Further Government Expansion into Health Care Is Not the Right Prescription for Our State
February 2002
Affordable prescription drug coverage for seniors, Medicaid recipients and the uninsured is near the top of policymakers' agenda this year. Our legislators are now debating new and far-reaching policies that will have significant effects on thousands of our state's citizens.
There has been a lot of focus recently on the so-called "rapid escalation of prescription drug costs." The reality is that the total cost of drugs is only increasing at the rate of inflation. As more drugs become available the total amount spent is going up at higher rates. This reflects the increased use of these drugs, the benefits of which include decreasing the cost of traditional health care.
In an effort to "control" total costs the Washington Legislature is considering a new proposal to create a preferred drug list for all state government purchasing. The list would exclude new or frequently used medications. The prescription drug "market" envisioned consists of a customer of one: state government.
The state alone would select which drug companies would hold a favored position to sell their products in Washington. The products of other companies would be excluded from the official formulary. Once state officials have granted their approval to a drug, price competition among suppliers is over and one winner remains.
Since the formulary is subject to annual review, an approved drug company would have every inducement to maintain its favored position and to keep potential competitors out. The likely result is many pharmaceutical companies would have no incentive to pursue further business in Washington, as happened among insurance carriers when the individual health insurance market collapsed in the late 1990s.
The secret and cumbersome drug formulary process would discourage innovation in new treatment technologies. Medical research companies will find it more difficult to develop new and timely therapies if they face a formidable formulary-approval process in Washington, in addition to the already-lengthy FDA review at the federal level. Washington would likely become the last place to see the latest drug therapies, as drug makers introduce new products in states with less regulated and more open prescription drug markets.
This type of system could prevent the best medicine from being prescribed. Recently approved products, which typically do not have a generic version, usually offer patients advantages with regard to clinical efficacy and disease prevention. Newer drugs also have fewer side effects and less frequent dosing requirements that can help patients follow the prescribed treatment; that improves the overall health of patients and reduces future health care expenditures.
One very important aspect to consider is the effect on physicians. In most cases the state, not the doctor, would ultimately choose which drugs are "substantially equal and…which one is the preferred drug." A doctor has to endorse the preferred drug list first in order to be allowed to substitute other drugs for their patients.
This proposal also creates a central computer database of all prescriptions written in Washington by doctors providing medical care under state-funded programs. It also requires the state to analyze medical claims to identify doctors who request non-preferred drugs more often than their peers. These doctors will be targeted for special attention from the state, receiving "information and education" and making their medical decisions about prescription medication subject to prior authorization.
Just as Washington was at the forefront of government-based health care reform in 1993, most of which was eventually repealed, our state needs to carefully examine any sweeping health care policy changes before we implement something of this scale. As with past attempts at reform, the expected savings and patient benefits are likely to fall well short of expectations, while the resulting regulations will further drive up costs and harm an emerging part of our state's economy.
Rather than relying on further government expansion into the health care industry, we should reduce the burden of state-imposed regulations, lower barriers to market entry and encourage vigorous competition among private companies as the most effective way to
lower drug costs to consumers.