# Presentation: 045186

## Prescription Drug Expenditures:

**Prescription Drug Expenditures:**

***March 11, 2003***
***Sacramento, California***

**Assembly, California Legislature**

***Committee on Health***

**What Do We Really Know?**

## Stephen W. Schondelmeyer, Pharm.D., Ph.D. 

**Stephen W. Schondelmeyer, ****Pharm.D., Ph.D. **
**Professor and Director**
***PRIME***** Institute, University of Minnesota**

## Overview

**Overview**

**Need for Medication **
**Need to Question Obvious Assumptions**
**Pharmaceutical Pricing Issues**
**Does the Pharmaceutical Market Work?**
**What Are Potential Roles for the State?**

***What are the issues? ***

## % of Adults Using Medicationin Previous Week

- Source:  *JAMA, Vol 287, No. 3, Jan 16, 2002, based on adult population survey in 1998-99.*

***% Using Meds***
***In Previous Week***

** ****Virtually everyone in society**
**   ****needs, or will use Rx drugs**

**  ****Medications are an essential**
**   ****societal resource**

** ****Lack of access can mean **
**   ****life & death to a person**

## U.S. Rx Expenditures:  1989 to 2000

**U.S. Rx Expenditures:  ****1989 to 2000**

- Source: Data reported by IMS America, Inc. 1990 to 2001.

**$ (billions)**

**$143.7**

**$217.3**

**$ 58.7**

**$ 39.6**

**$105.6**

**$ 68.6**

**Rx All Channels**

**Rx Expenditures**

- [**Outpatient Only**]

- [ Hospital, VA, Military,
- Medicare Outpatient, OTCs ]

## U.S. Rx Expenditures as a % of NHE: 1950-2010* (est. 2001-2010)

*HCFA****: 2001***

***% of NHE***

**Rx Outpatient Only**

**Rx All Channels:**
- [ Hospital, VA, Military,
- Medicare Outpatient, OTCs ]

## We Spend More on Rx Drugs Than We Usually Admit 

## Are Drug Prices & Price Increases   an Issue?

## Recent Drug Price Increases: Jan 1, 2002 vs Jan 15, 2003 (Average Wholesale Price)

**Recent Drug Price Increases: ****Jan 1, 2002 vs Jan 15, 2003 **(Average Wholesale Price)

- Source: Compiled by the PRIME Institute, University of Minnesota from data found in First Databank PriceChek PC, March 2003.

**% Change in Price 2003 v  2002**

**Consumer Price Index – All Items 1.6%**

## Recent Drug Price Increases: Jan 1, 2002 vs Jan 15, 2003 (Average Wholesale Price)

**Recent Drug Price Increases: ****Jan 1, 2002 vs Jan 15, 2003 **(Average Wholesale Price)

- Source: Compiled by the PRIME Institute, University of Minnesota from data found in First Databank PriceChek PC, March 2003.

**% Change in Price 2003 v  2002**

**Consumer Price Index – All Items 1.6%**

## Recent Drug Price Increases: Jan. 1, 2002 vs Jan. 15, 2003 (Average Wholesale Price)

**Recent Drug Price Increases: ****Jan. 1, 2002 vs Jan. 15, 2003 **(Average Wholesale Price)

- Source: Compiled by the PRIME Institute, University of Minnesota from data found in First Databank PriceChek PC, March 2003.

**% Change in Price 2003 v  2002**

**3 Changes in 2002**
****** ****21.1%**
**__________**
**4 Changes **
**in 2001**
****** ****9.3%**
- __________
**4 Changes in 2000**
****** ****8.8%**

**Consumer Price Index – All Items 1.6%**

## Average Cost per Day of TherapyNew vs. Old Drugs:  Pre-1995 to 2001

- Source: National Institute for Health Care Management and “*” estimates by the PRIME Institute, University of Minnesota.

