Proposed Drug Plan Legislation Could Hurt Oklahoma Consumers, Raise Costs

Brief Analyses | Health

No. 826
Thursday, April 21, 2016
by Devon M. Herrick

An estimated 70 percent of Americans are enrolled in a prescription drug plan through their employer, health insurer or Medicare Part D. Millions more have joined discount drug card programs. When hundreds of thousands of Oklahomans enrolled in drug plans walk into their neighborhood drugstore, they receive discounted drug prices that have been negotiated on their behalf. However, uninsured consumers and those enrolled in health plans with insurance deductibles that have not been met must bear the cost of drug purchases out of their own pockets. Rising drug prices have prompted some ill-conceived legislative proposals that should raise some concerns — and could boost costs for Oklahomans.

Our Generic Drug Approvals. Over the past several years, there has been a surge in abbreviated new drug applications at the U.S. Food and Drug Administration from firms applying to produce generic drugs. The backlog of FDA applications grew to nearly 4,000 by mid-2015. The extensive backlog and resulting lengthy period to get competing drugs approved has allowed some generic drug makers to temporarily jack up their prices exorbitantly — often with little notice.

High drug costs are a problem that ultimately affects consumers and their drug plans, but can also impact drugstores by temporarily reducing profit margins on a few drugs. In an attempt to insulate their industry from the effects of rising wholesale drug prices, and boost profits, drugstores are lobbying Oklahoma lawmakers to allow pharmacies to ignore negotiated discounts and pass the price hikes on to consumers in violation of contractual agreements.

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