[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]


 
                       EXAMINING THE FEDERAL 
                     GOVERNMENT'S PARTNERSHIP 
                    WITH AMERICA'S PHARMACISTS


                             HEARING

                           BEFORE THE

                      SUBCOMMITTEE ON HEALTH

                             OF THE 

                      COMMITTEE ON ENERGY AND 
                            COMMERCE
                      HOUSE OF REPRESENTATIVES


                     ONE HUNDRED NINTH CONGRESS

                          SECOND SESSION


                            MAY 23, 2006

                         Serial No. 109-102

        Printed for the use of the Committee on Energy and Commerce



Available via the World Wide Web:  http://www.access.gpo.gov/congress/house




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                   COMMITTEE ON ENERGY AND COMMERCE
                     JOE BARTON, Texas, Chairman
RALPH M. HALL, Texas                      JOHN D. DINGELL, Michigan
MICHAEL BILIRAKIS, Florida                  Ranking Member
  Vice Chairman                           HENRY A. WAXMAN, California
FRED UPTON, Michigan                      EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida                    RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio                     EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia                      FRANK PALLONE, JR., New Jersey
ED WHITFIELD, Kentucky                    SHERROD BROWN, Ohio
CHARLIE NORWOOD, Georgia                  BART GORDON, Tennessee
BARBARA CUBIN, Wyoming                    BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois                    ANNA G. ESHOO, California
HEATHER WILSON, New Mexico                BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona                  ELIOT L. ENGEL, New York
CHARLES W. "CHIP" PICKERING,  Mississippi ALBERT R. WYNN, Maryland
  Vice Chairman                           GENE GREEN, Texas
VITO FOSSELLA, New York                   TED STRICKLAND, Ohio
ROY BLUNT, Missouri                       DIANA DEGETTE, Colorado
STEVE BUYER, Indiana                      LOIS CAPPS, California
GEORGE RADANOVICH, California             MIKE DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire            TOM ALLEN, Maine
JOSEPH R. PITTS, Pennsylvania             JIM DAVIS, Florida
MARY BONO, California                     JAN SCHAKOWSKY, Illinois
GREG WALDEN, Oregon                       HILDA L. SOLIS, California
LEE TERRY, Nebraska                       CHARLES A. GONZALEZ, Texas
MIKE FERGUSON, New Jersey                 JAY INSLEE, Washington
MIKE ROGERS, Michigan                     TAMMY BALDWIN, Wisconsin
C.L. "BUTCH" OTTER, Idaho                 MIKE ROSS, Arkansas                       
SUE MYRICK, North Carolina
JOHN SULLIVAN, Oklahoma
TIM MURPHY, Pennsylvania
MICHAEL C. BURGESS, Texas
MARSHA BLACKBURN, Tennessee               

                     BUD ALBRIGHT, Staff Director
                    DAVID CAVICKE, General Counsel
     REID P. F. STUNTZ, Minority Staff Director and Chief Counsel


                         SUBCOMMITTEE ON HEALTH
                     NATHAN DEAL, Georgia, Chairman
RALPH M. HALL, Texas                      SHERROD BROWN, Ohio
MICHAEL BILIRAKIS, Florida                  Ranking Member
FRED UPTON, Michigan                      HENRY A. WAXMAN, California
PAUL E. GILLMOR, Ohio                     EDOLPHUS TOWNS, New York
CHARLIE NORWOOD, Georgia                  FRANK PALLONE, JR., New Jersey
BARBARA CUBIN, Wyoming                    BART GORDON, Tennessee
JOHN SHIMKUS, Illinois                    BOBBY L. RUSH, Illinois
JOHN B. SHADEGG, Arizona                  ANNA G. ESHOO, California
CHARLES W. "CHIP" PICKERING,  Mississippi GENE GREEN, Texas
STEVE BUYER, Indiana                      TED STRICKLAND, Ohio
JOSEPH R. PITTS, Pennsylvania             DIANA DEGETTE, Colorado
MARY BONO, California                     LOIS CAPPS, California
MIKE FERGUSON, New Jersey                 TOM ALLEN, Maine
MIKE ROGERS, Michigan                     JIM DAVIS, Florida
SUE MYRICK, North Carolina                TAMMY BALDWIN, Wisconsin
MICHAEL C. BURGESS, Texas                 JOHN D. DINGELL, Michigan
JOE BARTON, Texas                           (EX OFFICIO)                            
  (EX OFFICIO)


                               CONTENTS


                                                                        Page
Testimony of:
     Norwalk, Leslie, Deputy Administrator, Centers for Medicare & 
        Medicaid Services	                                         19
     Merritt, Mark, President and CEO, Pharmaceutical Care Management 
        Association	                                                 48
     Hopkins, Timothy, Vice President, Retail Mail Service, Operation 
        for Pharmacy Management, WellPoint, Inc.	                 56
     Couch, Kenneth, President, Smith Drug Company	                 60
     Harden, Dr. Buddy, Executive Vice President and CEO, Georgia 
        Pharmacy Association	                                         65
     Wirth, Gary, Director of Professional Services, Ahold USA, on 
        behalf of National Association of Chain Drug Stores	         70
     Galluzzo, Dr. Larry, President, Skilled Care Pharmacy	         76
     Hallberg, Charles E., President, MemberHealth, Inc.	         81


                           EXAMINING THE FEDERAL 
                      GOVERNMENT'S PARTNERSHIP WITH 
                           AMERICA'S PHARMACISTS


                           TUESDAY, MAY 23, 2006

                         HOUSE OF REPRESENTATIVES,
                    COMMITTEE ON ENERGY AND COMMERCE,
                           SUBCOMMITTEE ON HEALTH,
                                                         Washington, DC.


        The subcommittee met, pursuant to notice, at 11:04 a.m., in Room 
2123 of the Rayburn House Office Building, Hon. Nathan Deal 
(chairman) presiding.
	Members present:  Representatives Upton, Norwood, Shadegg, 
Ferguson, Burgess, Barton (ex officio), Brown, Waxman, Pallone, 
Eshoo, Allen, Baldwin, and Dingell (ex officio).
	Staff present:  David Rosenfeld, Chief Health Counsel; Melissa 
Bartlett, Counsel; Bill O'Brien, Legislative Analyst; Brandon Clark, 
Policy Coordinator; Chad Grant, Legislative Clerk; John Ford, Minority 
Counsel; Jessica McNiece, Minority Research Assistant; and Jonathan 
Brater, Minority Staff Assistant.
MR. DEAL.  Subcommittee will come to order.  The Chair will 
recognize himself for an opening statement.  
	Today, we are holding a hearing entitled "Examining the Federal 
Government's Partnership with America's Pharmacists."  As we all 
know, pharmacists are an integral and irreplaceable component of our 
healthcare delivery system, and we are here this morning to explore the 
prominent issues facing these healthcare professionals.  To assist us in 
this task, I am proud to say that we have two expert panels of witnesses 
appearing before us, and I would like to sincerely thank each of them for 
taking the time out of their schedules to be with us.
	Since the focus of this hearing is on the major issues facing 
pharmacists, we felt that it was important to include all the major players 
in the pharmacy delivery system in order to gain a full perspective of the 
issues.  To this end, we have representatives from the Centers for 
Medicare and Medicaid Services, community pharmacists, chain drug 
store pharmacists, long-term care pharmacists, prescription drug plan 
distributors, and pharmacy benefit managers.  It is important to note that 
the Minority has requested a witness from a beneficiary advocacy 
organization, but instead of expanding the focus of an already robust 
hearing, we have confirmed our intent to hold another pharmacy hearing 
where the beneficiary input will be of focus.  Of course, we have had 
beneficiary input in the past in previous hearings.  We appreciate the 
Minority's willingness to work with us to put together this multi-faceted 
hearing here today.
	There is no doubt that one of the major topics of discussion at 
today's hearing will be the provisions within the Medicare 
Modernization Act and the impact of the new Medicare prescription drug 
benefit.  As my colleagues are aware, on January 1 of this year, 
prescription drug coverage for our seniors became more than just 
something we talked about in Congress.  It became a reality for every 
single person eligible for Medicare.  This legislation accomplished a very 
important thing.  It helped tens of millions of senior citizens save 
thousands of dollars on their prescription drugs.  For years before 
enactment of this new benefit, we heard the horror stories of seniors 
having to choose between buying groceries or their medicines, and 
pharmacists having to advise patients which drugs on their lists were the 
most important because the patient simply could not afford to buy all of 
their prescribed medications.  Now, all the beneficiaries have the option 
to have good drug coverage and to have the quality of life that we want 
for our American seniors.  In fact, more than 38 million people with 
Medicare now have good secure prescription drug coverage and 
enrollment in Medicare Part D related coverage accounts for over 32 
million of these beneficiaries.  These truly are astounding numbers that 
have exceeded almost everyone's expectations, and the unparalleled 
effort to get this brand new change to Medicare up and running and to 
get people enrolled has been incredible in itself.
	Of course, the success of the new Medicare prescription drug benefit 
would not have been possible without the many people represented in 
this room today, and no group was more important than our pharmacists 
who truly were the heroes of the implementation of this new benefit.
	Again, I want to thank our witnesses for taking the time to testify 
before us today, and I look forward to hearing from each of you.
	At this time, I would like to ask unanimous consent that all 
committee members may have their statements and questions for the 
record submitted.  Without objection, so ordered.
	[The prepared statement of Hon. Nathan Deal follows:]

PREPARED STATEMENT OF THE HON. NATHAN DEAL, CHAIRMAN, SUBCOMMITTEE ON 
HEALTH

?	The Committee will come to order, and the Chair recognizes himself 
for an opening statement.
?	As we all know, pharmacists are an integral and irreplaceable 
component of our healthcare delivery system, and we are here this morning to 
explore the prominent issues facing these healthcare professionals.
?	To assist us in this task, I am proud to say that we have two expert 
panels of witnesses appearing before us today, and I would like to sincerely 
thank each one of them for taking time out of their busy schedules to join us.
?	Since the focus of this hearing is on the major issues facing 
pharmacists, we felt that it was important to include all of the major players 
in the pharmacy-delivery system in order to gain a full perspective of the 
issues.
?	To this end, we have representatives from 
        o	the Centers for Medicare and Medicaid Services
        o	Community pharmacists
        o	Chain drug store pharmacists
        o	Long-term care pharmacists
        o	Prescription drug plans
        o	Distributors
        o	Pharmacy benefit managers
?	It is important to note that the Minority had requested a witness from 
a beneficiary-advocacy organization, but instead of expanding the focus of an 
already robust hearing, we have confirmed our intent to hold another pharmacy 
hearing where beneficiary input will be a focus.
?	And we appreciate the minority's willingness to work with us as we put 
together this multifaceted hearing.
?	There is no doubt that one of the major topics of discussion at 
today's hearing will be the provisions within the Medicare Modernization Act 
and the impact of the new Medicare Prescription Drug Benefit.
?	As my colleagues are aware, on January 1, 2006, prescription drug 
coverage for our seniors became more than just something we talked about in 
Congress - it became a reality for every single person eligible for Medicare.
?	This legislation accomplished a very important thing - it helped tens 
of millions of senior citizens save thousands of dollars on their prescription 
drugs.
?	For years before enactment of this new benefit we heard the horror 
stories of our seniors having to choose between buying groceries or their 
medicines and pharmacists having to advise patients which drugs on their list 
were the most important because the patients could not afford to buy all of 
their prescribed medication.
?	Well, now all beneficiaries have the option to have good drug coverage 
and have the quality of life that we wish for all of America's seniors.
?	In fact, more than 38 million people with Medicare now have good, 
secure prescription drug coverage, and enrollment in Medicare-Part D-related 
coverage accounts for over 32 million of these beneficiaries.
?	These truly are astounding numbers that have exceeded almost 
everyone's expectations, and the unparalleled effort to get this brand new 
change to Medicare up and running and get people enrolled has been incredible.
?	Of course, the success of the new Medicare Prescription Drug Benefit 
would not have been possible without the many people represented in this room, 
and no group was more important than our pharmacists who truly were the heroes 
of the implementation of this new benefit.
?	Again, I want to thank our witnesses for taking the time to testify 
before us today.  I look forward to hearing from each of you.
?	At this time, I would also like to ask for Unanimous Consent that all 
Committee Members be able to submit statements and questions for the record.
?	I now recognize the Ranking Member of the Subcommittee, Mr. Brown from 
Ohio, for five minutes for his opening statement.

