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Executive Summary

The Pharmaceutical Manufacturers Association is supporting establishment of an outpatient drug benefit under Medicare Part B as an interim step toward melding together Medicare and the managed competition approach to health care reform, association representatives advised White House Senior Advisor Ira Magaziner during a March 8 meeting. The Medicare position is part of a larger revised set of common positions on pharmaceuticals and health care reform adopted by the Executive Committee of PMA's board during a strategic planning retreat convened over the March 6-7 weekend (see following story). PMA is also emphasizing its explicit support for the overall concept of health care reform through managed competition. PMA previously has expressed support for covering outpatient drugs as a standard benefit under privately run managed competition plans, but its board had until now been unable to agree specifically on backing outpatient drug coverage for the large government-funded Medicare market. The new position brings the association closer to dominant thinking within the Clinton Administration on the political prospects for drug coverage for the elderly (see related story, p. 5). The PMA position appears designed to look like a major concession to the Clinton Administration. Since immediately after the election, some major pharmaceutical firms have been looking for a small political loss to absorb to provide the Democratic administration with something to claim as a victory over drug prices. At the beginning of the process, some drug manufacturers felt that a revised version of Sen. Pryor's (D-Ark.) tax credit- enforced price controls might satisfy the Clinton Administration. The new changes in position acknowledge that that type of solution is not likely; the Clinton Administration and Congress will be asking for more from the industry. The new positions, however, also indicate that there is still room for maneuvering. Even though wealthier Medicare beneficiaries rebelled against the financing mechanisms of the Medicare drug benefit as designed in the Catastrophic Care Act, the issue of drug expenditures by the elderly still resonates in Congress. For example, Sen. Riegle (D-Mich.) is planning to introduce free-standing Medicare outpatient drug coverage legislation during this congressional session. PMA's newly adopted policy states that the association now "supports" a "prescription drug benefit to Medicare beneficiaries in the managed competition setting; but until this becomes possible, PMA endorses developing an approach to provide incentives for Medicare patients to join managed care programs, or if that is not possible, to design an outpatient drug benefit under Medicare Part B." Part B is the physician portion of Medicare. Representing PMA at the White House meeting were PMA chairman and Syntex Chairman and CEO Paul Freiman; Schering-Plough President Richard Kogan; Hoffmann-La Roche Chairman Irwin Lerner; American Home Products Chairman and CEO John Stafford; Johnson & Johnson VP Robert Wilson; Upjohn Vice Chairman Mark Novitch; PMA President Gerald Mossinghoff; and PMA Exec VP Robert Allnutt.

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