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What Can Contact Lens Prices Teach About Telehealth Regulation?

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Rising health-care costs present a large burden to future Americans. Telehealth and e-commerce can keep rising health-care costs in check and increase the quality of care and the patient experience.

Transitioning towards telehealth and more health-related e-commerce presents a regulatory challenge. There are health services that should, of course, be provided in person, while others can be provided remotely with limited risk to the patient. One clear area is in the contact lens market. Once an optometrist issues a prescription, consumers can easily judge for themselves where to buy contact lenses. There are no obvious health concerns or risks for individuals from purchasing contacts from a licensed seller rather than from an optometrist. Brands are relatively static, and consumers have constant but predictable demand for the number of contacts they buy. Furthermore, contacts are easy to ship. In fact, it’s hard to think of a health-related industry more primed to turn e-commerce into cost savings for consumers than the contact industry.

However, online sales of contact lenses in the United States lag behind those of several other countries. Online sales represent 18 percent of U.S. sales, but 25 percent in the Netherlands and Germany and 35 percent in Norway, Finland, and Sweden.* Lower rates in the United States may stem from discriminatory practices by optometrists who, as an industry, seek to limit consumer choice and maximize their own sales, as ITIF has demonstrated.

The contact lens market is a microcosm of the regulatory challenges faced by moving medical services online. Optometrists, of course, also control which brands get prescribed. Unfortunately, doctors frequently prescribe certain brands not because of better expected results for patients but because they are more likely to be able to control the sales of a particular lens and keep the patient from “diverting” to another seller.

Since 2013, some large contact lens manufacturers, in order to gain favor with optometrists, have begun enacting and enforcing unilateral pricing policies (UPPs), which mandate that their products cannot be sold at a price lower than a set minimum. For online sellers, this means that cost savings from more efficient online e-commerce cannot be passed onto consumers. For optometrists, it limits diversion since there is no price advantage to buying online or in a store like Wal-Mart because the latter are forbidden from discounting. By writing prescriptions for the brands that are cost competitive as a result of UPP, optometrists stand to retain a larger percentage of contact lens sales.

When the state of Utah passed a bill eliminating fixed prices for contact lenses in 2015, it was promptly sued by three major lens manufacturers in an attempt to prevent the law from going into effect. Thirteen other states have also considered anti-UPP legislation.

Several weeks ago, the optometry industry tried to go one step farther. The American Optometric Association pushed for the introduction of a Senate bill misleadingly named “Contact Lens Consumer Health Protection Act.” The bill would significantly limit the Fairness to Contact Lens Consumers Act of 2003, which guaranteed consumers the right to their own lens prescriptions. The passage of this new bill would limit the ability of American consumers to purchase contact lenses right for them at market prices. If passed, it is likely that the gap in the share of contact lens purchased online between the United States and leading nations would grow even wider.

Innovation in e-commerce and telehealth requires public policy that keeps established actors from preventing progress. As telemedicine becomes increasingly capable of providing solutions that benefit patients and consumers, policymakers need to be able to accurately determine what services need to be provided in person to ensure quality of care and which services could be provided remotely, but are not. Telehealth progress should not be halted by incumbent interests seeking to maintain arcane monopolies.

 

*Sources: Estimates based on market studies and other information.  GfKresearch on contact lenses in Europe, The Association of Contact Lens Manufacturers (ACLM) surveys, Euromcontact Comparison of European Soft Contact Lens Markets and other research reports. Penetration in Norway and Finland is similar to Sweden.

Photo Credit: n4i, Flickr.

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About the author

Adams Nager is an economic policy analyst at ITIF. He researches and writes on innovation economics, manufacturing policy, and the importance of STEM education and high-skilled immigration. Nager holds an M.A. in political economy and public policy and a B.A. in economics, both from Washington University in St. Louis.