Squeez­ing drug costs

Rx spend­ing tar­geted in Dems’ deficit-cut­ting plans

Modern Healthcare - - The Week in Healthcare - Rich Daly

Will an even­tual deficit-re­duc­tion deal in­clude sav­ings from changes to fed­eral pre­scrip­tion-drug pro­grams? A grow­ing num­ber of Democrats are dis­cussing that pos­si­bil­ity and push­ing their pre­ferred ap­proaches.

One of the big­gest tar­gets for drug sav­ings is Medi­care, which spent $61.7 bil­lion on phar­ma­ceu­ti­cals in 2010. The pro­gram also is viewed as a ma­jor fu­ture cost driver: Medi­care trustees are pro­ject­ing that spend­ing will in­crease 9.7% in each of the next nine years.

“In 2010, the Amer­i­can peo­ple spent more than $300 bil­lion on pre­scrip­tion drugs, and a third of that was paid for by Medi­care and Med­i­caid,” Sen. Herb Kohl (D-Wis.), chair­man of the Se­nate Spe­cial Com­mit­tee on Aging, said at a hear­ing last week on Medi­care drug costs. “Left unchecked, these costs threaten our coun­try, econ­omy and ev­ery Amer­i­can fam­ily.”

Kohl bol­stered his case on the need for change by re­leas­ing a re­port Thurs­day that found the av­er­age price of phar­ma­ceu­ti­cal drugs in the U.S. is about 30% higher than in 33 other de­vel­oped coun­tries.

The calls by Kohl and other Democrats last week to au­tho­rize the CMS to ne­go­ti­ate drug

“Left unchecked, these costs threaten our coun­try, econ­omy and ev­ery Amer­i­can fam­ily.”

—Sen. Herb Kohl (D-Wis.)

prices with man­u­fac­tur­ers—sim­i­lar to the au­thor­ity avail­able to Med­i­caid ad­min­is­tra­tors—are only the lat­est in a months-long drum­beat for such changes.

Last month, Demo­cratic health pol­icy lead­ers Sen. Jay Rock­e­feller (D-W.Va.) and Rep. Henry Wax­man (D-Calif.) in­tro­duced com­pan­ion bills to re­quire Medi­care drug ne­go­ti­a­tions that would garner $120 bil­lion in sav­ings over the com­ing decade.

Those bills fol­lowed Pres­i­dent Barack Obama’s deficit-re­duc­tion frame­work, of­fered in the spring, that would pro­vide $340 bil­lion in Medi­care and Med­i­caid sav­ings. Those sav­ings were largely un­spec­i­fied, al­though the plan did pro­pose lim­it­ing “ex­ces­sive pay­ments for pre­scrip­tion drugs by lever­ag­ing Medi­care’s pur­chas­ing power.”

The ad­min­is­tra­tion has not specif­i­cally en­dorsed the Rock­e­feller/Wax­man ap­proach, Jonathan Blum, deputy ad­min­is­tra­tor and di­rec­tor of the Cen­ter for Medi­care at the CMS, said at the Aging Com­mit­tee hear­ing. How­ever, Obama is open to all sav­ings op­tions as part of his deficit ne­go­ti­a­tions with con­gres­sional lead­ers, he said.

Con­ser­va­tives have warned that ne­go­ti­at­ing the same man­u­fac­turer re­bates in Medi­care that are re­quired by Med­i­caid would sim­ply shift drug costs to the pri­vately funded phar­ma­ceu­ti­cal mar­ket. A study re­leased last week by the con­ser­va­tive Amer­i­can Ac­tion Fo­rum con­cluded that such ne­go­ti­ated price cuts would in­crease Medi­care pre­scrip­tion-drug plan pre­mi­ums by as much as 39% and in­crease pa­tients’ out-of-

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