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Executive Summary

Legislation to permit the reimbursement of outpatient Rx drugs under Medicare should include incentives to dispense generic drugs and programs to educate physicians about medically and economically prudent prescribing, Harvard Medical School Professor Jerry Avorn, MD, maintained at an Oct. 8 hearing before the House Aging/Consumer Interests Subcommittee on high Rx drug costs for older Americans. "Any new piece of legislation must be crafted carefully enough to have built-in safeguards against runaway expenditures and abuse. Simply adding up the expenses and ratcheting up the premium to reflect this is a non-solution," Avorn said. "Considerable legislative skill will need to be applied in two main areas: generic vs. brandname drugs and inappropriate physician prescribing." The hearing was scheduled by subcommittee Chairman Bonker (D-Wash.), who in August introduced legislation (HR 5320) authorizing Medicare Part B coverage of outpatient prescription drugs. Regarding generic prescribing, Avorn contended that "considerably more specific language on acceptable limits to expenditures for particular drug products will need to be introduced into the proposed bill" if it is to work efficiently. With respect to the need for more education about prudent prescribing, Avorn maintained that physicians receive more information about pharmaceuticals from brandname company sales representatives than from formal medical training and that prescribers need more post-graduate education. "There is so little education in medical schools about pharmacology and it is so many years behind the doctor when he makes the prescribing decision," Avorn said, "that it really is the detail person or salesman from the drug industry who is much more likely to influence the physician's prescribing than is the medical educator from decades ago." Avorn has conducted research to demonstrate the cost and medical benefits of "detailing" MDs by "pharmacist-educators" who are trained to provide pharmacologic information to prescribers rather than to sell products. "Industry has known for years that it can change physician prescribing practices through such in-office visits," he said. "We feel that it is time for those who are not out to sell a particular product to take a similar approach." Noting that the technique has been used by health maintenance organization and hospitals, Avorn said "it is cost effective for any agency that pays for drug benefits to simultaneously mount its own educational effort to inform physicians about appropriate prescribing." "Congress could both contain costs and improve the quality of care by mandating that such an educational component be implemented simultaneously if Medicare coverage is expanded to prescription drugs," Avorn maintained. "Such activities could be performed on a contractual basis by medical schools on a region-by-region basis," he suggested, adding: "It is not often that one has the opportunity to improve the quality of care and lower costs at the same time, and this legislation could provide a window of opportunity to do both." Bonker noted that his legislation (HR 5320) would "permit Medicare beneficiaries the option to enroll in a Supplemental Medical Insurance program and allow those individuals the opportunity to select coverage of outpatient drugs used in the treatment of chronic illnesses." Prescription drug costs, unlike other health care costs, "are not covered by private health insurances or by Medicare outside of the hospital," the congressman pointed out. "Most medigap policies do not cover these costs, and Medicaid will cover these costs only for the indigent," he continued. "Only 20% of the elderly fall into one of these categories; the remaining 80% must pay for drugs from their own pockets." In his opening statement, Bonker acknowledged that he relied on drug cost research done by Rep. Waxman's (D-Calif.) House Commerce/Health Subcommittee. Waxman held a hearing on the subject in July 1985 and is expected to schedule further hearings. Bonker cited statistics demonstrating that from January 1981 to June 1985 Rx drug prices increased 56%, while general inflation over the same period was only 23%. "Drug prices are the fastest growing component of medical costs and are rising at a time when the drug industry is enjoying profit levels substantially higher than the rest of the manufacturing community," he said. American Association of Retired Persons (AARP) Pharmacy Service Program Development Director Nancy Olins testified that although Rx drug price inflation lagged behind general inflation "for many years prior to 1980," drug price hikes have "roughly been triple the rate of all other commodities" in the general Consumer Price Index (CPI). For example, Olins maintained, SmithKline's Dyazide, "the medication we most frequently dispense to older Americans, had a cumulative price increase of 70.2% or an average annual price increase of 21%," due to five separate price rises during the period. "It compares to an increase in the CPI of 10.2% for the same period," she said. From September 1983 to March 1986, Olins continued, Burroughs Wellcome's Lanoxin "had a cumulative price increase of 180.1%, or an average annual price increase of 60%," compared to "an increase in the CPI of 8.9% for the same period." Ayerst's Inderal has jumped in price by 117.6% (compared to 12.1% general inflation) since January 1983; Merk's Aldomet has risen in price by 58.2% (compared to 14.5% general inflation) since May 1982; SmithKline's Tagamet prices have climbed by 55.9% (compared to 11.7% general inflation) since October 1982; and Ciba Geigy's Lopressor has jumped in price by 78.6% (compared to 12% general inflation) since March 1983, she testified. "These price increases are for brandname products," the AARP official emphasized. "During the same relative period, there were no price increases for the generic equivalents among the top 15 drugs we dispense." Asserting that the association's Pharmacy Service has "nearly three million regular customers" whom AARP has saved "millions and millions of dollars" by dispensing generic products when possible, Olins criticized what she called brandname manufacturers' anti-generic propaganda. An organization known as Medicine in the Public Interest, which "is supported by brandname industry funds," she said, "is spreading misinformation and creating fear about the FDA approval process for generics." Furthermore, Medical Tribune, which is "supported entirely by industry funds and published by the owner of an advertising firm representing brandname companies," attempts to convince physicians that generics are inferior products, Olins contended. Rep. Biaggi (D-N.Y.) noted that the Pharmaceutical Manufacturers Association was invited to testify at the hearing but declined. "Chairman Bonker invited [PMA], but because of their busy schedule they said they were unable to attend," Biaggi said, commenting: "It's unfortunate" because the association's presence "would give this committee an opportunity to hear their perspective" and its absence "diminishes the committee's ability to distill both sides of the issues."

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