Showdown set between Minnesota and drug industry over rising costs

Minnesota is launching one of the most powerful state watchdogs to rein in the cost of prescription drugs, but which ones it will target first is yet to be determined.

Publicly available pricing data offer plenty of starting points for the Prescription Drug Affordability Board, which was created by the Minnesota Legislature last year to identify unaffordable drugs and cap the prices at which they can be sold.

The board could investigate why Currax Pharmaceuticals nearly doubled the price in one year of a long-acting form of naltrexone that has been around since 2014 to treat opioid addiction. Or why Genentech set a list price of $43,800 for Vabysmo, a new eye injection to treat macular degeneration and prevent blindness. Or why Novo Nordisk charges more for the popular weight-loss drug Wegovy than it does for a roughly identical drug in Ozempic that is federally approved to manage diabetes.

A good starting place is any drug priced so its manufacturer can maximize profits, doctors and pharmacies can get their cuts, and insurers can negotiate discounts to make money while looking good for clients, said Jane Horvath, a consumer advocate and former pharmaceutical industry executive.

"We need to sort of reset the market to a lower cost so people can continue to make their margins but we need to protect the patients in that process," said Horvath, who spoke Monday at a briefing arranged by AARP Minnesota and Take Action Minnesota. The advocacy groups are proponents of Minnesota's affordability board, which meets for the first time Tuesday.

The Minnesota Department of Health is supposed to supply a list of drugs of "substantial public interest" that will guide the board, but that list hasn't been completed yet.

Drug manufacturers and their trade group, PhRMA, spent $1.2 million lobbying state lawmakers last year and discouraged them from creating the board. Instead, the Legislature gave unique authority to the nation's ninth state affordability board — one of three that can influence private spending on drugs in addition to public health plans. Minnesota's board also is one of four with the power to cap prices at which prescription drugs can be sold in the state.

Colorado and Washington limited their boards to spend caps on 12 drugs, but Minnesota's board has no limit. That authority drew the swiftest rebuke from PhRMA leaders, who argued that payment limits could reduce access to medications while failing to address the middle-man markups that drive up costs.

"Anyone looking at the health care system understands there is a big difference between the list price and net price," said Reid Porter, a PhRMA spokesperson, who predicted that these boards are "doomed to fail" unless they can be expanded to look at other influences on consumers' medication costs.

Fears of a loss of access in Colorado compelled patient advocates to join with the drug industry and oppose a price limit to Trikafta, a treatment for cystic fibrosis. That state's board subsequently issued no limits on that medication. However, the Colorado board voted last month to declare the arthritis drug Enbrel unaffordable, because it costs about $46,000 per year and generates almost $4,000 in out of pocket costs for commercially insured patients. Setting a price limit is the next step.

Minneapolis attorney Jessica Intermill said she needs arthritis medication just to walk or turn a key in a lock, and that she is frustrated that she has no say over how much it costs.

"When you see me on the street, you won't know I have rheumatoid arthritis" because of the medication, said Intermill, who will serve as a consumer advisor to the state board. "But you also wouldn't know the drug company charges my insurance $56,000 per year, every year, so I can have the drug I need to live my life."

Minnesota's board can set price limits that apply to almost 40% of the population, including low-income residents covered by Medical Assistance and MinnesotaCare public programs.

The limits wouldn't necessarily affect Medicare Part D prescription plans for seniors or workplace health plans that are self-insured, meaning plans by which employers assume all risks and costs of employees' medical needs. About 38% of Minnesotans are covered by self-insured plans.

PhRMA's Porter said the limited scope of the affordability boards will create confusion, applying to some people and not others, and will complicate transactions when Minnesota pharmacies buy drugs from out-of-state wholesalers. He noted that Colorado's board has spent state taxpayer dollars for three years and is only now attempting to set a payment limit on one drug.

Prescription drug spending increased more than 17% for commercially insured Minnesotans from 2021 to 2022, according to the latest data from Minnesota Community Measurement. Total medical spending per patient per year increased by $581, partly because of that rapid in rise in pharmacy costs.

The trouble with the U.S. prescription drug market is that the usual forces of competition don't apply, allowing manufacturers to maintain or raise prices arbitrarily on popular medications, said Stephen Schondelmeyer, a University of Minnesota expert in pharmaceutical economics who is serving on the affordability board.

Wegovy is a high-profile example, selling at around $1,400 per month compared to Ozempic at around $900 per month, he said. "Usually, when a product hits the market and it's doing well, it's able to hold the price or lower it a bit. In this case, they consciously trademarked it and marketed it for weight loss separately and at a much higher price. That's not competition."