This week, the White House unveiled several policy proposals that it would like to see included in national Health Care reform.  See white house proposals here. Significantly, the White House strengthened the Senate’s earlier health reform bill by including a number of prescription drug provisions, including:

- an immediate $250 rebate for seniors that enter the ‘donut hole’ along with a plan to close the donut hole completely by 2020. The proposal notes that “Over 8 million seniors hit this gap in Medicare coverage, and for those who do not have other coverage, average drug costs are $340 per month, or $4,080 per year.”

- a provision giving FTC the authority to challenge ‘pay-for-delay’ or reverse-payment settlements that keep generic drugs off the market.  This reform is estimated to save $35 billion over the next decade, while making generic forms of some drugs more readily available. 

Even before these White House proposal were announced, the bill passed by the Senate and pending before the House included several significant reforms concerning prescription drugs, including:

- the expansion of prescription drug coverage to some 30 million newly covered people.

 - a reform to promote needed transparency and reduce doctor’s potential conflicts of interest, through the “full transparency [of] all drug companies, device, and medical supply manufacturers . . . gifts . . . or financial arrangements” with doctors. This proposal follows the current reform in the Senate bill.

- a transparency provision to require all pharmacy benefit managers (PBMs) under Medicare or the exchange to report “information regarding any rebates, discounts, or price concessions they negotiate for prescription drugs” to help health plans reduce waste and losses caused by PBMs. And health plans would also be told how often available generic drugs are used.”

- a 50% discount off branded drugs for seniors in the donut hole.

- billions of dollars in fees on drugs and devices to help pay for this historic expansion of coverage.

Pay-for-delay legislation needed now more than ever.

Also this week, a Court dismissed an FTC and consumer challenge to the legality of a pay-for-delay settlement concerning the drug Androgel. The Court dismissed the FTC’s complaint asserting that the agreement was anti-competitive, despite the fact that the generic competitor.

An article in Today’s BNA Pharmaceutical Law and Industry Report describes the decision, including the efforts by drum maker Solvay to transfer the case from California’s Ninth Circuit, to the less-favorable 11^th Circuit. The result of the case, following the precedent set in the 11^th Circuit in Shering-Plough, is not as surprising. But comments by the Generic Pharmaceutical Association’s were. This group asserted that the FTC’s loss somehow demonstrates that the FTC’s existing authority “adequately protects consumers” and that new legislation would be “anti-consumer.”

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Keep fighting the good fight

Yesterday’s White House summit illustrated how economic hard times and continuing insurance industry abuses leave consumers without protection without comprehensive reform.  (You can see highlight from CNN here, and Community Catalyst’s take on it here.) 

Advocates need to continue to make the case for comprehensive reform.  You can help by signing this online petition that is being sponsored by the American Cancer Society/ Cancer Action Network, Community Catalyst, and many other national organizations: www.healthcarepetition.org/10707_communitycatalyst

The White House, in its efforts to line up industry support for health reform, announced an agreement this spring with the Pharmaceutical Researchers and Manufacturers of America (PhRMA) to discount senior drug costs and save $80 billion over the next decade.  PhRMA has announced that it will finance new ads in support of health reform—it has helped advocates like Families USA with previous ad campaigns.  However, with House leaders now proposing to go further in reining in excessive drug costs, there is speculation that PhRMA might pull its support if the House drives too hard a bargain.  But PhRMA should be supporting health reform—it’s not only good for the country, but good for the industry when more patients are insured and become new customers for their products. 

While details are scant, a recently leaked memo describes the deal as including: $25 billion in savings through a half-price discount for seniors buying brand name drugs in the ‘donut hole’ under Medicare Part-D; $34 billion in increased rebates under Medicaid; $12 billion through an industry fee or tax, and some $9 billion in savings on biologics.  Any mechanisms to ensure oversight and reliable pre-discount drug pricing are not clear.  

Controversy has now erupted, however, over drug pricing issues that affect the cost of health reform.  House Speaker Nancy Pelosi has said that “the House was not bound by any industry deals with the Senate or the White House.”   House Energy and Commerce Committee Chairman Henry Waxman (D-CA) also said that the House would not be obligated to abide by the agreement.  On July 31^st House democrats added new drug provisions in the House Committee on Energy and Commerce mark-up of its bill,  America’s Affordable Health Choices Act of 2009, H.R. 3200.  

H.R. 3200 includes an amendment introduced by Representative Schakowsky (D-IL) which allows the federal government to negotiate lower drug prices on behalf of senior citizens and persons with disabilities covered under Medicare Part D.  PhRMA quickly cried ‘foul’ and claimed that part of their deal was the administration’s promise to not pursue any other cost-cutting proposals.  They claimed that Schakowsky’s amendment would be a ‘deal breaker.’  But proponents are quick to point out that the potential savings for consumers and government payors are significant, and could easily exceed the PhRMA deal’s $80 billion over-ten-years.  