**$ / Day**

## Rx Price Impact

** ****AWP ******** Will Result in:**
****** ****Medicaid Payments**
****** ****Employer Payments**
****** ****Cash Payer Payment **

*Does AWP price increase matter? *

## Slide 14

## Consumer Perspective on Safety, Effectiveness & Cost 

** **
**  ****neither safe nor effective.” **
**  **
**	****	**

**Consumer Perspective on ****Safety, Effectiveness & Cost **

** **
**  ****one can not afford is **
** **
**  **

**“****A drug that **
** **

** **
** **
** **
**  **
**	****	****	****	****	**-- *Stephen W. Schondelmeyer*
*	**	**	**	**	**    **PRIME Institute, *1996		**	****	****	****	**

## Drug Price Increases Are a Major Part of the Current Drug Spending Situation

## Do More Rebates Assure Lower Net Price?

## Prescription Prices, Rebates & Net Cost to Payer & Patient

**Prescription Prices, Rebates ****& Net Cost to Payer & Patient**

- Source: Compiled by PRIME Institute, University of Minnesota.

**$ / Rx**

**Assume that these 4 drug products **
**have similar safety & effectiveness.**

**  **
** **
**Which would you choose?   Why?**

## Prescription Prices, Rebates & Net Cost to Payer & Patient

**Prescription Prices, Rebates ****& Net Cost to Payer & Patient**

- Source: Compiled by PRIME Institute, University of Minnesota.

**$ / Rx**

**Rx Price**

**Based on *****Rx Price***** --**
**Which drug product**
**would you choose?**

## Prescription Prices, Rebates & Net Cost to Payer & Patient

**Prescription Prices, Rebates ****& Net Cost to Payer & Patient**

- Source: Compiled by PRIME Institute, University of Minnesota.

**$ / Rx**

**Rebate **
**Amount**

**$25.00**

**$12.50**

**$5.00**

**Based on *****Rebate Amount***** --**
**Which drug product**
**would you choose?**

**If you were the PBM & **
**kept most, or all, of the **
**25% rebate would your **
**choice change?**

## Prescription Prices, Rebates & Net Cost to Payer & Patient

**Prescription Prices, Rebates ****& Net Cost to Payer & Patient**

- Source: Compiled by PRIME Institute, University of Minnesota.

**$ / Rx**

**$25.00**

**$12.50**

**$5.00**

**Net Rx Price**

**Based on *****Net Rx Price *****--**
**Which drug product**
**would you choose?**

## Prescription Prices, Rebates & Net Cost to Payer & Patient

**Prescription Prices, Rebates ****& Net Cost to Payer & Patient**

- Source: Compiled by PRIME Institute, University of Minnesota.

**$ / Rx**

**$25.00**

**$12.50**

**$5.00**

**Net Rx Price**

**If the generic was the safest & most effective therapy –**

***Safest,***
***Most ***
***Effective***
***Drug ***

**Which drug product**
**would you choose? **

## Prescription Prices, Rebates & Net Cost to Payer & Patient

**Prescription Prices, Rebates ****& Net Cost to Payer & Patient**

- Source: Compiled by PRIME Institute, University of Minnesota.

**$ / Rx**

**$25.00**

**$12.50**

**$5.00**

**Net Rx Price**

***Safest,***
***Most ***
***Effective***
***Drug ***

**Which choice is best **
**for the patient? **

## Did More Rebates Result in Lowest Net Price?

**NO !**

## Relative Price (1999 $) of Prescriptions for Urinary Tract Infection 

- Source: Compiled by PRIME Institute, University of Minnesota based on data found in Archives of Internal Medicine vol. 102, Jan 14, 2002, p.41-47.

