New York takes drug pricing into its own hands with new clampdown

New York Governor Andrew Cuomo unveiled a first-of-a-kind plan to curb “exorbitant” prescription prices in the Empire State. Credit: Marc A. Hermann, MTA New York City Transit.

As much of the pharma industry waits to see what kind of approach the incoming presidential administration will take on drug pricing, New York Governor Andrew Cuomo has plans of his own. He’s unveiled a first-of-a-kind proposal to curb “exorbitant” prescription prices in the Empire State.

New York will create a “review board” to determine the “fair price” for certain expensive drugs under the plan, Cuomo said, and then the state will mandate that Medicaid won’t pay more than that amount for its purchases. When a company charges Medicaid more than the board’s set price, it’ll owe a “rebate for any amount” in excess, according to a release.

But before New York is to take any action on pricing, the state's lawmakers would have to sign off on Cuomo's approach. Industry group PhRMA told the Buffalo News that the new announcement is "similar to previous proposals that were soundly rejected by the Legislature.’’

The proposal would also impact private markets. If a pharma company sells into the state at a price higher than the board’s set amount, that sale will be hit with a surcharge; the government will collect that money and reallocate it “back to the insurance providers to reduce the cost of insurance.”

“This is going to make a difference across the entire state, and I feel very good about it because that’s what government is supposed to do, make a difference in people’s lives,” Cuomo told a crowd at his State of the State address (video).

Lastly, Cuomo's proposal includes new restrictions on pharmacy benefit managers, forcing them to register with the state and disclose “financial incentives or benefits for promoting the use of certain drugs, as well as other financial arrangements affecting customers,” according to the statement. Then, under the plan, PBMs must have a license beginning in 2019 and the state could revoke those licenses for “deceptive, unfair, or abusive business practices.”

The Pharmaceutical Care Management Association, which represents PBMs, said the plan “would increase costs by tying the hands of employers, unions, and public programs that hire PBMs to negotiate discounts on prescription drugs.” The group added it could be illegal due to a recent ruling by a federal appeals court to strike down a mandate in Iowa limiting PBMs.

In explaining why New York needs to make the moves, Cuomo said the cost of prescription drugs is a “tremendous problem,” adding that some companies are “unconscionable” for charging what they do.

“They control the price, and it’s a monopoly, and they can gouge the consumers,” he said. “There’s been very little that we can do about it for many years except complain.”

That kind of criticism shouldn’t come as a surprise to industry-watchers as pharma has been under siege for more than a year on its pricing practices. And Cuomo’s announcement comes the same week President-elect Donald Trump took an opportunity at his first press conference since July to say the industry is “getting away with murder.”

Trump said the U.S. can save billions by implementing a competitive “bidding” system for drugs and criticized the industry’s strong lobbying power in Congress.

Separately this week, Maryland officials rolled out two bills to take on high prices; industry quickly pushed back.