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Executive Summary

Senate Majority Leader Mitchell (Maine) is taking a public position just short of endorsement for Sen. Pryor (D-Ark.) and his Medicaid drug Prudent Purchasing Act in a May 7 address to NARD. Speaking at a luncheon during the retail pharmacy association's May 6-8 legislative conference, Mitchell said: "I will be working with Sen. Pryor to see that his legislation advances through the legislative do the best we can to help meet what I think is our common national objective" -- the right to quality health care that is "adequate, accessible and affordable." Pryor introduced his legislation (S 2605) on May 10 with six original cosponsors: Sens. Adams (D-Wash.), Bumpers (D-Ark.), Burdick (D-N.D.), Conrad (D-N.D.), Exon (D-Neb.), Kerrey (D-Mass.) and Kohl (D-Wis.). The Arkansas Democrat did not seek cosponsors before enactment. He circulated a "Dear Colleague" letter the day after introduction to solicit further Senate support. The letter states that the $3.5 bil. Medicaid program frequently pays "in excess of 40% more" than hospitals, HMOs or the Veterans Affairs Department for prescription drugs. Noting that Pryor's bill "is intended to reduce Medicaid's costs for prescription drugs without compromising care for Medicaid's beneficiaries," Mitchell described the proposal as a way to reduce program expenditures "by approaching the drug manufacturers' escalating drug prices rather than imposing the burden on the poor or the retail druggists, neither of whom have control over drug prices." The bill would also change estimated acquisition cost and average wholesale price issues regarding pharmacy reimbursements by providing marketplace payment equal to actual charges up to the 90th percentile of charges in a state. The legislation "recognizes the important role that you [pharmacists] play...with a provision intended to assure fair reimbursement for drugs while working to control increases at the source, where the increases do occur," Mitchell said. Pryor and Mitchell both sit on the Senate Finance Committee, where S 2605 has been referred. Besides chairing the Special Committee on Aging, Pryor also has a Senate leadership role through his post as secretary of the Democratic Conference. Pryor is expected to ask the Finance Committee to schedule a hearing in the near future and a markup as soon after as possible. Time is short on the legislative calendar; only about 45 legislative days remain in the current Congress. Introducing his legislation on the Senate floor, Pryor contended that the need for S 2605 has been voiced through concerns about high prescription drug prices voiced by his colleagues' constituents, and he laid the responsibility for those concerns at the foot of the pharmaceutical industry. Pryor said "the only representative of the health care industry satisfied with the current system appears to be the drug manufacturers." The Medicaid bill is based on a study of "the best business practices already being used by hospitals, HMOs, and a handful of federal government agencies to negotiate lower drug prices," Pryor maintained. He asserted that prices obtained by the Veterans Affairs Department, hospitals and HMOs constitute "30%-40% discounts under what the state Medicaid programs are paying." Pryor characterized Medicaid as a charity program that should be eligible for the same discounts obtained by nonprofit hospitals across the country. "While no one would begrudge a nonprofit hospital serving indigent patients a discount, how can anyone argue that the Medicaid Prescription Drug Program serving millions of poor people should not have access to at least the same or similar discounts?" The Arkansas Democrat also told the Senate that his bill will make prescription drug price discounts available to buyers other than Medicaid. The legislation "will ensure that employee benefit plans, health insurers and medicaid programs alike can start negotiating drug prices," Pryor said. Application of the proposal beyond Medicaid and the $250 mil. Pryor hopes to save the government program has been the source of unspoken fear for pharmaceutical manufacturers. "Many of my colleagues on the Finance, Aging and Labor [and Human Resources] Committees, I gather, have been subjected to a barrage of lobbying activity by the drug companies about this bill," Pryor said during introduction. "In all the years I have been in the Senate [since 1979], I have never seen such an extensive lobbying campaign against an idea that [had] yet to be formally introduced." The Pharmaceutical Manufacturers Association maintained in a May 10 statement that Pryor's legislation "is unlikely to save money and certain to hurt the people Medicaid is designed to help -- the nation's poorest citizens." The grouping of "old and new products, generic and single-source" into therapeutic categories for bidding "almost certainly" would result in "the oldest ones" being reimbursed as "the cheapest products," PMA said. "Except in special circumstances, the other drugs would be unavailable to Medicaid patients." According to a May 10 PMA analysis entitled "A Threat to Medicines in Medicaid," Pryor's bill would "not save money" and "may even increase costs." PMA-funded studies "suggest that when restrictions are placed on prescription drugs, patients often require alternative treatments such as additional physician care or hospitalization," the analysis states. Citing a recent Louisiana State University study ("The Pink Sheet" Jan. 22, p. 