	MR. DEAL.  I am now pleased to recognize our Ranking Member of 
the subcommittee, Mr. Brown, for his opening statement.
	MR. BROWN.  Thank you, Mr. Chairman.  I would like to thank the 
witnesses for joining us.  I want to extend a special welcome to the three 
witnesses from my home State, Charles Hallberg from Cleveland, and 
Dr. Larry Galluzzo and Timothy Hopkins, both from Mason, Ohio, 
Warren County.  Thank you for being here.
	Unfortunately, as you pointed out, Mr. Chairman, there is one key 
witness missing.  There is no beneficiary here.  I am perplexed by that.  
My guess is that the Majority and the Minority are aligned when it comes 
to the issues of what we do to help pharmacists, even though as this bill 
went and made its way through Congress previously many of us raised 
alarms about how pharmacists were not as major a part of this bill, as 
important a part of this new law, as they should be.  We can agree today 
that pharmacists should be paid fairly and paid properly.  We can agree 
today that benefit cards should not be used as billboards.  We can agree 
today the use of cost-saving generic drugs should, in fact, be promoted.  
We can agree today that medication therapy services should be 
encouraged, and we can agree that nursing home residents should be able 
to secure the coverage they need from the pharmacies best equipped to 
serve them.  But again, I am concerned the majority feels justified in 
denying any beneficiary their right to come before this panel.  I 
appreciate the fact, Mr. Chairman, that you invited witnesses from my 
home State, but the witness list was chosen by the Majority, and again, 
excluded beneficiaries.  At any hearing that we have about Medicare Part 
D, beneficiaries obviously should--at least one beneficiary should be 
included to enter in this discussion with pharmacists and with others.
	The supply chain and the coverage chain are well represented, but 
the customer chain isn't represented at all.  Medicare obviously begins 
and ends with the beneficiaries.  When pharmacies are underpaid, they 
can't promptly serve Medicare beneficiaries.  When benefit cards turn 
into advertisements, Medicare beneficiaries become just a marketing 
statistic.  When generic drugs aren't dispensed, Medicare beneficiaries 
pay more out of pocket.  When medication therapy is given short shift, 
Medicare beneficiaries lose ground against chronic conditions.  And 
when the unique circumstances of nursing home residents are dismissed 
as insignificant, Medicare beneficiaries get a firsthand look at why a 
program like Medicare fee-for-service, which is comprehensive and 
flexible enough to probably carry the moniker "one size does, indeed, fit 
all," why a program like Medicare fee-for-service makes a lot more sense 
than doing it the way we are doing it through Medicare Part D, which 
tells seniors to find the least imperfect fit and keep your fingers crossed.
	Pharmacy issues are beneficiary issues.  Members of this 
subcommittee are expected to work for Medicare beneficiaries, not 
around them.  In his written testimony, Dr. Galluzzo raised some 
important issues that have bearing on access to medicine for nursing 
home residents.  His concerns inevitably lead to serious beneficiary 
concerns.  If residents must choose a plan that covers their long-term 
care pharmacy, how do they also choose a plan that covers all of their 
medicines?  How often do those two variables collide, and how often do 
they coincide?  It would useful to hear from a beneficiary representative 
who could actually address this concern.
	This hearing is important.  I am glad we are holding it.  I am a proud 
cosponsor of H.R. 5182, bipartisan legislation introduced by Walter 
Jones and Marion Barry that addresses important issues raised by 
pharmacists and by those representing the pharmacy community, 
including prompt pay rules, co-branding medication therapy, and generic 
dispensing fees.  I am glad we are discussing the serious issues raised by 
Dr. Galluzzo, specific to long-term care pharmacy.  I am confident that 
all of our witnesses will provide valuable input.  But this hearing is about 
access and cost and quality.  It has everything to do with the beneficiary.  
It is a sad statement that everyone but Medicare beneficiaries will have 
their say today.
	Thank you, Mr. Chairman.
	MR. DEAL.  I recognize Dr. Burgess for an opening statement.
	MR. BURGESS.  Thank you, Mr. Chairman.
	For once in this committee, I find myself in agreement with the 
Ranking Member.  This is an important hearing and I am glad we are 
having it today.  Now, my understanding is we are going to have a 
similar hearing that will be devoted purely to beneficiaries forthcoming 
in the near future.  I know the gentleman from Ohio was retiring, but 
maybe we will get that done before he leaves.
	Timely reimbursement for healthcare providers is an essential 
component to maintain the health of the healthcare delivery system.  
When payment levels are negatively impacted or payment timelines are 
altered, it can adversely impact the delivery of healthcare, the health of 
the provider, and ultimately the health of the patient.  With the 
implementation of the Medicare Part D prescription drug program, the 
Government became a major payer of senior's medications, and the plans 
that have been contracted to do so must meet minimum requirements.  
	At the outset of the program, I heard from pharmacists in my area 
about the difficulties that they were having with the program, many of 
which impacted their bottom line.  I am thankful that CMS and HHS 
worked to resolve many of these problems.  Some we took on as just 
simply constituent cases and were able to get a satisfactory resolution in 
every time we asked.  I urge the Department to remain diligent and 
ensure that this program doesn't become a burden for frontline 
pharmacists who are small business owners.
	For years, prompt payment was a major issue pitting physicians 
against health insurers in the State of Texas.  I hope that the health plans 
will have learned important lessons from that example, as well as 
numerous other prompt pay battles around the country.  I, for one, never 
understood why it was necessary to have a law that required people to 
pay their bills on time.  I was always required to pay my bills on time 
when I ran a medical practice.
	Mr. Chairman, I do thank you for holding the hearing today.  I look 
forward to the witnesses' testimony, and I will yield back.
	MR. DEAL.  I thank the gentleman.
	Mr. Waxman is recognized for an opening statement.
	MR. WAXMAN.  Thank you, Mr. Chairman.  I am pleased that the 
subcommittee is holding a hearing today to examine the issues that have 
been faced by America's pharmacists since the implementation of 
Medicare Part D benefit and the enactment of the Deficit Reduction Act.  
Certainly, the initial months of implementation of the Medicare drug 
benefit have put many pressures and tasks on our pharmacists.  They 
have been close to the front lines in dealing with the complications and 
difficulties in that program.  It is indeed critical that we examine these 
issues and take steps to remedy some of the obvious problems, but the 
fact is that the pharmacists have faced many of these problems because 
they were on the front line trying to help the beneficiaries deal with the 
complications and frustrations of this program.  
	So to get a more complete picture of what has gone wrong and what 
needs to be changed, we should be hearing today from both pharmacists 
and beneficiaries.  Both of them have important stories to tell.  I know 
we have been promised an opportunity to hear from beneficiaries.  This 
is not the first time we have been promised that.  In fact, the Minority, 
the Democrats, have submitted a petition which requires another hearing 
on this subject, and that is supposed to come about under the rules we 
have been promised.  It is inexplicable that we don't have time to hear 
from the beneficiaries, as well as all the others that we are going to hear 
from today.  Beneficiaries are the ones who want to be able to access the 
program through their own pharmacists.  They are the ones who suffer if 
the pharmacists can't afford to spend the time to wait hours on the phone 
to see if someone is covered, who have to seek their pharmacist's help to 
deal with prior authorization and set therapy requirements, and who need 
their pharmacist to work with their physician to be sure the proper 
approvals are received so their drug can be covered.  And it is going to 
be the beneficiaries and the pharmacists who will be dealing with the 
confusion and the anger and frustration that will inevitably occur when 
people start hitting the so-called donut hole in coverage where they must 
pay the full bill out-of-pocket.  The pharmacists have indeed been in the 
middle of these problems.  They have been made worse by the fact that 
some plans make them wait months for payment, putting tremendous 
cash flow problems on them.  Some plans don't pay adequately for the 
cost of providing drugs, particularly low-cost generic drugs whose use 
we want to encourage.  We know that the pharmacists may have to spend 
more time explaining why the generic is appropriate, yet their 
reimbursement is sometimes miniscule for these drugs.  We know 
pharmacists will be on the front line trying to deal with the differing 
requirements among the plans for prior authorization.  This can be time-
consuming for them and frustrating for them and the beneficiaries they 
are trying to serve.
	Finally, we know that some plans engage in the practice of putting a 
specific pharmacy chain logo on their cards, causing beneficiaries to 
think that is where they must go to get their drugs.  This surely 
disadvantages the community pharmacy.  We hope that what we hear 
today will be used to form an appropriate legislative response.
	MR. DEAL.  I thank the gentleman.
	As you can tell by the bells, we have votes that have started.  Mr. 
Upton, I am going to try to get your opening statement in, and then we 
will recess for the votes.
	MR. UPTON.  The thing is, Mr. Chairman, I won't take my full 
allotment of three minutes.
	I want to thank you for having this hearing.  I do look forward to 
having the hearing with the beneficiaries later on.  I also want to thank 
my pharmacists in southwest Michigan, those both large organizations, 
the Walgreen's, et cetera, as well as the small mom and pop shops as 
well.  I know that I spent much of my recess time in March and 
throughout the weekends stopping at a number of pharmacies throughout 
my district, checking in on them, finding out how things were going.  I 
was very pleased with the response that I got.  I know that for many 
seniors signing up for Part D, it was a confusing process.  We had in 
Michigan some 42 different plans that beneficiaries were able to pick and 
choose from, and I have to say that as I went through my different 
communities, whether it be my hometown of St. Joe or Kalamazoo, a 
much larger city, our pharmacists were on the front line and they did a 
wonderful job in terms of trying to find the right program, the right fit for 
those seniors that wanted to participate in the plan.  I know that in our 
district we had about 70-some percent of eligible seniors sign up.  I think 
that the satisfaction rate was pretty good.  We did a lot of outreach to 
help with our pharmacists, as well as our beneficiaries, to make sure that 
they had the right plan, trying to ease that transition, and I again thank 
them for the work that they do and that they did.  I know that this plan 
isn't perfect.  We need to look at a number of different things where we 
can help facilitate it even better, which is one of the reasons why I have 
endorsed and signed on as a cosponsor of Nancy Johnson's legislation to 
ease the penalty, to take away the penalty for those that did not sign up 
for the Part D plan by the May 15 date, and I would like to think that this 
House, in a bipartisan basis, will be able to push that legislation through 
the House floor in the coming weeks.
	With that, Mr. Chairman, I yield back the balance of my time.
	MR. DEAL.  I thank the gentleman.
	I am going to make an exception to what I just said.  The Ranking 
Member of the Committee, Mr. Dingell, is here, and he is a little bit 
incapacitated.  We don't want to have him to have to move around too 
much on his crutches.  I am going to recognize him for his opening 
statement, and then we will recess.
	MR. DINGELL.  Mr. Chairman, thank you for your courtesy, and I am 
grateful to you.  
	Mr. Chairman, Medicare Part D and the changes to payments for 
prescription drugs under Medicaid have significantly affected 
pharmacies and the beneficiaries they serve.  For some, these changes 
have created such severe ramifications that some pharmacists are 
uncertain if they can continue to serve the patients in their communities.  
Therefore, I am pleased that we will hear today about the impact of the 
Part D program and the Medicaid changes on pharmacies.
	I am, Mr. Chairman, much disappointed that the Majority refused to 
allow the committee to hear from any witnesses who would give 
beneficiary perspective on pharmacy issues.  We will hear various 
perspectives from the business community and the Administration, but 
not one word from the people who these programs are designed to help 
and whom the pharmacists serve.  We will also hear from the 
Administration, for the second time this year, on Part D, and its efforts to 
work out all the problems that this program has caused, but we will again 
not hear from the seniors and the persons with disabilities most affected 
by them.  We will hear from WellPoint, for the second time this year, 
about their work as the backup contractors in Medicare Part D, but we 
will not hear from the beneficiary's perspective about how well that has 
worked.  We will hear from the wholesalers, who have no direct link 
either to Part D or Medicaid, as they do not get reimbursement from 
these programs, but again, we will not hear from the beneficiaries.  We 
will hear a pharmacist's perspective on helping beneficiaries to 
determine whether their drugs are covered by the prescription plan they 
have chosen, or how to file an appeal if they aren't, but again, we will 
not hear from the beneficiary's perspective on that interaction.  We will 
hear about the burdensome plan restrictions that have caused problems 
for pharmacies in delivering medicines to patients in the long-term care 
setting, but we will again not hear from those who are at the receiving 
end of the restrictions, the patients.
	The fact is that the Minority requested only one witness at this 
hearing.  We asked only one witness, compared to the seven categories 
from which the Majority chose their witnesses.  It is indeed a shame that 
the Majority is not interested in the concerns of the beneficiaries to the 
point of excluding them from this hearing.  Our goal in this hearing was 
to hear all perspectives, so that we can find out what is working and what 
is not, and why.
	I also note that the Minority has not been afforded the opportunity to 
have its hearing on Medicare Part D which we requested under the House 
Rules in March, when a balanced and complete hearing on this program 
was also denied by the Chairman.  Beneficiaries come with many 
different needs and circumstances.  Congress has an obligation to hear 
from as many as possible to better understand how this program affects 
the people who deserve the help, and how it is working, not just how it is 
going to serve the interests of the insurance companies and providers.  
When the Chairman provides the minority hearing as required under the 
House Rules, I hope the beneficiaries will be heard and we will at last 
have a clear, comprehensive, and decent picture of the situation before 
us.
	Thank you, Mr. Chairman.
	MR. DEAL.  We are going to stand in recess.  There are three votes 
on the floor and we will resume as soon as those votes are concluded.
	[Recess.]
	MR. DEAL.  I recognize Mr. Allen for his opening statement.
	MR. ALLEN.  Mr. Chairman, thank you for calling this important 
hearing to examine the vital role of pharmacists in our healthcare system.
	Over the past 7 months, pharmacists have worked tirelessly to help 
Medicare beneficiaries navigate the Part D labyrinth.  While it is 
appropriate to focus on the pharmacist's perspective in today's hearing, I 
am disappointed that the Majority would not allow us to invite a 
Medicare beneficiary to testify.  I have heard from hundreds of seniors 
and people with disabilities in Maine about their experiences with the 
new Medicare Part D plan.  Some found the process fairly easy to 
navigate and say they are paying less for their prescriptions than they did 
before, but the vast majority describe their problems choosing and 
signing up for a plan or dealing with the complicated appeals process if a 
drug is not in their plans formulary.  One area of agreement is the 
tremendous assistance that beneficiaries have received from their local 
pharmacists.  Pharmacists in Maine did not allow beneficiaries to leave 
the store without their prescriptions, even if payment was to be delayed 
or not received at all.  Pharmacists in Maine tell me that Medicare D is 
running more smoothly than earlier this year, but about 25 percent of 
prescription drug claims still need special attention.  This can entail 
additional calls to CMS or the PBM that is running the plan, which can 
take 30 minutes to an hour.  Pharmacists are not reimbursed for their 
time dealing with problems like these, and they are not paid for the true 
costs of dispensing care in either the Medicare or Medicaid programs.
	Maine pharmacies are struggling right now with cash flow.  They are 
waiting for 30 to 45 days to get paid, compared to 7 to 10 days when the 
State was paying for medications under Medicaid.  It is estimated that 25 
percent of an average Maine pharmacy's cash flow is tied up in this 
process.  Maine has lost 17 community pharmacies in just the past 2 
years.  These pharmacies closed not because of competition or poor 
management, but rather due to reimbursement cuts at both the State and 
Federal level.
	I look forward to hearing from our distinguished panelists today.  I 
hope their testimony will highlight the unique role pharmacists play in 
meeting the healthcare needs of Americans, as well as the challenges that 
they face, both financial and administrative.
	With that, Mr. Chairman, I yield back.
	MR. DEAL.  I am pleased to recognize the Chairman of the Full 
Committee, Mr. Barton, for an opening statement.
	CHAIRMAN BARTON.  Thank you, Mr. Chairman.  Thank you for 
holding this hearing.  I apologize to our witnesses for the interruptions.  
We have got votes on the floor and all this kind of stuff, and we do 
apologize for having to suspend the hearing.
	I look forward to hearing our witnesses' perspectives today on the 
issues that are facing America's pharmacists.  Pharmacists have been on 
the front line, providing the new Medicare prescription drug benefit to 
our seniors.  There have been some problems.  That is to be expected, 
unfortunately, with any large new government program.  I am told that 
things are improving now, but we must remain vigilant to ensure the 
program continues to be a success.
	The witnesses today are going to provide their insight regarding 
payment concerns expressed in recent months by some pharmacists.  For 
example, back in January and February, many members of this 
committee heard stories about how pharmacists experienced delay in 
payments by Medicare drug plans.  I have been told repeatedly by the 
Administration that this issue is being addressed, that the cash flow 
crunch experienced by pharmacists at the beginning is getting better.  I 
look forward to hearing from CMS and other witnesses today on this 
issue.
	I want to echo the remarks of Chairman Deal regarding our 
commitment to holding an additional hearing where beneficiaries will be 
provided a separate forum to discuss any overall concerns regarding the 
underlying benefit program itself.  As technical problems arise, this 
committee will remain committed to making sure that they are addressed 
quickly if a legislative solution is needed.  Some may exploit minor 
problems that have surfaced during the initial implementation of the new 
benefit program in an attempt to discredit the overall program.  We 
should not lose sight, however, that more than 38 million people now 
have a prescription drug benefit program under Medicare.  This is due in 
large part to the efforts of the witnesses appearing here today: CMS, the 
pharmacists, plan providers, and other payers, all who have helped to 
make this benefit accessible to any beneficiary who wants it.  Please 
keep up the good work as we work together to address the outstanding 
startup glitches that still remain.  I am committed to making the program 
work.
	Again, I want to thank Chairman Deal for calling the hearing, and 
thank the witnesses for being here today.  We look forward to hearing 
their testimony.
	With that, Mr. Chairman, I yield back.
	[The prepared statement of Hon. Joe Barton follows:]

