A majority of Americans say they are paying more for their health insurance and getting less coverage. What’s more, far too many patients are skipping medications they need because they can’t afford the out-of-pocket costs. Fixing the accessibility and affordability problem will go a long way toward improving health.
As we look ahead, we know that there will be fights in Washington about these and other issues. However, to see real progress, governors and state legislatures need to take charge. States have long been productive incubators for patient-centered healthcare legislation. State lawmakers, closely attuned to the needs of their constituents, are positioned to make a substantive and life-changing difference.
To reduce healthcare costs and help those who struggle to pay for the care they need, states should focus on two critical areas.
—States need to better understand what’s happening with the federal 340B program. This government program was created in 1992 to help patients access affordable medicines. However, the program has expanded in ways that raise concerns. Today, tax-exempt hospitals abuse this little-known federal program to charge huge markups on medicines to boost their profits while they pass the bill to patients, taxpayers and employers through higher drug costs. Instead of passing the savings to patients, these corporate entities are massively marking up discounted drugs purchased under the program — sometimes 7 times or more — to line their pockets. According to a recent report from the Minnesota Department of Health, large hospitals and clinics marked up the price of medicines by $630 million in 2023. And that’s just in one state.
Lobbyists for these hospitals and chain pharmacies are pushing states to lock in these programs and ward off needed federal reforms. State legislatures need to reject these unconstitutional state 340B expansion bills and Congress must fix 340B so that a program meant to help vulnerable patients can return to doing so.
—States still have a role to play in protecting patients and consumers from the predatory practices of corporations known as pharmacy benefit managers, or PBMs. Several states have taken the lead, whether through mandating that PBMs pass along negotiated savings on prescription drugs directly to consumers or stopping insurers and PBMs from siphoning off financial assistance intended for patients.
States must take steps by breaking the linkage between PBMs and drug prices. PBMs receive billions in rebates, discounts and other price concessions on medicines that are often tied to the list price of a medicine. Not only do these PBMs often fail to pass these savings on to patients at the pharmacy counter, but experts have noted this broken system may incentivize PBMs to steer patients toward more expensive drugs to generate greater profits at the expense of patients. States can enact measures declaring that PBMs will receive a fair market-based flat fee for their services and remove the incentives to push patients toward higher-cost medicines.
Making progress in these two areas will have an immediate effect on tens of millions of Americans. There’s no more important time than now. A recent analysis by Berkeley Research Group found that half of every dollar spent on brand medicines goes to those who don’t make medicines, like hospitals and clinics in the 340B hospital markup program and PBMs. Lawmakers would do well to move on practical bipartisan measures that will make a difference in healthcare costs right now.
Healthcare access and affordability are matters of urgency. We know that the wheels of progress grind slowly in Washington, and expecting rapid action is unrealistic. States have shown they can move swiftly to address their people’s needs. Cutting out-of-pocket drug costs should be a priority in 2025. This is, after all, what Americans want.
