Amid dire economic conditions brought on by the pandemic and exacerbated by the recent weather conditions, Texas legislators are eyeing policies on prescription drug prices that could jeopardize Texas employers’ ability to provide vital accompanying health care and prescription drug coverage.
Health insurance costs for prescription drugs are now higher than for any other expense, including patient hospital costs and doctors’ payments. The cost of health insurance is ranked as the single biggest problem and priority for Texas small-business owners in a recent National Federation of Independent Business survey of members.
Despite these ongoing economic hardships, drug makers continue to raise their prices. In January alone, drug makers increased prices for over 800 drugs by an average of 4.6 percent, almost twice the predicted inflation rate for the entire year of 2021. The average cost of insulin, for example, grew by 750 percent from 2002-2019.
Texas policymakers should be applauded for recognizing there’s a prescription drug affordability problem for too many people; however, government mandates aren’t the answer.
Unfortunately, in this legislative session, dozens of prescription drug regulatory, contract or benefit mandate bills have been proposed that would dramatically increase health care costs.
For example, a policy change that legislators are considering referred to as “Non-medical Switching” or “Frozen Formulary” would significantly increase prescription drug costs by eliminating the free market forces that help drive down the cost of drugs. These bills mandate that a health plan cover brand name drugs at the same level for years, even when better and less expensive alternatives become available.
That provides drug manufacturers with the ability to charge any price with no incentive to make drugs more affordable. Texas employers currently have — and need — the flexibility to cover new drugs, often less expensive generics or lower-priced brands, once available.
A new report prepared by the research firm Milliman found that “Frozen Formulary” legislation would increase Texas’ drug costs by $69 billion this year and $481 billion over the next five years.
Another proposal intends to prohibit Texas employers from implementing value-based contracting with pharmacies. The shift to pay-for-performance contracting is happening in all other health care delivery areas as Texas patients demand the most value for their hard-earned health care dollars. Pharmacies should be held to the same account.
The Texas Legislature also has proposed legislation prohibiting copay accumulators, a valuable tool used to expose big pharma’s market manipulation through coupons. The use of coupons prohibited by Medicare is simply a clever marketing tactic to protect market share and incentivize patients to take higher-priced name drugs when a lower-priced equivalent is available. By accounting for these costs, employers can provide overall lower-cost health plan options, meaning lower premiums for all participants.
These are difficult economic conditions, but Texas employers are committed to taking care of their employees by providing high-quality health care coverage that includes access to affordable prescription drugs. As small employers, we urge the legislature to pursue policies to reduce prescription drug costs by leveraging market forces that foster competition and lower drug costs.