Experts say potential impact of Measure 7 on drug prices hard to predict

FARGO – The future of prescription drug prices has been at the heart of arguments on both sides of the debate surrounding Measure 7, which aims to erase a North Dakota law restricting who can own pharmacies in the state.

Experts in the area of pharmaceutical economics say it’s unclear what effect changing the law would have on the price people pay for prescription drugs.

Under current law, pharmacies in North Dakota must be at least 51 percent owned by a pharmacist or pharmacists licensed in the state.

Backers of Measure 7, which if passed on Nov. 4 would eliminate pharmacy ownership restrictions, say the change would lead to greater access to pharmacies while boosting competition and pushing drug prices lower.

Opponents say changing North Dakota’s pharmacy law, the only one of its kind in the country, would dramatically reduce the number of independent pharmacies in the state, leading to reduced competition and higher drug prices.

‘No simple answer’

Authorities on pharmacy economics at the University of Minnesota say the issue is too complex to accurately predict what a change in law would mean for drug prices.

But eliminating the current law could lead to major changes in the pharmacy landscape in North Dakota, say Stephen Schondelmeyer and Roger Feldman.

“As with most issues, there’s no simple answer,” said Schondelmeyer,” a professor of pharmaceutical economics at the U of M and director of the PRIME Institute, an independent research organization that works to improve citizen access to pharmaceutical services.

“Honestly, prices on prescription drugs, the most expensive ones, are based on what the manufacturer sets and the big chains and small pharmacies don’t get any different price on them,” Schondelmeyer said.

“I’ve studied this for 40 years in markets all across the country,” he said. “We can find isolated cases where this store is cheaper than that one on a specific prescription, but on the next prescription the reverse is true.

“At the end of the day,” Schondelmeyer said, “I don’t think this (Measure 7) will greatly lower prices to people in North Dakota. I’m not sure it will raise them either, if you repeal the law.”

What may happen if Measure 7 passes, Schondelmeyer said, is that pharmacies in smaller communities will start going away if larger stores show up in nearby towns and begin drawing prescriptions away from established businesses.

“It may lead to losing pharmacies in communities that used to be able to support a pharmacy,” he said.

Feldman, who teaches health economics at the U of M, said the pharmacy picture in North Dakota is much different than in neighboring states and it has been that way since North Dakota’s pharmacy law was passed in the early 1960s.

Comparing states

Feldman said 84 percent of all pharmacies in North Dakota are independent operations with a single location.

In Minnesota, 44 percent of all pharmacies are independent operations with a single location, while in South Dakota that number is 58 percent.

About 8 percent of all pharmacies in North Dakota are independent operations with more than one location, meaning more than 90 percent of the state’s pharmacies are independent operations, said Feldman, who offered some additional facts about pharmacies:

•  About 30 percent of pharmacies in Minnesota are open seven days a week.
•  About 13 percent of pharmacies in North Dakota, are open seven days a week.
•  North Dakota pharmacies generally keep shorter business hours than pharmacies in neighboring states.

Feldman said he could not speak to what will happen to drug prices in North Dakota if Measure 7 is approved, but he pointed to studies that show that the arrival of a Wal-Mart in a given market can reduce grocery prices by 25 percent.

Price war

Both sides in the Measure 7 fight point to studies to bolster their arguments, with opponents asserting that drug prices nationally and in Minnesota are substantially higher than in North Dakota.

Supporters say drug prices in the nearby states of South Dakota and Montana are lower than in North Dakota.

Convenience is also a factor, said Amanda Godfread, a spokeswoman for North Dakotans for Lower Pharmacy Prices, which is pushing for Measure 7.

“Right now, North Dakotans are purchasing prescriptions in other states, online, or in Canada or Mexico to meet their budgets,” she said.

“Additionally, because of these laws, North Dakota hasn’t had many new pharmacies in roughly 35 years, yet our population has grown by almost 100,000 people,” Godfread said.

She said about 80,000 North Dakotans use tele-pharmacies because there are no nearby options.

Measure 7 has the support of a number of organizations, including: the Greater North Dakota Chamber of Commerce, the Fargo Moorhead West Fargo Chamber of Commerce and a health policy consortium that includes Sanford Health in Fargo and Bismarck, Altru Health in Grand Forks and Trinity Health in Minot.

On the other side, the North Dakota Retail Association has joined the North Dakota Pharmacists Association in opposing Measure 7.

Opponents maintain that if the law changes, big stores like Wal-Mart, Walgreens and Target could muscle out smaller competitors, leaving the market with fewer players who will be free to raise prices.

Surviving challenges

Mike Schwab, executive vice president of the pharmacists association, said North Dakota’s pharmacy law was enacted in 1963 to prevent doctors from owning pharmacies and self-referring patients to pharmacies they own.

The law has weathered legal challenges and was upheld by both the North Dakota Supreme Court and the U.S. Supreme Court.

Attempts to change the law in the state Legislature were defeated in 2009 and 2011.

A ballot initiative was proposed in 2009, but a judge threw out the attempt because names and addresses of sponsoring committee members were not circulated alongside signature petitions.

A follow-up attempt to place a measure on the ballot in 2012 also failed.

Schwab said North Dakotans have tremendous access to pharmacies, and he said one report predicts the state could lose more than 70 independent pharmacies in rural and urban settings if the law is changed.

Comparing Fargo and West Fargo to Sioux Falls, S.D., Schwab said the Fargo area comes out on top in the number of pharmacies per capita.

He added that when it comes to pharmacies, Sioux Falls is dominated by four main players.

A recent poll commissioned by Forum Communications Co. found that 39 percent of North Dakota voters oppose Measure 7, while 35 percent favor the initiated measure.

Twenty-six percent of respondents were undecided, according to the poll, which was conducted by the University of North Dakota College of Business and Public Administration.

The poll surveyed 505 randomly selected North Dakotans by landline or cellphone between Sept. 26 and Oct. 3.

Poll respondents were 18 and older and indicated they were likely to vote.