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99-100 Cornell L. Rev. Online 1 (2013-2015)

handle is hein.journals/clro2 and id is 1 raw text is: IS MORE INFORMATION ALWAYS BETTER? MANDATORY DISCLOSURE REGULATIONS IN THE PRESCRIPTION DRUG MARKET Joanna Shepherdt 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 at the federal level under the Affordable Care Act threaten to disrupt the cost savings that 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 a PBM's services if they know the specifics of the PBM's financial arrangements with pharmaceutical manufacturers and pharmacies, there is no theoretical or empirical reason to believe mandated disclosure of this information is necessay. 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. INTRO DU CTIO N ........................................................................................ 1 I. BACKGROUND OF PHARMACY BENEFIT MANAGEMENT .................. 4 A. PBM Industry Structure ................................................... 5 B. PBM Business Model and Prescription Drug Spending ...... 6 II. MANDATORY DISCLOSURE REGULATIONS ................................... 11 A . State Regulations ................................................................. 11 B. Regulations Under the Affordable Care Act .................. 13 III. ARE MANDATORY DISCLOSURE REGULATIONS NECESSARY? ........ 14 IV. COSTS OF MANDATORY DISCLOSURE REGULATIONS ................... 17 A. Direct Costs of Disclosure ............................................... 17 B. Litigation Costs ................................................................ 18 C. Competitive Harms .......................................................... 18 C ONCLUSION ....................................................................................... 21 INTRODUCTION The prescription drug market has changed dramatically over the last few decades. Whereas consumers once paid for prescription t Associate Professor of Law, Emory University School of Law.