PREPARED STATEMENT OF THE HON. JOE BARTON, CHAIRMAN, COMMITTEE ON ENERGY 
AND COMMERCE

        Good morning.  I would like to welcome all of our witnesses here 
today.  I look forward to hearing your perspectives on Medicare prescription 
drug coverage payment issues for America's pharmacists.
        Pharmacists have been on the front lines of providing the new Medicare 
prescription drug benefit to our seniors.  There have been some growing pains, 
but they were hardly unexpected.  Every new, large program has them.  Things 
seem to be improving, but I also believe that success will depend on us 
keeping a close eye on the program's progress.  
	The witnesses today will help us better understand payment concerns 
expressed in recent months by many pharmacists.  Back in January and February, 
we all  heard stories 
about how the mechanism to pay pharmacists was stalled.  I have been told that 
CMS is 
untangling that knot, and pharmacists are beginning to get the money they are 
owed.  I 
look forward to hearing from CMS and the other witnesses today on this issue 
and echo 
the remarks of Chairman Deal regarding our commitment to hold an additional 
hearing 
where beneficiaries will be provided a forum to discuss their experiences.
        As challenges arise in Medicare Part D, this Committee will deal with 
them. Now, 
it's also true that a handful of people prefer to celebrate the glitches.  To 
some of us, it 
almost looks like they want political benefits in the next election more than 
prescription 
drug benefits for Medicare patients.   Yet the public doesn't seem to have 
much taste for 
politics.  More than 38 million people now have prescription drug coverage, 
and they 
give it increasingly high marks on satisfaction surveys.   This is due, in 
large part, to the 
efforts of the witnesses appearing here today - thanks to CMS, pharmacists, 
plans and 
other payers, and to everyone who has helped make this benefit accessible to 
all Medicare beneficiaries.  
        I want to thank Chairman Deal for calling this hearing, and reiterate 
my thanks to all 
the witnesses for coming today.  I look forward to their testimony.

