PCMA:New Study Highlights `Market-Based` Reforms to Lower Part D Drug Prices

Policymakers Should Allow Plans to Negotiate Greater Discounts on All Drugs,
Extend Generic and Therapeutic Substitution
WASHINGTON--(Business Wire)--
As policymakers seek "offsets" to finance health reform, a new study released
today in Health Affairs ("How Medicare Could Get Better Prices on Prescription
Drugs") highlights several market-based reforms for Medicare Part D which could
reduce government spending, the Pharmaceutical Care Management Association
(PCMA) said.

"These reform options - including allowing Part D plans and pharmacy benefit
managers greater negotiating leverage and expanding generic substitution - are
`real` reforms in health care that would lower costs and increase access,
without shifting costs from the federal government to the private sector," said
PCMA President and CEO Mark Merritt.

The study also critiques other options that have been debated for Part D,
including allowing the government to negotiate directly on drug prices and
imposing Medicaid-style rebates. The authors note that "the structure of Part D,
replete with many private plans, poses difficult administrative and practical
hurdles to successful Federal price negotiations." Mandatory rebates in Part D
would be "prone to gaming by companies and politically expedient adjustments by
Congress," according to the study.

The study breaks new ground by highlighting market-based proposals which would
"retain the current framework of a competitive prescription drug marketplace."
These include:

* "Relaxing" Protected Class Requirements and Allowing Part D Plans to Negotiate
Greater Discounts on all Drugs. Part D plans are required to cover at least two
drugs in each therapeutic class and the Centers for Medicare and Medicaid
Services (CMS) also requires plans to cover at least one drug in each subclass,
and cover "all or substantially all" drugs in six or potentially more specially
protected classes. According to the study, "relaxing these formulary
requirements would allow plans to negotiate more aggressively with drug
companies and could lower prices by hundreds of millions of dollars per year."

PCMA strongly believes these Part D provisions eliminate price competition among
manufacturers without providing seniors greater access to those drugs. This
reform alone would save Medicare $4.2 billion over 10 years, according to CMS.

* Extending Generic and Therapeutic Substitution. Tools pioneered by PBMs -
including those which increase the use of generic medicine - have lowered costs
and expanded access to prescription drugs for seniors in Part D. While Part D
plans and the PBMs that manage them have generated "robust and growing" generic
substitution rates, the authors note "there may be more room for improving
generic substitution rates" and suggest that a federal generic substitution law
could "prevent local legislative retrenchments and promote uniform generic
access." Since 2008, 29 states have introduced more than 80 legislative
proposals to exempt certain classes of drugs from generic substitution laws. To
date, 69 of those bills have been defeated.
* Biogenerics. The authors also point out that changing federal law to permit
follow on biologics could achieve billions in savings. Meaningful biogenerics
legislation is strongly supported by AARP, AFL-CIO, the Ford Motor Company,
PCMA, and dozens of other consumer, labor, and employer organizations concerned
about runaway health care costs in both the private and public sectors.
Legislation that allows biogenerics to compete with biotech medicines the way
that generics do now with conventional brand-name drugs is one of the few
proposals that actually delivers score-able savings and is a good bellwether for
health reform prospects overall.

In addition to the options outlined by the authors, other market-based reforms,
such as allowing greater use of home delivery for refills of long-term, chronic
medications in Medicare would increase efficiency and save billions. Currently,
due to restrictions in Medicare Part D, beneficiaries in private sector retiree
plans use home delivery four times more often than those in Part D plans. This
is costly and unfortunate since home delivery reduces costs and increases
convenience for seniors and the disabled. Sadly, patients don`t fill more than
20 percent of those prescriptions which they are required to pick up at the
drugstore.

PCMA represents the nation`s pharmacy benefit managers (PBMs), which improve
affordability and quality of care through the use of electronic prescribing
(e-prescribing), generic alternatives, mail-service pharmacies, and other
innovative tools for 200-plus million Americans.

PCMA
Charles Coté, 202-207-3605

Copyright Business Wire 2009