The Medicare Drug Savings Act 2013
In mid-April, Senator Jay Rockefeller and 18 Senate Democrats introduced legislation to protect seniors and reduce the deficit by $141.2 billion according to the Congressional Budget Office (CBO) by “making sure pharmaceutical companies pay their share,” reported FiercePharma. Similar proposals were also included in the President’s most recent budget proposal and the President's Commission on Fiscal Responsibility and Reform.
Other Senate co-sponsors include Bill Nelson (D-FL), Amy Klobuchar (D-MN), Tammy Baldwin (D-WI), Richard Blumenthal (D-CT), Barbara Boxer (D-CA), Sherrod Brown (D-OH), Dick Durbin (D-IL), Al Franken (D-MN), Angus King (I-ME), Patrick Leahy (D-VT), Jeff Merkley (D-OR), Jack Reed (D-RI), Bernie Sanders (I-VT), Brian Schatz (D-HI), Jeanne Shaheen (D-NH), Debbie Stabenow (D-MI), Tom Udall (D-NM), and Sheldon Whitehouse (D-RI).
According to the sponsors, the Medicare Drug Savings Act would eliminate a special deal for brand-name drug manufacturers that allows them to charge Medicare higher prices for prescription drugs for some seniors and people with disabilities. The bill would require drug companies to provide rebates to the federal government on drugs used by dual eligibles – people eligible for both Medicare and Medicaid, who are predominantly low-income seniors and people with disabilities – just as was done for dual eligibles on Medicaid before Medicare Part D was created in 2006. Rebates would also be available to other enrollees in the low-income-subsidy plan in the Medicare Part D Prescription Drug Program.
With the exception of Medicare Part D, all large purchasers of prescription drugs negotiate better prices, including Medicaid and private insurers. This bill simply restores negotiated prices for low-income Medicare beneficiaries.
This bill would correct excessive payments to drug companies, while also saving taxpayers and the federal government from footing the unnecessary cost. Over the past ten years, the 11 largest drug companies alone took in $711.4 billion in profits, including a 62 percent increase from 2003 to 2012.
Ranking Members Henry A. Waxman, Sander M. Levin, George Miller, Jim McDermott, and Robert E. Andrews introduced the companion bill in the House.
“This bill would make sure drug companies no longer receive this unnecessary and excessive payment. It would responsibly help to reduce the deficit – without impacting Medicare beneficiaries – by making sure drug companies don't get more than they're due,” Senator Rockefeller said in a statement. AARP and the National Committee to Preserve Social Security and Medicare support the legislation.
Before the Medicare prescription drug program was created in 2006, brand-name drug manufacturers paid rebates for dually eligible beneficiaries on Medicare and Medicaid. All dual eligibles' prescription drugs were discounted by rebates negotiated by the federal government and some received additional discounts negotiated by state Medicaid plans. But since Medicare Part D was created, drug companies no longer had to provide these rebates and they have been unfairly making more money off of prescription drugs for dual eligibles at the taxpayers' expense. The bill retains incentives for drug manufacturer innovation and would not impose price controls.
However, Matthew Bennett, senior vice president of the Pharmaceutical Research and Manufacturers of America (PhRMA), said in a statement that the legislation “would bring higher premiums and copays, more restricted access to medicines for seniors and Americans with disabilities, and diminished research on the next generation of medicines,” reported by Kaiser Health News. “Unlike familiar consumer rebates that return savings to shoppers, this policy would undermine a successful and popular program to send ‘rebates’ to the Federal Treasury, not seniors,” Bennett said.
340B Drug Discount Program
In related news, FierceHealthFinance reported that the American Hospital Association (AHA) has asked the Health Resources and Services Administration (HRSA) to delay by at least six months the imposition of a new rule for the 340B drug discount program that would bar institutions from purchasing drugs for outpatients through a group purchasing organization The delay “would give hospitals enough time to modify their inventory management practices to meet the new GPO policies and avoid expulsion from the 340B program,” the article noted.
AHA claimed the lack of public hearings on the matter left hospitals unprepared to adjust to the rule change, which was enacted on April 7. The required changes include tweaks to overhauled inventory management systems, establishing new accounts with drug wholesalers and staff training, according to a letter sent April 3 by AHA Executive Vice President Rick Pollack to the HRSA.
“The rule change and AHA request come amid suspicions by U.S. Senator Charles Grassley, an Iowa Republican, that hospitals have been profiting from the drug discount program. It is intended to provide low-cost pharmaceuticals to uninsured patients or those who lack the financial means to obtain them on their own.”
“Instead, some hospitals have been using their 340B discounts to purchase drugs at steep discounts, then selling them to insured patients at hefty markups, FierceHealthcare previously reported. Duke University Hospital, for instance, profited to the tune of $69.7 million on drugs it purchased through the 340B program in 2012. Duke purchased the drugs for $65.8 million, then sold them to patients for $135.5 million.”