NY Legislature Considers Prescription Drug Pricing System

PRESCRIPTION DRUGS January 1995

A proposed bill in the last session of the New York legislature would change the way drug companies charge for prescription drugs (Michael Hill, "Pharmacies Rap Drug Firms Over High Prices," The Daily Gazette (Schenactady, NY), Nov. 7, 1994, p. B8).

The bill, proposed by State Assemblyman Ivan Lafayette of Queens, would outlaw drug companies' current practice of offering deep discounts to Health Maintenance Organizations (HMOs) and other groups while charging full price to pharmacies.

HMOs, hospitals, nursing homes, and mail-order businesses are now offered discounts on drugs by manufacturers if they agree to carry one brand of medicine exclusively. Pharmacies complain that they are unable to compete because they must offer different brands.

Supporters of the bill say that the current system is anti-competitive and harms low-income people.

"In many cases, it is either food or medicine for people," said senior citizen advocate Leon Von Holden. "If the corner drug store is charging a rate that is taking food our of their mouths, then we're in trouble." People without insurance must purchase medications at a pharmacy, thus paying a higher price.

Critics of the bill say drug prices will go up for everyone if the measure is passed. Discretion in pricing plans is necessary for drug companies to compete, they say.