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Executive Summary

The pharmaceutical industry and pharmacists are among the losers of the Pepper Commission's recommendations for health care provision, Rep. Gradison (R-Ohio) cautioned participants at the Ohio Pharmaceutical Seminar in Columbus on April 16-18. In a presentation at the meeting, Gradison discussed the Pepper Commission, chaired by Sen. Rockefeller (D-W. Va.), in terms of "winners and losers." Gradison explained that the "Pepper recommendations basically are a core package that doesn't include, among other things, outpatient prescription drugs." The congressman characterized the winners as those patients currently without insurance as well as the middle-class elderly, who currently are required to spend down to qualify for government-provided care. In addition, physicians and hospitals would win in that they "would be paid more adequately than they are today," he said. Gradison also suggested that long-term care legislation might originate at the state level rather than Congress. "A lot is going on at the state level," Gradison said. "It may be that by focusing on...Washington, we are missing where the action is really going to be." For example, the congressman continued, Hawaii has had "a plan for years [and] Massachusetts is struggling to implement one between now and 1993. There are important discussions taking place which are worth taking a look at in Connecticut, Oregon, Washington [and] California." Congress' interest in health care could change, Gradison acknowledged. However, he added: "unless there is a major commitment of political capital...into the health field by the next [winning presidential candidate] I think it's going to be hard for something to happen, even if Congress wants it." Marion Merrell Dow VP-Government Relations Ronald Docksai, PhD, suggested that the pharmaceutical industry and pharmacy profession have a unique window of opportunity to influence health care policy recommendations. The Marion Merrell Dow lobbyist pointed out that the Pepper Commission's final report is due by early summer. In addition, the Bush Administration has established two similar commissions, one chaired by HHS Undersecretary Constance Horner, the other by former Office of Management and Budget Associate Director and Bush presidential campaign advisor Deborah Steelman. Docksai predicted that the Steelman commission will produce a draft report by the fall, although a final report is not due until October 1991. "In light of the three major studies," Docksai said, "we've got a window of nine to 10 months" to educate policymakers in Congress and the executive branch while they are still planning legislation. * Docksai said he has heard that the Horner commission recommendations will include "service provisions for independent and hospital-based pharmacists." Any government provisions of prescription drug benefits will involve demands on pharmacists to provide drug monitoring, consulting, information and review services, he predicted. Burroughs Wellcome Federal Government Relations and Public Policy Director Richard Teske maintained that any government health care program expected to contain pharmaceutical product costs effectively must rely on competitive market forces rather than regulatory controls. "In the long run," a marketplace-oriented approach to controlling health care costs offers "the best chance of providing quality, [low] cost and access," Teske said. "Sadly," he continued, "we still don't have a viable marketplace alternative" for the U.S. health care system. "Policy alternatives" range from "market-based national plans like the Heritage Foundation's to national health plans like Sen. Kennedy's" (D-Mass.), Teske noted. However, he suggested that the "two most viable" plans may be an HHS proposal and Sen. Mitchell's (D-Me.) "soon-to-be-introduced long-term care proposal that will include a drug plan." Referring to cost, access, and quality issues as the "iron triangle" of health care, Teske maintained that programs affecting any one will affect all three. "The goal of public policy is to find the right mechanism that best balances society's demand for access to quality care at a reasonable price," he said. * An Office of Technology Assessment study into pharmaceutical R&D costs is being conducted with an eye toward developing a cost-recovery approach to price controls, Teske asserted, while Sen. Kennedy's strategy involves regulation of marketing and promotion. The Medicaid rebate/bid proposal by Sen. Pryor (D-Ark.) also does not meet Teske's market test; he called the Pryor proposal "a most-preferred customer" approach. Federal Trade Commission lawyer Michael McNeely said pharmaceutical manufacturers' reluctance to offer low bids in response to Medicaid agency solicitations in states like Kansas is not necessarily a per se violation of antitrust laws. The lack of participation "on its face is not an antitrust violation," the agency's Bureau of Competition assistant director said. However, he added, refusal to bid on a statewide market segment "would interest the FTC." McNeely apparently was unaware that competitive bid programs like the Kansas Medicaid agency suffered from a dearth of industry participation. In its first two years of operation, Kansas obtained bid prices for just six products from only three manufacturers. Marion Merrell Dow Exec VP and Chief Operating Officer David Sharrock suggested that the pharmaceutical profession and industry should work together to influence health care reform in a manner that is mutually acceptable. "Before we as a country permit our politicians and others to blindly embrace any form of government-sponsored health care, we must consider the consequences both to the consumer and to the profession of pharmacy," Sharrock said. The combination of "pharmaceutical innovation and the pharmacist's expertise" represents "what I consider the very best hope in the world for controlling medical care costs over the long term and thereby helping to maintain a free market system in our country." Sharrock decried "laws that tell you the pharmacist what drugs you must policies that require the least expensive drugs regardless of side effects and...dispensing fees that don't fully cover your expenses or yield an adequate profit." Such trends seek "short-term cost containment" at the expense of "long-term cost effectiveness," he said. The motto "better together" adopted last December regarding the merger of Marion and Merrell Dow applies to the pharmaceutical industry and profession and their "need to work together as a team," Sharrock continued. An example of "working together to improve utilization and the availability of pharmaceuticals" is a recent study conducted by Marion Merrell Dow "in conjunction with pharmacies in Maryland, North Carolina and Texas," he said. The Value-Added Pharmacy Services (VAPS) program is intended to determine whether "in-depth prescription information" and increased patient counseling "will translate into increased customer satisfaction, higher volume, sales and greater professional satisfaction." Sharrock reported that after six months into the program, "almost 25% of customers in VAPS test pharmacies said they notice a change in those stores" and 71% reported increased time spent with the pharmacist. In addition, Sharrock said, "job satisfaction among VAPS pharmacists increased in five of eight categories being measured." * GAO Senior Assistant Director for Medicare and Medicaid Jane Ross, PhD, discussed the agency's ongoing examination of how the top 50 drugs are reimbursed by Medicaid agencies in eight states: Pennsylvania, Ohio, Massachusetts, New Hampshire, Maryland, Florida, Texas and Arkansas. Currently early in the study, GAO has found "wide variations" in payments for identical prescriptions, Ross said. For example, Medicaid reimbursement for 60 units of Glaxo's anti-ulcer drug Zantac (ranitidine) ranges from $71.70 in Ohio and $72.32 in Texas, up to $76.37 in Pennsylvania and $79.36 in Arkansas. Reimbursement formulas vary from state to state, Ross noted. Three states in the study rely on the published average wholesale prices (AWP) to which Pennsylvania adds a $2.75 dispensing fee, New Hampshire adds $2.85-$3, and Maryland adds $3.75. Three states discount AWP. Ohio pays AWP less 7% plus a $3.23 dispensing fee. Arkansas pays AWP minus 7%, "times a factor of" 1.095 as a profit allowance, plus a $4.39 dispensing fee, Ross continued. Texas pays AWP minus 10.5% multiplied by 1.031 plus a$4.26 fee. Florida and Massachusetts base drug cost reimbursement on wholesale acquisition cost (WAC) plus a wholesaler markup. Florida pays WAC plus 7% and adds a $4.23 dispensing fee. Massachusetts pays WAC plus 10% and adds a $4.06 fee. American Pharmaceutical Association Scientific Affairs Director Arthur Kibbe, PhD, maintained that pharmacists should be a valuable resource in collecting data on post-marketing surveillance of prescription drugs. "There is a real potential for the practicing pharmacists around the country to be deeply involved in post-marketing surveillance studies at the site of collection of data," Kibbe said. Addressing an April 18 session, the APhA official encouraged pharmacists attending the seminar to "get involved" and noted that resulting information can be used for new indications, new cautions and advice on side effects, and general improvement of therapy. Noting that APhA policy supports inclusion in clinical trials of minority populations, pregnant women and at-risk patients, Kibbe added that "one of the easiest ways" to gather such information "is not necessarily in" pre-approval phases of study, but rather in post-marketing surveillance studies. Generic Pharmaceutical Industry Association President Dee Fensterer maintained that FDA testing of generic brands of narrow therapeutic range drugs has probably found no significant problems. Fensterer noted that the agency has announced its earlier tests on 2,500 generic drug products, which uncovered only 27 (1.1%) that failed to meet standards. Although "FDA has not yet announced the results of its testing program of narrow therapeutic-range drugs," she said, "I have to assume that the results are as good, or perhaps even better, than those of the first generic testing program...because there have been no recalls of [generic versions of] any of the 24 so-called narrow therapeutic-range drugs." The GPIA president suggested the notoriety surrounding such products has been overblown. "I ask you to be leery of the hue and cry over narrow-range drugs," she said. "Most pharmaceutical specifications are established by the original manufacturer, so shouldn't we be a little suspicious that for 17 years or more, during patent monopoly there is no request -- much less a demand -- for tighter specifications?" The agency "has full authority to tighten specifications and narrow allowable variances" with respect to such products, Fensterer continued. "GPIA fully supports this authority, and we would support stricter criteria, based on science, that would be applied across the board, brand and generic." NARD President Joseph Mosso, Sr., complained that retail pharmacists are "under seige from all sides." Consumers are upset at pharmacists for escalating prescription drug prices, Mosso said. Yet third-party payers wring "every last penny of profit out of the services we provide" and manufacturers "have rewarded us for our years of loyalty with the priviledge of paying the highest prices for their products of all the players in the pharmacy marketplace." Mosso maintained that "from 1981 to 1988, while prescription drug prices were going up 88%, independent pharmacey net profits dropped from 3.2% to 3%."

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