	MR. DEAL.  I thank the Chairman.
	Mr. Pallone is recognized for an opening statement.
	MR. PALLONE.  Thank you, Mr. Chairman.  I don't want to beat a 
dead horse, but I do want to mention that I was disappointed that we 
didn't have a beneficiary representative here today, and I did hear you in 
the beginning acknowledge the role of the beneficiaries and say that a 
hearing would be held separately with their testimony.  But I do want to 
stress that I really think that not only in this case, dealing with 
pharmacists, but in any case where we are dealing with Medicare Part D, 
whenever we do have a hearing, I really think that beneficiaries should 
be included in each of those hearings because of the impact on them.  
You know, obviously there is a lot of controversy over Part D and 
Democrats, including myself, feel that it is very confusing and that it is 
not being implemented in a fashion that is helpful to beneficiaries.  So I 
do think it is always important whenever we have a hearing on Part D to 
include the beneficiaries, and I would just make that request once again.  
I know you are going to have the separate hearing, but I think we need to 
include them in every hearing.
	I wanted to say with regard to the subject matter of the hearing 
today, whether it is revisions to Medicaid payment policies to the rollout 
of Medicare Part D, whatever the issue is, I can't remember a time when 
pharmacists were so directly impacted by changes in Federal health 
policy.  I have been hearing from them constantly, and as these policies 
are implemented, it is important that members of the committee hear 
from pharmacists about how they are being affected.  For most of us, this 
will not be the first time we hear from our pharmacists about Part D.  
Since the beginning of January, I have received numerous calls, mostly 
from community pharmacists, about the challenges that they faced under 
the new program, and I have heard all the horror stories about those 
pharmacists who were on the phone for hours with private drug 
companies or CMS, desperately seeking to fill the prescriptions that their 
customers needed.  These problems are not just startup problems, as 
many of my Republican friends contend.  They are systematic problems, 
from late payments to unfair marketing practices.  I think that the 
pharmacists have been uniquely disadvantaged by Medicare Part D.
	Now, I have introduced a bill that attempts to provide relief on the 
payment issue that would require prompt payment for the medications, 
and secondly, that would prohibit the practice of co-branding, which 
levels the playing field between the large chain drug stores and 
independently owned pharmacies.  In New Jersey, under Medicaid the 
rule was that you get paid electronically within 15 days and 30 days with 
written.  Most pharmacists have testified here, many before this 
committee, that they are waiting 60 to 90 days, and the co-branding issue 
is just outrageous.  I mean, the Medicare recipients and seniors are now 
getting cards that have major chain stores on the cards, and they think 
that they can't go to their independent pharmacists.  So these problems 
need to be addressed, and that is why I introduced that bill.
	Thank you, Mr. Chairman.
	MR. DEAL.  I thank the gentleman.
	Mr. Ferguson is recognized for an opening statement.
	MR. FERGUSON.  Thank you, Mr. Chairman.  Thank you for holding 
this hearing and giving us an opportunity to hear the concerns of 
pharmacists about the implementation of Medicare Part D.
	We are now almost five full months into have a prescription drug 
benefit in Medicare, and as a result, there are 39 million people who are 
Medicare beneficiaries.  That is representing more than 90 percent of 
Medicare beneficiaries now have coverage for prescription drugs.  That 
is extraordinary.  Almost 40 million people in this country are now 
paying less for their live-saving, life-enhancing drugs than they were 
before.  I think that when you talk to them, and certainly when I hear 
from beneficiaries in my district who have worked through many of 
these implementation issues and problems that we have seen, they are 
absolutely delighted with the cost savings that they are seeing.  I have 
heard a number that the average beneficiary is saving $1,100 a year on 
their medication, which is fabulous.
	But I think anybody involved in this implementation would say that 
this has been a long and difficult process in implementing this benefit, 
and our pharmacists have literally been on the front lines of that effort.  I 
have spoken with many of the pharmacists in my district.  I met with 
some this morning, and I have seen that these dedicated professionals are 
working as hard as they can.  I have heard one instance of a pharmacist 
who didn't pay himself for the first two months of this year because of 
problems in payment issues that they have seen.  These are folks who are 
working as hard as they can to make this benefit work, and they should 
be commended for that.  The pharmacists that I have met with also have 
a lot to say about how to make the program better, how to address these 
problems.  These are folks who are vital to the healthcare needs of our 
seniors.  These are folks who are trusted by their customers, by our 
seniors.
	I look forward to hearing from our panelists today.  They represent 
the breadth of participants in the drug delivery system for Medicare Part 
D, and I look forward to working with our pharmacists in order to make 
sure that this program continues to get better and continues to serve the 
needs of those who need these medications the most.
	Thank you so much.  I yield back.
	MR. DEAL.  I thank the gentleman.
	Ms. Baldwin is recognized for an opening statement.
	MS. BALDWIN.  Thank you, Mr. Chairman.  I thank the witnesses for 
joining us today.
	Pharmacists play a unique role in our healthcare system.  For many 
people, and I think this is especially true for our seniors, pharmacists are 
their main point of contact with our healthcare system.  It is a pharmacist 
who knows what drugs they are taking and who will take a little time to 
ask how things are going with a new prescription medication.  
Pharmacists certainly have had to hear a lot and bear a lot of the burden 
in dealing with the problems with Part D.  So I am happy that we are 
going to have the chance here today to hear more about the pharmacists' 
perspective on Part D and the changes that were made as part of the 
Medicaid cuts passed into law last year.
	I do have to join with my colleagues in noting it is a loss to our 
subcommittee that there are no witnesses on either of the panels today 
who are here to represent the beneficiary perspective, and certainly if we 
are talking about pharmacy issues, beneficiaries have a lot to say.  For so 
many beneficiaries, all they know of Part D is their experience at the 
pharmacy.  They don't have any direct interaction with CMS or with 
PBM, but they do know what has happened when they have gone to their 
pharmacy to get a prescription filled.  Not having that perspective as part 
of this discussion is unfortunate, and I regret that it hasn't been included.
	I hope that our friends from pharmacy will do their best to give us an 
idea of what their clients' experiences have been, as well as what their 
own experiences have been, especially as they relate to Part D.  Just 
yesterday, a pharmacist from Stouten, Wisconsin, came to my office and 
told me about all of the issues he has encountered with Part D, and there 
have been a lot.  Slow reimbursement, confusion over prior 
authorization, and constant formulary changes have made Part D a real 
challenge for pharmacists.  I am afraid that that challenge will only grow 
as time passes and seniors find themselves falling into the donut hole 
where they have no prescription drug coverage and the pharmacists are 
the ones who get to bear that bad news and explain that to confused 
senior citizens.
	But to sum up, I would like to tell you what this pharmacist from 
Stouten, Wisconsin, told me of his opinion on Part D.  He said that Part 
D was such a convoluted program, it was like, and I quote, "using your 
attorney to hire the neighbor's kid to mow the lawn."  It is convoluted, 
and the rollout has been fraught with issues, and as I suspect we will hear 
today, pharmacists have been on the front lines.
	I look forward to hearing about their experiences, and I thank you, 
Mr. Chairman, for the time.
	MR. DEAL.  Ms. Eshoo is recognized for an opening statement.
	MS. ESHOO.  Mr. Chairman, I will submit my opening statement for 
the record.  
I would just like to ask a question of you.  Why isn't there someone 
representing the beneficiary community?  I understand that there were 
requests that were made, and I know that you are very respectful of 
hearings.
	MR. DEAL.  I appreciate the question.
	MS. ESHOO.  Many of the hearings that I come to, there are very few 
here.  Of course, you are here because you are the Chairman, but they are 
important, and we learn from those that come in and offer their views.  It 
seems to me that it creates a hole in the panel.  I mean, I don't think that 
that speaks well for any of us.
	MR. DEAL.  May I respond?
	MS. ESHOO.  Can you maybe enlighten us?  Certainly.
	MR. DEAL.  Thank you for asking the question.
	I think it is a criticism without merit.  As you may recall, on March 
the 1st we had a hearing on Medicare Part D.  We had two beneficiaries 
and a beneficiary advocate that testified.  The purpose of this hearing is 
to examine the distribution chain of pharmaceuticals.  We invited your 
side to ask for PBM directors, representatives of the pharmacy 
community, et cetera, et cetera, but no one was invited by your side to do 
that.  We are going to have another hearing where beneficiaries will be 
heard from, but I think there are enough concerns about the issues in this 
very complex contractual relationship of how drugs get from the 
manufacturer to the pharmacist, and quite frankly, that is the purpose of 
the hearing.  
	I think it is a legitimate purpose.  I seriously doubt that any 
beneficiary, other than the one I will introduce in a few minutes, really 
knows anything about those issues.  So it was intended to be restricted to 
the pharmaceutical distribution chain.
	MS. ESHOO.  Well, Mr. Chairman, I appreciate what you just said, 
but I think that we need to keep in mind that the hearing that you 
referenced, the chain drugs were there, independent pharmacists were 
there, plants were there, Administration was there, WellPoint was there, 
and so I don't think it would have hurt.  But you know, I will go with 
what you said, and I think maybe part company with the explanation, but 
I respect you and I appreciate your addressing it--
	MR. DEAL.  Thank you.
	MS. ESHOO.  --as best you could.
	MR. DEAL.  I believe we have exhausted our members who are here 
to make opening statements, so we will proceed to the first panel.  I am 
very pleased to be able to introduce our first panel which is made up of 
Ms. Leslie Norwalk, who is the Deputy Administrator of the Centers for 
Medicare and Medicaid Services.  We appreciate you being here.  For all 
witnesses, I will say to you that your written testimony is being made a 
part of the record.  We would ask you during the 5 minutes to summarize 
your general testimony and we are pleased to have you here.  We will 
recognize you at this time.

STATEMENT OF LESLIE NORWALK, DEPUTY ADMINISTRATOR, CENTERS FOR MEDICARE & 
MEDICAID SERVICES

	MS. NORWALK.  Thank you, Chairman Deal, members of the 
committee.  It is good to be with you here this afternoon to discuss how 
wonderful, frankly, we all agree that pharmacists have been in 
implementing the new prescription drug benefit.  That is, without a 
doubt, nice that we can agree on something, certainly.
	They have been instrumental in our success in being able to ensure 
that over 38 million beneficiaries have prescription drug coverage in the 
Medicare program, over 90 percent of beneficiaries with coverage; 
certainly, not where we were a year ago, and it is a remarkable 
accomplishment, something that the pharmacists have played an 
important role in.
	Do you realize that we are actually filling three million prescriptions 
a day?  Without the pharmacy and the pharmacists, we certainly 
wouldn't be here.  Pharmacists were there in January when we had 
systems break down.  They made sure that our most vulnerable 
beneficiaries got the drugs they needed.  We have come a long way since 
January, and most of these problems are behind us, but let us face it.  We 
could not have done it without the pharmacies.  They ensure that 
beneficiaries get scripts that are safe and effective for them.  They 
promote lower costs and higher quality.
	I have personally been around the country and met with a significant 
number of pharmacists throughout town hall meetings and so forth and 
visited with them and appreciate that they have experienced real 
challenges in this implementation.  We have worked very closely with 
them to solve their problems.  We have made significant progress in 
resolving data handoff issues between the States, the prescription drug 
plans, and CMS so that pharmacists could get accurate information on 
beneficiaries at the pharmacy counter without having to call us at 1-800-
Medicare or the plans, and then would be able to build a correct plan 
with the correct co-payment, even when the beneficiary forgets his or her 
drug card.
	We have engaged in extensive and varied outreach.  The Secretary, 
the Administrator, and I, along with numerous CMS pharmacists and 
regional office staff, we visited pharmacies firsthand to see the problems 
that they have had.  We have provided online resources in particular for 
pharmacies.  We have worked closely with the pharmacy associations on 
both systemic issues and individual complaints.  We have held open door 
calls so that individual pharmacists have an opportunity to let us know 
their concerns directly.  We have also facilitated the interaction between 
plans and pharmacists to simplify a number of important business issues, 
business processes, and to minimize pharmacy administrative costs and 
burden, including standardized coding and messaging, and providing an 
E-1 query system, a dedicated pharmacy line at 1-800-Medicare.  We 
have expanded the billing window to 180 days so that pharmacists could 
get claims payment when there was coordination of benefits issues, and 
we have extended the transition period for beneficiaries.
	Finally, we will be announcing, hopefully later on today, that all 
plans for 2007 cannot provide co-branding material on their prescription 
drug cards, and they will need to provide those cards to beneficiaries 
brand new in 2007 with no co-branding of pharmacy.  Now, we did that 
initially so that AARP, employers, and the PACE program in 
Pennsylvania so that co-branding could be on the cards.  That can 
continue, but no pharmacy information can be on that card so that 
beneficiaries aren't confused about their options that are available to 
them, and again, new cards will be sent out in '07.
	The next complaint that we heard about from independent 
pharmacies in particular is that they are not being paid quickly enough, 
particularly because the pharmacists often will pay their wholesalers on a 
weekly basis, and they do that in order to receive payment concessions, 
such as discounts, from the wholesaler.  The time lag between payment 
from the plans and their payments to the wholesalers was causing a cash 
flow problem.  However, I point out that under the Medicare 
Modernization Act, CMS is prohibited from interfering with the 
negotiations between the prescription drug plans and the pharmacies, and 
due to this, we cannot require that payment be made within a particular 
timeframe.  But we are concerned about reports, and I think one was 
mentioned earlier here this morning, that payment is often maybe taking 
longer than it is in the standard contracts between these plans, and 
whenever we have received specific information about a plan not paying 
a pharmacy in accordance to its contract, we have investigated them.  We 
haven't found all that many problems.  Our research has found that 
delays in payments generally resulted from typical startup issues, such as 
miscommunication around billing addresses, for example, or if there is a 
group purchasing organization or other intermediary often getting the 
check, it is unclear to the pharmacy which plan has made the payments 
for what.  Our own survey found that 18 of the top 20 prescription drug 
plans paid pharmacy claims on a 15-day payment cycle or less, which 
lines up well with private industry norms with which the pharmacy is 
accustomed.  The MMA, however, does include some protections for 
pharmacies, including access standards and any willing provider 
provisions.
	Competition for the Medicare business has helped keep those costs 
down.  The estimates are $8 billion cheaper in 2006 alone, and $58 
billion cheaper over 10 years when compared to last year's--the baseline 
last year to this year's President's budget.  So we are pleased the 
taxpayers and beneficiaries alike can share in these savings.
	But pharmacists are healthcare professionals.  They provide 
incredibly valuable services to our beneficiaries and to patients of all 
kinds.  Often, they are paid for these services indirectly through the 
purchasing and selling price of their prescription drugs.  But these days, 
purchasers are looking to separate the acquisition costs of prescriptions 
from other services that are provided, as is evidenced in the DRA 
changes to Medicaid payments.  As this change occurs, it is critically 
important for us to consider how to value the quality of services that 
pharmacists as healthcare professionals provide, and to that end, we have 
been working with the Pharmacy Quality Alliance, which includes 
pharmacists and insurers to work together to develop and evaluate 
quality measures.  Pharmacists need to be a part of this discussion of how 
to value their services, because we all know that they do much more than 
simply sell prescription drugs.  With value-based purchasing, 
pharmacists will have an opportunity to be rewarded for providing 
quality care.
	In closing, I would like to reiterate my sincere appreciation for 
pharmacists across the country, and look forward to continuing to work 
with them and the public to help them understand the nature and real 
value of the services they provide.  I look forward to answering any 
questions you or the committee may have.
	[The prepared statement of Leslie Norwalk follows:]



PREPARED STATEMENT OF LESLIE NORWALK, DEPUTY ADMINISTRATOR, CENTERS FOR 
MEDICARE & MEDICAID SERVICES

        Chairman Deal, Representative Brown, I thank you for inviting me here 
this morning to talk about how the Centers for Medicare & Medicaid Services 
(CMS) has worked with pharmacists to implement the Medicare prescription drug 
benefit.  CMS has 
fully engaged with the pharmacy community in this effort and they have been 
key 
partners in the success of this benefit so far.  We greatly appreciate their 
efforts and 
appreciate receiving their feedback and input on how to improve our 
operations.  We 
look forward to continuing to work with them in meeting the needs of people 
with Medicare.
        The Secretary, the Administrator and I have all traveled the country 
and listened to 
the concerns that pharmacists have about the Medicare prescription drug 
program.  To 
this point, among other things, CMS has improved its data systems, provided 
extensive 
education and outreach, hired pharmacists and worked with the prescription 
drug plans to 
simplify business processes between them and the pharmacists who actually 
serve our 
Medicare beneficiaries.  Before the benefit began, we worked with pharmacy 
associations 
to inform their members about what was coming, and we established electronic 
systems 
to assist them in verifying eligibility of enrolled beneficiaries.  Since the 
benefit became 
available in January, we have issued multiple guidance letters to Medicare 
prescription 
drug plans on topics ranging from the need to improve their customer service 
to 
pharmacists, to allowing the pharmacists to submit bills for a longer than 
typical period, 
many of which have been aimed at streamlining plan/pharmacist/beneficiary 
interactions 
- so that pharmacists can continue with the outstanding job they have been 
doing.  We 
are continuing to work closely with pharmacists to address further issues as 
they arise.

