Hospitals, industry battle over discounts

April 1, 1997

Pharmaceutical Representative

A coalition of the National Association of Public Hospitals and Health Systems, New York, believes that if state and local health care facilities had access to federal discounts on drugs, they would save millions of dollars without raising prices for the government and the private sector.

A coalition of the National Association of Public Hospitals and Health Systems, New York, believes that if state and local health care facilities had access to federal discounts on drugs, they would save millions of dollars without raising prices for the government and the private sector.

The study, conducted by the Prime Institute at the University of Minnesota College of Pharmacy, found that allowing state and local health care facilities to have access to federal supply schedule prices on drugs and related equipment would have a negligible cost-shifting impact on the rest of the pharmaceutical market while saving taxpayers million of dollars.

In response, the drug industry's Washington-based trade association, the Pharmaceutical Research and Manufacturers of America, called the hospitals' proposal for discounts a "price-control scheme in sheep's clothing."

"By definition, discounts are reductions negotiated in the marketplace," said PhRMA President Alan Holmer. "Mandating arbitrary discounts is just a euphemism for imposing price controls. It's an unacceptable intrusion into the market. Most important, it will hurt innovation and the patients who depend on biomedical innovation."

The pharmaceutical industry said it is required to extend discounts on drug products to certain federal purchasers, which costs the industry in excess of $2 billion each year. PhRMA estimated that requiring the same discounts for all state and local entities would mean controlled pharmaceutical prices for 33% to 45% of the market.

Holmer said price controls "discourage investment in pharmaceutical research. Patients waiting for cures will be the losers - and so will the federal and state health care system, which will end up spending more to hospitalize patients who might have been helped by drugs that never got developed." PR