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SENATE MEDICARE DRUG PROPOSAL's FULL COVERAGE DELAY UNTIL 1993 KEYS WHITE HOUSE TENTATIVE AGREEMENT; MULTI-SOURCE DRUGS ARE INDEXED FROM 150% OF LOWEST AWP

Executive Summary

The Senate's proposal to delay until 1993 full drug coverage under Medicare is a key factor in getting the Reagan Administration's agreement and moving forward with the legislation. By deferring coverage of immunosuppressive drugs, chemotherapeutic agents, and homeuse I.V. anti-infectives until 1990 and coverage of cardiovascular products and diluretics until 1991, the Senate plan not only postpones costs but also provides time in which to develop better estimates of what the full program will cost. The delay until 1993, however looms as a contentious issue for a House/Senate conference on the bill. House conferees are almost certain to attack the provision when the outpatient drug benefit is brought to a House-Senate conference. A possibly final draft of the drug benefit amendment was completed Oct. 23. The full Senate resumed consideration of S 1127 the same day. The drug amendment could be introduced on the Senate floor as early as Oct. 27. Senate Finance Committee Chairman Bentsen (D-Texas) is likely to appeal to House Ways & Means Committee Chairman Rostenkowski (D-Ill.) in an effort to preserve the Senate-Administration compromise; both Democrats have expressed concerns about the costs of drug coverage under Medicare. However, House proponents -- particularly Reps. Stark (D-Calif.) and Waxman (D-Calif.), chairmen of the House Health Subcommittees, and Speaker Wright (D-Texas) -- can be expected to fight to provide the full benefit sooner. Among the parties interested in the legislation, the American Association of Retired Persons and the Generic Pharmaceutical Industry Association are wary of the agreement. In an Oct. 16 press statement, AARP Executive Director Cyril Brickfield praised the compromise for breaking "the stalemate which has been holding back" Senate consideration of the bill. However, AARP said it was "concerned that the compromise is not as thorough as the original Senate Finance bill in covering Medicare beneficiaries' out-of-pocket expenses." GPIA contended that the phased-in structure of the benefit will create a "self-fulfilling prophecy" with regard to the expense of the program. Noting that those concerned with the expense of proposals for outpatient drug coverage under Medicare have urged the graduated approach, the association said the Senate plan would provide the "most expensive single-source products" during the first phase, when costs per beneficiary would lead to exaggerated cost projections for the full program. The phase-in would be more acceptable to GPIA if the first phase covered cardiovascular drugs and diuretics, for which there is substantial generic competition. The Pharmaceutical Manufacturers Association will work to preserve the final version of the Medicare drug amendment through conference. PMA is gratified with the six-year delay until full coverage and notes that there are two presidential elections in the interim. PMA is also pleased that the compromise establishes annual caps for the drug benefit premium and limits the benefit to the extent that the premium can pay for it. Another change sought by PMA and reflected in the Oct. 23 draft provides that the average wholesale prices on which initial drug product reimbursement will be based are those established as of Jan. 1, 1987. The compromise calls for use of "the most recently published" price at the time a brandname product is dispensed. The draft provides a new reimbursement formula for generic products. Multiple-source drugs are reimbursed at the lower of: 150% of the least expensive product's most recently published AWP, or 150% of that product's price from the previous "payment calculation period" after it has been adjusted by the percentage change in the medical component of the Consumer Price Index.
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