Truth is the Best Medicine….Get the facts on prescription drug costs…Facts about formularies and how drug companies manipulate the truth

Myth: Formulary management and limitations on drug prices in other countries discourage research into new treatments and restrict access to necessary medicines

Fact: Other countries base formularies on clinical outcomes and the comparative  effectiveness of drugs

Australia’s Pharmaceutical Benefits Scheme (PBS), which sets a comprehensive national drug formulary, subsidizes new drugs based on evidence of improved health outcomes and cost effectiveness over existing drug treatments.1 In Canada, provincial drug benefit plans that provide coverage for most elderly, disabled, and low-income individuals utilize cost management approaches based on clinical evaluations to negotiate with manufacturers to get the best price among similar medicines. Other insurers are then able to also get those lower prices because the provincial plans publish the prices in their formulary.2

Fact: National health programs in other countries use formularies and prices to reward innovation

While average drug prices in European countries and Japan are generally substantially lower than American prices, prices for innovative biologics are actually as much as 20 percent higher._

“The key here is that European and Japanese authorities are willing to approve high prices for therapies that represent innovation and clinical superiority relative to older therapies.”3

Fact: Part D plans base formularies on secret rebates from drug manufacturers

Unlike the health programs in many countries, Part D plans are not bound by independent, clinical assessments of drugs when making coverage and pricing decisions. Part D plans negotiate drug manufacturers to cover their drugs in exchange for rebates. Those rebates are kept secret and are not reflected in the prices people with Medicare pay at the pharmacy counter. Though Medicare is moving toward a system of tying doctor and hospital payments to quality measures, payments for drugs and to the private Part D plans are not linked to measures of clinical effectiveness.

1 Personal communication with Dr. Ruth Lopert, Australian Government Department of Health and Ageing

2 “Prescription Drug Prices in Canada: What Are the Lessons for the U.S.?” AARP, July 2003. http://www.aarp.org/research/international/perspectives/jul_03_rxprices_canada.html

3 2005 Chartbook of International Pharmaceutical Prices, Research and Markets, December 2005.(http://www.researchandmarkets.com/reports/c32018/)

The National Legislative Association on Prescription Drug Prices (NLARx) is a nonpartisan, nonprofit organization of state legislators from across the country who advocate for lowering prescription drug costs and increasing access to affordable medicines. Legislators from the District of Columbia and all of the New England states plus Pennsylvania, New York, West Virginia, Oklahoma, Texas, Alaska, Arizona, and Hawaii are members of NLARx. 

The Medicare Rights Center (MRC) is the largest independent source of health care information and assistance in the United States for people with Medicare. Founded in 1989, MRC helps older adults and people with disabilities get good, affordable health care.

Public Citizen is a national, nonprofit consumer advocacy organization founded in 1971 to represent consumer interests in Congress, the executive branch and the courts.