Pre-Implementation Work with Pharmacists
        We knew early on that pharmacists would be key players to the success 
of the 
Medicare Prescription Drug benefit.  As front-line providers, pharmacists are 
the health 
care professionals to whom many patients turn to for advice and counseling on 
a broad 
range of issues, from minor aches and ailments, to medication therapy 
management, to 
decisions on what drug plans may be best for them.  Interaction and a strong 
partnership 
with the pharmacists and the pharmacy community has been a top priority for 
CMS.  
        In preparing for implementation of the Medicare Drug benefit, CMS made 
a point of 
hiring pharmacists.  We hired at least one pharmacist in each of our ten 
regional offices.  
And we added ten more pharmacists in our central office, including pharmacists 
in senior 
leadership positions inside the Center for Beneficiary Choices and a pharmacy 
expert 
within the immediate office of the Administrator.  They effectively brought 
the pharmacy 
perspectives to bear throughout CMS during our preparation and implementation 
phases.   
We also contracted with 125 additional pharmacists to review plan formularies 
for the 
2006 benefit year, and to ensure that plans continued compliance with our 
regulations and formulary guidance after the drug benefit went into effect.  
        From the beginning of our implementation efforts, we have engaged in 
rigorous 
outreach to the pharmacy community.  This included an effort beginning in May 
of 2005 
when we partnered with chain and independent pharmacies in an education and 
outreach 
program for beneficiaries likely to qualify for the low income subsidy.  The 
effort 
reached over 30,000 stores.  Those communications between CMS and pharmacies 
marked the beginning of an extensive and lasting effort to exchange 
information with the 
pharmacy community.  We continued our regular communications with pharmacies 
through the Medicare Rx Update.  Since last May, we have sent 42 updates to 
pharmacists and pharmacy associations.  With over 2,700 subscribers and its 
known 
multiplying effect (state and national organizations distribute it as well) 
these updates 
have gone a long way toward informing the pharmacy community about the 
procedures 
surrounding Part D.  Indeed, we have provided outreach through national, state 
and local 
pharmacy organizations and their newsletters and email lists, as well as their 
standards-setting organization and technical societies.  
        CMS' regional office pharmacists traveled the country and presented to 
tens of 
thousands of pharmacists in 2005 - and they remain in constant contact with 
pharmacists 
all over the nation.  One part of these outreach efforts involved hundreds of 
town hall and 
state pharmacy association meetings around the country - including our 
participation in 
27 National Community Pharmacists Association (NCPA) Part D town hall events, 
with 
attendance approaching 7,000 independent pharmacists.  We have held numerous 
national conference calls and posted extensive information on a page of the 
CMS web 
site dedicated to pharmacists.  
        All of our efforts are in addition to the tremendous work that 
pharmacy associations 
and individual pharmacies have done with our support.  These efforts have 
resulted in 
over 50,000 pharmacists and pharmacy technicians receiving continuing 
education 
related to Part D, several Part D centered websites with millions of hits, 
numerous 
conferences, and in-store efforts that have educated thousands of pharmacists 
and 
engaged millions of people.  These efforts to provide outreach to pharmacists 
continue 
through the present day, and we are grateful to the pharmacy community for 
doing so 
much to make a difference for Medicare beneficiaries.
        Recognizing some of the difficulties that pharmacists have in 
administering private 
third party programs, CMS collaborated with pharmacists starting in 2004 to 
create a 
system that would help them identify beneficiary plan information through 
their existing 
pharmacy systems.  This collaboration has yielded an electronic eligibility 
and enrollment 
query system that has now become part of most pharmacies' work flow.  If a 
Medicare 
enrollee does not have a card or proof of enrollment in a prescription drug 
plan, 
pharmacists can use this eligibility system (the E1 system) to obtain 
information needed 
to determine the beneficiary's Part D plan and fill the prescription.  Retail 
pharmacists 
now generally have the ability to perform real-time eligibility determinations 
for 
Medicare beneficiaries on their existing computer systems, which has resulted 
in new efficiencies at the pharmacy counter.  
        To assist pharmacists in learning to use this tool, CMS produced a 
CD-ROM that 
was distributed to national associations and placed on our Pharmacy website.  
We also 
held special training events conducted by CMS pharmacists from our ten regions 
in connection with that tool.    
        The E1 system is working as designed, providing rapid responses to 
pharmacists' 
queries.  Response times since January 2 have consistently been less than one 
second.  In 
addition, the number of queries is decreasing, because more people with 
Medicare are 
enrolling early in the month and have accurate billing information with them 
when they 
go to the pharmacy.  Pharmacies have also been able to obtain that information 
from the 
individual's plan, in most cases.  As a result, inquiries to the system have 
declined 
markedly from the opening days of the benefit.  For example, on January 4, the 
E1 
system received nearly 1.5 million inquiries.  On January 31st, it dropped to 
around 
300,000 and then to just over 120,000 on May 1st.  While the need for the E1 
system has 
been reduced remarkably, it nevertheless has provided many pharmacies with 
critical 
information to ensure that beneficiaries received drug coverage from the 
appropriate plan.  
Since January 1, using the E1 system, pharmacists have been able to identify 
plan information for beneficiaries more than 14 million times.   

Post-Implementation Work with Pharmacists
        CMS has taken many steps in order to ensure that accurate enrollment 
and payment 
information was available when people with Medicare prescription drug coverage 
went to 
the pharmacy to obtain their medications.  However, during the first weeks of 
January, it 
became apparent that certain beneficiaries, particularly some dual-eligible 
beneficiaries 
who switched or joined plans late in the month, had difficulty accessing their 
coverage 
when they went to the pharmacy.  Working with an independent experts and the 
drug 
plans and states, CMS refined data quality and availability to enhance system 
performance.  For example, CMS has made available twice-monthly summaries on 
eligibility and copay status for all enrollees in the limited income subsidy 
in each plan, 
and is monitoring plan use of these data to assure their coverage records are 
up to date. 
As a result of these steps, more complete, accurate, and timely information 
has been 
available to pharmacists when they fill prescriptions for people with Medicare 
drug coverage.  
        In addition to refining data systems related to coverage, we also 
provided expanded, 
direct customer support to pharmacists by modifying our call centers to 
include dedicated 
lines for pharmacists.  We provided a toll-free number exclusively for 
pharmacists and 
worked to ensure that answer times were well under a minute.  Pharmacists 
could call 
that line to obtain beneficiary enrollment information if they were unable to 
access it 
through the E1 system.  We also increased funding for customer service 
representatives 
(CSR) to assist our beneficiaries and the professionals who serve them.  
        In addition to this significant strengthening of our 1-800-MEDICARE 
capabilities, 
we have issued guidance to the plans, instructing them to increase the numbers 
of CSRs 
in their own call centers, expand call center hours, and take other necessary 
steps to 
provide timely and effective responses to inquiries from enrollees and health 
professionals, including pharmacists.  Plans have responded and as a result, 
call handling and wait times have improved significantly.   
        In addition to bolstering customer service efforts on our own part and 
through the 
plans, on February 2, we issued guidance calling on plans to extend the length 
of time 
during which they supplied a transitional supply of off-formulary medications 
from 30 
days, to 90 days to ensure that pharmacists were able to readily help 
beneficiaries access 
their medically necessary prescription drugs during the initial transition 
period.  We then 
encouraged plans to aggressively work to identify their enrollees who needed 
assistance 
to transition to on-formulary medications, or obtain an exception with the 
help of their 
provider.  These steps made it possible for pharmacists to more easily fill 
prescriptions 
during the initial startup of the benefit and helped ease the burden of the 
transition on 
beneficiaries and pharmacists.  Additionally, we issued guidance to plans on 
formulary 
changes, specifying that patients who had been stabilized on a medication that 
was 
covered by a plan when they enrolled could continue to be covered for that 
medication, 
even if the plan took their drug off of the formulary, unless the change was 
made because 
of a new generic coming on the market, an FDA safety warning, or new clinical 
guidelines becoming available.  This move reduced concerns and confusion for 
both patients and pharmacists.
        We also asked the Part D plans to work with pharmacists to resolve 
claims for 
medications dispensed when the pharmacist could not obtain adequate 
information on 
coverage for an enrolled beneficiary.  Many pharmacists did provide 
medications to their 
patients, even when they could not verify coverage through a plan, and we are 
grateful to 
them for being willing to support their patients in this difficult position.  
We expect plans 
to appropriately compensate pharmacists for medications the pharmacists 
properly 
dispensed to plan enrollees, but due to systems issues were not initially 
covered by the 
plan.  
        Because implementation challenges delayed payment of claims or 
verification of 
beneficiary eligibility for a percentage of Medicare enrollees, CMS has 
instructed plans 
that their typical window for submission of claims by pharmacies must be 
expanded.  
Ordinarily plans have a time period of between 30 and 90 days during which a 
pharmacy 
can submit claims.  We have required plans to expand that to 180 days for 
claims 
incurred during the first half of the year in recognition of the fact that 
pharmacies may 
not have been able to obtain appropriate or adequate billing information even 
though they 
have dispensed medications to meet their patients' needs.
        For beneficiaries who were for any time covered by two different 
plans, CMS is 
facilitating plan-to-plan reconciliation of claims paid, so that pharmacists 
will not have to 
resubmit claims or sort out issues of coverage once the beneficiary's coverage 
status is 
resolved.  CMS has also developed a process for state-to-plan reconciliation 
for claims 
incurred by States and State Pharmaceutical Assistance Programs between 
January 1 and 
March 31, 2006 which provided coverage to dual eligible and other low-income 
subsidy 
eligible individuals through state payment systems ? again providing an 
alternative 
process for recouping costs that avoids pharmacies having to reverse and 
re-bill claims.
        To ensure that quality service by plans to their network pharmacists 
is a continuing 
part of the Medicare prescription drug program, in addition to the various 
pieces of 
guidance we have issued during 2006, we have indicated to plans that their 
customer 
service to pharmacies will be used as a measure of their effectiveness and 
compliance with contractual requirements.  
        In its 2006 marketing guidelines, CMS permitted Part D plans to 
co-brand.  Many 
plans took advantage of this opportunity and have co-branded with a number of 
organizations, including state pharmaceutical assistance programs and the 
AARP.   Some 
plans co-branded with pharmacies, and placed the name or logo of the pharmacy 
on the 
prescription drug insurance card.  CMS and the plans are providing complete 
information 
on participating pharmacies. This is available through plan pharmacy network 
directories 
provided to plan enrollees, through our respective websites, and also by 
calling plan 
phone numbers.  Nonetheless, to assure that beneficiaries do not conclude that 
they could 
only get their prescriptions covered at co-branded pharmacies, for 2007 and 
beyond CMS 
will prohibit plans from placing pharmacy logos on beneficiary cards.  Doing 
so should 
alleviate any potential for beneficiary confusion over which pharmacies they 
can use, and 
better ensure that they know they are able to access all pharmacies that 
participate in their plan's pharmacy network.  

