SCOTUS Ruling Opens Door for Big Pharma Windfall, Higher Rx Prices

January 11, 2021

Rutledge v. Pharmaceutical Care Management Association.

When it comes to rising health and drug costs, this may be the most important United States Supreme Court decision you’ve never heard of.

In the case which was decided a few weeks before the holidays, the Court unanimously upheld a 2015 Arkansas law that mandates patients, through their insurer’s PBM, pay no less for their medicine than what it costs the pharmacies to obtain it.

For example, if a pharmacy pays $450 to stock Drug X, then at a minimum you, through your insurance premiums or deductible, must pay $450 for Drug X.

On its face, this may seem fair. Pharmacies are businesses with expenses and overhead. They provide an essential, and often high-quality service. They need money to operate.

The problem, however, isn’t with the pharmacists. It’s with the huge pharmaceutical manufacturers who set the prices.

What’s to stop the Big Pharma company who originally priced Drug X at $450 dollars from raising that price tag to $1,450

Pharmacists will know it’s not a fair price for their customers, but they’ll buy the drug anyways. They know people can’t live without it, and because of the pricing mandate, it will now cost you at least $1,450.

In the end, your costs go up, the pharmacy is protected from losses, and Big Pharma cashes in.

Last year, before the Supreme Court case was decided, there were similar attempts by some in the North Carolina General Assembly to handcuff the ability of your insurer’s PBM to negotiate drug prices.

While those efforts thankfully failed, the Arkansas law and court’s ruling have exposed a dangerous policy blueprint that could costs consumers millions of dollars in inflated drug costs.   

Much like in Arkansas, the legislators in North Carolina said they were pursuing drug price mandates to protect small, independent pharmacists. 

Protecting independent pharmacists is a worthy goal. Mom and pops struggle to compete against the likes of CVS and Walgreens. The big chains have a far greater purchasing power, which means they can negotiate better deals.

But you don’t protect independent pharmacists by making the consumer pay more for their medicine – you do it by lowering the price Big Pharma charges for their drugs through a more competitive marketplace. 

The mega-pharmaceutical manufacturers are the ones who set the price of the product – and those prices are yielding them massive profits.

Between 2000 and 2018, 35 big drug companies received a combined revenue of $11.5 trillion, with a gross profit of $8.6 trillion. That pure profit is almost twice as high as the 357 non-pharma companies in the S&P 500.

Among the 25 biggest pharma companies, the average profit margins were about 15 to 20 percent. For comparison, hugely successful brands like Target (4.31 percent) and Walmart (1.01 percent) had considerably thinner margins.

It’s no wonder prescription drugs are driving the cost of health care in our country. More than 20 cents of every dollar spent on health care is going to Big Pharma, outpacing doctor, emergency, and surgical visits.

Any mandates that require consumers to pay more will only add to Big Pharma’s bottom line.  

And they’ll do it by forcing you to pay more at the pharmacy counter.


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