Can Ohio's BestRX Drug Plan be Projected Nationally?

I was intrigued by an Op-Ed in today's Providence Journal by Teresa Heinz (she dropped the Kerry!) and Jeffrey R. Lewis ("Extend Ohio drug plan across U.S") that trumpeted the "success" of Ohio's just-implemented BestRX plan. With a critical eye, one derived from a predisposition to mistrust our almost-First Lady, I searched for corroborating evidence to support the assertions put forward in the aforementioned piece. I was pleased to find that my predispostion to doubt one of an opposing ideological bent seemed to have been unfounded.

Heinz and Lewis accurately described the genesis and highlights of the Ohio plan.

Negotiations between the pharmaceutical industry (PhRMA) and a coalition of labor, church and consumer organizations (led by the Ohio AFL-CIO) resulted in "Ohio's Best Rx," a first-in-the-nation program that will slash drug prices for uninsured Ohio residents of any age who earn less than $22,450 per year, and uninsured Ohio families that bring home less than $44,000 per year.

Ohio's Best Rx program, which begins this week, enables these Ohioans to buy drugs for the same average price paid by state employees and retirees, plus an additional $4 in fees ($3 to cover the pharmacy's professional services and a $1 transaction fee, to cover the program's administrative costs).

The potential benefit is enormous. Today, for example, a 30-day supply of the cholesterol-lowering drug Lipitor costs uninsured Ohioans up to $130. But if the state pays an average price of, say, $70, Ohio's Best Rx participants would pay just $74 -- a discount of more than 40 percent. A mail-order option will provide even greater saving.

What's more, these deep discounts are achieved without a big new bureaucracy. The program won't cost taxpayers a dime.

As to the last claim, the program will be initially funded by the Ohio taxpayers, but it is anticipated that the need for such support will disappear once the program is up and running. (Cue: Conservative skeptics, you may now raise your eyebrows). All and all, it would appear that Ohio's BestRX is an attractive bi-partisan solution to reigning in increasing drug prices. In fact, I could find none who argued against the program. One potential opponent, the Pharmaceutical Research and Manufacturers of America (PhRMA), as mentioned by Heinz and Lewis, was heavily involved in negotiating the plan. Kurt Malmgren of the PhRMA summarized his organization's view of Ohio's BestRX plan:

America's pharmaceutical makers understand that for some the cost of prescription medicine can be a challenge . . . We believe Ohio's Best Rx will provide a significant discount while preserving consumer choice, access and the ability of doctors and patients to determine the best treatments. Study after study show that patient health improves when they get the drugs they need. That is the mission and the goal of all pharmaceutical makers.

With the PhRMA endorsing the plan, it would seem that the road is clear for other states to negotiate similar deals with the pharmaceutical companies. As such, I would have to say that perhaps there is room within the drug company profit margins for them to offer a bit of relief to their consumers. However, will lower prices result in smaller profit margins, thus affecting their R&D budgets and their concomitant incentive to produce newer and better, as well as less profitable, yet much-needed, drugs? What if similar programs are instituted nationwide? Perhaps such fears should be held in check. According to Heinz and Lewis

We realize that drug companies are not charities. But by making Ohio's Best Rx the model for a national plan, focused on the uninsured, the companies would not only generate goodwill; they might even eventually increase their profits. Whatever profits are initially sacrificed because of lower prices could well be made up or even exceeded through increased volume from millions of new customers suddenly able to afford needed medications.

Maybe so. The willingness of the PhRMA to agree to the plan indicates to me that they hold a similar hope that this "Ohio model" will provide for sufficient profits to fund R&D, etc. I just wonder if they can be expected to support this model on a nationwide basis. If Ohio's plan proves successful, I suspect we will find out.