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Executive Summary

V-A DRUG DISCOUNT EXEMPTION FROM MEDICAID REBATE CALCULATIONS is contained in the Veterans Affairs Department FY 1992 appropriations bill awaiting presidential review. The bill (HR 2519) was adopted by Congress Oct. 2. It includes a provision originally offered by Sen. Mikulski (D-Md.) to exempt pharmaceutical price discounts offered to V-A facilities from best price calculations under the Medicaid prescription drug price rebate law. The exemption would extend through June 1992. The legislation also requires V-A to attempt to negotiate with manufacturers to obtain new low prices for the department. The exemption and negotiation requirement are substantive policy provisions not usually found in appropriations measures but more often handled by congressional committees with jurisdiction for legislative authority. Consequently, the legislators whose committees are responsible for Medicaid legislation, Senate Finance Committee Chairman Bentsen (D-Texas) and House Energy & Commerce Committee Chairman Dingell (D-Mich.), reportedly were concerned that the discount provision in HR 2519 constituted an infringement on their legislative jurisdiction by the Appropriations Committees of both chambers. The Pharmaceutical Manufacturers Association supports the approach of HR 2519 to restoring low prices for V-A hospitals because it would not require companies to offer deep discounts to the much larger Medicaid market. Consequently, PMA has taken the unusual step of urging its member firms to consider reducing their prices for V-A customers in accordance with the appropriations measure. In an Oct. 3 letter to board members, PMA Chairman John Stafford (American Home Products chairman and CEO) and President Gerald Mossinghoff called HR 2519 "far less intrusive in company decisionmaking -- and far more consistent with the preservation of a free market for the drug industry -- than previous proposals." The letter urges member firms "to cooperate fully" in V-A negotiations toward new low prices for its health care facilities. The letter notes that the more "intrusive" legislative proposals for restoring drug price discounts for hospitals include legislation by House Veterans Affairs Committee Chairman Montgomery (D-Miss.). That bill "would mandate that each manufacturer 'roll back' its prices to their Sept. 1, 1990 level, to be increased only by the inflation factor of the medical care account" of the V-A, PMA noted ("The Pink Sheet" Oct. 7, T&G-5). Sen. Pryor (D-Ark.) is considering legislation to lead to price rollbacks to 1990 levels for all hospitals and HMOs in such a way that deep discounts also would be required for the Medicaid program ("The Pink Sheet" Sept. 30, p. 3). "In view of the continuing threat of such intrusive legislation, and of the fact that the Mikulski amendment will be in effect only until June 1992 or until the enactment of other legislation concerning the price of drugs and biologicals paid for by the V-A, we urge PMA member companies to cooperate fully with the secretary of Veterans Affairs in the negotiations called for by the Mikulski amendment," the letter states. PMA then sounded a variation on its usual disclaimer that it cannot influence members' pricing policies: "Prices offered by the individual companies in the course of these negotiations must, of course, be determined individually by each manufacturer."

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