States Seek to Lower Drug Prices for Senior Citizens

One of the most pressing economic issues confronting individuals and families is the high cost of prescription drugs. For the 44 million Americans without health insurance, the high cost of drugs represents another hard decision that must be made as to whether they can afford to purchase medicine for themselves or for their children. Seniors in particular are extremely vulnerable because Medicare does not cover outpatient prescription drug costs and the majority of the elderly do not qualify for Medicaid. Americans pay 30-70% more than citizens of either Canada or Great Britain for the identical drugs sold in the United States. For working individuals and families without health insurance or for seniors who do not qualify for Medicaid but still live on a fixed budget, the high cost of drugs may require them to forgo paying other important bills such as utilities in order to afford critical medicine. This problem is especially acute with seniors because they have more medical concerns and consume one-third of all prescription drug even though they represent only 12% of the population. While President Clinton understands the need for reform, his proposed legislation has been lost in the partisan deadlock over HMO legislative reform. States must therefore take the lead to enact legislative reforms on this issue. Only 13 states have enacted legislative programs to address prescription drug costs. These programs generally offer financial assistance to low-income seniors. But during this passed year, six additional states — California, Maine, Texas, Nevada, North Carolina, and Delaware — passed legislation either to start a financial assistance program or to expand upon their subsidy programs. California’s drug financial assistance program for seniors stands out as the only state program that is not based upon income limits. It allows all Medicare recipients to purchase prescriptions at Medi-Cal rates (the California Medicaid program). Under the new law, anyone who receives Medicare benefits receives their drugs at Medicaid prices. Because the new law relies upon the existing structure of Medi-Cal, it does not create any new bureaucracy or costs. But providing low-income assistance is only a stopgap measure, which in essence props up the high prices that drug companies charge. When drug companies charge American citizens significantly more than they do Canadians, state legislators must step in and stop this price gouging. Without addressing the way pharmaceutical companies price drugs, the size of state subsidy programs will increase dramatically in order to be effective in providing financial support. Ultimately this legislative solution is self-defeating, with drug prices rising at 20% a year. State leaders are looking at new legislative strategies to address the high price of prescription drugs. Innovative approaches to address this problem are being pursued by state legislatures. Senator Chellie Pingree (Flemming Fellow ’96) introduced legislation (SB 300) that creates an 11-member Fair Drug Price Board to examine and oversee the prices of prescription drugs in Maine. This Board, consisting of members from the Maine House and Senate, representatives of the medical and pharmacy communities, and members representing the public, will establish a price ceiling that sets the maximum sale price for drugs. The maximum price for a prescription drug sold in the state must be lower than the Federal government Medicaid supply schedule or the price listed in the drug formulary by the Province of Quebec. "My bill will protect the people of Maine who are at the mercy of pharmaceutical manufacturers that are taking advantage of people who must purchase drugs for fighting illnesses and therefore are reaping exorbitant profits," Pingree stated. In October 1999, ABC’s 60 Minutes highlighted the plight of senior citizens’ inability to afford their needed medications, raising the profile of this issue across the nation. Frustrated with government inaction, groups of Maine seniors organized bus trips across the Canadian border to purchase cheaper prescription drugs made by the same pharmeceutical companies that sell identical drugs for much higher prices in the United States. Vermont, Illinois, and Massachusetts have introduced similar legislation to create Fair Drug Price Boards with the same mission. Additional legislative strategies are available online by clicking on the links below: StateAction.org Resources Prescription Drug Coverage Issue Brief on StateAction.org For more information about prescription drug coverage policy, please contact Kirsten Lindquist at (202) 956-5134. Important Facts on Prescription Drugs 34.7 million Americans are 65 or older. Nearly half of all 75+ seniors live at only 200% of the poverty level. 1 out of 5 seniors takes at least five prescription medications a day and about 2.2 million seniors pay more than $100 a month for drugs. 19 million seniors have little or no prescription drug coverage and 35% of Medicare recipients lack prescription drug coverage. Only 4.1 million seniors receive Medicaid benefits.