Ohio Issue 2 was called the Drug Price Standards Initiative. It was on the ballot in the state of Ohio in 2017 as an indirect initiated state statue. Voting for the measure would require state programs and agencies to purchase prescription drugs at prices that were no higher than what the Department of Veterans Affairs would pay for them.
The reason for this initiative was that the VA in the United States typically receives a 24% discount for the prescription drugs they purchase. Issue 2 would apply in any case where the state provided funding for drug purchases, even if that amount was not directly supplied by a government agency. The HIV Drug Assistance Program and the Best Rx Program were included with this measure.
The petitioners would also have a personal, direct stake in defending the law against legal challenges, requiring the state to pay reasonable legal expenses of the petitioners or having them pay $10,000 to the state if the rules were unenforceable.
Voters defeated the measure by a 79.15% to 20.85% margin, with over 1.83 million votes cast against it. If this idea had become law, then these are the pros and cons of Issue 2 that would have come under discussion.
List of the Pros of Issue 2 Ohio 2017
1. It provides a tool for the state to use to fight back against price gouging.
The facts on rising prescription drug costs in the United States show that manufacturers are creating an unsustainable expense profile that puts pressure on the entire healthcare system of each state. Prescription drug expenditures represent about 20% of all costs in the country, with expenses rising over 30% on specialty medications in 2014 alone. Spending rose 12.2% in 2015 on them as well.
The spending on 10 breakthrough drugs alone cost three government programs over $5 billion per year. Issue 2 would create a legal stipulation that could reduce the price gouging that occurs in this industry to save customers some money.
2. It would not change access to needed medication.
Federal law requires state programs to offer most FDA-approved medications to beneficiaries through the Medicaid and Medicare programs. Failing to offer items that fell into the Issue 2 debate would likely result in a loss of federal benefits in the pharmacy portion of the state-based program. That means people would still get what they needed while still giving agencies the opportunities to expand on their rebates that they get through the voluntary pricing schemes.
3. This proposal could set a new benchmark for pricing.
The cost of an EpiPen has far outpaced the cost sharing rates found in Ohio and the rest of the United States. Mylan increased their list price from about $100 in 2009 to more than $600 in 2016. During that same time, the average patient cost share paid for an EpiPen, including coinsurance and copays, decreased from 26% to 11%. That results in a net consumer increase of more than 200% for their out-of-pocket costs when there is coverage for this medication.
Why did the costs go up so high? Because there was a desire to reset the negotiated savings through health plan sponsors. With 84% of the money going to the manufacturer, it became an easy way to set a new benchmark for pricing. Issue 2 hopes to do the same thing, but in reverse so that consumers could experience lower prices.
4. Everyone would benefit from the measure in some way.
Bernie Sanders said that it is “unacceptable that the exact drugs we buy in our country are sold in Canada, Britain, and other countries at a fraction of the price.” Although there is some truth to the idea that only a handful of consumers would benefit directly from the outcomes of Issue 2 with lower medication costs, taxpayers would still see improved spending habits from the state government that could help those funds become more effective. Instead of paying for prescription drugs, the savings could go into other social safety net programs.
When California proposed this legislation, the estimated savings was up to $1 billion per year based on the estimated costs of the drug contracts that the VA holds with drug manufacturers. Ohio wouldn’t have seen that much, but it would have been in the $400 million range when using the same estimation profile.
5. Opposition spending showed how concerned drug manufacturers were of this idea.
Almost $60 million was spent during the 2017 ballot initiative for Issue 2 against the idea, while over $18 million was contributed in support of the idea. 100% of the funds that opponents organized for the ballot issue came from Pharmaceutical Research and Manufacturers of America. Tens of millions more were spent in California to defeat an almost identical measure. Imagine if that money were put into meaningful discounts that consumers could have at the pharmacy counter instead of using it as a lobbying effort. That’s one of the reasons why the healthcare system in the United States is as broken as it is right now.
List of the Cons of Issue 2 Ohio 2017
1. It did not include private insurance plans in the verbiage of the proposal.
Issue 2 in Ohio on the 2017 ballot would have required state programs and agencies, not private insurance plans, to purchase prescription medication at prices that were equal to or lower than what the VA could achieve. Because there wasn’t a complete requirement for lower mandated costs, individuals with employer-sponsored policies, exchange-based insurance not operated by the state, and others in a similar situation would not see the cost benefits when going to the pharmacy.
Matt Borges, who served as the campaign manager for Ohio Taxpayers for Lower Drug Prices, suggested that the state’s actions would create a “ripple effect” in the market. Since this option has never been fully implemented in the United States, that outcome is just conjecture.
