June 24, 2011—Leading Democrats in the U.S. House and Senate have introduced legislation to require drug manufactures to give Medicare Part D plans rebates on prescription drug for those dually eligible for Medicare and Medicaid, saying the change would save the government more than $100 billion over 10 years.
Pharmaceutical Research and Manufacturers Association (PhRMA) is criticizing the proposal, telling the Congressional Quarterly news service that “price controls” in the Medicare Part D drug benefit would lead to higher Part D premiums.
In 2010 negotiations with the Obama administration over health care reform, drug manufacturers agreed to provide beneficiaries in Part D’s coverage gap with significant discounts on their brand name and generic drugs as part of the effort to close the so-called “donut hole.” The discount began at 50 percent this year and will eventually ramp up to 75 percent.
The proposed Part D rebate could create a duplicate discount issue with respect to outpatient drugs bought through the 340B program. Manufacturers might object to paying a Part D rebate and giving a 340B discount on the same drug. The proposed legislation does not have anything similar to the language in last year’s health care reform law that declared Medicaid managed care organization (MCO) drugs purchased through 340B to be exempt from Medicaid rebates.
The potential 340B duplicate discount issue has not come up in public discussion of the proposed Medicare Drug Savings Act, which was introduced in the House (H.R. 2190) on June 16 by Reps. Henry A. Waxman George Miller and Pete Stark of California, John D. Dingell and Sander Levin of Michigan and Rob Andrews of New Jersey. The Senate version (S. 1206) is co-sponsored by Sens. Jay Rockefeller (W.Va.), Jeff Bingaman (N.M.), Debbie Stabenow (Mich.), Richard Blumenthal (Conn.), Sherrod Brown (Ohio), Barbara Boxer (Calif.), Jeff Merkley (Ore.) and Al Franken (Minn.).
Dual Eligibles
The bill would require drug manufacturers to provide rebates on drugs for Medicare and Medicaid dual eligibles as well as to those eligible for Part D’s low-income subsidy (LIS). As with the Medicaid rebate program, manufacturers would have to pay the difference between the average rebates they pay to private Part D drug plans and 23.1 percent of average manufacturer price. They would also be required to pay an additional rebate if drug prices increase faster than the rate of inflation.
Before Part D’s creation, dual eligibles received their prescription drugs through Medicaid and manufacturers paid rebates to Medicaid for those medicines. The House included language to revive those rebates in its version of the Affordable Care Act (ACA) but it was left out of the one that became law.
The leaders of President Obama’s bipartisan deficit reduction commission called for rebates on drugs for dual eligibles. In a mid-April speech in response to the House Republicans’ plan to reduce the federal deficit, the President proposed reducing the growth in Medicare spending, including lowering prescription drug spending, “by leveraging Medicare’s purchasing power.”
Last week, Reps. Peter Welch (D-Vt.) and Jo Ann Emerson (R-Mo.) reintroduced their bipartisan legislation to require the federal government to negotiate lower prices on Medicare drugs. Their proposed Medicare Prescription Drug Price Negotiation Act is identical to a provision that also was in the House version of the health care reform but not included in the final law.
The Part D rebate and price negotiation proposals could figure in ongoing deficit reduction negations being led by Vice President Biden. Congressional Republicans want trillions of dollars in savings over 10 years in exchange for their support for a measure to raise the federal debt ceiling. The negotiations ground late in the week over the issue of tax increases.
“Ending pharmaceutical manufacturers’ means of overcharging for drugs for ‘dual eligible’ enrollees in the Medicare Part D drug program saves taxpayers billions of dollars and helps us cut the deficit without ending Medicare as we know it,” Representative Dingell said. “When this provision was included in the health reform bill that passed the House, it made sense, and it makes sense today. This proposal must be on the table as we consider responsible ways to reduce our budget deficit.”