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MEDICARE DRUG COVERAGE EXCLUSION PROPOSAL IS "MORE SERIOUS" FOR INDUSTRY IN CLINTON LEGISLATION THAN IN SEPTEMBER DRAFT, PMA PRESIDENT MOSSINGHOFF SAYS

Executive Summary

The Clinton Administration proposal to allow Medicare to exclude coverage of "excessively" costly new drugs is worse for industry as spelled out in the President's proposed health care reform legislation than it was in Sept. 7 draft of the plan, Pharmaceutical Manufacturers Association President Gerald Mossinghoff told a health reporters breakfast Nov. 2 in Washington, D.C. Mossinghoff said the authority for the HHS Secretary to exclude coverage for new drugs deemed to be "excessively" priced "actually looks like it is more serious in the draft legislation than in the Sept. 7 [outline], because apparently that blacklisting...can be done retroactively." The President's bill states that any drug first marketed in the U.S. after June 30, 1993 is subject to review by HHS to determine if Medicare coverage should be extended. The bill states that, if HHS cannot negotiate an "acceptable rebate" from the manufacturer, exclusion of coverage "shall be effective on and after...the date six months after the effective date of marketing approval" ("The Pink Sheet" Nov. 1, p. 4). PMA is concerned about "what happens to the money that has already flowed" through Medicare reimbursement while HHS reviewed the price of a new drug, Mossinghoff observed. The exclusion provision was one area where PMA had thought it was making progress: after meetings with Administration officials in mid-September, PMA believed that it was conceivable the provision would be dropped altogether ("The Pink Sheet" Sept. 20, p. 17). The bill also states that HHS may exclude Medicare coverage of new drugs that are priced "significantly lower" in certain foreign countries. That appears to mean that HHS will not be able to exclude coverage of new drugs that are launched in the U.S. at a price on par with overseas prices. However, the restrictive price approval processes already in place in some markets outside the U.S. could make that parity provision restrictive. Mossinghoff pointed out that the 21 referenced countries include "some very, very low-priced foreign countries" including "countries that have heavy price restrictions, many of which have never invented a drug in the history of their country." The 21 countries cited by the bill are: Australia, Austria, Belgium, Canada, Denmark, Germany, Finland, France, Iceland, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland and the U.K. One positive change in the exclusion authority, Mossinghoff acknowledged, is the removal of explicit authority for HHS "to got confidential corporate records." While the bill states that the secretary may request records, "we cannot see any authority for [HHS] to subpoena cost information." PMA reviewed the bill with its outside counsel on Oct. 29 and Nov. 1, Mossinghoff said. "There are some very serious open questions for us," he said. "We'll be meeting starting today with people involved in the drafting of it to try to get answers to those questions." One question PMA has for the drafters of the bill, Mossinghoff indicated, is why the minimum Medicare rebate was increased from 15% to 17%. Mossinghoff repeated the industry's view on the rebate: "The Medicare rebate in my view has nothing to do with market forces. It is a flat-out tax increase." The PMA president suggested that "there ought to be some way for the government to be able to rely on the big HMO institutional forces to tell them what the government reimbursement ought to be. I think that would be fair." Mossinghoff noted that PMA has "not gotten involved in analyzing how to do this." PMA met with White House legislative affairs official Chris Jennings Nov. 2. One issue that was resolved: Jennings told PMA that a Medicare prior authorization provision was left out of the bill inadvertently and would be in the bill when introduced, PMA said. PMA expects a second draft of the bill to be prepared to clean up such errors before it is introduced.
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