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Executive Summary

SEN. KENNEDY's BILL TO RESTORE Rx DRUG DISCOUNTS TO PHS programs through Medicaid-like rebates was introduced Sept. 19. Entitled the "Public Health Clinic Prudent Purchasing Act," the legislation (S 1729) is intended to require drug manufacturers to provide affordable prices for drugs purchased by certain entities funded under the Public Health Service Act. Kennedy previously had prepared the proposal as an amendment to fiscal 1992 HHS appropriations legislation ("The Pink Sheet" Aug. 5, p. 3). However, the Senate passed the funding bill Sept. 12 without the Kennedy amendment. The bill stipulates that manufacturers intending to sell their products to PHS-funded health care programs first must "have in effect an agreement" with such programs for "the manufacturer to provide a rebate" to the PHS-funded health care entity. The bill further states that such entities "may not purchase any drug or biological" whose manufacturer has not entered into a rebate agreement. In situations where a patient is treated in a PHS facility but his or her drug therapies are covered by Medicaid, a separate PHS rebate agreement would not be required. Under the Massachusetts Democrat's bill, manufacturers would provide price rebates to various health care entities that receive PHS funding: migrant health centers, community health centers, family planning clinics, alcohol or drug treatment centers, mental health centers, black lung clinics and clinics that treat sexually transmitted diseases. Kennedy said Rep. Wyden (D-Ore.) will introduce a companion measure in the House. Rebates provided by the manufacturer under the bill would have to be sufficient to reduce the "average price paid by the covered entity" to the price negotiated between the manufacturer and the entity, or to the price paid by Medicaid, "whichever is lowest." The draft also bars PHS-funded programs that receive discounted drugs from reselling the products. The bill provides a $ 25,000 penalty for each violation. Introducing the measure, Kennedy told the Senate that "many PHS Act clinics have reported significant price increases in recent months." For example, one manufacturer told community health centers in Texas that its drug prices "will increase by at least one-third and possibly by as much as 350%," he said. "One large family planning clinic in Massachusetts reports that one manufacturer has increased the price for a widely used antifungal cream by 93%." The Pharmaceutical Manufacturers Association opposed the earlier amendment and is expected to oppose the current bill. The prohibition on resales was added to mollify some of industry's perceived concerns. Similarly, a provision to exempt PHS prices from being factored into Medicaid rebate calculations has also intended to appease industry. PMA, however, reportedly remains concerned that the bill's list of subject programs is not exclusive and may include others not identified.

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