What Is the Pharmacy ‘Gag Clause’ that Senate Just Banned?



The Senate passed a bill yesterday that would outlaw gag clauses in pharmacists’ contracts. But will it really make a difference in medication pricing? 

The Senate passed a bill yesterday that may help lower some drug prices for consumers, if the legislation makes it through the House and is signed into law. The bill calls for an end to “gag clauses” that currently prevent pharmacists from telling customers when it would cost less to purchase a medication outright, rather than through their health insurance.

Most of the time, the full cost of a medication exceeds the co-pay amount dictated by health insurance companies. But that’s not always the case, especially for inexpensive, generic drugs. For example, an influenza drug might cost $125 with insurance and $100 without, the New York Times reported earlier this year, or pharmacy customers could be charged their $20 copay for blood pressure or diabetes drugs that only cost $8 to $15.

According to STAT News, 25 states have enacted laws that protect consumers from overpaying in these scenarios. But in the remaining states, it’s perfectly legal for insurance companies to insert fine print into their contracts with pharmacies—known as “gag clauses”—that prohibit pharmacists from discussing these types of cost differences with patients.

The new bill, known as the Patient Right to Know Drug Prices Act, was introduced in March by Senators Susan Collins (R-Maine), Claire McCaskill (D-Missouri), and Debbie Stabenow (D-Michigan). Lowering drug prices is a goal of both Democrats and Republicans in Congress—as well as President Trump—and the bill passed overwhelmingly in the Senate, 98 to 2.

RELATED: 10 Tips for Saving Money on Prescription Drugs

Under the new bill, insurance companies nationwide will not be able to block pharmacists from discussing drug prices with customers. And if pharmacists do share information about price differences, they will be protected from penalties. The Senate passed a similar bill, preventing gag clauses in Medicare insurance policies, earlier this month.

In a statement to the Washington Post’s The Health 202 blog, U.S. Representative Earl L. “Buddy” Carter (R-Georgia) thanked the Senate for recognizing the “critical need” for this bill. “As a pharmacist for more than 30 years, gag clauses prohibited me from telling my patients about a better option for them many times,” he said. “I know how important it is for patients that we end this unfair practice.”

Carter is the sponsor of a similar bill that passed House Energy and Commerce Committee last week. He also urged the full House to vote on the matter soon. In order for the ban on gag clauses to become official, the bill must pass in both the Senate and the House, and must then be signed by the President.

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Lauren Blair, a spokesperson for the Campaign for Sustainable Rx Pricing, told The Health 202 that the bill’s passage is an “important but incremental step.” Experts say it’s unclear how much this measure will really lower drug prices for the majority of Americans, and that it certainly won’t solve all of the problems around runaway pharmaceutical costs.

“This is certainly progress but there’s a lot more work to be done, both in the transparency bucket specifically, and broadly in the larger effort to tackle drug prices,” Blair told The Health 202. “And again, transparency is not enough to tackle outrageous drug prices.”



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