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OTA MEDICARE DRUG PAYMENT STUDY: FORMULARY

Executive Summary

OTA MEDICARE DRUG PAYMENT STUDY: FORMULARY should be considered by the Office of Technology Assessment in its study of alternatives to existing payment methods, House Energy & Commerce/Health Subcommittee counsel William Corr told an Office of Technology Assessment advisory panel meeting Sept. 11. Corr said the notion of a formulary "should definitely be on the table," pointing out that OTA "should not be involved in the politics" which resulted in the law specifically prohibiting establishment of a restrictive formulary in the Medicare program. The Sept. 11 session marked the first meeting of the OTA advisory panel on the study of alternative payment policies for the Medicare outpatient prescription drug benefit. A report on the study will be issued in 1991. The Energy & Commerce Committee is among four committees that requested the study. In its letter to OTA, the Senate Aging Committee had also asked for an evaluation of a formulary, specifically, on the the impact of "alternative reimbursement methodologies -- including alternative methods for excluding from reimbursement certain drugs or groups of drugs" ("The Pink Sheet" March 27, T&G-1). The House Ways & Means Committee and Senate Finance Committee were co-signers with Energy & Commerce on a letter of request sent last May. Corr said that Energy & Commerce does not expect the OTA study will necessarily presage changes in payment methods. If costs in the drug program become excessive, he said, the committee's concern is that Congress "would have a set of options well thought out" for possible changes. The committee also views the study as an "excellent background piece" for the Prescription Drug Payment Review Commission, Corr said. The commission was set up to monitor drug prices and payments under the law (see following T&G). Corr commented on the current movement in Congress to repeal all or parts of the Catastrophic Coverage law (see story, p. 3). He pointed out that the view of Rep. Waxman (D-Calif.), chairman of the Health Subcommittee," is that the drug benefit is the first thing to be kept" when considering trimming benefits from the catastrophic package. He emphasized that "Waxman's view is at all costs to save the drug benefit." OTA project director for the study, Jane Sisk, told the panel that OTA has identified three general "priorities" for the study. First, she said, the panel should "get a sense" of how drugs are reimbursed by other payers, including state Medicaid agencies, the Veteran's Administration, private insurers and foreign governments, such as programs in the Canadian provinces. The review would consider methods to promote appropriate use of drug technologies as well as set payment rates. The group will then "consider different ways" Medicare could set payment rates for the drug benefit, she said. Among the methods are contracting with manufacturers of single-source drugs and discounting the average wholesale price. In developing policy options, the study will emphasize improving beneficiary health, controlling expenditures and providing incentives for research and development on innovative technologies and efficient distribution and dispensing, Sisk said. The study will also review payment methods for epoietin (EPO, Amgen's Epogen) as a case study (see related T&G). OTA plans to hold two additional panel meetings for the project. One will be held next spring to review the status of the broader payment study and a completed draft of the EPO report. The other is expected to be held in the fall of 1990 to review a first draft of the final report on the overall payment study. The 20-member advisory panel includes: Upjohn Drug Policy Analysis Director Patrick McKercher; National Association of Chain Drug Stores VP-Pharmacy and Professional Services Leonard DeMino; Medco Containment Services Senior VP-Product Development Gary Sekulski; FoxMeyer Drug Co. Exec VP Mark Pulido; Mark Hornbrook, Kaiser Permanente, Northwest, Health Research Center senior investigator; Helene Lipton, University of California Institute for Health Policy Studies; Carlo Michelotti, California Department of Health Services; Public Citizen Health Research Group Director Sidney Wolfe; D.C. attorney Michael Pollard (Michaels & Wishner) and Zetachron President Kenneth Larson.
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