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NARD, NACDS MEETING WITH CONGRESSIONAL, STATE OFFICIALS DEC. 7 ON STRATEGIES FOR STATE COVERAGE, PAYMENT FOR PHARMACY SERVICES UNDER HEALTH CARE REFORM

Executive Summary

NARD and the National Association of Chain Drug Stores are preparing state strategies to provide for coverage and reimbursement of pharmacy services under the reformed health care system, NARD Exec VP Charles West told an Oct. 25 session of his association's Oct. 23-27 annual meeting in Indianapolis. The associations have scheduled a meeting for Dec. 7 with congressional staff and state officials to discuss possible legislative and regulatory strategies for obtaining pharmacy services coverage and payment on the state level, West explained, because the Clinton Administration's health care reform proposed legislation provides states freedom to establish covered services. "States will be given a great deal of flexibility in structuring their health benefits programs," West noted, and covered services and payment amounts will "be determined at the state level." Speaking to an Oct. 23 meeting of the National Council of State Pharmaceutical Association Executives, West said the Dec. 7 "work session" is designed to develop "a plan for you to go back to your states and pass whatever legislation that you need to really put pharmacy in the position" to work effectively in the reformed health care system. "There's latitude in [Clinton's] Health Security Act for a very aggressive role for pharmacy," he commented. NARD Senior VP-Government Affairs & General Counsel John Rector told the NCSPAE session that his association is looking to the proposed North American Free Trade Agreement as a potential means for leveling Rx drug prices offered to pharmacies in Mexico, Canada and the U.S. Although NARD has "not taken a position on" NAFTA, Rector said, congressional debate on the proposal could include "the question of [equal] access to price." The NARD lobbyist asserted: "It's conceivable that when a product is made in Puerto Rico" and, from a common batch of common origin, "one shipment goes to Mexico ...one shipment goes to Canada and another one goes to Philadelphia...there is a possibility of getting access for U.S. wholesalers and U.S. retailers to the prices in both Canada and in Mexico." Rector also suggested that passage of NAFTA would increase the need for state legislation or regulations requiring the licensing of mail-service pharmacists in each state into which they send prescription drugs. Consumer protection dictates that professionals providing services be licensed in the consumer's state, he argued. If the California pharmacy board does "not require a mail- order pharmacist in Pennsylvania who fills a prescription [for a patient] in California in a way that totally disenfranchises the California consumer and California" civil and criminal statutes, he warned, "you're not going to have a prayer in stopping a pharmacist in Mexico from" serving California patients, he maintained. A California mail-order patient counseling law was, in fact, enacted Oct. 2. Rector took issue with drug industry statements that the Federal Trade Commission and the courts have upheld manufacturers' differential pricing practices. Pharmaceutical Manufacturers Association President Gerald Mossinghoff told the American Managed Care Pharmacy Association's annual meeting Oct. 12 that differential pricing has been sanctioned by FTC and the courts ("The Pink Sheet" Oct. 18, p. 12). Such "blessing" by FTC and the courts "is a total and complete fiction," Rector asserted. An FTC staff letter written several years ago in response to questions by Rep. Brooks (D-Texas) about drug discriminatory prices was "rigged," he suggested. In fact, he maintained, in response to the federal lawsuit filed in Harrisburg, Penn. by 10 chain and independent pharmacies Oct. 14 ("The Pink Sheet" Oct. 18, p. 10), FTC lawyers indicated that they have not sanctioned multi-tier pricing. Furthermore, Rector maintained, "no court has ever given the blessing to the so-called 'classes of trade'" distinction for purposes of differential pricing. Legislation to reauthorize the FTC is currently in conference, having passed the House in August and the Senate in September, Rector noted. Congress is likely to pass the bill and send it to the White House "within the next month," he predicted. The legislation contains an "anti-intervention section and the predatory price section," he explained. The former restricts FTC staff from lobbying state legislatures that are considering freedom-of-choice (or "any willing provider") legislation; the pricing provision requires the commission to "report on every complaint that's filed, what they do with it [and] how they proceed," Rector said. He noted that the provision was first drafted in response to a statement by an FTC official in a previous administration that predatory pricing occurs as frequently "as unicorn sightings." "Single-source" provider provisions in the Clinton Administration's health care reform proposal should not concern pharmacy, NARD's Rector told NCSPAE. The proposal provides "an ability of providers to negotiate directly with the plan" so that intermediaries have a more limited role in the marketplace" -- one restricted to claims adjudication and processing, not reimbursement-setting, Rector said. Furthermore, because provisions that limit differential pricing will enable pharmacy buying groups to obtain favorable product prices as readily as mail-order pharmacies and other currently advantaged purchasers, Rector contended that community pharmacists will no longer be at a disadvantage in the formation of restricted provider networks. Once mail-service pharmacies' advantaged purchase "deal is gone, with the discriminatory pricing that enables it, the pressure for exclusivity is gone," the NARD official said. The coalition of seven pharmacy associations other than NARD and NACDS has expressed concern about the draft provision ("The Pink Sheet" Oct. 11, p. 5). The proposal will eliminate "discriminatory pricing," Rector said, because it provides that manufacturers that engage in such pricing practices risk disqualification from participating in Medicaid and Medicare, which together account for about 50% of their market. "That's adequate persuasion to eliminate discriminatory pricing," Rector said. Furthermore, the proposal's elimination of the antitrust exemption for the insurance industry "means no more of these take-it-or-leave-it contracts" in which insurance plans unilaterally dictate terms of reimbursement to pharmacies, he said. "Pharmacy providers will be able to negotiate directly with the plan." Rector also suggested that drug wholesalers are accomplices in manufacturers' illegal price discrimination. "The best way to think of wholesalers in this discriminatory pricing circumstance," he said, "is to think of somebody fencing stolen property." From the thief, through the seller, to the buyer who buys at a low price, "each party in that chain of illegal conduct is culpable in equal ways," he said. "From a prosecutorial point of view, your principal defendant is very likely and almost always going to be the wholesaler," he continued, because once the wholesaler can be prosecuted, "you reel the other folks in." The reason, he said, is that "wholesalers are managing the discriminatory contract: they do the chargeback; they make the deal work; they manage it; they have all the numbers; [and] they have all the contracts." West announced Oct. 25 that NARD is starting up a Health Reform FAX Network both to call members to action when grassroots lobbying of Congress is needed and to alert them to misrepresentations about the legislation. Outgoing President Donald Moore on Oct. 24 told the association of plans to join with Lilly to produce an annual report on independent pharmacy operations, the NARD-Lilly Digest. The first report will be published next year in lieu of the annual Lilly Digest.
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