Unnecessary Drug Regulations Hiking Rx Prices: NCPA Study

Patients Benefit from Competitive Rx Drug Marketplace

– As drug coverage increases as a result of expanded health insurance and Medicaid coverage under the Affordable Care Act, unnecessary regulations will increase prescription drug costs, according to a new study from the National Center for Policy Analysis (NCPA).

            “Sixty percent of all Americans take a prescription drug in any given year, and nearly all seniors do,” said NCPA Senior Fellow Devon Herrick. “Drug coverage is expanding rapidly and heightened regulatory scrutiny will prevent drug plans managers from holding down costs for consumers with programs such as creating exclusive networks and encouraging mail-order prescriptions.”

            Herrick said there are many barriers, regulations and practices that restrict competitive bidding among drug plan stakeholders.

  • Some state laws restrict the ability of drug plans to develop limited pharmacy networks that lower drug prices through bargaining with specific drug dispensers, instead requiring that any pharmacy can fill enrollees’ prescriptions. The Federal Trade Commission says this raises drug prices and premiums to consumers by reducing drug plans’ bargaining power.
  • While some drug plans incentivize use of mail-order pharmacies through lower copayments or refill limits, some states are enacting laws that restrict drug plans from offering lower prices for mail-order prescriptions to benefit local community pharmacies.
  • Some drug plan sponsors use formularies to determine which drug therapies are appropriate and often discourage certain drugs or encourage generics.
  • Dispensing fees -- counting tablets, filling bottles and administrative tasks -- are much higher for state-managed plans resulting in higher compensation to pharmacies.

           Americans filled an estimated 3.8 billion retail prescriptions in 2011 and Herrick notes that, “Even though prescriptions can still be extremely expensive, drug therapy is arguably the most efficient method to treat many illnesses and often can prevent the need for more expensive surgeries and hospital stays.”

            “Prices, profitability and services will continue to suffer unless open competition removes many of these barriers that will continue raising prescription costs,” said Herrick.

Full text: http://www.ncpa.org/pub/st346