FOR YOUR INFORMATION................................JUNE 30, 1992
CALIFORNIA BILL MAY DISCOURAGE COMPETITION, RAISE PRICES FOR CONSUMERS IN PREPAID HEALTHCARE PROGRAMS, FTC STAFF CAUTIONS
A proposed measure before the California State Senate, ex- pecting to give consumers greater freedom to choose where they obtain covered pharmacy services, could eventually raise prices and limit consumers' choices under health care plans, staff of the Federal Trade Commission said in comments made public today. At issue is the ability of health insurance companies to arrange for pharmacy services through contracts with pharmacies not located in California. Senate Bill 1986 would prohibit health insurance companies from entering exclusive contracts for pharmacy services with non-California companies, which typically fill prescriptions by mail. Further, it would require health insurers to allow California companies to learn about and obtain pharmacy-service contracts on the same terms and conditions as non-California firms.
The FTC staff comments were made in the form of a letter signed by Michael O. Wise, Acting Director of the FTC's Office of Consumer and Competition Advocacy, in response to a request from California State Senator Patrick Johnston. If the bill is enacted, the staff said, it may limit the ability of health insurers to cut the cost of delivering health care.
Specifically, the FTC staff said, the bill would take away two means of ensuring that a contracting pharmacy would obtain a sizeable portion of a subscriber's business. First, the bill would discourage contracts for pharmacy services with firms that "may be competively important, that is, those that are non- residents." Second, it would eliminate contracting with a non- resident firm on an exclusive basis and offering incentives for consumers to use its services.
- more - (Calpharm--06/30/92)
Without assurances that it can count on a certain volume of a health insurer's subscribers, a potential contracting pharmacy may be unable to offer lower-price terms or additional services. The FTC staff also said the bill, by encouraging providers only to match the terms of a contract with a non-California company, would decrease incentives for pharmacies to compete with each other. Health insurers could end up paying higher prices for pharmacy services as well as higher administrative costs -- which, in turn, could raise consumer prices and limit consumers' choices in prepaid health care plans, the staff said.
These comments reflect the views of the FTC's Office of Consumer and Competition Advocacy, and not necessarily the views of the Commission or any individual Commissioner.
Copies of the staff comments are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY 202-326- 2502. # # #
MEDIA CONTACT: John Leslie III, Office of Public Affairs 202-326-2178
STAFF CONTACT: Michael O. Wise, Office of Consumer and Competition Advocacy, 202-326-3344