Federal Trade Commission Staff Cites Opposition to North Dakota PBM Bill

In a comment submitted to North Dakota State Senator Richard L. Brown at his request, staff of the Federal Trade Commission’s Office of Policy Planning, Bureau of Economics, and Bureau of Competition stated that House Bill (HB) 1332, which currently is pending in the legislature, might have the unintended consequences of increasing the price of pharmaceuticals within the state and ultimately decreasing the number of North Dakotans with insurance coverage for pharmaceuticals. In his letter, Senator Brown asked the FTC to examine the bill to determine “whether the proposed legislation is anticompetitive and will likely result in the increased cost of pharmaceutical care for consumers.”

According to the comment, HB 1332 would regulate PBM’s contracts with pharmacies and prohibit certain drug substitutions. By prohibiting a PBM from discriminating “on the basis of copayments or days of supply” when contracting with pharmacies and requiring that “a contract must apply the same coinsurance, copayment, and deductible to covered drug prescriptions” to all pharmacies or pharmacists in a network, staff wrote, HB 1332 would prevent health plans from designing benefit plans to encourage participants to use network pharmacies that provide drugs to the plan at a lower cost than other network pharmacies. As a result, HB 1332 would cause both the consumers and health plans to miss out on the savings they could have shared by using the low-cost pharmacy. A potential secondary effect, staff wrote, is that low-cost pharmacies may lose the incentive to offer lower prices to plans under such a uniform copayment structure.

The letter also noted that HB 1332 may limit some drug substitutions to those that are “for medical reasons that benefit the covered individual.” As a result, according to FTC staff, the bill would prevent a PBM from switching a prescription for one brand-name drug to a less-expensive equivalent with similar therapeutic effects, unless the switch was made for medical reasons. By making safe and price-reducing substitutions less common, the bill is likely to increase the price of drugs, leading to higher health insurance premiums and reductions in the availability of pharmaceutical insurance coverage. At the same time, according to the staff, because North Dakota law already requires physician approval before one branded drug may be switched for another, there already are safeguards in place to protect consumers from inappropriate substitutions.

In concluding its comment, the staff wrote, “HB 1332 is likely to limit a PBM’s ability to reduce the cost of prescription drugs, without providing consumers any additional protections. Any such cost increases are likely to undermine the ability of some consumers to obtain the pharmaceuticals and health insurance they need at a price they can afford. Accordingly, we would urge the North Dakota legislature not to adopt HB 1332.”

The Commission vote authorizing the staff to submit the comment to North Dakota State Senator Richard L. Brown was 5-0. Copies of the comment can be found on the FTC’s Web site as a link to this press release.

Copies of the documents mentioned in this release are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. Call toll-free: 1-877-FTC-HELP. The comments represent the views of the staff in the FTC’s Bureau of Consumer Protection, Bureau of Economics, and Office of Policy Planning and not those of the FTC or any individual commissioner.