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Executive Summary

Benzodiazepines can be excluded from state Medicaid programs under the drug price rebate legislation (a.k.a. "Prudent Pharmaceutical Purchasing Bill") passed by Congress on Oct. 27. At the eleventh-hour on Oct. 26, a House-Senate conference committee added benzodiazepines to the list of drugs that state Medicaid agencies may exclude from coverage. Both chambers adopted the conference bill Oct. 27, and Congress adjourned at 2:00 a.m. the following morning. The tranquilizer/sedative category of prescription drugs was added to the list of medications for which reimbursement may be denied after state Medicaid agency representatives urged the conference committee that such restrictions, currently in effect in several states, are necessary. The House had discussed other ways to limit benzodiazepine prescriptions during the Medicaid drug/budget discussions. Rep. Stark (D-Calif.), for example, had been a proponent of a triplicate prescription proposal modeled on New York law. That law has had the effect of cutting benzodiazepine use. The previous House proposals may have facilitated the benzodiazepine restrictions in the final Medicaid rebate bill. The benzodiazepine class includes a number of prominent brandnames such as Upjohn's hypnotic Halcion and anxiolytic Xanax, Roche's Valium and Librium, Wyeth-Ayerst's Ativan and Abbott's Tranxene. A Senate Aging Committee summary of the final legislation explains the provisions on "permissable drug restrictions and prior approvable programs" as intended to enable states "to maintain control over the design of their drug programs through prior approval." The summary states that "the only drugs" for which coverage is "not required" are "those not subject to rebates and the...drugs that many states are currently excluding." The potential exclusion list includes anorexia or weight-gain treatments; fertility drugs; hair growth products, such as Upjohn's Rogaine, or other products used for cosmetic purposes; barbiturates; smoking cessation products; prescription vitamins and minerals, except prenatal vitamins and fluoride preparations; benzodiazepines; products, like Sandoz' Clozaril, which are sold with associated tests or monitoring services available exclusively from the manufacturer or its licensed agent; nonprescription (OTC) medications; and cough and cold preparations. Upjohn has three major products that can be excluded from Medicaid coverage under the legislation. Because of those potential exclusions, Upjohn appears to be a company that may be particularly affected by the Medicaid legislation. Other companies that may be adversely affected are those manufacturers with existing state rebate agreements. If those existing contracts do not add up to a 10% savings to Medicaid on the company's entire product line, then the deals will be supplanted by the new legislation. Merck's "best price" contracts may fall under the 10% figure. Upjohn's flat-rate $1.35 per prescription rebate also may fall below the minimum 10% across-the-line discount. By contrast, some manufacturers could gain from openings created in the Medicaid market. Bristol-Myers Squibb, for example, has the non-benzodiazepine anxiolytic Buspar, which could pick up some of the Medicaid business if the benzodiazepines are excluded. BMS, however, is one of companies which may be in the position of being tied to large rebates on some of its major products because of existing best prices. The inconsistent effect of the legislation on different companies was decried by the Pharmaceutical Manufacturers Association in a statement developed by the board at a Nov. 1 post-legislation meeting. "The new law treats lawfully operating companies unequally," PMA declared. "Further, it discriminates unfairly against pioneer products in favor of generic copies." The Senate summary of the legislation leaves open future additions to the exclusion list. HHS can "add to this list (by regulation) if state utilization data suggest that such an addition is warranted."



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