Prior Authorization and Supplemental Rebates Are Hidden Taxes

Remarks- Medicaid budget

February 27, 2002

Thank you Mr. Chairman and other committee members:

My name is Jonathan Hill. I am State Director of North Carolina Citizens for a Sound Economy. We are a grassroots organization representing taxpayers and citizens with over 30,000 members and supporters across North Carolina.

We believe we must look at the long-term effects on the economy and jobs. We believe that Prior Authorization and Supplemental rebates are hidden taxes on manufacturing and that consumers will ultimately pay the price through reduction of services and lack of availability of life saving drugs.

We don’t have to look far to understand the importance of pharmaceutical manufacturing in North Carolina. Senator Purcell, I was in Laurinburg last week at one of our meetings with 250 people. Their number one concern was the loss of hundreds of pharmaceutical jobs in Scotland County. Representative Wright is exactly right about the importance of manufacturing jobs in North Carolina— 42,000 jobs.

A study by Columbia University economist Frank Lichtenberg found that every $1 in prescription drug spending saved $4 in hospital care. This is because prescription drugs are often used for preventive care, to prevent more debilitating- not to mention more expensive- medical conditions. While a $600 annual prescription for cholesterol-reducing drugs Zocar and Libitor may seem expensive, if they can avert a $300,000 hospital stay and bypass surgery, they are more than worth the investment.

If the state decides to cover the drugs but caps the price that drug manufacturers may charge for them, the cost savings will come at the expense of pharmaceutical research.

And by the way, when was the last time a new drug was developed in Canada? We all understand the importance of research and development for new life-saving drugs.

We believe Prior Authorization and Supplemental rebates will have negative long-term consequences for public health and our state budget.

Thank you Mr. Chairman.