Study shows North Dakotans would benefit from lower prescription drug prices

by Jacqueline Dotzenrod

PharmacistsMortar.svgNorth Dakotans stand to save in several ways if the pharmacist-ownership law is repealed this legislative session. According to the law, a licensed pharmacist must “hold the majority stock” (own at least 51 percent) of the business. North Dakota is the only state to have such a law in place. House Bill 1440 would repeal that law, thus allowing residents access to lower-cost prescription medication.

“As a legislator, how do I tell my constituents that they shouldn’t have the opportunity to buy prescription medication at the lowest possible price,” asked Rep. Bob Martinson, who introduced the bill to repeal the law.

Comparing North Dakota prescription prices to prices in states without an ownership law, residents would save an average of $16.92 per fill. Annual savings for users of Lipitor or Prevacid would amount to more than $130 and $250 respectively, according to an impact study done by Dr. David T. Flynn from the University of North Dakota.

“The report employs economic impact analysis to study the effects of a proposed change in North Dakota’s pharmacy ownership rules,” Flynn said. “The results indicate significant economic benefit to the state economy.”

The reason prescription prices are high in North Dakota, is because the law inhibits low-cost providers, such as Walmart, Target and Walgreens as well as regionally-based corporations such as Hugo’s and Pamida, from entering the market and fostering competition. While other states have been enjoying an eight percent decrease in prescription costs over recent years, North Dakota drug prices have been increasing at a rate of two percent annually. And it’s not only because low cost providers offer many prescription medications for just four dollars on the most commonly prescribed drugs.

Thrifty White, a Minnesota-based company, owns 28 pharmacies in North Dakota. Because it is an employee-owned corporation, it can operate in this state under the pharmacist-ownership law. It also does not have to compete with low-cost providers like it does in other states. As a result, North Dakota consumers do not get the same prices as their Minnesota neighbors. In a list of the most commonly prescribed prescription drugs, Thrifty White often charges its North Dakota customers more than Minnesota customers. For example, a prescription for 40mg of Fluoxetine can be filled at Walmart for four dollars. In Minnesota, Thrifty White will charge its customers $37.52. North Dakota customers are charged $72.09.

“Competition benefits consumers and as a result benefits the overall economy in North Dakota,” added Flynn. But consumers aren’t the only ones who stand to benefit from lower-cost prescriptions.

Blue Cross Blue Shield of North Dakota provides health insurance coverage for 350,000 North Dakotans.

“Ultimately, any savings in health care costs help keep member premiums as low as possible, and BCBSND supports its members’ choices to make the best buying decisions to save money,” Denise Kolpack said. “As a health care industry leader, BCBSND is in favor of the repeal of the pharmacy ownership law because it believes such a change will save North Dakotans money on prescription medication.”

Kolpack, BCBSND Vice President of Corporate Communications, adds that while the ultimate impact depends on consumer choices and buying behaviors, the company estimates a realistic annual savings for members of $6.3 million. The savings is a combination of a projected savings of $5 million on brand-name medications and $1.3 million in savings from the availability of discount four-dollar generic drugs.

“When market forces and increased competition are factored in, similar to what has been experienced in other states, BCBSND estimates as much as $5 million in additional savings could result,” Kolpack added.

North Dakota Medicaid Director Maggie Anderson also ran the numbers and found the state could save more than $92,000 over the next biennium.

“We estimated our savings for the 2009-2011 biennium at a total of $248,882,” Anderson said. “We have a federal-state share. Of that, $92,037 would be state general fund savings.”

The savings could either go back into the general fund, or be used to assist more individuals.

“That would be a decision of the legislature,” Anderson added. “We built our budget without the consideration of the pharmacy bill. If the pharmacy bill passes, then it’s the legislature’s decision as to if that money is removed or kept in our budget.”

In addition to savings for individuals, insurance companies and social programs, Flynn’s findings indicate that repealing the law would benefit North Dakota’s overall economy.

“I have heard from many people about ever-rising drug prices and the adverse impacts on low-income households, people living on fixed incomes and many others on a frequent basis,” Flynn said. “In fact, there is another group that suffers as a result of price increases but we seldom hear about – those with good incomes but significant medical expenses. These households have typically made a choice to spend any amount necessary on medical care for family members and therefore sacrifice on other expenses, such as household and consumer goods.”

Flynn estimates that repealing the law would generate from $11.9 million – on the conservative end – to $49.6 million in additional output through consumer spending and other factors. With the output increase, there would be 82 to 350 new jobs created and an additional $437,000 to $1.85 million in tax revenue.

Flynn’s report can viewed here.

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  1. Supporters of ownership law battle ethics charges, flip-flopping « Just One Take

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