**$ / Rx**

**Prescribing Off-Patent Med  ****14**** to ****1**** Savings**

**Dispensing Generic Rx  ****4 ****to ****1**** Savings**

***Drug of Choice***

## Are Newer Drugs Always Better?

**NO !**

##  Hypertension:   NIH ALLHAT Study (JAMA 2002)
Old drugs safer & more effective, yet lower cost
Thiazides are better than alternatives such as:
ACE Inhibitors, Ca Channel Blockers, Beta Blockers
 Safer & More Effective than newer, higher priced drugs
  Urinary Tract Infections
Generic versions of sulfa combination (~$10/Rx) 
Drug of Choice for UTI
Most prescribed drugs are fluorquinolones (e.g., Cipro, ~$100/Rx)
 Arthritis	
COX-2 Inhibitors  (e.g., Celebrex) incomplete data published
Older Non-steroidal anti-inflammatory drugs are first line of therapy

** ****Hypertension:   ****NIH ALLHAT Study (JAMA 2002)**
- Old drugs safer & more effective, yet lower cost
- Thiazides are better than alternatives such as:
- ACE Inhibitors, Ca Channel Blockers, Beta Blockers
-  Safer & More Effective than newer, higher priced drugs
**  ****Urinary Tract Infections**
- Generic versions of sulfa combination (~$10/Rx)
- Drug of Choice for UTI
- Most prescribed drugs are fluorquinolones (e.g., Cipro, ~$100/Rx)
** ****Arthritis****	**
- COX-2 Inhibitors  (e.g., Celebrex) incomplete data published
- Older Non-steroidal anti-inflammatory drugs are first line of therapy

***Several recent examples of evidence-based medicine showing older drugs to be the best drugs --***

**Can Older Drugs Be Better?**

## Are PBMs Needed?

**NO !**

**Yes !**

**Can PBM ****Conflicts of Interest  Be Ignored?**

## Does Mail Order Increase Generic Use & Lower Price?

## Generic Dispensing RateBy Source of Payment

***% of All Rxs ***
***as Generic***

- Source: Compiled by PRIME Institute, University of Minnesota from information found in Drug Store News, Aug 30, 2001, p.38 and based on IMS Health data; also Medicaid data from Medicaid State Drug Utilization files with analysis and estimates by the PRIME Institute.

**Notes:**
Mercer WM. Mercer/Foster Higgins: National Survey of Employer-Sponsored Health Plans, Report of survey findings, 1997
Mercer WM. Mercer/Foster Higgins: National Survey of Employer-Sponsored Health Plans, Report of survey findings, 1998
Mercer WM. Mercer/Foster Higgins: National Survey of Employer-Sponsored Health Plans, Report of survey findings, 2000

## Various Generic Rates for Los Angeles, CA Mail Order vs Retail:  2002

**Various Generic Rates for Los Angeles, CA Mail Order vs Retail:  2002**

- Source: Compiled by PRIME Institute, University of Minnesota from data provided by CVS Pharmacy based on IMS Health data for same mix of drugs drawn from 10 most frequently dispensed therapeutic categories of drugs in mail order pharmacy from August 2001 to July 2002.

**% of Rxs**

**Mail Order**
**Pharmacy**

**Retail**
**Pharmacy**

**Mail Order**
**Pharmacy**

**Mail Order**
**Pharmacy**

**Retail**
**Pharmacy**

**Retail**
**Pharmacy**

## Do Larger AWP Discounts Assure Lower Net Pricefrom Mail Order vs Retail Networks?

**(Re-Labeler Rx)**
**AWP – 25%**
**+ $0 Disp. Fee**

**Do Larger AWP Discounts ****Assure Lower Net Price****from Mail Order vs Retail Networks?**

*Source:  Compiled by PRIME Institute, University of Minnesota from data found in PriceChek PC (Facts & Comparisons, Inc), January 1, 2003*

**Which contract terms offer the “best deal”?**

**Mail Order Rx**
**(Re-Labeler Rx)**
**AWP – 25%**
**+ $0 Disp. Fee**

**Retail Rx**
**AWP – 10%**
**+ $3 Disp. Fee**

## Net Rx Price for Retail & Mail Order (Re-Labeler) Celebrex 100 mg Cap (#60)

*Source:  Compiled by PRIME Institute, University of Minnesota from data found in PriceChek PC (Facts & Comparisons, Inc), January 1, 2003*