In the days following the release of H.R. 3200, the White House seems to have pulled back on its previous description of the agreement with PhaRMA. Huffington Post   $8 million in annual savings on a yearly drug tab in excess of over $200 billion nationwide seems to leave a lot on the table that we hope will be up for negotiation over the course of hammering out a final health care agreement.  

Another important provision in the House health care reform bill was a successful amendment by Rep. Rush (D-IL) would prohibit the ‘pay-for-delay’ settlements that drug manufacturers have used to keep generic competitors off the market.  (See more info here). Thees anti-competitive agreements, also called reverse payment settlements, have kept generic versions of several drugs off the market since 2005. The FTC conservatively estimates that banning such ‘pay-for-delay’ or ‘reverse-payment’ settlements would save $35 billion dollars over the next decade.

In addition Rep. Baldwin (D-WI) successfully introduced an amendment that wouldrequire the disclosure of financial relationships between pharmacy benefit managers (PBMs) and drug manufacturers.  PBMs manage insurers’ prescription drug benefits, including creating formularies of preferred medicines, negotiating discounts with drug manufacturers, and negotiating reimbursement rates with retail pharmacies that fill prescriptions.  Under Rep. Baldwin’s amendment, all PBMs must provide, to both their client health plans and to the federal government, a confidential annual accounting of all payments and rebates they receive from drug manufacturers in relation to the prescriptions filled.  In addition, the PBM must report, in aggregate, how much they paid pharmacists to fill all prescriptions. 

These two classes of information are essential for health plans to ensure that their formularies are designed to lower costs and not to maximize rebates often alleged to be retained by the PBM.  It would help ensure that the conflict of interest that PBMs face is not working against the fundamental purpose of PBMs to manage formularies that reduce costs.  Similar disclosure provisions have been enacted under state law in Maine and the District of Columbia even withstanding legal challenges.  Maryland, Iowa, South Dakota, and Vermont have also enacted state PBM reform measures.  In South Dakota, the state saved more than $800,000 on health insurance costs in one year after enacting its law.  Kansas, Mississippi, North Dakota, Rhode Island, Tennessee, Connecticut, Georgia, Louisiana, and Arkansas have also taken steps towards PBM transparency.  For example, through an audit of the PBM which manages the state employee health program, Arkansas discovered that in a three-month period, the state was overcharged by nearly $500,000.  The experience of these states demonstrates that increased PBM transparency has the potential to yield significant savings for public and private insurers.  

Tony Garr, the Executive Director of the Tennessee Health Care Campaign, has an op-ed today in The Tennessean. The Tennessee Health Care Campaign is a member of the Prescription Access Litigation coalition. We here at the PAL Blog aim to highlight the work of our coalition members.

In his op-ed (reprinted below), Tony challenges the Administration’s plan to cut the cost of the Medicare Part D drug benefit by charging higher premiums to higher-income recipients. He points out the absurdity of charging them more to save $640 million when $16 BILLION could be saved by ending the ridiculous overpayments to Medicare Advantage plans. The Government Accountability Office released a report yesterday, Medicare Advantage: Higher Spending Relative to Medicare Fee-for-Service May Not Ensure Lower Out-of-Pocket Costs for Beneficiaries. This report found that “Medicare spends more per beneficiary in Medicare Advantage than it does for beneficiaries in the original Medicare fee-for-service program, at an estimated additional cost to Medicare of $54 billion from 2009 through 2012.” Or, $16 Billion per year over that 4 year period.

Here’s Tony’s excellent op-ed. Food for thought:

Pay HMOs less to get real savings

By TONY GARR

A basic value that most Americans believe in is fairness. Most Americans are willing to pay their fair share.

However, imagine that on Oct. 1, 2008, people making more than $82,000 annually or families making more than $164,000 would begin to pay extra property tax so their children could go to public schools, or to pay an extra fee for police and fire protection, or to pay a higher fee for water and sewer services.

Lower- and lower-middle-income families would pay a base fee for these services, but higher-income families would pay extra. If such fees were really imposed, most Americans, even middle-income Americans, would be up in arms.

Recently, President Bush proposed that wealthier elderly and disabled Americans on Medicare pay higher fees to reduce the cost for the Medicare Prescription Drug Program, Part D. His proposal would supposedly save about $600 million per year.

$16 billion, or $640 million?

When Part D was created in 2003, it had been projected that Part D premiums and co-payments would not be adequate to fund the program. In fact, the current deficit for Part D far exceeds $600 million per year. The extra fees proposed by the president for wealthier Americans push more costs onto the Medicare beneficiary and do very little to slow the skyrocketing costs for this program. At the same time, the Medicare Advantage Plans (Medicare health-maintenance organizations) are making record profits.

If President Bush is really serious about controlling and reducing the costs for Part D, he needs to follow the money. According to the Congressional Budget Office, the Medicare Advantage Plans are being overpaid by as much as 13 percent, a figure that is increasing spending by more than $16 billion a year.

