Medicare Rx Benefit Has 50-50 Chance “At Best” In 2002, GSK Says

The chance of a Medicare prescription drug benefit becoming law in 2002 is 50-50 "at best," GlaxoSmithKline Chief Operating Officer Bob Ingram predicted Feb. 14.

"If I were to project an opinion, and that's just what I'm doing, I think it's probably 50-50 at best whether you'll get a prescription drug benefit of a broad nature signed into law this year," he told a securities analysts meeting in London.

Ingram's remarks appear to be a first step by GSK in preparing the financial markets for the likelihood that the Medicare Rx debate will carry over into the next Congress. The assessment of the legislative prospects as an even-money proposition is probably optimistic.

Ingram predicted that the House will pass a bill similar to Rep. Bill Thomas' (R-Calif.) Medicare Rx plan from 2000.

"The House will clearly pass this year a prescription drug benefit for Medicare, probably much along the lines of the one they passed in the last Congress."

However, Ingram said, expanded drug coverage offers Democrats one of few potential points of advantage heading into the elections.

Democrats have a 15-point advantage over President Bush and congressional Republicans on healthcare issues, Democratic pollster and Lake Snell Perry President Celinda Lake told a recent National Health Policy Conference (¹ (Also see "Healthcare Reform Returns To Political Agenda Heading Into 2002 Elections" - Pink Sheet, 21 Jan, 2002.), p. 24).

"With the popularity of President Bush being what it is, I think the Democrats are clearly going to look for domestic issues where they think they can get traction with voters," Ingram said.

"Not surprisingly, overall healthcare costs, and particularly access for prescription medicines for Medicare, is going to be at the top of their list."

Ingram suggested that the only hope for a Medicare bill is if the Democrats are willing to accept a more modest program than they might otherwise prefer.

"The question will be whether [Senate Majority Leader] Tom Daschle...really wants to get something done," he maintained. "His argument, particularly from his colleagues, will be it's not enough." However, Ingram asked, "do you start, or do you use this as an election issue?"

GSK's "Orange Card" program has won favor from both Republicans and Democrats, Ingram said. "The response both politically, and perhaps as importantly, from our providers...to the Orange Card program...has been phenomenal."

"We've gotten plaudits from both sides of the political aisle, because we were the first company - others have subsequently followed, as all of you know - to really provide meaningful discounts to low-income seniors. It's putting our money where our mouth is."

The "Orange Card" program offers seniors up to 300% of the federal poverty level a discount of 25% off the wholesale acquisition cost (² (Also see "GSK "Orange Card" Price For Seniors Is 25% Off Wholesale Acquisition Cost" - Pink Sheet, 8 Oct, 2001.), p. 6). GSK has issued 30,000 cards, Ingram said. The program became effective Jan. 1.

The discounts will be offset by volume gains, Ingram assured investors.

"It's a business today we probably don't get. These are low-income seniors. They either don't go to the doctor, or if they go, they don't get the script filled. If they get the script filled, they cut it in half," the exec said. "So, there's a volume upside here. But more importantly, it's doing what's right."

Ongoing rebate negotiations with state Medicaid agencies are also not expected to affect GSK's bottom line, Ingram maintained. Eighty-five percent of GSK's business in the U.S. is under a contract, be it in Medicaid or private payors, he noted.

GSK expects that the supplemental rebate programs in Florida and Michigan will be widely copied. "This is like a playbook, they share it, and you're going to see this roll out across the country," Chief Operating Officer Bob Ingram said.

"We're working with those states on a one-on-one basis and we're really, I think, achieving good success in getting access for our broad portfolio, with the kind of rebates, discounts, that are not going to affect our ability to deliver these results," Garnier added.