STATE REPRESENTATIVE
PAUL C. CASEY

A View from the Hill

FOR IMMEDIATE RELEASE: January 3, 2000
CONTACT: Tommy Voltero (617) 722-2240

RETHINKING THE PRESCRIPTION DRUG ASSISTANCE POLICY

Well, once again, they were wrong. Despite all the hype and paranoia about the four horsemen of the Apocalypse and the end of the world, everything turned out to be just fine when the ball touched bottom to ring in the new year. The streetlights worked. The water came out of the faucet. My car started up without a problem. After over a year of warnings, precautions, and advisories the world entered the year 2000 gracefully.

Many people, of course, took a more "cautious" approach to the potential "Y2K disaster" than the rest of us, stockpiling food, water, and medicine in the basement. The planning process for the "end of time" was reminiscent of the preparations for a nuclear holocaust seen in the 1950s. Needless to say, should a national disaster ever strike the United States, the American people will be more than ready for it.

In the spirit of preparing ourselves for the worst, it is quite appropriate to discuss some of the "real" issues that we must still deal with in the new year. Although the Y2K issue was taken into consideration on Beacon Hill, we did not let it distract us from our many other legislative duties. The General Court is now officially back in session and we already have plenty of work to do. There is another budget to start thinking about, more bills to be debated, and numerous issues to be discussed.

One important topic that we will face in the new year is the rising cost of health care- specifically, prescription drugs. We have received an enormous amount of correspondence about the disturbing choices people had to make between getting prescription medication and purchasing the basic goods needed to survive. For some folks, it sometimes comes down to choosing between buying medicine and paying the rent or putting food on the table. These are choices that no one should have to make.

Why then, are people still making these difficult decisions? For starters, health care costs have been rising steadily over the years and prescription drugs have been a major part of that. Coupled with the fact that federal programs are insufficient (and states have very limited resources), these high costs are devastating to large segments of the population, especially the poor and the elderly. Medicare does not cover prescription drugs consumed outside of hospital care, even though its beneficiaries use more prescription drugs than any population group in the country. Medicaid was crippled by the federal Balanced Budget Act of 1997, and now is even less capable of adequately assisting the poor.

The reality of the situation is that states are left with the incredible burden of paying the health care costs of their citizens while only receiving a fraction of the tax revenue the federal government receives. Therefore, state legislators and not Congressmen must make tough decisions.

In Massachusetts, we have been fortunate to be able to respond to this challenge. In FY'00 we included several provisions in the budget to help people who were devastated by the high costs of prescription medicine. One of these is a $21.7 million increase in the Senior Pharmacy Program, which gives selected seniors up to $1,250 to cover drug expenses. Another is a Temporary Catastrophic Pharmacy Assistance program, funded at $20 million, which provides financial assistance to the neediest members of the Commonwealth.

While this financial assistance will come as a welcome surprise, there is a caveat that the public must be aware of: the funds that underwrote portions of these programs were taken from the Tobacco Settlement, which is a temporary source of revenue. Plainly speaking, we might not be able to afford these programs when this money stops coming in and sooner or later, legislators will have to make some very unpleasant decisions.

Upon closer scrutiny of the issue, we can easily see that state legislators are in a "lose-lose" situation. The federal government has clearly passed the buck on to individual states. Unfortunately, there is a powerful force in Washington that is preventing any kind of serious action to be taken on the issue: the pharmaceutical industry. Drug companies fight hard to preserve economic policies that keep them ranked high on the Fortune 500, even though many others must suffer as a result.

For those who are curious, here's how the process works. Taxpayers across the nation subsidize billions of dollars for the research and development of new drugs, often in such places as the National Institute of Health with an annual budget of $15 billion (this, incidentally, is the result of massive tax breaks won by the industry that were pushed through because of intense lobbying). After receiving our tax dollars for R&D, the industry then markets the products and charges us top dollar for them. In effect, we pay for drugs twice- once in taxes and once at the register.

But it gets worse, since the pharmaceutical industry continually opposes legislation that would allow citizens to form a "buyer pool," giving them the wholesale prices enjoyed by HMOs. To them, it is far better to have atomized consumers paying overinflated retail prices than allowing for the free market to determine the costs.

This philosophy is most clearly seen in their annual statements. On the average, drug companies reap in net profits of about 18% ($22 billion in FY'99), a margin 5 percent higher than any other industry in the country. Brand name drugs often see gross profits of over 90%. Thus, when the industry complains that a buyer pool would "hinder research and development," we must ask ourselves what their true interests are. Why, we might ask, are they spending $11 billion a year on marketing, which diverts valuable capital from research and development and produces no direct value?

The Center for Responsive Politics, a watchdog agency that monitors money in politics, says that drug companies outspent every other major industry in national lobbying efforts ($111 million in FY'98). And thanks to campaign finance "reforms" passed in 1997, this industry increased its donations to the 1997-98 elections by a whopping 53% from the last ones. It is no coincidence our drug prices are the highest in the world. Other countries, like Canada, have costs that are 40% lower than our own.

Some states actually subsidize transportation costs for people to cross the border and buy medicine. I do not see Massachusetts doing this in the near future, but it could be a possibility if Congress continues to push more financial burdens upon us. If things go on as they have been on the national level, states will be in real trouble. Already we have seen the Executive Office's health care agenda get torpedoed, and just recently we saw the Patients' Bill of Rights almost die on the House floor in the Capitol.

No one in the State House is waiting for the federal government to change its ways. That is why we are already working on something that might be the solution to our problems. The FY'00 budget directs the Office of Administration and Finance to test out a program for the aggregate purchasing of prescription drugs. Should the program prove to be successful, we might be well on the way to lowering drug costs and state expenditures at the same time. Such an accomplishment would make Y2K compliance look like riding a bicycle.