NCPA - National Center for Policy Analysis

Hillary's Plan Won't Lower Drug Costs

August 11, 2016

NCPA Senior Fellow Devon Herrick writes for Townhall:

Newsflash! Hillary Clinton is concerned about your drug costs. Unfortunately, her plan could actually raise drug prices and force you to pay more, albeit indirectly. She proposes to accomplish both feats simultaneously by capping your prescription drug co-pays at no more than $250 per month. This reckless proposal is central planning of the ilk you would find in Cuba or Venezuela. But I'm getting ahead of myself. 

Rising drug costs are now a political issue because the number of diseases and conditions that can be treated using drug therapy has grown tremendously over the past 25 years. Arguably, one of the main reasons patients visit their doctors is to obtain or renew prescriptions. When they visit their doctors' offices, Americans  leave with a prescription in hand about three-fourths of the time. This is hardly a travesty; patients aren't drowning under the cost of prescriptions drugs. When patients swing by their neighborhood pharmacy to pick up their prescriptions, they generally pay only a fraction of the actual costs. Most prescription costs are paid for by prescription drug plans sponsored by insurers and health plans. 

Insurers and health plans use multiple techniques to make drug benefits affordable. One of the ways employers, insurers and pharmacy benefit managers (PBMs) hold down costs is through formularies with multiple tiers. The purpose of tiered formularies is to steer enrollees to lower-cost alternatives when appropriate, using differing levels of cost-sharing. Drug plans typically encourage generic use by requiring little if any cost-sharing when a generic drug is filled. Generic drugs are cheap compared to brand drugs -- accounting for less than three percent of health care expenditures. Because of their value, prescriptions are dispensed in generic form nearly 90 percent of the time. 

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