PCMA: New CBO Analysis Confirms Independent Pharmacy 'Collective Bargaining' Legislation Increases Costs for Consumers and Payors

Business Wire, Sept 29, 2008

WASHINGTON -- The Pharmaceutical Care Management Association (PCMA) issued the following statement in response to a new analysis released by the Congressional Budget Office (CBO) that estimates the costs associated with sweeping antitrust exemptions for independent pharmacies:

"The new CBO analysis confirms that sweeping antitrust exemptions for independent pharmacies would increase costs for Medicare Part D, Medicaid, the Federal Employees Health Benefits (FEHB) program, and as well as for employers and consumers. HR 971 would give independent pharmacies a 'license to collude' to raise prescription drug prices, without adding value for consumers or payors.

"CBO found that HR 971 would increase federal costs by $640 million over ten years and that increased drug costs to private health plans, employers, and consumers would result in 'reductions in the scope or generosity of health insurance benefits, such as increased deductibles or higher copayments.' CBO's analysis also contends that cost increases resulting from the legislation would be passed along to workers, reducing 'both their taxable compensation and other fringe benefits.'

"During testimony on HR 971 before the House Judiciary Committee Antitrust Task Force, the Federal Trade Commission (FTC) stated: 'Giving heath care providers . . . a license to engage in price fixing and boycotts in order to extract higher payments from third-party payers would be a costly step backward, not forward, on the path to a better health care system.'

"The FTC also stated 'it also bears emphasis that there are a variety of lawful ways - short of price fixing and coercive boycotts - that pharmacies can collectively express their concerns about both price and quality issues relating to managed drug benefit programs.'

"Independent pharmacies currently enjoy numerous collective bargaining tools to gain market power in government and commercial programs, including:

* Independent pharmacies often participate in joint purchasing groups that allow them to lower costs and compete more effectively.

* Both Medicare and private insurers require geographic pharmacy network access standards for their enrollees that already provide pharmacies--particularly rural pharmacies--extensive negotiating power with PBMs.

* All health care providers, including pharmacies, can form joint ventures with other pharmacies to provide quality and clinical services and negotiate the fees for those services.

* Pharmacies also have the ability to utilize the "messenger model" that allows for network providers to use a third party to convey to purchasers information obtained individually from the providers about the prices or price-related terms that the providers are willing to accept."

PCMA is the national association representing America's pharmacy benefit managers (PBMs), which administer prescription drug plans for more than 210 million Americans with health coverage provided through Fortune 500 employers, health insurance plans, labor unions, and Medicare Part D

1 "Statements of Antitrust Enforcement Policy in Health Care," August 1996 http://www.usdoj.gov/atr/public/guidelines/0000.htm