If the president is serious about real savings, there is no contest. Save $640 million a year by making wealthier Americans pay more. Or save $16 billion a year by paying the Medicare Advantage Plans less — the same as what is being paid for beneficiaries in traditional Medicare. The choice is obvious.

Our Medicare system is already too complicated. When we consider that Medicare serves our elderly parents and grandparents and others who have disabilities, all of whom may have difficulties completing more forms, then it is easy to see that our Medicare system needs to be simplified and not made even more complicated.

Already, the Medicare Advantage Plans can be a barrier to seeing the doctor whom we may want to see. Now, the president is asking wealthier Americans to pay extra fees. In the larger view of Medicare savings, Bush’s plan does not add up.

Follow the money and take “Advantage” of the real savings. This is where the real savings are — Medicare Advantage Plans.

Below is a press release issued today by the Medicare Rights Center and Consumers Union, the nonprofit publisher of Consumer Reports. The press release calls for the creation of a Medicare-operated prescription drug plan, alongside the plans run by private insurers under the Medicare Part D prescription drug benefit. Medicare Rights Center is a member of the PAL Coalition.

Report: Medicare-Administered Drug Benefit Would be More Affordable, Comprehensive, Stable than Current Private Insurance-Run Drug Benefit

Members of Congress Call Today for a “Medicare-Operated” Drug Plan

Washington, DC – Older adults and persons with disabilities should have the option of choosing prescription drug coverage through the Original Medicare program to eliminate the consumer exploitation that plagues the current Medicare Part D drug benefit run by private insurance companies, concludes Consumers Union and the Medicare Rights Center in a report released today.

“Seniors and taxpayers deserve the choice of a Medicare-administered drug plan that covers the safest and most effective medicines at the best possible price,” said Bill Vaughan, senior policy analyst for Consumers Union, publisher of Consumer Reports. “We know that the private insurance companies aren’t getting the best deals for consumers on prescription drugs. Let’s let Medicare – which Americans know, trust and count on for their health care coverage – offer prescription drug coverage, too.”

“Day after day we see men and women with Medicare unable to get the medicine they need because of the confusing and exploitative marketplace that dominates the for-profit drug offerings from private insurance companies,” said Robert M. Hayes, president of the Medicare Rights Center, a national consumer service organization. “It’s time for Congress to offer a Medicare-administered drug benefit option that would benefit consumers’ health and pocketbooks and bring down the program’s cost for taxpayers.”

In “The Best Medicine: A Drug Coverage Option Under Original Medicare,” Consumers Union and the Medicare Rights Center cite numerous independent research studies that find the current Medicare drug benefit available only through private plans is unnecessarily costly, has coverage gaps, is unstable and leaves consumers vulnerable to marketing fraud because of the number of plans offering such divergent benefit packages.

The consumer groups report that a Medicare-administered drug benefit can lower drug prices and reduce the overall cost of the Medicare coverage program by harnessing the purchasing power of the 43 million Americans with Medicare to negotiate prices. It costs private insurers 9.8 percent of the drug benefit’s total cost to administer the program, yet it costs Medicare only 1.7 percent of the total costs to administer hospital and outpatient coverage. Prices for the Veterans Administration’s most commonly prescribed drugs are half as much, or less, than the prices offered through private drug insurance plans.

Consumers Union and the Medicare Rights Center recommend using a national evidence-based formulary for a Medicare-administered drug plan option that would help guide doctors to prescribe in a way that improves health care outcomes, reduces costs and facilitates a fair and efficient drug appeals system. The Veteran Administration’s formulary is broader than the drugs covered under Medicare private drug plans and also covers non-formulary drugs prescribed according to evidence-based guidelines.

Legislation to give consumers a Medicare-run drug option was introduced today by Senator Richard Durbin (D-IL) and Representatives Marion Berry (D-AR) and Jan Schakowsky (D-IL). The Medicare Prescription Drug Savings and Choice Act would utilize price negotiation and the best evidence about the safety and effectiveness of drugs to give older adults and people with disabilities the choice of a stable, consistent and affordable drug coverage plan.

The consumer groups also report that the current, private drug plan appeals system is dysfunctional, with a lack of information from the private plans about the right to appeal, lengthy delays in the process and the need to use an experienced advocate to navigate the process. According to the Centers for Medicare & Medicaid Services, private drug plan denials are overturned by the independent review entity in over half of the cases concerning utilization management (prior authorization, step therapy and quantity limits).

The instability of a Medicare drug benefit available only through private insurers means fluctuating plan premiums, drug prices, formularies and utilization management restrictions for Americans with Medicare, most of whom are locked into their plans for the year, the report found. Each year, the poorest, most vulnerable people with Medicare who get “extra help,” the federal subsidy to help pay drug plan costs, are forced out of their plans when premiums rise. For 2008, as many as 1.6 million people will be reassigned to a different drug plan due to increased premiums.

“The Best Medicine: A Drug Coverage Option Under Original Medicare,” is available online at http://www.medicarerights.org/TheBestMedicine.pdf or at www.ConsumersUnion.org.