FOR YOUR INFORMATION................................JUNE 30, 1992

           CALIFORNIA BILL MAY DISCOURAGE COMPETITION,
   RAISE PRICES FOR CONSUMERS IN PREPAID HEALTHCARE PROGRAMS,
                       FTC STAFF CAUTIONS

     A proposed measure before the California State Senate, ex-
pecting to give consumers greater freedom to choose where they
obtain covered pharmacy services, could eventually raise prices
and limit consumers' choices under health care plans, staff of
the Federal Trade Commission said in comments made public today.
     At issue is the ability of health insurance companies to
arrange for pharmacy services through contracts with pharmacies
not located in California.  Senate Bill 1986 would prohibit
health insurance companies from entering exclusive contracts for
pharmacy services with non-California companies, which typically
fill prescriptions by mail.  Further, it would require health
insurers to allow California companies to learn about and obtain
pharmacy-service contracts on the same terms and conditions as
non-California firms.

     The FTC staff comments were made in the form of a letter
signed by Michael O. Wise, Acting Director of the FTC's Office of
Consumer and Competition Advocacy, in response to a request from
California State Senator Patrick Johnston.  If the bill is
enacted, the staff said, it may limit the ability of health
insurers to cut the cost of delivering health care.

     Specifically, the FTC staff said, the bill would take away
two means of ensuring that a contracting pharmacy would obtain a
sizeable portion of a subscriber's business.  First, the bill
would discourage contracts for pharmacy services with firms that
"may be competively important, that is, those that are non-
residents."  Second, it would eliminate contracting with a non-
resident firm on an exclusive basis and offering incentives for
consumers to use its services.

                            - more -
(Calpharm--06/30/92)

     Without assurances that it can count on a certain volume of
a health insurer's subscribers, a potential contracting pharmacy
may be unable to offer lower-price terms or additional services. 
The FTC staff also said the bill, by encouraging providers only
to match the terms of a contract with a non-California company,
would decrease incentives for pharmacies to compete with each
other.  Health insurers could end up paying higher prices for
pharmacy services as well as higher administrative costs --
which, in turn, could raise consumer prices and limit consumers'
choices in prepaid health care plans, the staff said.

     These comments reflect the views of the FTC's Office of
Consumer and Competition Advocacy, and not necessarily the views
of the Commission or any individual Commissioner.

     Copies of the staff comments are available from the FTC's
Public Reference Branch, Room 130, 6th Street and Pennsylvania
Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY 202-326-
2502.
                              # # #

MEDIA CONTACT:  John Leslie III, Office of Public Affairs
                202-326-2178

STAFF CONTACT:  Michael O. Wise, Office of Consumer and
                Competition Advocacy, 202-326-3344

(V920017)

(Calpharm)