MERCK HAS FOUR COMPANIES BEHIND "EQUAL ACCESS" MEDICAID PROPOSAL: PMA BOARD VOTES AGAINST ACCESS-FOR-DISCOUNT TRADE, BUT OPEN FORMULARY HAS APPEAL

Bristol-Myers Squibb, Burroughs-Wellcome, Glaxo and Procter & Gamble are supporting Merck's "best-price" proposal to Medicaid programs. The four firms reportedly expressed their support for the Merck plan to the Pharmaceutical Manufacturers Association executive session held in Washington, D.C. on May 3. The majority of PMA firms represented at the executive committee meeting voted against the Merck plan, and the association arrived at a position reiterating its former support for open formularies and objection to requirements tying state coverage of a medication to bid or discount programs (see box for PMA's statement on the May 3 review of association policy state Medicaid programs). Although the majority of the association remains opposed to the Merck offer, the proposal has received a surprisingly positive reception in industry discussions, even among those companies not willing to openly support a discount program or more specifically Merck's "best price" offer. The active support of a Medicaid re-evaluation by three of the top five U.S. companies in the non-hospital drug business means the subject should continue to receive attention despite the vote against the Merck proposal by the PMA exec committee. The strategic attempt to open state formularies, especially the Medi-Cal formulary, to recently approved products and potential products in the future is striking a responsive chord across the industry. The size of the Medi-Cal business and the inability of firms to crack that formulary with new products is creating a fertile atmosphere for re-evaluating the traditional no-approach attitude of many firms. Glaxo, for example, has an obvious attraction to an open formulary. Its market leader Zantac remains off the Medi-Cal formulary. Bristol-Myers Squibb does not have the same type of current enticement (Capoten is not excluded from any state Medicaid formulary). The company, however, has a major lipid-lowering product, Pravachol, waiting in the wings that could face the same de facto restraints that are hurting Merck's Mevacor and could pose a problem for Merck's upcoming Proscar prostate drug. Bristol-Myers Squibb disclosed its support of the Merck concept prior to the PMA meeting in a statement prepared after it met with analysts on April 25. Because of the head-to-head competition between Squibb and Merck in the ACE inhibitor class and the upcoming competition in the lipid-lowering field, a rapid public position on Merck's proposal was forced on Bristol-Myers Squibb. The statement focuses on support of the open formulary and access to medications for the poor. "Bristol-Myers Squibb Company strongly supports the concept that all patients should have open access to prescription medications regardless of the patient's financial status." Stressing the support-in-concept position again, the firm declared: "For this reason, Bristol-Myers Squibb conceptually endorses the Equal Access to Medicines Act as recommended to the State of California." Both Bristol-Myers Squibb and Glaxo should have difficulties with the "best price" part of Merck's offer. Both companies are more aggressive discounters than Merck. Squibb, for example, offered the Defense Personnel Support Center discounts of 20% off the direct price for Capoten, according to 1988 figures. That level of discount well exceeds Merck's "best price" discounts, and the DPSC price may not be Squibb's "best price" for Capoten. Despite the potential drawback of the best price formula in the Merck bill, Glaxo and Bristol-Myers Squibb spoke up in favor of Merck on May 3. Burroughs-Wellcome and P&G did not attend the meeting, but reportedly sent messages of support for Merck. Bristol-Myers Squibb support for Merck's proposal contained one cynical reference to a possible Merck objective in the deal. The firms said "certain items" in the legislation require clarification and pointed specifically to the definition of "single source" products. That reference is probably a jibe at the Merck and ICI/Stuart comarketing of lisonopril under the brands Prinivil and Zestril. ICI has taken more of that ACE submarket with an aggressive discounting program, and Bristol-Myers Squibb apparently is questioning whether Merck is trying to get a place for Prinivil without having to match Stuart discounts. The split political situation in the industry, with some prominent PMA members in support of Merck and the association on record against the proposal, may work as a tactical advantage for the industry. While split positions are not as easy to manage, this situation lets individual companies try to fashion acceptable arrangements with the states without putting the industry as a whole out on a limb. If PMA had supported the Merck proposal at the May 3 meeting and supported the "Equal Access" bill in California, then other health care industry constituents would have had a more viable vehicle for seeking their own amendments. PMA could have found itself tied to a bill that was picking up unwanted amendments and modifications of the basic Merck proposal. With only individual companies supporting the "Equal Access" bill, it may be easier for the industry to abandon if it changes shape radically during the legislative process. Merck continues to expect current open formulary states to adopt the "best price" offer since it is a no-lose situation for those states. The states with currently restrictive formularies will presumably look hard at the trade-off between a low-discount offer and the added cost threat of permitting excluded products to join the formularies. Merck said it is "encouraged by the generally favorable reception" for the proposal from state legislators and administrators. Arkansas has accepted Merck's proposal. The state's Medicaid agency estimates that it will save $172,000 annually on Merck products through the discounts. Furthermore, the agency estimates that almost $80,000 of the savings will be attributable to discounts off reimbursements for Merck's H2 blocker Pepcid, which is already on the state's formulary. Arkansas is the home state of Sen. Pryor (D), who is introducing legislation to mandate states to form multi-agency buying groups to negotiate for prescription drug discounts or rebates. Pryor is said to be encouraged by the fact that at least four PMA firms have followed Merck's lead; however, he believes his bill is still necessary to provide savings for Medicaid drug expenditures for products by manufacturers that refuse to provide price discounts. The senator is expected to formally introduce his bill by as early as May 11. The legislation was circulated in summary form March 20 ("The Pink Sheet" March 26, p. 3 and April 23, T&G-1). In the interim, Pryor's staff has been fine-tuning the measure in response to concerns expressed by interested parties, including the pharmacy and medical professions. Commending the senator's staff for accommodating their initial serious concerns, the American Medical Association recently wrote the Arkansas Democrat to say it is moving closer toward full support for the legislation. PMA ON MERCK PROPOSAL The Pharmaceutical Manufacturers Association's board adopted the following resolution on Merck's proposed Medicaid legislation at a May 3 meeting of the Executive Committee. The Executive Committee strongly endorses the concept of open access to medicines in Medicaid programs in the Merck proposal, but reiterates its opposition to legislative or regulatory proposals to tie the availability of prescription drugs to the willingness or ability of companies to grant discounts or rebates.