Trewhitt said. The drug lobby supports Nevada's initiative to improve drug coverage for seniors, as well as efforts in Maine, New Hampshire and Vermont to hire a pharmacy benefit manager to win better prices for residents in the three states, Trewhitt said.