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SEN. PRYOR’s MEDICAID DRUG PRICE DISCOUNT BILL: HHS INDICATES SUPPORT OF PRINCIPLE; BREAUX, LOTT ADDED AS COSPONSORS; IBA LOBBIES AGAINST MEASURE

Executive Summary

HHS Secretary Sullivan has indicated he may be favorably inclined toward Medicaid drug prudent purchasing legislation authored by Sen. Pryor (D-Ark.). Although HHS has no official position on S 2605, Sullivan indicated that states may need federal legislation to facilitate negotiations to obtain lower prices -- negotiations which the department supports. In a letter to Senate HHS Appropriations Subcommittee Chairman Harkin (D-Iowa), Sullivan wrote that the department "would support states' efforts to negotiate lower prescription drug prices." Noting that "states have attempted to negotiate lower drug prices with drug manufacturers but, to date, have been largely unsuccessful," the secretary asserted: "Legislation could help provide states leverage to obtain drugs for their Medicaid programs at a lower or discounted price." Sullivan was responding to a question from Harkin as to whether HHS would "favor legislation to mandate that states establish programs to negotiate lower drug prices." The written questions and answers were exchanged as a followup to Harkin's May 7 HHS Appropriations Subcommittee hearing. The National Association of Chain Drug Stores, NARD, and the American Pharmaceutical Association issued a joint statement May 15 in support of the Pryor bill. Referring obliquely to the pharmaceutical industry's multi-tier prices, the three associations maintained that S 2605 "assures that the Medicaid program does not pay the highest prices for prescription drugs." The statement added that the measure will involve drug manufacturers in "playing a meaningful role in the Medicaid cost containment effort." Pryor introduced the measure May 10 ("The Pink Sheet" May 14, p. 3). The statement appears to be a direct response to comments made about the bill by the Pharmaceutical Manufacturers Association. The pharmacy groups contradicted industry criticisms that the bill would limit access of Medicaid patients to important therapies by relying on formularies. "The proposal is designed to help Medicaid beneficiaries gain access to the widest range of prescription drugs while protecting program costs against ever-increasing manufacturer prices," the joint statement asserts. The requirement that manufacturers "provide equal access to [reduced] prices for prescription drugs is a prudent approach to cost containment widely used throughout the industry," the associations maintained. "There is no reason that lower manufacturer prices which are available to hospitals, managed care organizations, and government agencies should not be made available to our poorest citizens as well," NARD Exec VP Charles West contended. APha Exec VP John Gans added that the legislation "opens up enhanced practice opportunities for pharmacists in the community setting, which will contribute to better health care for the patient." The bill's market-based reimbursement provision, which would pay pharmacies usual and customary charges capped at the 90th percentile within a state, "relies on the proven ability of competitive market pricing to assure access to the highest quality of pharmacy-based care," the statement maintains. NACDS President Ronald Ziegler added that "the proposal reflects a blend of vision and practical day-to-day marketplace reality." PMA has argued that the bidding-formulary feature of the legislation would result in "second-class medicine" for Medicaid beneficiaries in that products not included on a state formulary would be denied. The bill does not require restrictive formularies and products might be excluded only to the extent that manufacturers do not offer Medicaid adequate discounts; furthermore, even excluded products would be reimbursed if physicians prescribe them as medically necessary. The pharmacy statement contends that PMA's argument "that the bill will provide second-class treatment to Medicaid beneficiaries ...is just plain wrong." The groups noted that support from several organizations representing the elderly and poor illustrates "that this legislation will improve the Medicaid prescription drug program by assuring recipients access to all needed medications." The groups concluded their statement with the line: "The bill is fair, wise, and workable." PMA's previous comments in opposition to the legislation have included the sentence: "The bill is unfair, unwise, and unworkable." PMA has argued that the legislation is "certain to hurt...the nation's poorest citizens." The proposed grouping of "old and new products, generic and single-source" into therapeutic categories for purposes of 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." The Industrial Biotechnology Association lobbied California Sens. Cranston (D) and Wilson (R) on May 18 to oppose the Pryor bill on the grounds that it would discourage innovation. In separate visits to the senators, officials from three California-based companies and the IBA "expressed industry's serious concern that Pryor's nationwide pharmaceutical purchasing scheme for Medicaid could reduce biopharmaceutical manufacturers revenues to the point that future drug development is stifled," according to a same-day IBA statement. The industry representatives also emphasized that "seemingly expensive drugs may serve to actually reduce health care costs by shortening the duration of hospital stays and reducing the need for other health care expenditures." Representing the biotechnology industry at the meetings were Amgen President Harry Hixson, Codon CEO Fred Craves, Genentech VP-Government Affairs David Beier, IBA President Richard Godown and IBA Government Relations Director Lisa Raines. Sens. Breaux (D-La.) and Lott (R-Miss.) have signed onto S 2605 since it was introduced with eight original cosponsors. As a new member of the Senate Finance Committee, Breaux could become a key cosponsor. A supporter of his home state's efforts to obtain full AWP-based Medicaid drug reimbursements for pharmacists, Breaux may champion the Pryor bill's marketplace reimbursement provision.
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