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A system for automatically including generic drugs in the Maximum Allowable Cost (MAC) program once they receive ANDA approval from FDA is one option being considered by HHS, the dept.'s Acting Assistant Secty. for Planning and Evaluation Robert Helms, PhD, said July 15 at a hearing on drug prices by the House Energy and Commerce Health Subcmte. chaired by Rep. Waxman (D-Calif). Helms indicated that in lieu of going through a "very cumbersome public hearing process," a requirement under the existing regulations, he would like to look into the possibility "of going directly from the published ANDA list and having them come to MAC." At the same time, however, Helms cautioned the subcmte. that the Health Care Financing Administration (HCFA) would have to look at such a program "very carefully," and that if it were to be done, economic incentives for pharmacists would be necessary. He added that whslrs. would have to play a prominent role in "encouraging pharmacists to fill Rxs with generic drugs." Helms also noted that HHS is considering the elimination of the Pharmaceutical Review Board (PRB), an internal body responsible for establishing MAC limits for specific drugs, but continuing with the agency's standard notice of proposed rulemaking procedures. "We were hoping to maybe eliminate the PRB in order to streamline the process," he stated, pointing out that "the present procedure requires a new drug to go through several generations of review." Chairman of an HHS Rx reimbursement task force, Helms presented to the Waxman subcmte. a statement of the group's policy alternatives to the current MAC limit-setting program, which has been virtually suspended since July 1983. After considering testimony presented at a public hearing on MAC issues held in the fall of 1983, the task force established four objectives that any changes in the MAC program should achieve. In its opinion, the reforms should: (1) take advantage of generic competition in the marketplace; (2) be administratively simple; (3) insure access to pharmacy services for Medicaid clients; and (4) provide states the flexibility to develop alternative reimbursement approaches. The task force concluded that the most feasible approach to payment reform is "likely to be one that continues to use somewhat different methodologies for single-source drugs and for therapeutically equivalent multiple-source drugs," Helms said. According to Helms, one way to give pharmacists financial incentives for using generics is to develop a "target payment" rate for multiple-source drugs that would be set at some percentage of the lowest priced generic product, for example 150%. In addition to receiving the normal dispensing fee, a pharmacist would retain the difference between the target rate and the actual cost, thereby encouraging him to obtain products selling for less than the target rate. He maintained that this type of incentive approach, by relying on actual industry prices to determine the generic price floor and the FDA's listing of ANDAs as the basis for establishing the target payment rate, could be designed to operate "more simply and with fewer administrative requirements." With regard to single-source drugs, Helms stated that "at present, we have not developed any workable alternative for single-source drugs which would involve such a major reform." He added, however, that HCFA regional offices are encouraging states to implement "more realistic estimated acquired cost (EAC) limits to achieve greater program savings." Pointing out the pace at which HHS has been moving on the MAC issue, Subcmte. Chairman Waxman (D-Calif.) commented: "You haven't put a MAC limit on a drug since July 1983 and that inaction has cost the government millions of dollars." Noting that HHS has been studying the program for two years and that some of the top selling drugs in the U.S. such as Inderal and Valium are off patent and will soon be available in generic form, Waxman asked: "How long will it take before the department gives them MAC limits again?" Helms responded, "I can't say exactly but I can say that (HHS Secty. Heckler) is committed to getting things going again. At the same time we want to look at very complicated legal issues about what we have to do to the present MAC program to be able to revitalize the MAC groups. . . and that will obviously take several months." According to Helms, one of the "legal" problems preventing HHS from using the existing MAC mechanism while the agency decides on program changes is that each state is required to furnish estimated acquisition costs for every drug whether or not it is under the MAC program. "We had a process for getting these drugs listed," Waxman replied. "You want to make a transition to a new program and in the meantime you suspended the program that you had to put these new drugs on that list."

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