FTC: NY Bill Nixing Mail Order Rx Hurts Consumers

A bill in New York to prohibit health insurers from requiring their customers use mail-order pharmacies was criticized by the Federal Trade Commission as a well-intentioned effort that, nonetheless, could have an anti-competitive outcome, according to a letter written by the agency to one of the sponsors of the legislation. The bill has passed both the state senate and assembly, and awaits a signature from New York Governor Andrew Cuomo.

In explaining its position, the FTC acknowledged that the bill (which you can read here) was designed to increase consumer choice and limit the ability of pharmacy benefit managers, or PBMs, from penalizing consumers who do not purchase their meds from mail-order pharmacies. You may recall that the largest PBMs, including CVS/Caremark, Express Scripts and Medco Health Solutions, own mail-order pharmacies.

But the agency believes unintended consequences could occur. "By reducing competition between pharmacies, this legislation likely will raise prices for, and reduce access to, prescription drugs, which are an increasingly important component of medical care," according to the letter sent by the FTC to New York State Senator Jim Seward (here is the letter).

"By restricting a health plan’s ability to offer favorable treatment to a low cost mail order pharmacy, the bill undercuts pharmacies’ incentives to bid aggressively for a share of that health plan’s business. Reducing those incentives is likely to raise the prices that consumers pay for the prescription drugs that their health plans cover."

The FTC went on to add that mail-order pharmacies can offer substantial savings (and cited its own 2005 report as evidence). The agency also argued that its research has found that mail-order pharmacies typically are less expensive than retail pharmacies for both health plans and consumers.

"Mail order pharmacies can offer substantial cost savings, especially with respect to prescriptions for maintenance drugs," the agency writes. "Limits on the use of mail order may, therefore, raise the cost of providing prescription drug benefits to New York health care consumers. Although the bill attempts to provide consumers with a choice among available pharmacy providers, it may have the unintended consequences of curtailing prescription drug coverage and increasing out-of-pocket payments."

UPDATE: Not surprisingly, a spokesman for the National Community Pharmacists Association debunked the FTC letter. "There are a multitude of problems with the FTC letter," he writes us. "First and foremost, their analysis is based on an old, flawed 2005 study of a mail order market that has undergone dramatic transformation since the merger of CVS and Caremark and the possible proposed merger of Express Scripts and Medco.

"In the case of CVS/Caremark, the FTC should be aware of the changed dynamic since they are undergoing an investigation of their anti-competitive and anti-privacy business practices, based in no small part of evidence that the National Community Pharmacists Association has provided. Second, the FTC fails to account for the fact that comparable pricing requirements are the result of extra costs that PBMs force pharmacies and beneficiaries to absorb, which this bill attempts to guard against. So why is real choice a bad option by mitigating those discrepancies?

"Finally, the FTC does not take into account the waste associated with mail that does not occur at the retail pharmacy level, such as patients having excessive supplies of mail order prescriptions that have been rendered useless due to intervening circumstances like a doctor changing the dosage of their prescriptions.” END OF UPDATE.

However, a trade group for PBMs was heartened by the FTC response. “The Federal Trade Commission’s comments on the anti-mail-service pharmacy bill make it clear that it would harm consumers by limiting access and raising their prescription drug costs,” Pharmaceutical Care Management Association ceo Mark Merritt says in a statement. New York State “Governor Cuomo should veto this prescription drug tax on small business. It pads drugstore profits and sticks employers with the tab.”

Two months ago, the New York Health Plan Association, a trade group for managed care organizations, lambasted the bill as "protectionist legislation of the worse kind....This proposal enriches community pharmacists at the expense of patients and will result in increased pharmaceutical costs," according to a June 2 statement.

"This legislation would allow any mail order covered prescription to be filled at any in-network retail pharmacy if the retail pharmacy offers to accept a price that is 'comparable' to that of the mail-order pharmacy," the organization complained. "At no point is the term 'comparable' defined in the bill. The use of this ambiguous term will only cause confusion and conflict as plans and pharmacies negotiate its meaning. It is much more appropriate to clearly define that the in-network retail pharmacy will receive the same reimbursement as the mail order pharmacy."

Shortly afterwards, the National Community Pharmacists Association also wrote a letter urging Cuomo to sign the bill. "Community pharmacies represent the most accessible point in patient centered health care where typically consumers do not need an appointment to talk with a pharmacist about prescription medication, over‐ the‐ counter product or any other health‐related concern. This access and related counseling typically results in more effective medication use and optimized health care outcomes that ultimately save money on averted downstream medical care" (here is the letter).

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