Working with Long Term Care Pharmacies
        Early in preparations for implementation of the prescription drug 
benefit,CMS 
identified long-term care residents as a particularly vulnerable population, 
and created a 
long-term care "campaign within a campaign" to address their special needs.  
In the LTC 
population, 70 percent are full-benefit dual eligibles, beneficiaries that are 
entitled to 
Medicare Part A and/or Part B, and are also eligible for Medicaid benefits.  
The Medicare 
Modernization Act required that all dual eligible beneficiaries receive 
prescription drug 
coverage from Medicare, rather than Medicaid.   CMS needed to ensure that 
nearly six 
million dual eligibles would continue to be covered under the new program.  
        Adding to the challenge of switching coverage for so many 
beneficiaries, many 
nursing home residents have cognitive and/or other impairments which make 
communication a challenge.  To address this issue, CMS worked with the nursing 
home 
industry and related advocacy associations to get information to their members 
and 
caregivers.  We communicated directly to the staffs of the more than 16,800 
nursing 
homes throughout the nation.  Further, since January 2006, CMS has kept 
nursing homes 
up-to-date on policy clarifications and recommendations that directly impact 
nursing home patient care and participation in Part D.  These include:
         Continuation of a dedicated fax/express mail program that 
allowed nursing homes to obtain residents' Part D enrollment data from 
Medicare, with more than 500,000 records processed, to ensure continuity of 
care;
         Continuation of Part D auto-enrollment of full-benefit dual 
eligibles in nursing homes;
         Weekly calls with industry representatives to help 
troubleshoot individual Part D cases, fine-tune our procedures, address 
anticipated questions and concerns, and receive feedback;
         Identification of CMS Regional Office long-term care leads 
to troubleshoot Part D nursing home cases in their respective regions; 
         Providing industry groups with Part D plan contacts for the 
exceptions and appeals processes;
         Issuing written guidance for differentiating Part B and Part 
D drugs in the LTC setting, thereby eliminating confusion, speeding 
prescription fulfillment and reducing physician call backs on transitions, 
exceptions and appeals;
         Distribution of a model Part D Exception & Prior 
Authorization trigger form to assist with exceptions requests;
         Distribution of mid-year Part D formulary request 
information;
         Issuing guidance to plans charging them with using best 
available information to adjust subsidy levels in the event that data received 
from CMS does not yet reflect full dual eligible institutionalized status and 
the corresponding $0 co-payments for beneficiaries in this population.  This 
guidance also advised plans to reimburse LTC pharmacies directly for underpaid 
cost sharing subsidies when those pharmacies have refrained from billing their 
residents.
         Clarifying that $0 co-payments for full benefit dual 
eligibles are effective the first day of the first month that the individual 
is expected to remain in a LTC facility for the entire calendar month; and 

         Allowing those entering a nursing home as a resident after 
May 15 to enroll in a prescription drug plan without having to wait until the 
next open enrollment in November 2006.

Standardizing Business Procedures and Practices
        Efforts to reduce administrative burdens associated with health 
insurance coverage 
and payments have the potential to reduce pharmacists' costs by shortening the 
amounts 
of time they have to spend in resolving problems at the pharmacy counter.  CMS 
has 
strongly supported collaborative efforts undertaken by the plans and 
pharmacists to 
reduce the day-to-day costs of working with different health insurance plans. 
This is one 
of many examples of how various parties are working together not only to 
improve the 
Medicare drug benefit for pharmacists, but also to use this opportunity to 
reduce administrative costs more generally for pharmacists.
        In January we heard concerns from pharmacists about different claims 
processing 
and administrative systems and protocols used by the various Medicare 
prescription drug 
plans.  While pharmacists have long had to deal with multiple health insurance 
plans, the 
new drug benefit provided an opportunity to streamline administrative 
procedures across 
insurance plans.  We have made plans aware of the challenges posed by their 
varying 
requirements, and supported external industry discussions involving both plan 
and 
pharmacy representatives.  As a result, in early April, a group of pharmacy 
and plan 
organizations, including America's Health Insurance Plans (AHIP), the NCPA, 
and the 
National Association of Chain Drug Stores (NACDS), announced an unprecedented 
joint 
effort to simplify and standardize the steps that most affect service for 
Medicare beneficiaries filling prescriptions at pharmacies.  
        NACDS, NCPA, and AHIP worked together, along with the American 
Pharmacists 
Association (APhA) and the Pharmaceutical Care Management Association (PCMA) 
and 
others, to simplify and standardize the electronic claims processing messages 
going from 
Medicare Part D drug plans to pharmacies.  The initial step in this effort was 
to provide 
pharmacists electronic message clarity regarding the coverage status of 
certain drugs.  
        Coverage denials can be grouped into many categories: drugs that are 
denied 
because they are excluded from Part D coverage as mandated by the Medicare 
Modernization Act, and drugs that are denied because they are covered under 
Medicare 
Part B, the drug is not on a plan formulary, or requires some prior 
authorization.  
Pharmacists need clarity about why a particular drug is not covered, and they 
need it in a 
format that is recognized and consistent between plans.  This information will 
help the 
pharmacist guide the beneficiary to the appropriate next step, whether that is 
contacting 
his or her physician for an alternative prescription, billing Medicare Part B, 
or paying out of pocket.
        To alleviate some of this concern, AHIP, NACDS, and NCPA developed and 
presented joint recommendations to a Work Group of the National Council for 
Prescription Drug Programs (NCPDP), the organization that creates and promotes 
standards for transferring data to and from pharmacies.  NCPDP then approved a 
process 
for using standardized coding and electronic messages notifying pharmacists of 
claims 
rejections when the prescription is excluded from Medicare, or may be covered 
under Medicare Part B.
        AHIP, NACDS, and NCPA have transmitted to CMS and NCPDP a second set 
of 
recommendations to further improve service to Medicare beneficiaries filling 
prescriptions at community pharmacies.  That proposal for additional 
standardized 
electronic claims processing messages to pharmacists addresses prior 
authorization 
requirements, daily dose limitations, quantities that may be dispensed for a 
given prescription, and age and gender contraindications.
        On February 7, CMS posted to its website a model form for 
beneficiaries to use in 
requesting a coverage determination.  The form was developed with input from 
the 
American Medical Association (AMA), AHIP and others and is accompanied by 
instructions.  Cooperation between the plans and physician organizations led 
to a form 
that will receive wider adoption and use and will help reduce confusion for 
providers, plans and our beneficiaries.  
        CMS has also posted contact information on our web site for every drug 
plan for 
those wishing to pursue an appeal.  To facilitate communications between 
pharmacists 
and physicians, we recently posted a form for pharmacists to use to inform 
physicians 
that their patient's plan is requiring use of another drug, step therapy, or 
prior 
authorization.  To ensure access to these forms and other important exceptions 
and 
appeals information, we required plans to create exceptions and appeals web 
pages with 
this information.  We have also encouraged plans to accept prior approval 
requests by 
fax, rather than requiring phone calls from physicians, since that is less 
time consuming for the physicians. 
        CMS also sent information to plans which will expedite their processes 
for making 
sure they are not inappropriately paying for drugs that should be covered 
under Medicare 
Part B, and we have worked with Epocrates, an electronic prescribing software 
company, 
to ensure that their product provides accurate and easy access to plan 
formularies.  We've 
also held weekly prescribers' conference calls and bi-weekly meetings with the 
AMA and 
other organizations to find out what prescribers are experiencing, to supply 
them with information on our activities and answer their specific questions. 

Current Conditions
        Many pharmacists expressed concerns that they are not being paid in a 
timely 
fashion.  Interruptions in cash flow occurred as pharmacies switched from the 
system 
used by their respective state Medicaid payment systems to those of the 
Medicare 
prescription drug plans.  However, a clear majority of PDPs are paying 
pharmacies well 
within the industry standard of 30 days from the time a clean electronic claim 
is 
submitted to the time a pharmacy receives payment.  A recent CMS survey found 
that up 
to 18 out of the top 20 PDPs pay pharmacy claims on a twice-a-month billing 
cycle of 15 
days or less.  A 15-day billing cycle generally provides pharmacies with 
payment within 
21-25 days. These top plans account for more than 90 percent of the drug 
coverage for Medicare beneficiaries.
        Because resolving specific pharmacy complaints is a top priority for 
CMS, we have 
investigated a number of complaints from pharmacists that they have not been 
paid in a 
timely manner.  The result of the vast majority of these investigations has 
been that the 
plan has paid the pharmacy in accordance with the terms of its contract.  In 
some cases, a 
plan sent a check to the wrong address or to the pharmacy's claims payment 
representative (e.g., a pharmacy buying group or Group Purchasing Organization 
(GPO), 
etc.).  Additionally, we discovered situations where plans may have printed 
checks that 
were held several days before mailing.  In these cases, the plans quickly 
remedied any 
problems to ensure pharmacies are paid as expeditiously as possible.
        The Medicare prescription drug benefit represents a new line of 
business for the 
pharmacies, but it does not differ substantially from the private commercial 
market with 
which they are already familiar.  Thus, the contract terms require that claims 
for 
medications dispensed to people with coverage under the Medicare prescription 
drug 
benefit are being paid in a timeframe with which pharmacies are accustomed and 
within which they know how to operate.  
        In addition to expressing concerns about prompt payment and cash flow 
issues, 
smaller pharmacies have complained to CMS that low Medicare payment rates may 
threaten access to a robust pharmacy network for Medicare beneficiaries.  We 
are very 
sympathetic to the concerns of small pharmacies.  In particular, the MMA 
creates a 
competitive environment that provides constraints on how aggressive plans can 
be in 
negotiating pharmacy rates.  CMS will not approve a plan for participation in 
the 
Medicare program unless it can demonstrate that it can meet the TriCare access 
standards 
for pharmacy network participation.  This provides small independent 
pharmacies, 
particularly those in underserved areas, with bargaining power that they can 
use to 
negotiate favorable rates with the plans.  Plans are also required to accept 
into their 
network any pharmacy that is willing to participate and hence, cannot 
selectively exclude specific pharmacies.  
        Congress specifically included these provisions to assure beneficiary 
access to 
pharmacies in the Medicare program.  However, a corollary benefit to 
pharmacies is that 
these standards assure that pharmacy payment rates remain acceptable to 
pharmacies.  
For example, if a plan is overly aggressive in its contracting, and enough 
pharmacies 
independently decide not to accept the network rate, the plan will not be able 
to 
participate in the program because it does not meet the TriCare Access 
standards.  On the 
other hand, if a plan can meet the TriCare Access standard because a 
sufficient number of 
pharmacies accept the plan's network contract rate, this is a strong 
indication that 
pharmacy network rates are acceptable to most pharmacies and that competition 
is 
working to keep premiums and prices low for beneficiaries while preserving 
access to an 
adequate number of pharmacies for the beneficiary.  Aggressive contracting by 
plans, 
while meeting the TriCare Access requirements, has contributed to more 
affordable 
prescription drug costs for Medicare beneficiaries and taxpayers while 
preserving convenient access to pharmacies.

