A new look at curbing prescription prices

In hardly the blink of an eye -- from 1997 to 2002 -- the state's spending on drugs for Medicaid beneficiaries alone soared from $19.4 million to more than $37.5 million.

And that is only half the story, because the federal government matches the efforts of the states in this program that is at once vital and fiscally ruinous.

Another set of numbers also caught my eye -- a series of recently recommended, practical, common sense reforms in the way Rhode Island buys drugs -- not just for Medicaid patients, but also for its employees, prison inmates, and many at-risk children. They were the kinds of changes you would expect any sensible business to take both to get more value out of its spending and keep costs down.

All told these changes -- emphasizing generics, rational purchasing policies, a single list with sensible criteria for approved drugs -- would lower state spending on prescriptions by well over $30 million a year. That would be a savings, with no change in availability and arguably much better value for the patients involved, of an astonishing 32 percent.

The prospect struck me as thrilling, just as its flip side struck me as depressing; roughly one of every three dollars spent on prescription drugs by the state today might just as well be flushed down the toilet. The reforms, mind you, do not involve adopting ideological dreams of the right or left, changing eligibility one wit, or anything else politically drastic; they mostly involve logic and probing the balsa wood foundation of the status quo.

As one of the country's leading authorities on health care put it this month: "Asking the tough questions and seeking the answers to which they lead, however politically difficult, is a real demonstration of true leadership. That kind of leadership needs to be embraced and praised."

That would be Teresa Heinz-Kerry. While her husband, John, is running for president, she continues to spur new ideas in health care and environmental policy from her influential perch as the Heinz Family Philanthropies chairman.

This month's recommendations for Rhode Island is the tip of the iceberg. The Heinz foundations have been working on prescription drug plans for nine states plus the District of Columbia, under the umbrella of the National Legislative Association. Work has been completed in Idaho, Virginia, and Pennsylvania.

Among the NLA's ideas is the eventual establishment of a non-profit administrator for prescription drug plans. In the current system, these so-called pharmacy benefit managers typically receive payments from manufacturers promoting specific brands for inclusion on official lists (called formularies) of approved drugs. This is one reason formularies leave much to be desired.

In the Heinz study of feasible reforms, much more than a third of all the potential savings to Rhode Island could come from using what they call in health care a Preferred Drug List, or the approved medicines for third-party payment. Under Medicaid, the system is wide open for virtually all medicines; the savings come when you start to make changes that, for example, favor generics over brand names where no therapeutic difference is involved, and use other cost-control tools common in the private sector; these kinds of lists are standard in health care plans serving more than 100 million people.

The Heinz study also provides strong evidence for a move by the Legislature to coordinate the payment of fees for pharmacy providers. They not only vary widely within the government's various programs, they are also well above the private sector norm.

There is no question that the cost of Medicaid is at the core of the most severe state fiscal crisis in two generations, and that at the core of the explosion in Medicaid costs is the soaring cost of prescription drugs. In a vice because of the sluggish economy, too many states have been restricting eligibility, which has had the effect of denying care to the vulnerable people who need it most.

A far better idea is to reexamine the status quo, an exercise that continually demonstrates the appalling amount of waste and unnecessary spending that occurs today because of duplication and unexamined assumptions.

Beneficiaries of that status quo, like the drug companies, should not fear that Teresa Heinz-Kerry will emerge as the champion of national reform the way another first lady did a decade ago. Instead, through her foundations, she is doing an excellent job as it is of nudging a creaky system in the right direction.

Thomas Oliphant's e-mail address is oliphant@globe.com.