Topic: Miller College of Business
March 11, 2015
The attempt to reduce Indiana’s meth problem by creating prescription-only policies for medicines containing pseudoephedrine — an ingredient of the highly addictive drug — could cost Indiana millions of dollars, says a new study from Ball State University.
“The Cost-Benefit Analysis of Pseudoephedrine Drug Laws in Indiana,” an analysis by the university’s Center for Business and Economic Research (CBER), found that the annual cost for a prescription-only law could range from $28.2 to $92.2 million each year in increased Medicaid spending, decreased tax revenues, increased household spending for medicine and doctor visits and reduced business productivity.
The Indiana General Assembly has considered changing cold and allergy medicines with pseudoephedrine (PSE) from over the counter (OTC) to prescription-only for several years in an effort to combat the rising addiction of meth, also known as crystal meth. In 2006, Oregon was the first state to adopt prescription-only laws, with Mississippi following in 2010.
“While there are many perceived advantages of passing such a law in terms of reduction of meth use and lab incidents, there are associated potential costs to state government, households and employees,” said Michael Hicks, CBER director, who coauthored the study with Srikant Devaraj, CBER’s senior research associate and project manager, and Karthik Balaji, a CBER student research assistant. “To date, little research has focused on the fiscal and health care related costs associated with restricting OTC medications in the state of Indiana.”
The study projects a prescription-only policy would cost per year:
- state government in lost sales tax revenues, $900,000 to $1.3 million
- Indiana households from out of pocket expenses (including co-pays for doctor visits and transportation), $15.9 million to $61.2 million
- uninsured individuals from increases in price of prescription drugs, $170,000 to $651,000
- employers due to lost productivity, $9.5 million to $27.3 million
The study also found that a prescription-only policy would have a significant impact on Medicaid, forcing Indiana to spend an additional $1.8 million.
CBER’s research predicts a 24.4 percent increase in respiratory drug claims per Medicaid patient and a 28.1 percent increase in respiratory drug payments. Prescription-only policies would create a 106 percent increase in antihistamine drug payments, 47.8 percent increase in cold and allergy drug payments and 54.4 percent increase in nasal agent drugs payment .
Indiana ranked No. 1 in 2013 for having the most meth-related incidents in the U.S. and appears set to top the 2014 list as well, according to data from the U.S. Drug Enforcement Administration. In recent years, Indiana has restricted the sale of PSE to pharmacies and retailers using a tracking system, limited the amount of PSE that a consumer can buy, and required customers to present ID.
“The illegal use of PSE-based products in the manufacture of meth has led to implementation of a prescription-only policy in two states, Oregon and Mississippi, but such a policy affects a wide range of stakeholders such as households, state government and employers,” Devaraj said. “The downside to the implementation of such a law in Indiana is the increased cost to households, employers and the state government. This will lead to further burden on Indiana residents through increased taxes rates and health premiums. A better understanding of the benefits of such legislation is necessary to recommend any changes to the OTC sales of pseudoephedrine.”