Ilovebenefits’s Blog

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So Where is Health Reform and Cost Control in this Proposal

Baucus – Senate Finance Committee Bill

In the SFC bill there is a proposal to eliminate over the counter drugs from   FSA (Flexible Spending Account) reimbursement. They are doing this to collect additonal tax dollars to pay for health reform. Let’s examine the practical effect.

The new limitation on FSAs, specifically OTC products, is potenially a new barrier to moving medications from Rx to OTC.

The hydraulics of pricing are important here. If a drug copay is $10, $35, and $50 for the respective tiers (generic, preferred brand, and brand) — the effective cost for someone utilizing the FSA is say 20% lower subject to their specific tax bracket. When the drug goes OTC (for example claritin) then the pricing of the drug OTC is a barrier to moving patients to that product in two ways. First the OTC price has to be compared to the tier copay they were paying when it was a Rx and now it will additionally have  the added disadvantage of not having the tax effective lower price.

So, the hurdle price for the consumer is likely to get higher. They are more likely to go to the therapeutic equivalent that is still an Rx. This improves the profit margins for big pharma. So the government collects more taxes and big pharma stands to increase their revenues.

One more thought to contemplate. That is circular reasoning. The process described above drives taxes higher. It drives Rx spending higher. It drives medical trend higher.  So where is health reform and cost control?

Did the drug lobbies have anything to do with this?



September 17, 2009 - Posted by | drugs, Federal Government, healthcare | , , ,

1 Comment »

  1. Good job on this. There is so much going on its hard to stay on health care which you have. I got side tracked with ACORN and defense but I will join the fray again tomorrow. Thanks for keeping the info flowing, I put your link up so hope it gets you some traffic, Bernie……….sbl

    Comment by Bernie | September 17, 2009 | Reply

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