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Executive Summary

MEDICAID COST-CONTROL REFORM SHOULD ADDRESS ALL ASPECTS OF HEALTH CARE and not focus specifically on pharmaceuticals, Lilly suggested in August 29 comments to the Health Care Financing Administration (HCFA) on its recently proposed regulations concerning limits on payments for drugs under Medicaid programs. "Any cost-reduction proposal should address the total cost of Medicaid health care and the effect of the program on the quality and availability of that care," Lilly asserted. Lilly suggested that it may not be "prudent to focus on the cost of drugs apart from other Medicaid health costs." The firm maintained that "programs which affect only one aspect of health care may create economic distortions that alter the kinds and amounts of medical services provided to Medicaid patients." HCFA's proposed rule, published in the Aug. 19 Federal Register with a 30-day deadline for comments, proposes three alternatives to replace the current Maximum Allowable Cost (MAC) system for drug reimbursement under Medicaid ("The Pink Sheet" Aug. 25, pp. 3-5). Lilly is requesting that the comment period be extended for an additional 60 days. Noting that "the soundness of the assumption of bioequivalency is central to a public debate about the advisability of these programs," Lilly commented that interested parties "should have the opportunity to consider the information presented at [FDA's Sept. 29 through Oct. 1 public workshop on bioequivalence issues] before submitting final comments." Lilly added that "the 30 days provided for submitting comments will not permit the kind of review and analysis . . . necessary for an informed decision" on the proposed reimbursement programs. Lilly put forth several issues which the firm believes should be addressed before a decision on the proposals is made. For example, the firm asserted "the Medicaid proposals will interfere with state programs and policies and the freedom of states to manage their own programs." Lilly also contended that "to offset Medicaid losses, pharmacists may increase the markup to non-Medicaid customers, thus increasing the cost shift the private sector already bears." Some pharmacists, Lilly stated, "may choose not to dispense to Medicaid customers." Effects of the new pharmaceutical environment under the ANDA/patent restoration law "should be addressed before a new program is put in place," Lilly maintained. "Alternatives such as direct budget reductions and prescription co-pay programs should also be considered." The firm added that "the impact of these proposals on pharmaceutical research and development should be evaluated." HHS should determine the extent to which "the research-intensive companies [will] be forced to reduce their R&D expenditures if the proposed programs are successful in reducing the volume of their product sales," Lilly said.

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