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Executive Summary

The provision in Sen. Pryor's (D-Ark.) Medicaid drug prudent purchasing legislation to establish a National Pharmacy & Therapeutics Committee is unconstitutional, according to a May 25 memorandum prepared for the Pharmaceutical Manufacturers Association by the Washington law firm of Wilmer Cutler & Pickering. The courts would be likely to "hold the provision of the act relating to the National P&T Committee to be unconstitutional for two reasons," the memorandum states. "Establishment of such a committee would unconstitutionally delegate an important governmental function to a private body," and "the essentially unreviewable discretion granted to the committee would violate the traditional norms associated with legislative due process." Wilmer, Cutler contends that the courts recognize an advisory role for private bodies in formulating national and state policy, "particularly when specialized scientific or technical judgments are involved." However, the document continues, "the role of private parties has always been seen as an 'advisory' rather than a law-making one." Introduced by Pryor on May 10, the bill (S 2605) would establish the National P&T Committee to evaluate outpatient prescription drugs and group them into therapeutic categories to identify interchangeable products. Using the information, state Medicaid agencies would be able to restrict reimbursements to those products within each group for which the manufacturer has provided price discounts ("The Pink Sheet" May 14, p. 3). The memo states that therapeutic equivalency determinations made under the bill "are the only decisions contemplated by the statute that require the exercise of substantial judgment and discretion." Such determinations, the document notes, "are subject to wide difference of opinion among professional experts." Although "there would be no constitutional objection to the legislative delegation of such subjective judgments to an officer of the executive branch (subject to the degree of judicial review required by due process)," the memo states, "there are major constitutional flaws in delegating this task to private citizens -- no matter how well qualified -- without any effective review by an executive branch officer or any opportunity for judicial review." The proposed decisionmaking process "not only bypasses entirely the FDA...but denies even the secretary of HHS the power to alter the committee's decisions," the memo continues. Although the statute provides a public comment period, "it does not require the committee, after consideration of these comments, to make any statement of the basis and purpose of its determinations." Furthermore, the memo contends that "the demands of legislative due process are particularly strong in cases where the legislating function is delegated to a non-governmental private entity." The Pryor bill "offends the basic notions of legislative due process" by establishing a P&T committee that "would make its decisions guided by few standards, without any obligation to state the basis and purpose of its determinations, without any provision for judicial review and without giving the secretary any power to make substantive changes," the document states. In a May 15 letter, Pryor asked Senate Finance Committee Chairman Bentsen (D-Texas) to schedule a hearing on S 2605 in the committee, preferably in June or July. Bentsen has not yet responded. Pryor held two hearings on prescription drug prices before his Senate Aging Committee last year. Sens. Baucus (D-Mont.), Johnston (D-La.), Breaux (D-La.) and Lott (R-Miss.) have been added as cosponsors of S 2605. Pryor introduced his legislation May 10 with seven senators agreeing to be original cosponsors ("The Pink Sheet" May 14, p. 3). The National Black Caucus of State Legislators opposes Pryor's Medicaid bill for restricting the access of program beneficiaries to "better medicines." In a May 23 letter, the caucus urged all U.S. senators to oppose the legislation. Pointing out that Medicaid beneficiaries "include a significant number of Blacks and other minorities, the caucus said it "urges your opposition to S 2605" because it would "restrict the availability of prescription drugs to Medicaid beneficiaries." The caucus said the legislation "seeks to switch Medicaid patients to the cheapest medicines for a particular illness, even though there may be better medicines available." Calling the measure a "catsup as a vegetable" approach to cost containment, the caucus maintained that "poor people will get older and even OTC products to treat conditions for which better medicines are available." Consequently, the letter states, "many poor people will simply not get better, or not get better as quickly, as those who have access to the best products." Furthermore, the letter contends, Medicaid patients will receive second-class service at pharmacies because of the bill. "Medicaid patients will wait for long periods of time while the pharmacist attempts to reach their doctors to discuss drug-switching" and "while others are served ahead of them." The caucus attached to the letter a copy of its April 30 resolution to oppose the Pryor legislation. The resolution states that the caucus "opposes any federal proposal of this type that would create barriers limiting a physician's right to choose the best medicine for his or her patients and would prevent the establishment of comprehensive and open Medicaid prescription drug programs." The caucus noted that it has previously endorsed open drug formularies.

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