On Nov. 29 the U.S. 2nd Circuit Court of Appeals closed, at least for the time being, the latest chapter in Vermont's long-running War Against the Drug Industry. More on that later.
Ever since the latter years of the Dean Administration, Vermont's liberal legislators have found one rationale after another to launch demagogic attacks on the drug manufacturers. The cause of this recurring urge is the desire of patients for cheaper pharmaceuticals.
In 2000 Gov. Dean announced he would attempt to add 175,000 people to Medicaid to let them take advantage of Medicaid's discount for medications. A federal appeals court ruled a year later that Dean's plan was a unauthorized enlargement of Federal Medicaid program.
The same year the Vermont Senate narrowly approved a provision imposing state price controls on pharmaceuticals, which would likely have made most of them unavailable in the state. The House declined to go along.
Two years later another bitter battle ensued over a bill that sought to impose sizable license fees on drug manufacturers and their salespersons. Those provisions too were dropped.
Early in 2005 Gov. Douglas and the legislature cooperated to put Vermonters into the Illinois ISaveRx program. This was a state run program where Vermonters could call in their brand-name prescriptions (sorry, no generics) and have them filled by a foreign pharmacy. Most were filled in Canada, where the provinces impose price controls on drugs sold into their government health systems.
ISaveRx ran into three problems. The Federal Food and Drug Administration forcefully reiterated that it is illegal for a state to import price controlled drugs into the US (except for "personal use"). In early 2005 it initiated seizure of more than one fourth of ISaveRx's incoming drug shipments to make its point.
In July of that year the Canadian Health Minister put a stop to Canadian pharmacy participation in ISaveRx, noting that his country would no longer serve as "a cheap drug store for the United States". ISaveRx had to go ever further abroad to find product, raising persisting questions about drug manufacturing safety.
Then in September 2006 the Illinois Auditor General issued a scathing report on the program. He found that in its 19 months of operation fewer than 5,000 persons had made use of the program - two thirds of them Illinoisans. Worse, the participating pharmacies were operating illegally, and the state was making little effort to assure drug safety. The auditor identified over $1 million in waste in the first 19 months.
A month later private enterprise came to the rescue. In October 2006 WalMart, followed by K-Mart, announced dramatic price-cutting for 314 common generic drug products in 14 states, including Vermont. With this announcement, and the ensuing response from online and retail competitors, ISaveRx became increasingly irrelevant.
The program limped on, apparently for two more years. In January 2009 the Illinois legislature impeached and removed from office the program's biggest booster, Gov. Rod Blagojevich. A month later the program quietly disappeared. There was no memorial service in Montpelier.
Inquiries made in 2010 to the Vermont Agency of Human Services triggered an exhaustive and ultimately fruitless internet and telephone effort to find out how many Vermonters were making use of ISaveRx, or whether it still existed. By then it didn't, but Illinois had never bothered to tell Vermont, and Vermont had long ago lost interest in it.
Now for last month's court case. Act 80 of 2007 sought to ban the sale or use of commercial "data mining" to improve marketing of prescription drugs. The U.S. Second Circuit held that unconstitutional: "The legislative findings are explicit that Vermont aims to do exactly what has been so highly disfavored [by the courts] - namely, put the state's thumb on the scales of the marketplace of ideas in order to influence conduct."
Big Pharma, with its embrace of high entry barriers for new products and patent law manipulation, ought not be immune from political attack. But 12 years of liberal chest-thumping against Big Pharma, involving at least two judicial embarrassments and a failed program, has produced, essentially, nothing but a lot of demagoguery, bureaucracy, legal costs, and incompetence - plus, admittedly, some coerced "supplementary discounts" and lots of useful name recognition for the leading chest thumper, Sen. Peter Shumlin.
John McClaughry is vice president of the Ethan Allen Institute (www.ethanallen.org).