Drug Coverage Mandates

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PBMs negotiate rebates from drug manufacturers in exchange for covering their drugs and granting preferred status on formularies. Imposing mandatory drug coverage or limiting cost-sharing requirements for prescription drugs raises premiums and grants drug companies unlimited pricing power. Such mandates remove incentives to use dramatically lower cost generic alternatives. Forcing plans to cover expensive brands—regardless of price—eliminates manufacturers’ incentives to offer discounts. This results in higher costs and virtually unchecked pricing power for drug companies.

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