NCPA - National Center for Policy Analysis

States Launch A Multitude Of Drug Cost Containment Plans

April 23, 2001

Lawmakers in states across the country are rushing to enact various types of plans to lower the costs of prescription drugs to their constituents. Details of the plans differ widely from state to state.

  • Some states, such as Pennsylvania, use state money to pay part of the cost of prescriptions -- while others, such as Florida and California, have passed laws limiting the prices that pharmacies can charge elderly customers.
  • A few, like Michigan and Missouri, have created tax credits to offset the amounts spent on prescriptions -- whereas others, including Iowa, New Hampshire, Washington and West Virginia, have created buyers' clubs or purchasing cooperatives to help the low-income elderly obtain drug discounts.
  • Maine and Vermont recently received permission from the federal government to use their Medicaid programs to provide drug discounts to tens of thousands of elderly and low-income people who would not otherwise qualify for Medicaid.
  • Various states in the Northeast and South are banding together to negotiate discounts from drug manufacturers -- with five states in the Northwest considering similar joint efforts.

The drug industry says it supports efforts to expand access to prescription medicines, but it has filed lawsuits challenging the programs in Maine and Vermont.

D. Brock Hornby, chief judge of the federal district court in Maine, blocked one part of the state program that requires drug companies to subsidize discounts for the uninsured. He said that Maine was interfering with interstate commerce, in violation of the Constitution, by demanding rebates on drugs sold to wholesalers and distributors in transactions consummated outside the state.

Hornby said that under the Constitution, "states cannot legislate outside their boundaries."

Source: Robert Pear, "States Creating Plans to Reduce Costs for Drugs," New York Times, April 23, 2001.


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