Download this Paper Open PDF in Browser

Is More Information Always Better? Mandatory Disclosure Regulations in the Prescription Drug Market

Cornell Law Review Online, Vol. 99, 2013

Emory Legal Studies Research Paper No. 13-245

24 Pages Posted: 16 Mar 2013 Last revised: 3 Jul 2013

Joanna Shepherd

Emory University School of Law

Date Written: March 1, 2013

Abstract

Pharmacy benefit managers (PBMs) save Americans billions of dollars each year by lowering the prices of prescription drugs and the costs of prescription drug coverage. However, as I explain in this Article, mandatory disclosure regulations recently enacted in several states and under the Affordable Care Act threaten to disrupt the cost savings PBMs currently produce for consumers. These regulations require PBMs to disclose competitively-sensitive financial information to various participants in the prescription drug market. Although mandatory disclosure regulations are premised on the idea that PBM clients can only ensure that they are paying a competitive price for PBM services if they know the specifics of PBMs’ financial arrangements with pharmaceutical manufacturers and pharmacies, there is no theoretical or empirical reason to believe mandated disclosure of this information is necessary. Not only are these regulations unnecessary to achieve competitive outcomes, they also impose significant costs on PBMs. The additional disclosure increases both direct costs and litigation costs for PBMs. More importantly, the regulations foster tacit collusion and reduce PBMs’ ability to negotiate discounts with pharmacies and rebates with drug manufacturers. By disrupting competition in the prescription drug market, mandatory disclosure regulations will ultimately increase the prices that consumers pay for prescription drugs.

Keywords: prescription drug market, pharmacy benefit manager, disclosure, transparency

JEL Classification: I1

Suggested Citation

Shepherd, Joanna, Is More Information Always Better? Mandatory Disclosure Regulations in the Prescription Drug Market (March 1, 2013). Cornell Law Review Online, Vol. 99, 2013; Emory Legal Studies Research Paper No. 13-245. Available at SSRN: https://ssrn.com/abstract=2234212

Joanna Shepherd (Contact Author)

Emory University School of Law ( email )

1301 Clifton Road
Atlanta, GA 30322
United States
404-727-8957 (Phone)

Paper statistics

Downloads
143
Rank
172,720
Abstract Views
1,038