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Executive Summary

The frequency of recent price increases by prescription drug manufacturers is one of the key factors behind the American Pharmaceutical Association's strong support of the the House version of catastrophic health care legislation. In an address to a March 13 session of APhA's annual meeting, association President Schlegel maintained that "pharmaceutical product price increases have become even more frequent and substantial" than in the past. Because of the number of increases each year, the pharmacy group prefers the House Medicare bill's semi-annual updates of reimbursement levels to the Senate version's annual updates. Schlegel told the annual meeting that APhA Trustee Donald Gronewold recently provided his congressman, House Minority Leader Michel (R-Ill.), with "computerized documentation of more than 600 price increases for pharmaceutical products," including various brands, dosage forms, concentrations, and sizes, "in just one week! " Schlegel later reported that, using a similar computer printout, Gronewold counted approximately 1,000 additional price increases during the following week. APhA's support for the Waxman/Stark House version of the pending outpatient drug bill could be very useful for the House bill proponents in the conference which is now getting underway. Schlegel's continued support of the House bill in the face of the drug industry's gains in Senate negotiations gives the two House sponsors Waxman (D-Calif.) and Stark (D-Calif.) a visible ally from the drug trade. Proponents of the House bill can use APhA to counter arguments that the Senate bill has the consensus support of all areas of the drug manufacturing and distribution business. The importance of the issue of the frequency of price changes to APhA is not new. Last fall, APhA cited Medi-Span data that showed 422 price changes, averaging an increase of 12.7%, for the top 200 prescription drugs in 1986 ("The Pink Sheet" Nov. 9, 8). "To try to control this price escalation by reducing the pharmacist's compensation is unfair, unreasonable, and unjustified," Schlegel told the convention. Since Medicare was authorized by Congress in 1965, Schlegel noted, the average prescription drug price has risen from $3.50 to $5 in 1975, to more than $7 in 1980, and to more than $13 in 1985. Although drug prices soared from $5 to $13, during the 1975-1985 period, pharmacists dispensing fees inched "from just a little over $2 in 1975" to less than $3.50 in 1985, Schlegel said. "How unfair to expect pharmacists to absorb a 160% prescription price increase with only a 75% increase in their fee," Schlegel commented. Pharmacy's net profit tumbled from "nearly 6% in 1965" to "about 3.5% in 1975" to "an all-time low of just over 2.5% in 1985." APhA also supports the House bill for the faster implementation schedule for outpatient drug coverage. The association opposes the Senate Medicare bill's phase-in of drug coverage as a threat to subsequent, more general prescription drug coverage. APhA opposes the phase-in, Schlegel explained, because it will produce "growing pressure either not to phase in additional drug products or to kill the prescription drug benefit entirely," he said. Under the Senate bill's gradual approach to implementing an outpatient prescription drug benefit, Schlegel reasoned, "the drug products most likely to be phased in first are the high-cost ones -- home I.V. therapy, including cancer chemotherapy and immunosuppressants, for example." If further coverage is avoided on the basis of high first-year costs, "the opportunity will be lost for pharmacy to demonstrate that a prescription drug benefit, administered in such a way as to assure the provision of comprehensive pharmaceutical services by pharmacists, can have the effect of reducing, not increasing, total health care costs," he maintained. For similar reasons, APhA opposes the Senate bill's provisions for a separate drug benefit trust fund. "Because the new trust fund will stand alone, it will be evaluated alone," Schlegel explained. APhA argued that segregating drug costs from other components of the medical care system would in the long-run prevent estimates on the cost-saving potential of drug therapy. "No mechanism will measure . . . how much the inclusion of pharmaceutical products and pharmacy services may reduce the overall costs by lessening hospital utilization rates," Schlegel said. The APhA president noted that the Senate proposal establishes a catastrophic care trust fund separate from the Medicare trust fund and that an additional drug benefit trust fund might be established separate from the catastrophic care fund. If the specifics of the outpatient drug benefit program are dividing APhA from drug manufacturers, APhA believes that the cost efficacy issue can reunite different segments of the drug business. APhA, in fact, is joining with the Pharmaceutical Manufacturers Association and the American Association of Colleges of Pharmacy to form a joint task force to explore data on the cost effectiveness of pharmaceutical therapy. The joint task force will "review existing research findings on the cost effectiveness of pharmaceutical products and pharmacy services," the APhA president said, adding that formal announcement of the group will be made the week of March 21. Composed of "well respected and nationally known pharmacists, pharmaceutical scientists, health economists, and representatives of the federal government," the task force will review existing studies, "summarize key findings, and . . . identify areas for additional research," Schlegel said. The sponsoring groups have set a tight deadline for the task force. Schlegel said that "by this fall" the task force can be expected to produce "a document that can be used by our profession as we continue to argue the value of drug therapy and pharmacy service." The APhA president explained the joint task force in terms of a "short-term strategy" to complement the "profession's long-term strategy for coping with many of the dramatic changes in the delivery and financing of health care." A "fundamental element" in the long-term strategy is the association's founding in December of the American Pharmaceutical Institute. "API will conduct and encourage policy studies on such topics as the changing environment for the delivery of health care services, the role and importance of the 'team' concept in providing quality health care, the cost-effectiveness of modern medicines and pharmaceutical services, the role of the pharmacist in the selection and proper use of therapeutic agents, and pharmacy management in integrated health care systems," Schlegel said. Initially funded by a substantial grant from the APhA Foundation, the institute "will conduct workshops, hold seminars, fund research projects, and disseminate the research findings of participating research centers from across the U.S.," he added. At a March 15 session of the APhA annual meeting, PMA President Gerald Mossinghoff complimented the formation of API. "We welcome the institution by Jack Schlegel at APhA of your American Pharmaceutical Institute," Mossinghoff said. The PMA exec noted that the association's current chairman (Upjohn President Larry Hoff) had announced that he would join the API board. "We hope to work very closely with that organization," Mossinghoff said.(ITEM 200)#050928M001J59307# #970804M001XFCWP5# (ITEM 201)(COPYRIGHT) 1988 F-D-C Reports, Inc., The Pink Sheet, March 21, 1988

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