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REP. WAXMAN WILL INTRODUCE BILL TO ADD RX DRUG BENEFITS UNDER MEDICARE; HEALTH SUBCMTE. SETS MAY 21 HEARING ON AMENDMENT TO CATASTROPHIC CARE BILL

Executive Summary

Rep. Waxman's (D-Calif.) legislation to provide outpatient prescription drug coverage under Medicare will begin Capitol Hill consideration of the issue in earnest. Waxman has scheduled a hearing on the issue for May 21 before his House Commerce/Health Subcommittee. The congressman reportedly has scheduled a May 19 introduction of a measure providing the drug benefit to Medicare beneficiaries whose outpatient pharmaceutical costs exceed $500 per year. His subcommittee will consider the legislation as an amendment to the Medicare catastrophic care bill referred to the Commerce/Health Subcommittee from the Ways & Means Committee. Waxman told a May 14 meeting of the American Group Practice Association: "One of the first things that I think we'll be able to do and hope we'll be able to do [in his subcommittee] is to add a catastrophic prescription drug benefit." He pointed out that drug costs "for 10% of the Medicare population exceeds $500 a year." Consequently, he said, "we're looking at a Medicare prescription drug benefit that would come into play after a very high amount of deductible, covering those who really need prescription drugs on a catastrophic basis." Waxman's plan reportedly would fund the benefit by an increase in the Medicare Part B premium paid by recipients. The plan reportedly includes no taxes and will not require a copayment by beneficiaries. At the May 21 hearing, Waxman will be taking up, for the second time in a month, issues related to the cost and financing of drug coverage. In April, Waxman focused on drug prices and the relationship between price rises and drug company research and development spending. At that hearing, Waxman said that the drug industry's price policies were unjustified in comparison to increases in other inflation indices, such as the Consumer Price Index. Organizations invited to testify at the upcoming hearing include the Pharmaceutical Manufacturers Association, the Generic Pharmaceutical Industry Association, the American Pharmaceutical Association, the National Association of Retail Druggists, the National Association of Chain Drug Stores, the American Association of Retired Persons, the National Council of Senior Citizens, and Blue Cross/Blue Shield. PMA, however, has declined the invitation to testify; the association currently has not formulated an official position on Medicare outpatient drug coverage. PMA's executive committee has referred the issue to the association's Policy and Planning Committee, which is scheduled to meet during the association's annual meeting in West Virginia during the week of May 18. A policy recommendation could be referred to the PMA board, which also will meet during the annual meeting. PMA has been looking at the drug coverage issue from the perspective of the state rather than the federal level. The association, for example, has contracted with the D.C. consulting firm Lewin & Associates to study the existing pharmaceutical assistance programs in nine states. Approaching the issue at the state level is one way to lessen the chances of de facto drug price controls through the federal implementation of DRG-style caps or restrictive price-based formularies. Among other drug industry trade groups, NACDS is already on record with a position on drug coverage under Medicare. The association offered testimony at an April 23 hearing conducted by catastrophic care bill sponsor Rep. Stark (D-Calif.). At the hearing by the House Ways and Means/Health Subcommittee, NACDS urged that Medicare drug provisions include "high deductibles . . . and a system of direct patient reimbursement." Revco Government Affairs Director Patrick Donoho maintained that such a system would be "similar to present major medical plans which allow for prescription drugs to be considered part of the deductible," and it would provide the beneficiary "an incentive to shop prudently before and even after a deductible is met" ("The Pink Sheet" April 27, p. 7). NACDS also suggested that further cost-saving measures such as drug DRGs, "dollar caps on reimbursement per recipient," and variable copayments based on a percentage of the drug price would be facilitated by electronic debit cards, or "smart cards." Donoho said debit card use "expands the possibility for reimbursement structures to be tailored to the retail market system." While the catastrophic health care bill moves through the Commerce Committee, the Ways & Means Committee, which has joint jurisdiction, will also draft outpatient drug provisions. Ways & Means Committee Chairman Rostenkowski (D-III.) instructed his Health Subcommittee to draft a free-standing drug benefit amendment. Ways & Means/Health Subcommittee Chairman Stark has noted that a free-standing amendment can be added later in the legislative process -- when the catastrophic care bill reaches the Rules Committee or the House Floor, for example ("The Pink Sheet" May 11, p. 2). Waxman's fellow California Democrat Stark has estimated that a Medicare drug benefit costing $1-2 bil. annually might require "a deductible somewhere between $200 and $500 and a $2 copayment or a 20% coinsurance" ("The Pink Sheet" April 27, p. 6). Stark added that such coverage also might be limited to drugs on a legislated formulary. Other legislators said to be interested in the Medicare drug coverage issue include Senate Labor & Human Resources Committee Chairman Kennedy (D-Mass.). House Rules Committee Chairman Pepper (D-Fla.) also is likely to play a key role in the formulation of Medicare outpatient drug coverage legislation. Pepper has long advocated adding outpatient drug coverage under Medicare. The number of Representatives showing interest complicates the legislative process relating to the drug coverage issue. If Waxman, Stark, Pepper and others do not coordinate their efforts, the Medicare drug coverage issue could get left behind as the overall catastrophic care package, which has wide support, moves toward passage.
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