Drug Industry Sues Over Vt. Plan to Lower Prices

Seeking to prevent Vermont from extending lower prescription drug prices to a wider range of residents through Medicaid, the pharmaceutical industry has filed a lawsuit against the federal government.

This week’s action by the trade group PhRMA, the Pharmaceutical Research and Manufacturers of America, will likely postpone the Jan. 1 start of a new Vermont program that would allow an additional 69,000 state residents to save an average of 30% on prescription drug prices.

The first-in-the-country effort was made possible by a waiver from U.S. Health and Human Services Secretary Donna Shalala that eased certain restrictions on Medicaid, the federal government’s low-income health program.

Discounted prescriptions offered by the state to Medicaid patients are financed through rebates provided by the pharmaceutical industry.

In attempting to increase the number of people eligible for such discounts, PhRMA argued in the lawsuit filed late Wednesday, Vermont and the federal agency “in effect, made an ‘end run’ around existing federal law by creating a new ‘government’ program with no government cost but paid for solely by private manufacturers.”

Vermont, with just 600,000 residents, is the only state to win federal approval for a plan to bring lower drug prices to more residents through Medicaid. But other states have expressed interest in adopting similar efforts.

Vermont Human Services Agency Secretary Jane Kitchel said the lawsuit filed in U.S. District Court in Washington targeted Vermont “not because the numbers are large in Vermont. It’s the precedent here.”

PhRMA spokesman Jeff Trewhitt said Thursday that a lawsuit would have been filed to stop the Medicaid waiver no matter where it took place. He said his group took action to stop Medicaid from being altered.

“Basically our concern is that Medicaid is a well-established program with well-established procedures, and they are modifying the rules and regulations and the approach to Medicaid,” Trewhitt said.

He added, “That’s not the right way to approach the [prescription drug] access problem anyway. The right way is to expand prescription drug coverage [through Medicaid].”

About 92,000 Medicaid beneficiaries are eligible for discounted prescription drugs in Vermont.

The new program was set up so the state would pay only administrative costs of receiving prescriptions at the discounted prices. Those costs are passed along to each person enrolled in the form of an annual fee of $24.

Eileen Elliot, commissioner of Vermont’s Department of Social Welfare, said Thursday that she was still digesting the PhRMA lawsuit.

“I’m disappointed,” Elliot said. “But I need time to read it and try to figure out its implications.”

Noting that his state’s annual budget is less than $2 billion, Rep. Bernard Sanders (I-Vt.) observed Thursday that “the pharmaceutical industry last year made $27 billion in profits and spent $80 million in campaign-related activities during this election cycle to make certain that Americans continue to pay by far the highest drug prices in the world.

“Certainly I am not surprised that they would go running to their courts to prevent Vermont from lowering the cost of prescription drugs for our citizens,” Sanders said.