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Executive Summary

MERCK MEDICAID CHILDHOOD VACCINE INITIATIVE will permit states to contract with the company for vaccines at the discount price provided to the Centers for Disease Control plus a "small premium" to cover shipping and processing costs. Merck Vaccine Division President Gordon Douglas outlined the upcoming initiative at an April 8 hearing on childhood vaccines convened by the Senate Appropriations/HHS subcommittee. Douglas said the program is in the final design stage and Merck is beginning discussions with state Medicaid programs with the goal of selecting four to five states to pilot test the initiative. Under the plan, Merck will send physicians providing Medicaid services "a 'seed' shipment of vaccines on consignment to the state Medicaid program, at no cost to the physician," Douglas' written testimony explains. "The physician administers the vaccine and bills Medicaid for the office visit," then Medicaid "compiles vaccine utilization data and notifies Merck of physicians who require replacement doses. Merck replaces doses to the physicians and forwards invoices to the state." Merck said its plan would help encourage physicians to provide vaccinations by eliminating the need for the physician to purchase and store vaccines and would simplify state vaccine programs. Douglas noted that private physicians often refer Medicaid patients to public clinics for immunizations but, because patients usually do not go to the clinic, "referral is deferral" of the immunization. Merck's products include a measles, mumps, rubella vaccine (MMRII) and a recombinant hepatitis B vaccine (Recombivax HB). A chicken pox vaccine (Varivax) was recommended for approval by an FDA advisory committee in January 1990. Merck's announcement scored points with Sen. Bumpers (D-Ark.), who chaired the hearing and has taken up immunizations as a personal cause. Bumpers told Douglas that "you're on to something" and suggested other companies might take a look at special efforts to help low-income children not reached by current immunization programs. But alluding to physician complaints that Medicaid offers very low reimbursement rates for drug administration services, Bumpers said that the "big question" is how many doctors would opt into providing Medicaid immunizations with a plan like Merck's. Douglas replied that that issue will be studied in the pilot test, and said physicians have responded positively in focus groups. His written statement suggests that states could raise Medicaid reimbursement rates for physician-delivered immunizations using savings from the vaccine discount prices and reduced state activities for vaccine storage and distribution. According to a recent CDC study of measles outbreaks in five cities, about 40% of unvaccinated but vaccine-eligible children with measles were enrolled in Medicaid. All three industry witnesses -- Merck's Douglas, Connaught Senior VP-R&D Howard Six and Lederle-Praxis Biologicals President and CEO Ronald Saldarini -- opposed a plan that Bumpers has floated for a consolidated total federal purchase of all childhood vaccines. They said that gaps in immunization result from problems of access to immunizations and other health services, not the price or supply of vaccines. Six, in his written testimony, said that to "continue with the success of this country's immunization program there must be a guaranteed source of vaccine supply at a reasonable price in an atmosphere that fosters innovation after basic research." Current prices to CDC, he said, "reflect significant discounts and cannot support the type of product improvements and new vaccines that are possible." Six' statement adds: "We do not believe that there is a problem with expanding the public sector to ensure that all those in need are receiving vaccines. However, we must emphasize that the goal of guaranteeing a stable source of supply will be jeopardized if the distribution of CDC-purchased vaccines were to expand to cover other than those in need because the support for the public sector now provided by the private sector will no longer be available." CDC Director William Roper, MD, responding to questions from Bumpers on the total federal purchase idea, agreed that such an approach might have "good" effects in the "near term" but said he is less certain about the longer term. Roper indicated he would be concerned about long-term effects on private sector vaccine research and said the federal government "doesn't do a very effective job of getting a good price on the things that we're the exclusive purchaser of." Roper noted that while almost all school-age children are appropriately vaccinated, many fewer pre-school children are immunized according to recommended schedules. One of HHS' "Year 2000" health promotion goals is to immunize at least 90% of all children by two years of age with recommended age-appropriate immunizations; CDC's FY 1992 appropriations included $46 mil. specifically for this effort. Roper reported that 63 states and cities receiving CDC immunization funds plus another 24 urban areas have been asked to prepared "immunization action plans" by mid-July. The $46 mil. will be awarded on a competitive basis reflecting areas with the greatest needs and the best action plans, he said.

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