Supporting Quality in the Pharmacy Environment
        While the new drug benefit has led to greater access to needed 
prescription 
medicines for our beneficiaries, CMS believes that further steps can be taken 
to support 
high-quality pharmacy care, that may result in better health and lower overall 
health care 
costs.  In line with CMS' extensive efforts to improve and promote quality 
across the 
health care settings we serve, in April we announced the formation of the 
Pharmacy 
Quality Alliance (PQA).  The goal of the PQA will be to agree on a strategy 
for 
measuring and reporting data that will help consumers make informed choices 
and 
appropriate healthcare decisions.  The founding members of the PQA include 
leading 
pharmacy organizations, health plans, consumer and employer groups.
        CMS has implemented quality measurement programs in other payment 
systems 
within Medicare, and now it is time for a similar consensus effort to support 
pharmacy 
services in order to promote higher quality care and lower overall costs.  We 
would like 
to like to place more emphasis on providing better support for high quality 
innovative 
healthcare.  The PQA is the vehicle that can help us do this.  We cannot do it 
by 
ourselves at CMS, but we will assuredly support and promote a collaborative 
effort across the healthcare system. 
        While the primary goal of the PQA is to develop strategies for 
defining and 
measuring pharmacy performance, CMS expects that this will lead to greater 
interest in 
plans that promote high-quality pharmacy services and potentially new pharmacy 
payment models to help improve patient outcomes at a lower cost.  We are very 
interested in supporting the testing and development of those payment models. 
Private sector expertise, working in collaboration with the other key 
stakeholders in our program, is absolutely essential for making this happen 
soon. 
        Thanks to the Ambulatory Care Quality Alliance and to the leadership 
and hard 
work of the health plans and many physician organizations involved in 
ambulatory care, 
we have made substantial progress in creating consensus around meaningful 
measures of 
quality of physician care.  We are now in the process of implementing 
physician payment 
demonstration programs that tests whether we can obtain higher quality care at 
a lower overall cost to our healthcare system. 
        We believe that through the PQA we can make a similar kind of progress 
in the 
development of pharmacy-care quality measures and the development of better 
support 
for high quality pharmacy care.  Encouraging higher quality and less costly 
care is a 
critical priority for us at CMS, just as providing high quality care and 
avoiding 
preventable complications is a top priority for our nation's health 
professionals. 
        Pharmacists and other health professionals want to do everything in 
their power to 
provide the best care for their patients.  When we provide consumers with 
better 
information about quality and when our payment systems encourage better 
quality, we 
enable health professionals to focus on what they do best. 
        This is part of a fundamental strategy in Medicare and Medicaid today.  
For 40 
years, our programs have focused on paying the bills without really taking 
into account as 
much as we should, whether what we are buying really improves beneficiary 
outcomes, at the lowest possible cost. 
        Pharmacists and pharmacies have already demonstrated the tremendous 
value they 
provide in their work through the implementation of the Medicare drug benefit. 
They 
have shown that they can add much more as well, including helping people find 
lower 
cost drugs like generic medicine. 
        They can help people who have multiple illnesses understand how to use 
their 
medication thus improving patient compliance with treatment plans and 
preventing 
complications.  All of these things can improve quality and reduce overall 
healthcare 
costs, to achieve a healthcare system that provides the right care for each 
patient every time. 
        A recent CMS analysis indicated that a beneficiary with common chronic 
conditions 
who enrolls in a Medicare prescription drug plan can save, on average, more 
than 55 
percent compared to what they would pay without drug coverage.  If they switch 
to 
lower-cost generic medications, which have exactly the same active ingredients 
as the 
brand-name medicines they had been taking, they could achieve savings of up to 
70 percent over what they would pay without drug coverage.   
        Even larger savings are possible on a very broad range of drug plans 
for 
beneficiaries who also switch to lower-cost "therapeutically equivalent" drugs 
- drugs in 
the same drug class that have very similar effects. Those who switch to less 
expensive 
brand-name therapeutic equivalents can save even more- with savings of up to 
83 percent for the  plan with the lowest cost.  
        Pharmacists can provide a valuable service through coordination of 
care with respect 
to prescription medications.  This could help reduce adverse drug interactions 
and the 
accompanying expenses and risks to beneficiaries.  Their participation in 
medication 
therapy management programs has the potential to help patients better 
understand how 
their medications work and what to expect.  Promoting continuity and 
coordination of 
care and medication therapy management may lead to appropriate utilization of 
prescription drugs and better health for Medicare beneficiaries at a lower 
cost.

Deficit Reduction Act of 2005 (DRA) 
        In conjunction with concerns about payment rates in the Medicare drug 
benefit, 
pharmacists have also raised concerns about reimbursement rates in state 
Medicaid and 
other programs.  Specifically, they cite recent changes in the Deficit 
Reduction Act 
(DRA) that will affect the way the Medicaid program calculates the Federal 
Upper Limit 
(FUL), which is used by many states to determine the maximum level of 
reimbursement 
at which a state will reimburse a pharmacy for multiple source drugs, 
including generic 
drugs.  The goal of these DRA provisions is to capture the most accurate 
pricing data 
possible to assure that the Federal government and State Medicaid programs are 
not overpaying pharmacies for generic drugs.  
        While the DRA represents an opportunity for state and the federal 
governments to 
save money on generic product costs, actual savings will be dependent upon the 
actions 
that states take in implementing the new FUL.  For example, if states do not 
maintain the 
right incentives for encouraging generic utilization, potential savings on 
generic 
reimbursement will be lost to higher and more expensive brand name 
utilization.  For this 
reason, CMS has consistently encouraged states to align incentives for 
optimizing generic 
utilization and consider paying pharmacists more in dispensing fees if they 
can assist the 
state in saving money through greater generic utilization.  
        In its "Road Map to Medicaid Reform", CMS also encourages states to 
"Re-align 
Medicaid prices on prescriptions drugs with other purchasers and protect 
community pharmacists."  Specifically, CMS said:

        ... States retain the overall authority for pharmacy reimbursement 
and may target 
reimbursement to providers, for example, through higher dispensing fees for 
independent pharmacies, pharmacies serving a large share of low-income 
beneficiaries, or pharmacies in rural areas to assure access.  States can also 
adjust 
payments to provide more financial support to pharmacists that improve quality 
and reduce costs of drug coverage and chronic disease management.

        Private and public payers, including Medicaid, do not want to pay more 
for products 
and supplies than is reasonable or necessary.  They are, however, willing to 
pay for a 
high level of service that promotes quality and the very best health outcomes.  
We believe 
that the states should have the tools and options to promote a value-based 
approach to the 
delivery of health care, and specifically the delivery of prescription drug 
benefits, and 
CMS intends to continue to support the implementation of such steps in 
pharmacy care.

Conclusion
        CMS worked hard to resolve the early challenges of implementing the 
Medicare 
prescription drug benefit.  We greatly appreciate the way in which the 
pharmacy 
community has stepped up to the challenge and how they have worked with us and 
the 
plans to identify and resolve these issues.  Plans are now paying for millions 
of 
prescriptions every day, and pharmacies are receiving those payments in a 
timely fashion.  
Competition among plans has resulted in prices for beneficiaries and the 
government that 
are substantially lower than originally expected, and we have already seen 
important 
improvements in the delivery of the drug benefit to reduce costs for 
pharmacists and to 
promote more effective use of prescription drugs.  We look forward to 
continuing to 
work closely with the pharmacy community to ensure that our beneficiaries 
receive the 
highest quality of care at the lowest cost, and that pharmacies are able to 
operate freely in 
a market setting, running their businesses as they see fit, without the 
necessity of complying with a cumbersome regulatory structure.  
        I thank the Committee for its time and look forward to answering any 
questions you may have.  

