July 18, 2012
(Washington, DC)—Imposing a federal “protected classes” prescription drug mandate on individual and small employer plans would raise premiums, grant drug companies unlimited pricing power, and create strong opposition from small businesses, the Pharmaceutical Care Management Association (PCMA) said today. The Centers for Medicare & Medicaid Services (CMS) says a similar mandate is dramatically increasing costs in Medicare Part D.
In the commercial market, employers and unions negotiate discounts from drug companies in exchange for covering their drugs. This reduces premiums and offers manufacturers a greater marketplace. To simply force plans to cover expensive brands – regardless of price – would eliminate manufacturers’ incentives to offer discounts. The result would be higher costs and virtually unchecked pricing power for drug companies.
Unfortunately, “protected classes” regulations have already taken their toll on Medicare Part D. CMS estimates that they will increase costs by $4.2 billion. There is no corresponding evidence that Medicare beneficiaries’ health or access to care has improved as a result.
In a recent survey, 66% of small employers say “cost” is their top consideration when considering health benefits. Imposing “protected classes” would not only undermine affordability but also contradict the Department of Health and Human Services’ (HHS) pronouncement that states can design benefits like those of popular, high-performing plans that local employers already use. No such plans are governed by “protected classes” regulations.
“These ‘protected class’ mandates would grant drug companies unlimited pricing power and make coverage less affordable for individuals and small businesses. Small businesses shouldn’t have to choose between a bloated Cadillac plan and no plan at all. They want access to affordable plans that offer broad coverage, promote generics, and reduce brand name drug costs,” said PCMA President and CEO Mark Merritt.
The poll of small business owners and human resource managers (who represent the companies directly impacted by the upcoming Essential Health Benefits regulations) found that:
- Small businesses want low-cost coverage options, not mandatory “Cadillac coverage.” Their top priorities are low pharmacy costs for their business (66 percent) and lower out-of-pocket costs for their employees (39 percent). Given a choice, they prefer basic coverage with lower premiums (71 percent) to expanded coverage with higher premiums (19 percent).
- Small businesses that provide drug benefits are overwhelmingly satisfied with the benefits that they are able to offer. By an 86 to11 percent margin, small businesses that provide drug benefits are satisfied with those benefits.
- Seventy-four percent oppose mandating across-the-board, low co-pays for high-priced drugs. By a 2-1 margin, small businesses think it would be better to require drug companies to offer case-by-case price discounts to those in need.
- Small businesses want access to plans that encourage delivery of prescription drugs through the mail. 79 percent say it is a good idea to “allow plans to offer discounts that encourage employees to get prescriptions by mail.”
The survey echoes concerns outlined by the Essential Health Benefits Coalition (an employer led coalition comprised of the National Federation of Independent Business, the National Retail Federation, and others) and Administration policy that commercial practice would be the benchmark for essential health benefits for prescription drugs.