***Net $ /Rx***

**Retail Rx**
**AWP – 10%**
**+ $3 Disp. Fee**

**Mail Order Rx**
**(Re-Labeler Rx)**
**AWP – 25%**
**+ $0 Disp. Fee**

**How can the *****greatest AWP discount***** give the *****highest Rx price*****?**

**By assigning an inflated AWP **
**to a re-labeled originator drug product.**

**How can this happen?**

**How can the *****greatest AWP discount***** give the *****highest Rx price*****?**

## AWP Originator & Mail Order (Re-Labeler) Celebrex 100 mg Cap (#60)

*Source:  Compiled by PRIME Institute, University of Minnesota from data found in PriceChek PC (Facts & Comparisons, Inc), January 1, 2003*

***$ AWP/Rx***

**Originator Product**
**Re-labeled & Given**
**New NDC # With **
***Inflated AWP***

**Re-Labeler Buys**
**Drug at Price**
**= to or less than**
***Originator Price***

**AWP *****Inflated***** **
**77% Over **
**Originator AWP**

**Does this really happen?**

**Patented Drug**
**-------------------------**
**No Generics**
**on Market**

**AWP Originator & Mail Order ****(Re-Labeler) ****Celebrex 100 mg Cap ****(#60)**

## Actual AWPs Listed in Price Database Celebrex Cap 100 mg (Jan 1, 2003)

*Source:  Compiled by PRIME Institute, University of Minnesota from data found in PriceChek PC (Facts & Comparisons, Inc), January 1, 2003*

*$/Unit*

**15 Re-Labeler Products With Inflated AWP**

**Orig AWP**

**AWP Inflation vs Original AWP**

**3 Originator **
**NDCs with**
**Same AWP**

**2% to 77%**

## Net Rx Price for Retail & Mail Order (Re-Labeler) Celebrex 100 mg Cap (#60)

*Source:  Compiled by PRIME Institute, University of Minnesota from data found in PriceChek PC (Facts & Comparisons, Inc), January 1, 2003*

***$ AWP/Rx***

**A Larger Discount**
**May Cost You More ! ! !**

**In this case . . .**
**47% More than Retail **

**Net Rx Price for Retail & Mail Order ****(Re-Labeler) ****Celebrex 100 mg Cap ****(#60)**

**Even with the *****larger discount*****, **
**the *****Re-Labeler Net Price is still ***
***higher *****than the *****Retail Net Price*****.**

**Even with the *****larger discount*****, **
**the *****Re-Labeler Net Price ******is still ***
***higher *****than**** the *****Retail Net Price*****.**

**Retail Rx**
**AWP – 10%**
**+ $3 Disp. Fee**

**Re-Labeler Rx**
**AWP – 25%**
**+ $0 Disp. Fee**

##  Re-Labeled Drugs May Have Inflated AWPs
Many Re-Labeled Drugs Are Single Source Brand Names
A New NDC # is Assigned with a Higher AWP (↑as much as 500%)
More Than 3⁄4 of All Brand Name Drugs Have Re-Labeled Versions
Who Are the Re-Labelers?
Drug Marketing Firms That Buy Their Product from the Originator
Re-Labelers Sell Only to a Limited Class of Clientele
Re-Labeler Firms Usually Will Not Sell to Retail Pharmacies
 Who Takes Advantage of These Inflated AWPs? 
Mail Order Pharmacies & PBMs 
Physician Dispensers & Clinics
Some Closed System Pharmacies (e.g., Long Term Care or Hospitals)

** ****Re-Labeled Drugs May Have Inflated AWPs**
- Many Re-Labeled Drugs Are Single Source Brand Names
- A New NDC # is Assigned with a Higher AWP (**↑**as much as 500%)
- More Than 3⁄4 of All Brand Name Drugs Have Re-Labeled Versions
**Who Are the Re-Labelers?**
- Drug Marketing Firms That Buy Their Product from the Originator
- Re-Labelers Sell Only to a Limited Class of Clientele
- Re-Labeler Firms Usually Will Not Sell to Retail Pharmacies
** ****Who Takes Advantage of These Inflated AWPs? **
- Mail Order Pharmacies & PBMs
- Physician Dispensers & Clinics
- Some Closed System Pharmacies (e.g., Long Term Care or Hospitals)

