State Health Plan Prohibited by Pharmaceutical Industry from Saving $$ on Prescription Drugs

With all the talk about how critical it is to contain costs in the State Health Plan, there is one area that has received very little attention. While large and small pharmacies fought efforts to wring savings from their businesses, the drug manufacturers, the big guns of the pharmaceutical industry, have so far been free from such worries.

As one of the most politically powerful health care special interests in the state, this shouldn’t be a surprise. The pharmaceutical industry’s favored position in the State Health Plan is cemented by a single line in North Carolina law:

Any formulary used by the Plan’s Executive Administrator and pharmacy benefit manager shall be an open formulary.

The State Health Plan does charge members higher co-pays for drugs that it doesn’t list as “preferred,” but, because of this line in the law, it still must pay for almost any drug available on the market if a doctor prescribes that drug for a member. There is a very limited list of drugs that the plan requires prior approval for – mostly extraordinarily expensive drugs or drugs for things like hair growth. However, this list is vanishingly small.

It isn’t hard to find a pretty comprehensive list of drugs that are effective and worth paying for compared to drugs that are either not effective or no more effective than others and overpriced. Consumer Reports magazine has a comprehensive project with extensive research and information on what drugs are most effective and cost the least.

This is just one resource – albeit one with extensive reports and data on multiple conditions from heartburn to schizophrenia. And the important message here isn’t just about cost savings – it’s about effectiveness too. Why take any drug that isn’t effective and has serious side effects? In fact, if you take prescription drugs, the Consumer Reports research is worth a look, state health plan member or not.

One complaint brought up against having a stricter formulary is that a particular brand of drug might be what works for a particular patient despite the research. This isn’t so hard to deal with. For most drugs not on the list, the State Health Plan could give the doctor the option of easily prescribing the lesser-effective and more expensive drug just by some affirmative action – perhaps by writing “dispense as written” on the prescription. Even with this provision, freeing the state health plan from being required to always pay for almost any drug available is likely to save millions of dollars.

Finally, the State Health Plan would also have a strong new negotiating tool with the big drug companies. In the case where two drugs are equally effective, the plan could ask each drug company to come in with the lowest price it would sell that drug to the plan. Competition at its best.

It’s a measure of the power of special interests in this debate that this option to save money hasn’t come up already. But the tide may be turning. Governor Beverly Perdue has already proposed a similar effort to save money in the state’s Medicaid program on drugs in her proposed budget. Legislators should let the State Health Plan follow her lead.

3 Comments

  1. Louie

    April 8, 2009 at 5:32 pm

    The Pharma companies will do ANYTHING to remain profitable to shareholders. Just look how they have manipulated public health officicials to keep the NC childhood vaccine subsidy as lucrative as possible.

  2. [...] Joining the many states that already use a preferred drug list – an evidence-based list of which drugs are most effective and cost the least – has always been a stretch for the pharmaceutical-friendly General Assembly. It’s hard to see your way clear to saving millions in taxpayer dollars when those millions will come from a friendly and extremely wealthy industry in your state. No state health program uses a preferred drug list – it’s actually specifically prohibited. [...]

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    July 30, 2009 at 5:17 pm

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