Use feds' price list to cut cost of prescription drugs

January 27, 2004

A prescription drug bill passed last week by the West Virginia House of Delegates could save the state more than $300 million a year.

But pharmaceutical industry lobbyists say that price controls don't work, and may have adverse effects on the quality of health care.

Bankrupting the state's Medicaid system wouldn't help the health care system either, so we recommend the Legislature move this bill forward.

The bill would have West Virginia adopt the Federal Supply Schedule of prices, based on what suppliers charge their "most favored" private customers. According to The Associated Press, FSS prices are 42 percent under what is charged to most retail customers.


AP also reported that the $300 million-a-year estimate of savings came from a 2000 report done by the Boston University School of Public Health.

That study also estimated that if all states adopted the FSS price list, the annual savings nationwide would be $35.3 million.

There is some risk in this approach, because although several states have considered such a move, West Virginia would be the first state to actually follow through with enacting it. And the Boston University study said that drug manufacturers could raise prices to offset lost revenues.

That would be a good argument for locking in the present FSS prices in the legislation, with some sort of an escalator clause for inflation. There should also be some sort of an appeal mechanism included, so the pharmaceutical companies could argue for compensation over and above the FSS price, if the cost of producing a new drug justified it.

But whatever form the bill finally takes, there's no arguing that some change isn't necessary. Pharmaceutical prices rose by 10 percent in the past 12 months, according to industry analysts - and by 18 percent a year between 1997 and 2001.

At some point we'll hear how the free market will sort all of this out, but that assumes that citizens are able to comparison- shop for their drugs.

Yes they can, if it's aspirin. But if the doctor prescribes a drug and specifies no generic substitutions, patients risk their health if they don't follow instructions. It's time to instruct drug companies to follow the FSS price list.

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