***Contrary to the common sense notion, ***
***a bigger discount may not deliver a lower price because --***

**Bigger Discounts ****Don’t Always Mean Lower Prices**

## Major Sources of Growth in MedicaidDrug Expenditures

**Major Sources ****of Growth in ****Medicaid****Drug Expenditures**

## Sources Driving Rx Payment Growth: 

**Sources Driving Rx Payment Growth: **
**1980 to 2002  ****(Constant 2002 $)**

**Avg. Rx **
**Payments**

**Drug Product Payments**

- Source: Compiled by the PRIME Institute, University of Minnesota from data found in *Pharmaceutical Benefits Under Medical Assistance Programs, *National Pharmaceutical Council, 1975 to 2002

**Pharmacy Fee Payments**

**$ / Rx**

## Medicaid Rx Payment Components: 1980 to 2002 (Constant 2002 $)

**Medicaid Rx Payment Components: ****1980 to 2002 ****(Constant 2002 $)**

**$ / Rx**

**Drug Product Payment**

**Dispensing Fee Payment**

**Rebate Amount**

- SOURCE: Compiled by the PRIME Institute, University of Minnesota from data found in Pharmaceutical Benefits Under State Medical Assistance Programs, National Pharmaceutical Council, 1976 to 1998.

## Factors Contributing to Change in Medicaid Drug Expenditures:1992 to 2002  (Constant $)

**Factors Contributing to Change in Medicaid Drug Expenditures:****1992 to 2002  ****(Constant $)**

- Source: Compiled by the PRIME Institute, University of Minnesota from data found in *Pharmaceutical Benefits Under Medical Assistance Programs, *National Pharmaceutical Council, 1975 to 1998

**10-year **
**% Change**

## Drug Rebates as a % of Total Drug Expenditures

**% of Drug **
**Product Cost **(AMP)

**% of Total **
**Drug Expenditures**

**% of Medicaid**
**Drug Expenditures**

- Source: Compiled by the PRIME Institute, University of Minnesota from data found in *Pharmaceutical Benefits Under Medical Assistance Programs, *National Pharmaceutical Council, 1975 to 1998 and in HCFA Form 64.

## Steps in Drug Rebate Programs

**Mfg Sells **
**Drug To **
**Wholesaler**

- Source: Compiled by the PRIME Institute, University of Minnesota

**0.5 ****months**

**Pharmacy Buys Drug From **
**Wholesaler**

**2 ****months**

**Patient**
**Goes to Pharmacy for Rx**

**Pharmacy**
**Waits to Get Paid by MediCal**

**# of MediCal Rxs for Each Quarter Are**
**Tracked**

**MediCal ****Sends Bill to Drug Firm for Rebates**

**Drug Firm Reviews Drug Use & Pays Rebate**

**1 ****month**

**3 ****months**

**1 ****month**

**1.5 ****months**

**** Rebates Provide a 6.5 Month Govt. Loan to Drug Firms***

**** California Rebates in 2003 Will Be $1 Billion***

**Govt. Funds *****Loaned***** for 6.5 ****months**

## Has Past Regulation Adversely Impacted Drug Firm R&D?

**Has Past Regulation Adversely Impacted ****Drug Firm R&D?**

## Drug Firm R & D Expenditures 1970 to 2000

**Drug Firm R & D Expenditures ****1970 to 2000**

**Hatch-Waxman**

**OBRA ’90 **
**(Medicaid**
** ****Rebate)**

- Source: *Pharmaceutical Manufacturers & Research Association, PhrMA Annual Survey, 1999, Table 2.*

**$ (billions)**

## Drug Firm R & D as % of Sales 1970 to 1999

**Drug Firm R & D as % of Sales ****1970 to 1999**

**Hatch-Waxman**

**OBRA ’90 **
**(Medicaid **
** ****Rebate)**

- Source: *Pharmaceutical Manufacturers & Research Association, PhrMA Annual Survey, 1999, Table 2.*

**% of Sales Revenue**

## The Value of Innovation 

** **
**realized only when a person  **

**“****The value of innovation is**

**has access to, and properly**
**	****	****	****	****	**

**uses, a needed medication. ****  **
**	****	****	****	****	**

## Drug Firm, Fortune 500 Firm & Pharmacies

**Drug Firm, Fortune 500 Firm & Pharmacies**
**Net Profit as % of Sales: 1970 to 2000**

**Hatch-Waxman**

**OBRA ’90 **
**(Medicaid **
** ****Rebate)**

- Source: Fortune 500 issue, April each year.