10) sponsored by PMA, the association noted that a study estimated that "formularies increase overall Medicaid costs by 4.1%-15.5%." The PMA analysis also contends that apparently similar products have disparate effects. As an example, PMA cited a 1987 American Heart Journal article on the clinical differences among eight beta blockers and states: "only three of the eight drugs preserve renal blood flow, five offer once-a-day dosing (greatly increasing compliance), but only three can be used to reduce post-heart attack deaths." PMA contended that "elimination of any of these drugs would seriously limit physicians' choices" and that the beta blocker category is not unique. "Prescription medicines should not be chosen by low bid but by the value to the specific patient for the specific illness," the association maintained. The bill also is "so complex as to be unworkable," PMA maintained. To support this point, PMA pointed to the proposed National Pharmacy and Therapeutics Committee, which would make its determinations on therapeutically interchangeable products "outside of the normal government decisionmaking process." The association is preparing an extensive legal challenge to the extra-governmental status of the P&T committee. PMA also has issued a series of six articles titled "Medicines in Medicaid: Cost-Effective Health Care for America's Poor." Dated April 1990, the documents are intended to focus separately on individual issues raised by the Pryor bill. The issues addressed are "Medicaid coverage of prescription drugs: a fact sheet"; "differential pricing"; "restrictive formularies"; "formularies: a review of the studies"; and "therapeutic equivalence: a faulty basis for restricted formularies." Pryor said the Merck proposal to discount its drug prices for Medicaid in return for open access to state formularies does not eliminate the need for his bill. In Q&A accompanying the bill, Pryor calls the Merck proposal is "an encouraging sign and an admission by the drug companies that they can survive and prosper without having to charge state Medicaid programs high prices." Furthermore, the Q&A document adds, "there is no indication that other drug companies will follow suit, nor is it guaranteed that these discounted prices will remain in effect after one or two years." In written remarks prepared for NARD's conference on May 7, Pryor said he hoped introduction of the bill would be "the first step to making sure that we all get a fair deal on prescription drugs." In a video presentation, Pryor told the independent retail pharmacists that Merck's Medicaid drug price discount proposal is cause for "optimism" about his legislation. The senator said his bill "already...has produced some important results. Merck's proposal to give state Medicaid programs their lowest price represents a major victory. It represents an acceptance that they are charging too much for a program that serves sick and poor people." Pryor contended that Merck's proposal is "important in that it is breaking to shreds the industry's historical position of no deals" on drug prices. While the exact number of states that have accepted Merck's "best price" proposal is not clear, Pryor's home state of Arkansas is one that has. About 30 states have open formularies and, because they would sacrifice nothing to obtain Merck's offer of price discounts, can be expected to consider the offer seriously. Pryor submitted letters of endorsement from several elderly and pharmacy groups for the Senate record. The organizations supporting the legislation include the National Council of Senior Citizens, the American Association of Retired Persons, NARD, the National Association of Chain Drug Stores and the American Pharmaceutical Association. APhA qualified its support as a commendation for accepting many of the association's positions. The APhA board has not taken an official position. The American Medical Association will be a key interested party during the legislative process. Christopher Jennings, deputy staff director for Pryor's Aging Committee, called the position of physicians groups "absolutely essential" to the bill's viability and said the committee has "had very, very encouraging discussions with them." A May 3 letter from American Medical Association Acting Exec VP James Todd, MD, to Pryor commended the "cooperation and flexibility" of the Aging Committee staff in fine-tuning the bill to accommodate AMA concerns. "I am certain that we can work together to achieve the laudable goals which your committee has set for itself," Todd wrote. AMA hopes the pharmaceutical "industry will see the merit of being involved in addressing the problem you have identified," he added. "Our concerns with your proposed legislation are not insurmountable." Describing the AMA letter for NARD, Jennings said the association acknowledged that drug price increases are "a problem" which "needs to be addressed legislatively"; the letter stated that "we can address any problems that [AMA has] with this legislation over the next weeks and months to come." Doctors also "are tired of" having Medicaid reimbursements cut back, Jennings said, and "there's a sense that if everyone else has to deal with cost containment, the manufacturers should too, as long as its done in a reasonable way." While they may not endorse the bill, doctors "are not opposing" us, he continued, predicting that "over time" physicians groups will exhibit "a working relationship that's very constructive."

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