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HCFA ALTERNATIVE TO OMB MEDICAID DRUG THERAPEUTIC SUBSTITUTION PLAN EXPECTED TO BE FORWARDED TO HHS AFTER LABOR DAY; SEPT. 17 SENATE PREVIEW TARGETED

Executive Summary

The Health Care Financing Administration's recommended alternative to the Office of Management and Budget's Medicaid drug therapeutic substitution plan is expected to be forwarded in a decision memo to HHS Secretary Sullivan during the first week of September. Later the same week, HHS is scheduled to present its strategy to the White House and the Office of Management & Budget. The Administration is hoping to finish a revised budget proposal for HCFA so that the agency's administrator, Gail Wilensky, can preview the plan at the Sept. 17 hearing before the Senate Finance/Subcommittee on Health for Families and the Uninsured, chaired by Sen. Reigle (D-Mich.). HCFA reportedly has not been asked to come up with a plan to save more than the $300 mil. described in earlier cuts from Medicaid outpatient drug spending. OMB agreed to drop its original therapeutic substitution plan at HHS' request with the understanding that HCFA would develop an alternative ("The Pink Sheet" July 23, p. 3). Modeled on Sen. Pryor's (D-Ark.) S 2605, the OMB plan was forwarded to Capitol Hill budget negotiators the week of June 18. HHS had planned to have a revised proposal ready the week of July 23, but asked OMB for more time to talk with state Medicaid plans. Within the last month HCFA also has met informally with about five pharmaceutical companies and the Pharmaceutical Manufacturers Association. HCFA is reportedly looking to both single- and multi-source drugs for savings. That is an important subject with Sen. Pryor, who also wants savings from both classes of products. The HCFA proposal may allow pharmaceutical companies to have individual contracts with state Medicaid programs. The Sept. 17 Senate hearing has been called to review Medicaid drug price rebate plans and Sen. Pryor's legislation. Four separate national drug plans proposed by Merck, Pfizer, Glaxo and Upjohn also will be discussed at the hearing (see following story). Pryor is expected to present a statement at the hearing on his bill on "Pryor II," alternative legislation to S 2605. PMA will testify on behalf of industry, presenting its four "principles" for Medicaid drug price legislation ("The Pink Sheet" Aug. 6, p. 3) and discussing the common elements of the four company proposals. Representatives from each of the four companies will be present at the hearing to answer questions on their proposals. The subcommittee is planning to invite other witnesses to represent pharmacists, Medicaid patient advocacy, academia and state programs. A member of the Texas state legislature is expected to appear on behalf of the states. The House Energy & Commerce/Health Subcommittee hearing on Medicaid, scheduled for Sept. 14, is planning to schedule a panel of witnesses to discuss drug price proposals. Although the panel has not been set, Medi-Cal Drug Discount Program Director Jim Parks is expected to testify, as is a representative of Merck. The House version of S 2605, reportedly under development by Reps. Wyden (D-Ore.) and Cooper (D-Tenn.) has not yet been introduced.
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