Drug Store News: Congress' plan could cost drug stores more - Washington Perspective

Congress' plan could cost drug stores more

Over the past few weeks, a pair of major new drug "reform" proposals were unveiled by Congress and the administration - initiatives that their proponents hope will significantly reduce the cost of prescription medicines throughout the country.

But while they share the same basic objective - lower prescription prices - the alternatives advanced in Congress and at the White House couldn't be more different.

For his part, Senate Aging Committee Chairman David Pryor (D-Ark.) has introduced legislation aimed at forcing pharmaceutical manufacturers to avoid price increases that exceed the annual rise in the Consumer Price Index of inflation.

Pryor, the Congressional godfather of the current Medicaid rebate law, is far from happy with how that particular prescription cost containment scheme is working.

Although drug manufacturers are grudgingly agreeing to offer Medicaid their "best prices," they are achieving that end by raising pharmaceutical prices to institutions which previously enjoyed deep discounts from the industry.

These discriminatory pricing practices have always irritated the drug store industry, and no retail druggists should lament their passing. But increases in the discriminatorily low drug prices available to hospitals haven't produced any reductions in pharmaceutical prices to drug stores.

If anything, drug prices to retailers may be rising even faster now as manufacturers maneuver to offset forced price cuts to Medicaid.

Pryor's latest solution involves more cost-containment tinkering. This time he wants to blackjack manufacturers into holding the line on prices by eliminating the Section 936 (Puerto Rican) tax credit for companies who raise drug prices faster than the overall CPI.

Additionally, Pryor's bill would create a new federal bureaucracy - the "Prescription Drug Policy Review Commission" - whose sole job would be to come up with new ways to tweek the pharmaceutical industry (e.g. compulsory licensing or reduced patent protection for manufacturers who charge "too much" for pharmaceuticals).

Not surprisingly, the Pharmaceutical Manufacturers Association has denounced Pryor's plan as "another short-sighted health care cost containment measure" that could backfire by discouraging research and development of new drugs able to significantly reduce the nation's health costs.

In contrast, the Bush Administration's plan seeks to lower the cost of prescription drugs by making the process for approving new prescription products more efficient.

By streamlining the Food and Drug Administration's lead-footed pre-market reviews of New Drug Applications, the President's Council on Competitiveness hopes to significantly reduce the current 12-year process for clearing pharmaceuticals for safety and effectiveness.

If important new drugs can be brought to market six months or a year faster, manufacturers will have substantially more time to recoup their enormous ($231 million per drug) R&D investment, and the price of new pharmaceuticals should be measurably lower.