Anti-PBM Proposals Undermining Mail-Service Pharmacies & Drug Substitution Would Increase Costs, Hurt Consumers and Offer No Corresponding Benefits, FTC Says
Washington, DC; 03.11.05 — A new analysis from the Federal Trade Commission’s Office of Policy Planning foresees higher prescription drug costs associated with limits on cost and contracting differentials between retail and mail-service pharmacies and should raise alarms with state and federal policymakers considering such proposals, the Pharmaceutical Care Management Association (PCMA) said today. PCMA is referring to a letter written by the FTC regarding North Dakota house Bill (HB) 1332, which would restrict PBMs’ ability to use cost differentials to encourage consumers to use mail-service to purchase prescription drugs. PCMA is the national association representing America’s pharmacy benefit managers (PBMs).
“The Federal Trade Commission’s analysis of this effort to restrict the adoption of mail-service pharmacies has broad implications for federal and state policymakers nationwide. By undermining competition, rewarding those who keep drug prices high, and punishing those who provide more affordable alternatives for consumers, these kind of proposals fly in the face of efforts to lower health care costs,” said PCMA President Mark Merritt.
A March 8, 2005 letter from the Federal Trade Commission’s Office of Policy Planning, Bureau of Competition, and Bureau of Competition analyzes the impact of North Dakota House Bill (HB) 1332, which would place limits on cost differentials and contracting between retail pharmacies and mail-service pharmacies as well as prohibit drug substitutions. Based upon their analysis, the Federal Trade Commission found:
“HB 1332 is likely to limit a PBM’s ability to reduce the cost of prescription drugs without providing consumers any additional protections. Any such cost increases are likely to undermine the ability of some consumers to obtain the pharmaceuticals and health insurance they need at a price they can afford. Accordingly, we would urge the North Dakota legislature not to adopt HB 1332.”
PCMA believes strongly that this FTC analysis has implications far beyond North Dakota HB 1332. The retail pharmacy lobby has lobbied heavily to enact HB 1332 and similar provisions across America. Such provisions, they argue, are necessary to protect the bottom line of drug stores.
The FTC analysis raises serious concerns about retail pharmacy’s agenda on two fronts. First with respect to limits the bill places on PBMs’ freedom to contract, the FTC notes that the “the promise of increased customer volume creates an incentive for pharmacies to bid aggressively with lower drug prices in exchange for membership in a network. Pharmacies will be willing to compete more vigorously for inclusion in a network as the exclusivity of the network and the number of pharmacies in a relevant market increases.”
Second, the FTC finds that undermining cost-differentials between retail pharmacies and mail-service pharmacies “will likely generate inefficient decisions and higher drug costs.” Specifically, the FTC suggests that undermining such important cost differentials will only benefit high-cost pharmacies as otherwise lower-cost pharmacies would have no incentive to offer a lower price. Hence, consumers and plan sponsors will likely pay higher drug prices.
According to an analysis by PricewaterhouseCoopers, undermining the mail-service pharmacy option across America, would increase prescription drug costs by three percent or $100 billion over the coming decade. In North Dakota alone, such proposals could increase by $206 million dollars over the next decade.
PBMs administer prescription drug plans for more than 200 million Americans with prescription drug coverage provided through the nation’s small and large employers, Taft-Hartley union plans, health insurers, state and federal-employee benefit plans, and Medicare Advantage health plans. PBMs help drive down the cost of prescription drugs for consumers and plan sponsors â?? on average by 25 percent â?? by negotiating discounts with drug manufacturers and retail pharmacies. These savings are, in turn, passed on to consumers. PBMs also provide consumers with important quality protections, such as disease management and physician and patient education. PricewaterhouseCoopers estimates that PBMs will save consumers and employers $1.3 trillion dollars on prescription drug costs over the next decade.
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The Pharmaceutical Care Management Association (PCMA) is the national trade association representing America’s pharmacy benefit managers (PBMs). PCMA member companies provide pharmaceutical care management services to more than 200 million Americans.
Contact Information:
Phil Blando
202-207-3614