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VARIBLE COPAYMENT REQUIREMENT UNDER MEDICARE OUTPATIENT DRUG PROGRAM WOULD PROVIDE INCENTIVE FOR BARGAIN SHOPPING, NACDS TELLS REP. WAXMAN

Executive Summary

NACDS is supporting a variable copayment requirement for outpatient drug benefits under Medicare to encourage beneficiaries to become prudent purchasers and shop for the least expensive vendors. The association explained its position in testimony May 21 to the House Health Subcommittee on Rep. Waxman's (D-Calif.) Medicare drug coverage proposal. Revco Government Affairs Director Pat Donoho testified that NACDS supports "a variable copayment based on the price of the product." Under that system, Donoho explained, "the copayment would be higher for more costly medications and lower for less expensive prescriptions." Such a requirement "should encourage greater utilization of less expensive generics which will save consumers money with no decrease in the level of quality health care." NACDS has long opposed copayments under Medicaid on the grounds that the beneficiaries under that program often are unable to meet the requirement and participating pharmacists are forced to accept the cost. The association, however, sees a distinction in the economic status of the beneficiaries of the two programs, justifying a copayment requirement under Medicare. Because the Waxman bill would base reimbursement during six-month "payment calculation periods" on published wholesale prices (AWP), the American Pharmaceutical Association (APhA) and the National Association of Retail Druggists (NARD) suggested to Waxman alternate methods for ensuring that drug costs do not rise after reimbursement is fixed. NARD Executive Vice President Charles West urged that manufacturers' prices be frozen during the six-month periods. "We prefer a marketplace pricing standard," but "if the subcommittee is intent upon setting our prices, you must address the [supplier] prices . . . over which the pharmacist has no control," West said. "Manufacturers could be required to submit prices to the secretary twice a year in conjunction with the 'calculation period,' e.g., Oct. 1/April 1. They would guarantee such prices for that period, just as is the case presently for Medicare inpatient prescription drugs." APhA Professional Affairs Director Maude Babington recommended that drug cost calculations be updated monthly to reflect supplier price increases. "APhA supports the use of the national AWP for computation of reimbursement rates for drug products under the proposed bill," Babington said. "However, we believe that monthly price updates are necessary to give pharmacists fair and adequate reimbursement for drug products they dispense. . . Pharmacists should not be asked to absorb these increases over a prolonged period of time." Generic Pharmaceutical Industry Association Chairman William Haddad suggested that cost containment would be guaranteed if the legislation mandated that generic versions of multisource drugs be dispensed. Generic products are dispensed for approximately 30% of prescriptions for multisource pharmaceuticals, Haddad maintained. For every 10% increase in generic use, the government would save $65 mil., he contended. "That is why generics must be mandated," he asserted. Another generic incentive the bill could include is a provision for a one-line prescription form simplifying generic substition, Haddad continued. Such a provision "doesn't take [the decision-making authority] away from the doctor; he can still do what he wants," Haddad noted. But it provides "a procedure that makes him think twice" before indicating that "a higher price brand is necessary."
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