What's Not In The Budget: Deficit Panel's Proposal For Rebates On Drugs Used By Dual-Eligibles

The president's National Commission on Fiscal Responsibility and Reform suggested that mandatory rebates for drugs used by Medicaid/Medicare dual eligibles would go a long way in offsetting a proposed "doc fix."

A drug proposal suggested by the chairmen of President Obama's own National Commission on Fiscal Responsibility and Reform is noticeably absent from the fiscal year 2012 budget plan the president just submitted to Congress.

The deficit commission wrapped up work in early December. Its proposals for cutting costs included one to mandate Medicaid-level rebates on drugs used by Medicare Part D beneficiaries who also are eligible for Medicaid. The same idea was favored by a number of Democrats during the health care reform debate, but was not included in the final legislation. The pharmaceutical industry has opposed such a measure.

The commission estimated mandatory rebates for dual-eligibles could bring in $49 billion from 2012 to 2020. That is a particularly significant amount when compared to the pharma-related proposals that did make it into the president's budget. Those proposals also are intended to offset a huge liability overhanging Medicare: fixing the sustainable growth rate formula for physician payments, also known as the "doc fix."

The 10-year cost (2012 to 2021) for a permanent fix for SGR, which has been pushed back by Congress year after year, comes in at around $370 billion.

The chairmen's package of deficit proposals did not gain enough votes to be officially recommended by the commission, but a majority of commissioners voted for it and members of Congress and the president suggested that some items should be considered (Also see "Fiscal Commission's Final Plan Includes Rebates On Drugs Used By Medicare/Medicaid Dual Eligibles" - Pink Sheet, 1 Dec, 2010.).

The budget, which can be viewed as the administration's "wish list" for policy initiatives in the coming year, does include several SGR-offsetting items that would directly affect pharma, including reducing the period of exclusivity for biologics and eliminating "pay-for-delay" deals between brand and generic drug manufacturers. Those two proposals are estimated to contribute relatively little, however, at about $11 billion over 10 years. In addition, they seem unlikely to gain traction in the current Congress (Also see "CMS' 2012 Budget Looks To Biosimilars, Ban On Brand/Generic Deals To Offset Costs" - Pink Sheet, 14 Feb, 2011.).

Mandatory rebates for dual eligibles might not have a much better chance of passing in the current Congress, given the previous failure in a Democrat-controlled Congress. However, with the emphasis placed on fixing the SGR by Congress and the Obama administration, plus the high price tag it carries, Congress may be pressed to seriously consider some sort of savings on drug spending.

The budget does list a couple of Medicaid drug-related items, but attaches little or no savings to them: tracking high prescribers and utilizers of prescription drugs in Medicaid ($3.45 billion); requiring manufacturers that improperly report items for Medicaid drug coverage to fully repay states ($125 million); enforcing Medicaid drug rebate agreements (none); increasing penalties on drug manufacturers for fraudulent non-compliance with Medicaid drug rebate agreements (none); and requiring drugs to be properly listed with the FDA to receive Medicaid coverage (none).

No Enhanced Role For IPAB

Also absent from the budget is the fiscal commission's recommendation to strengthen the Independent Payment Advisory Board's authority. IPAB was created under the Affordable Care Act to make binding recommendations for reducing spending in Medicare.

Although IPAB will not implement its first proposals until 2015, the Congressional Budget Office has scored its cost-savings potential at $28 billion through 2019; expanded authority presumably could give IPAB even more cost-savings potential.

However, IPAB has been a contentious issue. Republicans in Congress already have introduced legislation that would repeal IPAB. The pharmaceutical industry has also said it will work to have IPAB modified since its rulings could adversely affect drug reimbursement.

-Scott Steinke ([email protected])