**Net Profit as % of Sales**

**Drug Firms**

**Fortune 500**
**(median)**

**Pharmacies**

## Profit as % of Sales for Selected Industries (Fortune Magazine)

**Profit as % of Sales for ****Selected Industries **(Fortune Magazine)

- Source: Compiled by the PRIME Institute, University of Minnesota from data found in Fortune magazine.2000

**Profit as **
**% of Sales**

**Fortune 500 **(median)

## Estimated Relative Price Compared to AWPfor Prescription Drugs at Manufacturer Level (2000)

**Estimated Relative Price Compared to AWP****for Prescription Drugs at Manufacturer Level**** (2000)**

- Source: Data derived from _Prescription Drugs: Expanding Access to Federal Prices Could Cause Other Price Changes_, U.S. General Accounting Office, GAO/HEHS-00-118, August 2000 and  _How the Medicaid Rebate on Prescription Drugs Affects Pricing in the Pharmaceutical Market_, Congressional Budget Office Papers, January 1996.

## Relative Price Level for Same Branded Drug at Manufacturer Levelby Market Segment or Country

**Relative Price Level for Same Branded Drug ****at Manufacturer Level****by Market Segment or Country**

- Source:  Data from Patent Medicine Price Review Board, Sept. 1998, p.14 and Dorland’s Biomedical, 1998, p. I-109.

## Drug Price Changes in the U.S. & Various Countries:  1999-2000

**Drug Price Changes in ****the U.S. & Various Countries:  1999-2000**

- Source:  Data from various articles in Scrip during 1999 and 2000.

## Role of Drug FirmVoluntary Efforts

**Role of Drug Firm****Voluntary Efforts**

** ****Drug samples**
** ****Indigent care programs**
** ****Senior discount cards**
** ****Temporary Help:**
** ****But Can Disappear at Will of Drug Firm**

***What is role of drug firm efforts?***

## Pharmaceuticals Are An Asymmetric Market 

**Pharmaceuticals Are An Asymmetric Market **

**Directed-Demand** (physicians, pharmacists, PBMs, others)
**Insurance Coverage & Subsidies **(govt. & private)
**Prices, Discounts, & Rebates Hidden **
**Economics of Industry vs. Therapeutic Market**

***The Pharmaceutical Market Differs from ***
***Other Markets:***

##  PBM revenue from drug firms 
PBM gets hidden rebates, not 
Drug firms pay other fees for data, research studies, etc.
 Higher-priced drugs sometimes preferred drug on formulary 
  Medicare Over-Pays Office-Based Drug	
Physicians & clinics receive discount > community pharmacies 
Physician makes more from Medicare on higher cost drugs 
Higher-priced drugs become the most prescribed drugs
 Generic Firms Paid Not to Enter Market	
Brand firms pay 1st generic approved not to market  
Payments more than generic firm would make in market
Brand firm continues with price at 2 to 4 times the market-based price

** ****PBM revenue from drug firms **
- PBM gets hidden rebates, not
- Drug firms pay other fees for data, research studies, etc.
-  Higher-priced drugs sometimes preferred drug on formulary
**  ****Medicare Over-Pays Office-Based Drug****	**
- Physicians & clinics receive discount > community pharmacies
- Physician makes more from Medicare on higher cost drugs
- Higher-priced drugs become the most prescribed drugs
** ****Generic Firms Paid Not to Enter Market****	**
- Brand firms pay 1st generic approved not to market
- Payments more than generic firm would make in market
- Brand firm continues with price at 2 to 4 times the market-based price

