Revolution From Below
Monday, March 29, 2004; Page A22

THE BEAUTY OF federalism is that when national politicians fail to resolve a problem, local politicians get a chance. That is happening in phase two of the drug wars -- the battle to force down the price of some prescription drugs. Methods proposed in the first, national phase -- importing drugs from Canada or introducing federal purchasing for Medicare -- have been problematic, and they have not won approval from Congress. Now the battle has moved to the state and local level. In Wisconsin, government Web sites direct residents to Canadian drug exporters; in Maine, courts and legislators are arguing over a bill designed to force prices down.

Unexpectedly, the D.C. Council joined the revolution when it passed, on March 2, the AccessRx Act, one of the first bills to combine several methods of cost cutting used elsewhere. If signed by the mayor, the new law, written by council members David A. Catania (R-At Large) and Sandy Allen (D-Ward 8) would use "manufacturer rebates, pharmacy discounts and aggregate purchasing" (and, possibly, Canadian purchasing) to bring down the prices of drugs bought for publicly funded pharmaceutical programs such as Medicaid and the D.C. Health Care Alliance. In effect, any savings would subsidize drug purchases for the low-income elderly and the uninsured. As in Maine, the products of drug companies that refuse to participate could be excluded from the list of drugs available to those using publicly funded health plans.

There is more: The law also would require pharmacy benefits managers -- those who buy drugs from manufacturers and sell them to insurance companies -- to make their relationships with both buyers and sellers more transparent. Mr. Catania points out that a series of lawsuits against these intermediaries, four of whom control the vast majority of the market, have recently alleged that they pocket rebates, inflate drug prices and pay kickbacks to insurers. In addition, the law would require drug companies to provide "full disclosure of prescription drug marketing costs," including advertising to the public, to doctors and to others.

The drug industry is shrugging this last point off on the grounds that similar requirements have been passed and complied with elsewhere. But industry representatives are worried that they will be forced to sell their drugs for less or risk having them taken off lists recommended to doctors. Pointing out that implementation of AccessRx will be delayed by bureaucracy and lawsuits, the industry's trade association proposes instead to set up a special D.C. Web site and a toll-free number to promote the more than 250 discounts drug companies already offer to lower-income patients and to help explain the new Medicare benefits.

This proves how important such local legislation can be, even if it is never implemented. Drug industry spokesmen admit that they wouldn't be making their offer of help if not for the D.C. Council's law. If AccessRx also manages to draw public and insurance industry attention to the shadier practices of pharmaceutical benefit managers and industry advertisers, that's positive too.

Still, the industry's offer needs to be taken with a grain of salt: Some of the complicating lawsuits, after all, would most likely be filed by the same drug companies that say they are so worried about them. And in the end the District government does have the right to make some decisions about drug provision based on price. That principle is essentially what lies behind all the talk of "rebates" and "discounts" in this law. The drug industry would be wise not to challenge it too vigorously.