2. It could increase the price of prescriptions for those with private healthcare.
Dale Butland served as the communications director for the opposition campaign for Issue 2. His concern with the measure was that the Ohio residents who were not covered by this proposal would see higher prices at the pharmacy as a way for the pharmaceutical companies to create a revenue neutral outcome if the idea passed.
“If you tell a company… that they have to sell their product to a certain segment of the popular at a low price that is lower than the market, what happens to prices for people who aren’t covered under that edict?” Butland asked. “What I’m telling you is cost shifting isn’t some nefarious scheme dreamed up by the drug companies. It’s basic economics.”
3. There were legal defense concerns to consider with Issue 2.
Section G of Issue 2 in 2017 on the Ohio ballot says that the committee of individuals responsible for the circulation of the petition have a direct and personal stake in defending it from legal challenges. There were only for individuals who were the named proponents in this proposal, with three of them working for AIDS Healthcare Foundation. The language in this section gave the promoters a right to intervene at taxpayer expense if any legal challenges were filed against Issue 2 if it were to become law.
Dennis Willard, who served as a spokesperson for Ohio Taxpayers for Lower Drug Prices, said the section was included to give the people who spent the time and money to pass Issue 2 a chance to be in the courtroom. “If someone sues,” Willard said, “and the only people who would sue would be the drug companies who are trying to protect their profits, those who spend hundreds of thousands of dollars to save taxpayers $400 million would get to help fight it.”
4. It pegs the pricing to what the VA costs are with no mechanisms.
Even with the potential benefits of Issue 2 in Ohio on the 2017 ballot, one of its most significant disadvantages is that it couldn’t do anything to reverse the tide of rising pharmaceutical prices in the state. The goal of this idea was to peg the prices to the underlying VA costs, but there is nothing included that can maintain or reduce that profile. It only impacted the fee-for-service portion of most expenses, which means the discounts would be minimal at best. The Medicare programs in Ohio (and other states) already receive the same discount as the VA does.
It would be up to the state negotiators to achieve results that went above that figure. Since the baseline was already what Issue 2 mandated for many providers, it may not have encouraged much movement toward a better cost.
5. The VA does not publicize its purchasing prices.
The Department of Veterans Affairs does not make the purchase prices of its prescription drugs available to the public. That means it remains unclear how Ohio agencies could have made informed purchasing decisions if Issue 2 had been given the green light by voters. The courts would have likely allowed the state to pay for prescriptions at the lowest known price that the VA paid instead of the actual lowest price, but there really was no way to determine what that would be because of how the idea was ultimately written.
6. It would have likely increased the price of prescription drugs.
Medicare tried to peg the prices of prescription drugs to what the VA paid in 1990. That effort resulted in the costs doubling or tripling for the Department of Veterans Affairs, with increased costs to veterans and less access being likely outcomes to the idea. Any potential savings that would have come from Issue 2 would be challenging to predict because it would depend on the implementation of the idea and how the pharmaceutical manufacturers reacted to it.
There is also the risk that passage of Issue 2 could trigger a national regulation to peg the prices to the VA rate for Medicare nationally, representing over 20 million people who would be eligible for the new price. This disadvantage could have increased the resistance to the concept exponentially.
7. Issue 2 could have limited access to the medications that patients needed.
This proposal could have led to interference with patient access to the prescriptions that they required for their treatment plan. It did not require manufacturers to offer Ohio agencies the lower price pegged to the VA rate. The wording only requires that state agencies to not pay more than that amount when making a purchase. That means the general population in the state would either be purchasing the drugs that the VA doesn’t pursue or adopting to the use of medicines that specific manufacturers would agree to sell at that rate.
Conclusion of the Pros and Cons of Issue 2 Ohio 2017
Ohio was not the only state to try lowering prescription drug costs by pegging the state-based rate for medications to what the Department of Veterans Affairs pays. As with every other state so far, voters have defeated the measure because there is so much uncertainty surrounding what the outcomes would be.
There are certainly some price gouging behaviors that need to be controlled in the American healthcare system. The average annual cost of specialty drugs is 3.5 times larger than the average Social Security benefit.
The worst example of this is Hepatitis C. More Americans die from it than all other infectious diseases even though there is a cure. One of the reasons why is that the company that controls the supply charges more than $1,000 per pill. A common infection-fighting pill went from $13.50 per does to $750 overnight.
The pros and cons of Issue 2 Ohio 2017 do serve as an indication to Washington that something needs to change in the United States. Healthcare costs are spiraling out of control because the free market system is tilted toward the very wealthy. This idea might not be the answer, but it is a good first step in a journey that will hopefully lead to a fixed system.
Natalie Regoli is a child of God, devoted wife, and mother of two boys. She has a Masters Degree in Law from The University of Texas. Natalie has been published in several national journals and has been practicing law for 18 years. If you would like to reach out to contact Natalie, then go here to send her a message.