***Pharmaceutical Firms have been able to ***
_***reverse the economic flow ***_*** in the Rx market ***
***to co-opt major players:***

**Reverse & Perverse Economics**

##  PBM Revenue from Drug Firms 
 Creates Conflict of Interest with Client’s Expectations
 Medicare Over-Pays for Office-Based Drug	
 Doctor Has Incentive to Prescribe Highest Priced Drug
 Brand Firms Pay Generic Firms Not to Enter Market
 Cost of Settling Lawsuit Less than Added Revenue

** ****PBM Revenue from Drug Firms **
** *****Creates Conflict of Interest with Client’s Expectations***
** ****Medicare Over-Pays for Office-Based Drug****	**
** *****Doctor Has Incentive to Prescribe Highest Priced Drug***
** ****Brand Firms Pay Generic Firms Not to Enter Market**
** *****Cost of Settling Lawsuit Less than Added Revenue***

***Pharmaceutical Firms have been able to ***
_***reverse the economic flow ***_*** in the Rx market ***
***to co-opt major players:***

**Reverse & Perverse Economics**

## What Can States Do? 

## State Strategies to Increase Access

**State Strategies to Increase Access**

**State as Regulator    **[ME, VT, most developed countries]
***Utility Model:  *****Drugs as Public Good**
**State as Wholesaler  **[Europe, VT considered, untested in US]
***Controlled Distribution:  *****State Liquor Stores***** ***
**State as Prudent Purchaser   **[IA market, OR ref prices]
***Market-based Competition:  *****Competitive Bidding**
***Payment-Limits Model: *****Set Maximum Payment / Reference Price**
**State as Subsidizer    **[PA, NY, NJ ME, SD, VT, border states]
***Welfare Program Model: *****Medicaid or Food Stamps**
**State as Importer    **[VT, ME, SD, border states]
***Importation from Canada: *****Free Trade Approach**

## What Have We Learned?

**What Have We Learned?**

**Source of Growth is ******** Use & Mfg Price**
***Inappropriate Use & High or Growing Prices***
**Volume Alone Does Not Lower Price**
***Market Share Movement Does Influence Price***
**Price Controls Do Not Flow Upstream**
***Pharmacy Prices Controlled, Drug Mfg Price is Not***
***Limiting Pharmacy Fees Will Not Control $/Rx Growth***
**Must Anticipate Behavior of All Players**
***Patients, Physicians, Pharmacists, Drug Firms &***
***	******Federal & State Policymakers***

## Don’t Accept the Obvious Assumptions

**Trust and verify!****-- ***** former President Ronald Reagan******    speaking on nuclear disarmament.***

** ****Drugs are a Small Part of Health Spending**
-  **Drug Price Is a Small Part of the Problem**
** ****Volume Gets You Lower Price**
** ****PBMs Are Working for Your Best Interests**
** ****Mail Order Will Increased Generic Use**
** ****More Rebates Means Lower Net Cost **

## How Can the Market Forces Be Restored?

**Require Transparency of ****Relationships & Prices ****At All Levels in the Market**

## Goals of Price Transparency 

**Goals of Price Transparency **

-  **Economic Efficiency in Rx Market**
** ****Accurate Price Information in Market**
** ****Empower Buyers to Better Negotiate**
** ****Access to Actual Price Information by ****	****	****	****Buyers, Policymakers & Researchers**
** ****Accountability of Pharmaceutical Firms for Price  ****	****& R&D Investment**

***5 Basic Goals:***

## Partnership With:

**Partnership With:**

** ****Patient**
** ****Physician**
** ****Pharmacist**
** ****Payer **** **(*If someone else is helping to pay*)
-  **Policymakers**
***     ******	******All parties must collaborate to choose***
***     ******	******the best value for the money!***

## PRIME Institute	P 	R 	I 	M 	E 

**	**** *****harmaceutical***
**	**** *****esearch****** ***
**	*****n***
**	****  *****anagement &***
**	**** *****conomics ***

**University of Minnesota**