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Executive Summary

Sen. Pryor's legislative alternative ("Pryor II") to his Medicaid drug price bill and a House counterpart to "Pryor II" sponsored by Reps. Wyden (D-Ore.) and Cooper (D-Tenn.) are expected to be introduced during the week ending Sept. 14. The new bills will be on the table for the Sept. 14 hearing before Rep. Waxman's (D-Calif.) Energy & Commerce/Health Subcommittee and the hearing the following Monday before the Senate Finance/Subcommittee on Health for Families and the Uninsured, chaired by Sen. Riegle (D-Mich.). Pryor plans to testify at both hearings and will reportedly focus on the general issue of obtaining reduced drug prices for Medicaid rather than the specifics of his two Medicaid bills. Pryor has said that he remains open to alternatives to his original bill, S 2605, as long as they result in substantial savings to the Medicaid program. The Congressional Budget Office estimates that Pryor's first bill would save approximately $1.6 bil. over five years. CBO has also been asked by Pryor to estimate savings from "Pryor II." "Pryor II" will be similar to prescription drug proposals offered by Merck and Pfizer in that it will be based on "best price" discounts. However, the bill is expected to include additional safeguards to assure long-term savings to Medicaid. The safeguards would involve some kind of indexing to tie discounts to the Consumer Price Index. Also, Pryor II is not expected to include the provisions for a national formulary and national P&T committee that were included in the first Pryor bill and, instead, is expected to encourage best price discounts from pharmaceutical companies. The new Pryor bill will not contain the earlier provision to set pharmacy reimbursement levels at the 90th percentile of charges. Pryor is considering other options to restore reimbursement levels by focusing on reforms to the Medicaid system. In what is expected to be the single substantive difference between the Senate and House version, the Wyden/Cooper bill will not address pharmacy reimbursement. Provisions requiring reduced prices for brand products in multi-source categories is expected to be included in the new legislation. S 2605 focuses on single-source drugs. In a recent analysis of existing drug discount proposals ("The Pink Sheet" Sept. 3, p. 11), Pryor criticized plans developed by Merck, Pfizer, Upjohn and Glaxo for excluding multiple source products. Merck and Glaxo are scheduled to appear as part of a panel on prescription drug issues at the Waxman hearing, as is the director of the Medi-Cal drug discount program, Jim Parks. The Pharmaceutical Manufacturers Association is also scheduled to testify. Merck, which has reached agreements with more than 30 state Medicaid agencies to provide drug discounts, may address Pryor's criticism that its plan does not guarantee that discounts will be maintained at a certain level over time. Indexing discounts could provide a solution. Pryor has said that "the very serious and obvious problem" with both the Merck and Pfizer "best price" proposals "is that the manufacturers have control over the 'best price' on which the discounts would be based, and could easily eliminate them over time." In a Sept. 6 statement issued after a same-day PMA board executive committee meeting, PMA maintained that drug industry efforts underway to reduce prices to Medicaid obviates the need for federal action. PMA stated: "It now appears that the stated objectives of the drug purchasing plans developed by Senator Pryor in S 2605 and [the Office of Management and Budget] in its June 23 deficit reduction proposal are being realized by market forces. Given the progress that has occurred, those market forces should be given time for full expression without Federal interference."



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