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How Drug Companies Control How Their Drugs Are Covered By Medicaid


Rising drug prices, especially in Medicaid, are straining state budgets. Lawmakers across the country are being forced to make tough choices between giving the poor access to medications and other budget priorities, like education.

NPR and the Center for Public Integrity have been looking at all the ways the drug industry tries to keep that Medicaid money flowing to pharmaceutical companies.


Today on Morning Edition, NPR's Alison Kodjak looked at the state committees that decide what medications get preferential treatment by Medicaid and how drug companies influence those decisions. Now she has a report on how the drug industry's intense lobbying at the state level has blocked efforts to control Medicaid costs.

ALISON KODJAK, BYLINE: When Ray Ward tried to take on the pharmaceutical industry in Utah, he got a close look at the tactics and the reach of this very powerful lobby. Ward is a doctor and a state representative from Bountiful, just north of Salt Lake City. And he was alarmed that the state's Medicaid program wasn't allowed to negotiate the price of any mental health drugs.

RAY WARD: And that was, in fact, a full third of the Medicaid budget. So a third of the budget worth of medicines did not have negotiated prices.

KODJAK: For other types of medication, the state maintains a list of drugs it'll pay for, no questions asked. If doctors want to use a different drug, they have to get special permission from Medicaid. So companies offer big discounts to secure a spot for their drugs on the preferred list.

But in Utah, mental health drugs were different. The Medicaid program was required to pay for all of them with no conditions. So Ward, whose family practice includes lots of Medicaid patients, introduced a bill to change that.

WARD: There was very intense lobbying at every step of the way - every step of the way.

KODJAK: The pharmaceutical industry deployed 36 lobbyists in the state capital to influence just 104 legislators. And it paid off. The bill was watered down.

Our investigation shows that across the country, drug companies have a massive lobbying presence in statehouses. For the last 10 years, on average, there have been more than 2,200 drug company lobbyists in the states each year. That's 1 lobbyist for every 3 state lawmakers.

TRISH RILEY: The numbers of people hired in the states to lobby on behalf of the industry has exponentially increased as state activity increases.

KODJAK: That's Trish Riley, executive director of the National Academy for State Health Policy. She says there are more than 150 bills related to drug prices pending in state legislatures this year. And, she says, drug companies are also spending tens of millions of dollars supporting patient advocacy groups that lobby state lawmakers.

RILEY: The pharmaceutical industry is aware that they're not popular oftentimes, and so we see an increasing engagement of consumer groups.

KODJAK: Which is exactly what Ward says happened in Utah. Among the consumer groups that flooded the statehouses with citizens opposing his bill was the National Alliance for Mental Illness, or NAMI.

WARD: And so then, they will send out an email blast to thousands of people - whoever's on their list - to say, the legislature is going to take away your medicine. You won't be able to get your mental health medication. You need to come up now and block this bill before it takes your medicine away from you. So the rooms will fill up with patient advocates who have been invited there by virtue of belonging to a group that the pharmaceutical industry runs.

KODJAK: NAMI disputes that. But their website shows they received $4.2 million from corporations and foundations in 2016, the year Ward's bill was being considered. About half that money came from drug companies. Andrew Sperling, NAMI's director for legislative advocacy, said the group is working for mental health patients, not drug-makers.

ANDREW SPERLING: We have a code of conduct that we don't endorse products. We don't take pharmaceutical industry funding for public policy advocacy. It's actually for discrete specific programs that serve people living with mental illness and their families.

KODJAK: He says the group fought Ward's bill because it would require doctors to justify a more expensive drug before Medicaid would pay, making it harder for patients to get drugs they might need.

SPERLING: We need, to the maximum extent possible, to have open access to the full range of treatments for disorders such as schizophrenia, bipolar disorder and major depression.

KODJAK: All the pressure from lobbyists and advocates had an impact, Ward says.

WARD: In the final committee vote, when I got it through committee, they had successfully lobbied. Three people who told me they would vote for me changed their vote and voted, no, in that committee hearing. So I got it through 6-5 - by the skin of my teeth.

KODJAK: He says the House leadership then delayed the bill until he finally pressed them to bring it to the floor. That was when one of Ward's colleagues with close ties to the mental health group offered a compromise.

The state could have a preferred list of mental health drugs, but if a doctor wanted to prescribe something else - something more expensive, instead of having to go through a time-consuming process to get it approved, all a doctor would have to do is write three words on a prescription - dispense as written.

WARD: And instead of fight them on that, I accepted that compromise.

KODJAK: Which was a win for drug company lobbyists because Ward says the new law has saved Utah some money, but not as much as it would have if it had passed in its original form. Alison Kodjak, NPR News. Transcript provided by NPR, Copyright NPR.

Alison Fitzgerald Kodjak is a health policy correspondent on NPR's Science Desk.