NCPA: Regulations hike prices

March 8, 2013

Regulatory scrutiny will prevent drug plans managers from holding down costs for consumers

As drug coverage increases as a result of expanded health insurance and Medicaid coverage under the Patient Protection and Affordable Care Act, unnecessary regulations will increase prescription drug costs, according to a 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,” says NCPA Senior Fellow Devon Herrick. “Drug coverage is expanding rapidly and heightened regulatory scrutiny will prevent drug plan managers from holding down costs for consumers with programs such as creating exclusive networks and encouraging mail-order prescriptions.”

Herrick reviewed economic and policy literature on drug plans, as well as the literature on lobbying and government documents.

“The basic findings are that some of the regulations purported to benefit consumers actually harm them by driving up costs,” Herrick says. “Something implied but maybe not stated is special interests often promote legislation as beneficial ‘consumer protections’ that is actually designed to benefit special interests.”

Herrick says 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.

  • Dispensing fees-counting tablets, filling bottles and administrative tasks-are much higher for state-managed plans resulting in higher compensation to pharmacies.

 “Regulations that inhibit the negotiation process between drug-makers, drug stores, and the drug plan will affect managed care organizations that insure health plan enrollees,” he says.