Imposing or expanding mandatory drug coverage laws, such as the Medicare “protected classes” prescription drug mandate, on individual and small employer plans will raise premiums and grant drug companies unlimited pricing power. These mandates will make drug coverage more expensive for individuals and small businesses.

In the commercial market, PBMs, working for employers, unions, the government, and other sponsors, negotiate rebates from drug companies in exchange for covering their drugs and granting preferred status on formularies. This reduces premiums and offers manufacturers a greater marketplace. To force 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.

Unfortunately, “protected classes” have already taken their toll on Medicare Part D. Centers for Medicare & Medicaid Services (CMS) estimates that they will increase costs by $4.2 billion.

Visit the What is a formulary? card stack in the Knowledge Center to learn more.

Resources

White Paper: The Management of Specialty Drugs, sPCMA, February 2016

‘Protected Classes’ Prescription Drug Mandate Would Hike Small Business Costs, Drug Company Profits, PCMA