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Executive Summary

Pfizer supports an outpatient drug benefit under Medicare, the company disclosed during Feb. 22 testimony to Rep. Waxman's (D- Calif.) House Health Subcommittee. Pfizer Exec VP Robert Neimeth noted the company's position on Medicare drug benefits in an understated paragraph in the middle of his prepared remarks. First stating the general industry position of support for broad access to prescription drugs through expansion of third-party coverage, Neimeth then specifically added support for "the adoption of a drug benefit under Medicare." With the extension of Medicare benefits to outpatient drugs viewed as one of the most likely outgrowths of the Clinton health care reform proposals, Pfizer's declaration of support appears on one level as simply a pragmatic reading of the political realities. From the point of view of market expansion, it puts Pfizer in support of a potential benefit that has been estimated to represent $2.5 bil. of pharmaceutical purchases in 1993. What makes Pfizer's position noteworthy at this point is that the company is apparently the first major U.S. pharmaceutical manufacturer to state its support for Medicare drug coverage publicly. The Pharmaceutical Manufacturers Association board has come up short of support for the extension of Medicare benefits to outpatient drugs in its recent deliberations. Pfizer Chairman William Steere is the chairman-elect of the PMA. His company's leadership position on the issue could generate movement on the association's board or could create a difficult situation in which the chairman's company is out ahead of the majority of the membership. Pfizer's statement may also be a good indicator of which way the political winds are blowing. For a decade, Pfizer's stance has been a good predictor of when legislation will pass. The company changed positions on the Waxman-Hatch and Medical Device Amendments when those bills began to move toward final passage. The current PMA position is explained in a Jan. 25 statement in which the association declared its support for the inclusion of outpatient drugs "in any standard managed competition plan under proposals for health care reform, such as the ones offered by the Jackson Hole Group and the Conservative Democratic Forum." PMA would presumably rather deal with a number of private third-party purchasers than the federal government as a single major purchaser. The current board position, however, leaves the association staff in a somewhat awkward situation when discussing potential health care changes with the Clinton Administration and on Capitol Hill. PMA President Gerald Mossinghoff has finessed his way around the PMA position several times recently. At a Feb. 24 hearing before Sen. Pryor's (D-Ark.) Special Senate Committee on Aging, for example, Mossinghoff stated the association's support for a minimum benefits package, its support for full Medicaid benefits and then slipped in a comment on willingness to work on Medicare. "The PMA board has taken, I think, a very forthright position," Mossinghoff told the committee's Ranking Republican, Sen. Cohen (Maine). "We want to work with you and Sen. Pryor and the administration to make sure that any managed competition basic benefit includes prescription drugs. For years, we have had the position that Medicaid drugs should be provided at 100% of the federal poverty level. We want to work with you on any issue having to do with Medicare patients." The difficulty of the PMA position was reflected by Cohen's quick retort to Mossinghoff. "Let me suggest to you that if the pharmaceutical industry wants to be included in this health care reform (including managed competition), you are probably [facing] pretty serious price controls. What you would like to see is to have drugs included as far as coverage but with no restraint on pricing." Six years ago, when the debate over outpatient drugs began as part of the Catastrophic Care Act, PMA similarly withheld support for the program until about six months into the legislative effort, when the association supported a Senate proposal (with a five-year phase-in, prohibitions against formularies and therapeutic substitution, and an insurance style funding mechanism). According to Washington observers, two companies were out ahead of the industry in support of an outpatient benefit during that debate (SmithKline Beecham and Johnson & Johnson) but they did not broadcast their support as openly as Pfizer has this time. The strategy of delay worked effectively in the 1987-1988 debate in winning the adoption of many proposals from the Senate bill in the final legislation. Some firms are favoring a similar approach again -- especially waiting until the Administration's health care task force releases its plan in May. PMA addressed its concerns to two key senators during the Catastrophic Care debate. Both are no longer in the Congress: the late Sen. Heinz and Sen. Bentsen (now Treasury secretary). A likely contact for PMA this time around is Sen. Bradley (D-N.J.), who has spoken up for the industry in recent years and is a member of the Senate Finance Committee.

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