[Pharm-policy] Maine Pricing law draws retribution

[James Love]

      Date: 2000/09/24 Sunday Page: 001 Section: BUSINESS Edition: FINAL
Size: 780 words

Drug makers on attack in Maine

Pricing law draws apparent retribution 

By ED SILVERMAN
STAR-LEDGER STAFF

The pharmaceutical industry's war against the state of Maine is
intensifying.

In the wake of Maine's groundbreaking price-control legislation, two
more companies - Bristol-Myers Squibb Co. and Astra-Zeneca Plc - have
shifted their distribution business out of state in the past month.
Until now, SmithKline Beecham Plc had been the only drug maker known to
have made such a move.

The action underscores what is going to be a fierce and closely watched
battle. In mid-August, Maine became the first state to require drug
makers to negotiate lower prices, or face price controls in 2003. The
law allows the state to purchase medicines on behalf of 325,000
residents who lack insurance coverage for prescription drugs.

Drug makers, which have endured intense criticism over their pricing
policies this election year, argue that price controls would limit
revenue and cap the profits that can be plowed back into research and
development. The industry raises the same point in the national debate
over competing proposals to provide a prescription-drug benefit to
Medicare recipients.

"We look at the law as having a detrimental impact," said Pat Donohue, a
Bristol-Myers spokesman. "It discourages investment in new medicines."
Rachel Bloom, an AstraZeneca spokeswoman, called the shift "a business
decision."

Although Maine is mostly rural and sparsely populated, the legislation
may have national ramifications. The drug industry fears other states
will follow Maine's lead, particularly in New England where residents
have access to cheaper drugs in Canada. Many senior citizens have fueled
the controversy by taking bus trips to Montreal and other points to buy
medicine.

Similar bills have been introduced in a number of states and others are
conducting hearings and studies, said Marjorie Powell, assistant general
counsel at the Pharmaceutical Research and Manufacturers of America, an
industry trade group that sued Maine last month saying the legislation
is unconstitutional. "Price controls aren't the answer," she said. "We
think they don't work and will, ultimately, hurt patients."

Critics of the industry, however, charge that the industry's profits are
too high; the cost of researching and developing new drugs is
overstated, and that a large

[See MAINE, Page 4]

amount of resources is actually spent on advertising, influencing
doctors' prescribing trends or lobbying the federal government for
patent extensions and other favorable legislation.

The issue is being debated across the nation and figuring prominently in
the presidential campaign. But in the absence of federal legislation,
it's playing out, for now, in Maine, where roughly one in four people
lack some type of insurance for prescription drugs.

Many Maine legislators argue that the pharmaceutical industry has
employed scare tactics in the hopes of first defeating the legislation
and now turning popular support against the politicians who forged it.
Chellie Pingree, the Maine legislator who spearheaded the law and has
been touring the country touting its provisions, accused the drug makers
of scaring senior citizens into thinking their drugs won't be available.

"We wrote this law anticipating some reluctance from the pharmaceutical
manufacturers. So I'm not surprised," she said. "But I'm not pleased.
It's really just a threat. And it's actually kind of silly, because I
don't think it will stop lawmakers from proceeding with what we know is
a good idea."

One reason the drug makers are shifting their distribution out of state
is to avoid a provision in Maine's new law. This requires drug makers
selling medicines in the state through any public assistance program,
such as Medicaid, to offer rebates to the purchasing program created by
the Maine law. By shifting their distribution to facilities outside of
Maine, the drug makers are hoping to avoid this provision.

The drug makers, however, insist their products will remain available in
Maine, because they say medicines will now simply be trucked from
warehouses in nearby states. In each case, the warehouses are owned by
the same distributor, Bindley Western Industries Inc. The manager of
Bindley's Maine facility didn't return telephone calls seeking comment,
but a company official and spokespeople for the drug makers confirmed
the arrangement.

The drug makers deny the distribution shift will result in higher
prices. But one Maine legislator, Joe Bruno, who also owns 10 pharmacies
in the state, said any additional shipping costs would likely be borne
by retailers. In some instances, he said, this could result in higher
prices.

NOTES: Ed Silverman covers the drug industry. He can be reached at (973)
877-1542 or esilverman@starledger.com.