May 6, 2014
In New York, the State Senate and the State Assembly are considering legislation that if enacted into law would raise prescription drug costs in the state by billions of dollars over the next decade and reduce the quality of care for patients taking specialty medications for conditions such as multiple sclerosis, hepatitis C, and rheumatoid arthritis.
These bills effectively exempts retail pharmacies from meeting the same safety and performance standards—contractual terms and conditions—that health plans require of mail-service and specialty pharmacies. Visante analyzed the potential cost impact of S.3995-B and A.5723-B based on the legislation’s likely impact of reducing the ability of plans to negotiate effective pharmacy network contracts in New York. Visante projects significant costs associated with this legislation.
- If enacted, the legislation could increase prescription drug costs and related medical costs in New York by up to $392 million in 2015. Over 10 years, the estimated cost could be $6 billion.
- The legislation would raise costs and undermine care in New York by exempting retail pharmacies from meeting standards related to credentialing, drug utilization evaluation activities, clinical prior authorization, quality-of-care reviews, and formulary compliance.
- By reducing the effectiveness of pharmacy network contracts, the legislation is not likely to result in a rush of drugstores offering new price concessions, but rather the undermining of the current price concessions offered by mail-service and specialty pharmacies, which are based on superior economies of scale and performance in areas such as formulary compliance.
The major findings above are based on a recent analysis by the Centers for Medicare and Medicaid Services (CMS) found that mail-service pharmacies save an average of 16% on prescription costs compared to retail pharmacies. The proposed legislation would take away the ability of mail-service pharmacies to continue to provide such savings. Likewise, specialty pharmacies have demonstrated average savings of 10% on drug costs and substantial savings on non-drug medical costs compared to retail pharmacies. The legislation would put these savings at risk.