Policy Documents

Florida's Folly: The darker side of the sunshine state's drug-pricing scheme

William Orzechowski, PhD & Robert C. Walker –
December 1, 2001

In this policy document by the NTU, the authors ask us to suppose that one state implemented a 25% tax on all prescription drugs in order to pay for a new program to ensure their wider “affordability.” Then suppose that a neighboring state enacts price controls to mandate a 25% drop in prescription drug costs. Many policymakers would conclude that these two states took radically different approaches to the same supposed “problem.” And, many of these same experts would warn that the first state has chosen the worse path. 

Florida recently passed legislation designed to force prescription drug manufacturers to “rebate” even more of the state’s costs for prescription drugs it subsidizes under Medicaid, a joint federalstate medical program for the poor drug costs. Under current federal Medicaid law, drug manufacturers are already required to provide substantial rebates on their products in order to participate in the program. The average discount for all drugs is close to 19% of the average manufacturing price.

Florida’s power to control access to the Medicaid program, via its restrictive drug formulary, is a blatant form of government blackmail, as well as being another kind of price control, with all its attendant dangers. Florida’s law could stall the race for new cures, deny patients access to the drugs they need, and likely lead to higher total health care costs. Although Florida’s attempt to command cheapness will prove illusory, taxpayers will face some very real costs as a result.