Prescription Drug Spending -- the Clearinghouse for the Future of Pharmacy Benefits

The Perils of State-Sanctioned Private Regulation: A Case Study from the Healthcare Marketplace
By Professor Joanna M. Shepherd, Emory University School of Law (May 23, 2014)

Washington Legal Foundation

In this piece, Professor Joanna M. Shepherd looks at the conflicts of interest inherent in state transfers of regulatory power to self-interested market participants, and uses as a case study  the Mississippi Board of Pharmacy’s regulation of PBMs.

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Challenging Government-Sponsored Private Regulation of Competitors
By Professor Alexander Volokh, Emory University School of Law (May 2014)
Reason Foundation Policy Brief

In this policy brief, Professor Alexander Volokh cautions state legislators and regulators that they need to be aware that recent state and federal court decisions show increasing skepticism of private regulatory delegations where conflicts of interest may exist – such as the Mississippi Board of Pharmacy’s regulation of pharmacy benefit managers.  He says courts might invalidate an entire agency, prevent it from regulating in certain ways, and/or hold individual regulators liable for damages.

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 Letter from Federal Trade Commission (March 7, 2014)

In this letter, the FTC staff warns the Centers for Medicare and Medicaid Services that proposed any willing pharmacy provisions threaten the effectiveness of selective contracting with pharmacies as a tool for lowering Medicare Part D costs.

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Biologic Drugs, Biosimilars, and Barriers to Entry
By Joanna Shepherd, Ph.D., Emory University School of Law

Health Matrix: Journal of Law-Medicine (forthcoming)

Congress has recently created a biosimilars approval pathway that would allow less expensive versions of biologic drugs to reach patients more quickly. However, original biologics manufacturers have sought to extend their monopoly profits by erecting various legal and regulatory barriers to entry. This paper discusses the various barriers and explores their market consequences.

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The Impact of Preferred Pharmacy Networks on Federal Medicare Part D Costs, 2014-2023
By Stephen J. Kaczmarek, Andrea Sheldon, and David M. Liner of Milliman

Prepared for the Pharmaceutical Care Management Association (October 2013)

This actuarial report by Milliman finds Medicare Part D savings of as much as $9.3 billion over the next ten years from using preferred pharmacy networks.

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Is More Information Always Better? Mandatory Disclosure Regulations in the Prescription Drug Market
By Joanna Shepherd, Ph.D., Emory University School of Law
Cornell Law Review Online, Vol. 99, 2013  (March 1, 2013)

Pharmacy benefit managers (PBMs) save Americans billions of dollars each year by lowering the prices of prescription drugs and the costs of prescription drug coverage. However mandatory disclosure regulations recently enacted in several states and under the Affordable Care Act threaten to disrupt the cost savings PBMs currently produce for consumers. These regulations require PBMs to disclose competitively-sensitive financial information to various participants in the prescription drug market. The regulations foster tacit collusion and reduce PBMs’ ability to negotiate discounts with pharmacies and rebates with drug manufacturers. By disrupting competition in the prescription drug market, mandatory disclosure regulations will ultimately increase the prices that consumers pay for prescription drugs.

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The Fox Guarding the Henhouse: The Regulation of Pharmacy Benefit Managers by a Market Adversary
By Joanna Shepherd, Ph.D., Emory University School of Law

Northwestern Journal of Law and Social Policy, 2013 (March 1, 2013)

Pharmacy benefit managers (PBMs) save Americans billions of dollars each year by lowering the prices that consumers pay for prescription drugs and health plans pay for drug coverage. However, new regulatory developments in some states threaten to undercut competition in the PBM industry and disrupt the cost-savings PBMs currently generate. The regulatory scheme that was adopted by Mississippi in 2011, and is currently under legislative consideration in several other states, shifts regulatory control of PBMs from the neutral Insurance Commissions to the states’ Boards of Pharmacy. The fundamental problem with this structure is that the Boards of Pharmacy are made up of pharmacists, the direct market adversaries of PBMs.

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Express Scripts 2012 Drug Trend Report
Published by the Research and New Solutions Lab (March 2013)

The Express Scripts 2012 Drug Trend Report quantifies annual changes in utilization, unit costs and overall prescription drug spending, based on Express Scripts claims data. For the first time in more than 20 years, there was a decrease in 2012 U.S. spending on traditional prescription drugs — primarily pills people take to treat more common diseases such as high cholesterol and high blood pressure.   The Drug Trend Report also includes annual data on specialty drugs and on Medicare and Medicaid populations.


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The Effect of Any Willing Provider and Freedom of Choice Laws on Health Care Expenditures
U of Penn, Inst for Law & Econ Research Paper No. 12-39 by Jonathan Klick and Joshua D. Wright (November, 2012).

Any Willing Provider and Freedom of Choice laws restrict the ability of managed care entities, including pharmacy benefit managers, to selectively contract with providers. This paper examines the effect of state adoption of such laws on total state healthcare spending, finding that any willing provider/freedom of choice laws are associated with cost increases of at least 3 percent, and are therefore harmful from a spending perspective.

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Health Care and Prescription Drug Spending in the U.S.
By Edward C. Lawrence, Ph.D., Ellen N. Briskin, Ph.D. and Jane Qu, MBA

University of Missouri-St. Louis (July 31, 2012)

Compared to the other 30 democracies in the Organization for Economic Cooperation and Development (OECD), the United States spends the most on health care with per capita costs more than double the average for these other industrialized countries. As one study notes, the U.S. stands out for not getting good value for its health care dollars. Over the last four decades, the U.S. health care sector has experienced exponential growth: aggregate expenditures increased from $74.9 billion in 1970 to $2.7 trillion in 2011. Along with other components of health care spending, prescription drug expenditure growth accelerated particularly sharply in the late 1990’s and early 2000’s. This paper provides the reader with a brief overview of the issues related to rising health care and prescription costs in the U.S.

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Drug Pricing:  Manufacturer Discounts in the 340B Program Offer Benefits, but Federal Oversight Needs Improvement
GAO Report to Congressional Committees (September, 2011)

In this report, GAO finds that the Health Resources and Services Administration (HRSA), which is responsible for administering the section 340B discount drug program, has provided inadequate oversight of the program and cannot ensure that covered entities and drug manufacturers are in compliance with program requirements – such as the requirement that entities transfer drugs purchased at 340B prices only to eligible patients.  GAO finds that HRSA relies on participant self-policing to ensure program compliance, but has not issued guidance with the necessary level of specificity to provide clear direction, making it possible for participants to interpret the guidance in ways inconsistent with the agency’s intent.

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