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Prescriptions for Change: The Price of Drugs and State Cost Control Strategies (June 2020)

By Kari M. Bruffett, Peter F. H. Barstad, Wyatt J. Beckman, M.P.H., C.H.E.S. | June 30, 2020

Prescriptions for Change: The Price of Drugs and State Cost Control Strategies (June 2020)

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In 1980, prescription drug spending totaled $12 billion, which was less than five percent of U.S. national health expenditures. Forty years later, prescription drugs are projected to account for nearly $360 billion, about nine percent of total national health expenditures. How does the complex pricing and distribution system work?  What can state governments do to control prescription drug costs? Learn more in our latest issue brief, which looks at the expanding set of policy levers states can access to control the costs of prescription drugs.

Key Points from the brief include:

  • State legislatures across the country have passed 164 laws in the past two years specifically targeting prescription drug pricing, payment or costs.
  • In 2020, six such bills were introduced in the Kansas Legislature, focused on regulating pharmacy benefit managers (PBMs), limiting out-of-pocket costs for insulin, and creating a drug importation program. However, none of the bills were enacted into law.
  • While the federal government plays a lead role in approving drugs, protecting intellectual property and mandating discounts, states have an expanding set of policy levers they can access to control costs, including leveraging the purchasing power of state Medicaid programs.
  • While laws aimed at increasing transparency in prescription drug pricing have been gaining momentum, no state currently has laws requiring transparency across the entire supply chain, from manufacturers, to wholesalers, pharmacies, PBMs and health plans.