	MR. DEAL.  Thank you very much.
	First of all, let me pass on some thank you's from my congressional 
office and I think probably from many other congressional offices where 
we have asked for your assistance in assisting our local pharmacists.  We 
found that your organization has been very willing to do so and we 
appreciate that.
	I think probably without exception, most who are in the supply chain 
would say that CMS has done an excellent job of putting on the number 
of people necessary to respond to the calls.  It was a dramatic increase in 
personnel, I know, on your part to be able to do that, and I think some of 
the criticism would be that maybe the insurance companies haven't done 
a like job of being able to respond to inquiries and questions and calls.
	Let me talk about a few things that I think all of us are mutually 
concerned about.  One of the issues is the so-called enrollment lag.  That 
appears to be where some of the confusion at the outset and will 
continue, I suppose, to be a problem as we have people enrolling every 
day and as we have renewals of those taking place.  Would you address 
that issue, and is there a good solution for somebody who enrolls on the 
next to the last day of the month with a new plan and then the first day of 
the next month comes in and expects their prescription to be filled under 
that plan?
	MS. NORWALK.  Right.  We have done a number of things.  The 
Medicare Modernization Act tells us that when someone enrolls on the 
last day of the month, that their enrollment is effective the next day, if 
that is the beginning of the month.  That has, in fact, caused some 
difficulty for us, and what we have done is a couple of things.
	The first thing is we implemented something called the E-1 system, 
or the E-1 query, and as soon as the computer programs can talk to each 
other between the plans and CMS, the pharmacy will have access to 
computer information so they don't have to make a phone call to 
determine what plan the beneficiary is in, as soon as that enrollment can 
be processed.  Now, enrollment processing can take a week or so, 
depending on how it comes in.  If it is done through an agent or a broker, 
if it is done online, the timing may change a little bit.  What we have 
done, given that there is a time lag in information flow, is we have tried 
to let the beneficiary know to bring to the pharmacy whatever 
information he or she may have so the pharmacist can determine what 
plan is the appropriate plan to bill and what co-payments and so forth are 
associated with that plan.  We have had some limited success with that, 
but given the Medicare Modernization Act dictates that what we have 
done thus far is really tried to educate beneficiaries.  It was a significant 
problem when 20 million people joined the system on one day.  It is a 
problem that we have seen significantly less of, but since a quarter of a 
million people are eligible for the Medicare benefit every month, it will 
continue to be an issue if people sign up late.  So we encourage people to 
sign up early and bring with them whatever information they have to the 
pharmacy to minimize the issues once they get there.
	MR. DEAL.  All right.  
	One of the issues that we are going to hear talked about by the panel 
that follows you is the loophole.  We will have the opportunity to discuss 
with the industry itself, but your statistics were rather revealing.  The 
majority appears that the major plans are on a 15-day cycle.  Is that 
right?
	MS. NORWALK.  Yeah, that is what our own research has found.
	MR. DEAL.  All right.  Let me go to another one.  The co-branding 
issue has been a big one, and you have said that you are not going to 
allow co-branding next year?
	MS. NORWALK.  Right.
	MR. DEAL.  They can't just carry those same cards with the branding 
on it.  Will they have to issue new cards?
	MS. NORWALK.  That is correct.
	MR. DEAL.  Okay.  I think that goes a long way toward taking care of 
that.
	Let me ask you about medication management therapy.  Where is 
that issue in the overall scheme of things, and what is CMS 
contemplating there?
	MS. NORWALK.  Well, for 2006, medication therapy management is 
something new for us, at least, obviously the whole thing is new.  What 
we wanted to do was allow plans to develop their own best practices to 
figure out what we could do on a go forward basis, as opposed to 
requiring and mandating something in particular.  It is one of the things 
that the Pharmacy Quality Alliance will be looking at to help determine 
what makes sense for plans and the pharmacists alike to ensure that 
beneficiaries receive the most value for the services, particularly for 
those beneficiaries who have chronic drug needs and are taking many, 
many prescriptions and spend thousands of dollars on drugs a year.  In 
order to ensure that those beneficiaries are well taken care of and have 
the appropriate medication therapy management, we would like to see 
what can develop in a number of the plans and then develop a best 
practice approach.  I believe on your next panel you have someone 
testifying from Georgia, who, in fact, they are working on that issue in 
Georgia to also develop best practices, and that is the sort of thing that 
we would like to continue to encourage, whether it is through our QIO 
program, our Quality Improvement Organizations, or the Pharmacy 
Quality Alliance, we think there are lots of ways that this may be 
successful.  We didn't want to stifle those ways in going forward, but 
want to encourage best practices as we learn more about those programs.
	MR. DEAL.  Real quickly, formulary changes.  Dr. McClellan on 
March the 1st I believe said that there had been no requests for formulary 
changes.  Has that status changed?
	MS. NORWALK.  That is not accurate.  There are 450,000 formulary 
drugs in the Medicare program, if you look at all the formularies.  We 
have had a request for under one percent of them.  The last number that I 
saw, we had approved--of the 450,000 drugs, we had approved changes 
in 3,000 of them.  Two-thirds of those changes, roughly 2,000, were 
because generics became available on the market.  The other third were 
because either the drug was withdrawn from the market or there were 
other safety concerns, or there was an issue with the prescription possibly 
being covered by Medicare Part B.  The physician benefit and the statute 
require that that be paid under the physician benefit, continue to be paid 
there, and that they may have had some prior authorization.  So that is 
the majority of the things that we approved.  After that--during that or 
shortly thereafter that hearing, we required that any changes in formulary 
that are made for 2006, and frankly, beyond, would have to grandfather 
the beneficiary in.  We are very concerned about the bait and switch.  So 
beneficiaries who relied on a particular formulary when they signed up 
for that plan and take a particular prescription on that formulary must be 
allowed to continue to take that prescription for the rest of the year, and 
then when they change plans the next year that formulary would be able 
to change.
	MR. DEAL.  Thank you.
	MS. NORWALK.  Thank you.
	MR. DEAL.  Mr. Allen is recognized for questions.
	MR. ALLEN.  Thank you very much, Ms. Norwalk, for being here.
	I want to ask you some questions about the low-income subsidy.  As 
of April 28, which is the last data that we have, anyway, the Families 
USA study shows that about one-quarter of the 7.2 million people, low-
income seniors that qualify for the low-income subsidy are actually 
receiving the subsidies.  The number may have changed since April 28, 
but that was their number.  In Maine, the estimate was 45,000 are 
estimated to eligible for the low-income assistance, but as of April 28, 
only 16 percent had received it.  My understanding is some hadn't signed 
up, some had not been approved by CMS, and some had been approved 
but the system hadn't recognized that they qualified.  If we can get those 
people into the system and get the extra help they need, I am sure you 
understand that would be better for them and better for the pharmacists 
and everyone.
	So several questions.  I wondered if you could provide a final tally 
on the number of beneficiaries who have signed up for extra help as of 
May 15, compared to how many are eligible, and I don't know if you 
might have that now, but the second part of that question is break that 
down for the number of people with disabilities.  So the overall group, 
and then the number of disabilities.  How many have signed up as 
compared to how many are eligible?
	MS. NORWALK.  From the best numbers that we have thus far, there 
are about 4.5, 4.2 million beneficiaries as of today.  We continue to get 
enrollments coming in, so that is sort of where we are now.  There are 
about 4.5 million that have not signed up for the benefit.  While I am not 
sure that we have the same numbers that Families USA does, I am not 
sure that we use the same baseline.  We estimate about 3 million of the 
4.5 million are LIS beneficiaries, so a significant portion of those 
beneficiaries are LIS.  I don't have a breakdown as to disabled versus 
aged beneficiaries, I am sorry.  I don't know that I have ever actually 
seen those numbers.  I can see if we can run them for you.
	MR. ALLEN.  That would be helpful.
	MS. NORWALK.  We will take a look at that.
	If your point is, we need to reach out to these beneficiaries and get 
them enrolled in this plan in 2006, I could hardly agree with you more.  
There are a couple of things that we are doing and we have been doing 
since the beginning.  Certainly, one is to reach out the community health 
centers; 90 percent of the community health center population tends to be 
the limited income subsidy individual, and reaching out through the 
community health centers to make sure that they know and understand 
what is available to them, even after this enrollment deadline has passed, 
because we have allowed a special election period for those who have 
LIS who qualify after May 15 who will be able to enroll in the plan for 
the rest of this year without a late enrollment penalty.  So reaching out to 
them now is really our number one concern from an outreach perspective 
and beneficiaries.
	In addition, we have issued a grant to the National Council on Aging 
to do more specific and targeted outreach and determine what methods 
work the best to find these people and to let them know about the benefit.  
They are, without a doubt, the hardest group to reach that we have, and 
we are looking forward to as many ways to get them as possible to at 
least give them the option, help them with their Social Security 
paperwork, and allow them to join a prescription drug plan.
	MR. ALLEN.  Have you thought about working through hospital 
emergency rooms, for example?
	MS. NORWALK.  Also a terrific idea, and I will go back and see if 
that is another way that we have approached it, and if we haven't, I think 
it is something that we can at least get the hospitals and work with them 
to put information in their waiting rooms and the like.  It is an excellent 
idea.
	MR. ALLEN.  Okay.
	MS. NORWALK.  I don't know if that is a part of our plan or not.
	MR. ALLEN.  I am told that the disabled tend to not use the same 
sources of information as others, and I think--don't you have to reach out 
in somewhat different ways to find the disabled population?
	MS. NORWALK.  Absolutely.  We have--
	MR. ALLEN.  There are, I guess, some who might show up at 
community health centers, but--
	MS. NORWALK.  Right.
	MR. ALLEN.  --they might not.
	MS. NORWALK.  Right.  From an LIS perspective, that is one of our 
targets, but one of the things that we have done generally with outreach 
is really done an unprecedented campaign to find people, as we say, 
where they live, work, play, and pray.  We have worked with church 
organizations, religious organizations generally.  We have done all 
different types of media advertisements.  I am sure you have heard about 
the bus that toured around the country.  I know it spent some time in 
Maine.
	MR. ALLEN.  It did.
	MS. NORWALK.  So we have done a lot of things.  We have tens of 
thousands of partners who have been fantastic and instrumental in 
helping us find the 32 million people who have coverage through 
Medicare, separate and apart from the six million with other coverage, in 
order to make sure that people didn't miss the May 15 opportunity.  We 
wanted to be sure that they knew about it and they were able to make a 
choice by May 15.
	MR. ALLEN.  It would be very helpful--I thank you for all the work 
you are doing, and will do.  It would be very helpful if you could give us 
as much data as possible on who signed up, who may still be out there 
among those who are eligible for the low-income subsidy, because I 
think that is the way that we can all work together to address the problem 
most effectively.  So I would appreciate following this hearing--
	MS. NORWALK.  Sure.
	MR. ALLEN.  --that data as soon as you have it available.
	MS. NORWALK.  No problem.
	MR. ALLEN.  Thank you.
	MR. DEAL.  Dr. Norwood.
	MR. NORWOOD.  Thank you very much, Mr. Chairman.
	Ms. Norwalk, welcome.  We are thankful and glad that you are here.  
Over the last 12 years, I don't suppose I know many people that have 
been more critical of CMS than I have been, but I have got to tell you, I 
think you folks have handled this Part D prescription drug part rather 
admirably.  I have watched carefully, waiting and watching, and you 
have not made too many mistakes.  I appreciate that fact.
	Tell me this about your authority.  CMS generally has a lot of 
authority, and I wonder about your authority to pace these Part D plans 
and their payment practices.  How much leeway do you have in that?
	MS. NORWALK.  Well, we do have a significant amount of authority, 
particularly to ensure that the plans can implement the benefit as written 
and follow our guidelines, so we have authority to ensure that, obviously, 
the plan is not either prescribing the prescription or dispensing it, but that 
is actually done through a pharmacy, and if that part fails, then we have 
great problems.  So we do--and the plans have been very helpful in 
working with us, so if we come up with a problem, they are willing to 
take a look and try to resolve that issue without question, because they, 
too, appreciate that this, in order to be successful, that the pharmacists 
need to play an important role.  You certainly have a number of plans on 
the next panel that you can ask about that specifically, but we have found 
them to be, as a general rule, helpful. 
	But inasmuch as they are not abiding by their own contracts, and 
beneficiaries don't have access to prescriptions, which at the end of the 
day, even though you don't have a beneficiary representative, it is what I 
care most about.  Can beneficiaries have access to their prescriptions at a 
price that is affordable for both the beneficiary and the taxpayer?
	MR. NORWOOD.  Well, we all care about that part of it.  I also 
happen to care about particularly the community pharmacists, too, that 
have spread all over Georgia.  I am curious at a remark you made in your 
opening statement where you said that you didn't have much authority 
over payment being made in a particular timeframe.  I am not seeing you 
all have any trouble having authority at making rules.  It seems to me it is 
pretty important that these plans pay the pharmacists in a timely manner.
	The reason I bring that up is that may be going on today, because all 
this is new, but history would tell us that that did not happen very well 
over the years with health insurance.  Plans just typically would run 
rough shod over people, particularly at the end of the month, making sure 
they didn't get paid, et cetera, et cetera.  I think maybe you know the 
story.  I want to know why you couldn't use your authority to say--and I 
am not trying to term up a time, but let us just say 30 days.  Why 
couldn't you insist that if you want to participate in this program, you 
must pay your bills in 30 days?
	MS. NORWALK.  Well, I think that generally you are correct.  
Medicare has a significant amount of authority to do any number of 
things.  However, in this particular instance, the statute is clear that we 
are not permitted to interfere with the negotiations between plans and 
pharmacies, or plans and manufacturers, for that matter.  One of the most 
critical things are payment terms within those negotiations, and payment 
terms both include the rate of payment as well as the timing of payment.
	Now, you did ask an important question, and I think it is somewhat 
of a distinction.  We do need to ensure that plans pay pharmacies and 
they pay so in a timely manner.  How timely is defined is a matter of 
negotiation between the pharmacist and the plan.  It is nice to know that 
18 of the top 20 plans do pay within a 15-day cycle.  That is helpful.
	MR. NORWOOD.  What if they don't?  What can you do?
	MS. NORWALK.  It is a matter of contract between the pharmacy and 
the plan.  So if the pharmacy determines that that is not sufficient amount 
of time, the pharmacy has the option of not--during renegotiation.
	MR. NORWOOD.  Probably I don't have that option if I am in Watley, 
Georgia.  You know, the single pharmacist out there doesn't have many 
options.  The big plan has all the options, and if they may agree in their 
contract to pay in 15 days, there is no reason on earth to believe that will 
continue.  What can you do at CMS to kick them out if they don't do 
that?
	MS. NORWALK.  Well, other than requiring them to pay according to 
their contract terms between the two, which is something that we have 
offered to do.  Typically, it is an issue between the two private parties, 
but if you know of pharmacists who are not being paid in accordance 
with their terms of the plans, we would appreciate it if you would let us 
know so that we can investigate and ensure that those plans meet the 
obligations of their contracts.
	MR. NORWOOD.  I would in a minute, but I am more concerned 
because I don't hear you saying this is automatically something we at 
CMS are aware of.  We know this can happen.  As more or smaller plans 
drop out, there are going to be fewer plans.  They are going to 
consolidate.  I mean, I can just sort of see it 5 years from now, and I am 
really trying to make sure you have the authority to do something about 
it.
	MS. NORWALK.  One thing the Medicare Modernization Act does do 
is it requires that the plans adhere to the Tricare Access Standards for 
pharmacies, which means that 90 percent of beneficiaries have to have 
access to a pharmacy within two miles if they live in an urban area, 90 
percent of beneficiaries have to have access within five miles in a 
suburban area, and 70 percent of beneficiaries in the plan have to have 
access to rural pharmacies within 15 miles.
	I do know that in certain instances, pharmacies have used that to 
their advantage in negotiating, although I hear the same complaints that 
you do, is that independent pharmacies, particularly smaller ones, have a 
difficult time negotiating with the plans and feel that they have little 
negotiating leverage.  So I don't want to diminish that--
	MR. NORWOOD.  No, don't.
	MS. NORWALK.  --but the Medicare Modernization Act, other than 
the Tricare Access Standards, does not have any additional protections 
that help the pharmacy in that particular way.
	MR. NORWOOD.  Mr. Chairman, I see my time is up.  I hope we will 
be able to submit in writing the many questions.  I have a long list I 
would like to get answered.
	MR. DEAL.  Yes, that has already been agreed to by unanimous 
consent, so you may do so.
	Ms. Baldwin, you are recognized for questions.
	MS. BALDWIN.  Thank you, Mr. Chairman.
	On March 1, our subcommittee had a hearing entitled "Medicare Part 
D: Implementation of the New Drug Benefit."  At that subcommittee 
hearing, Dr. McClellan appeared and Ranking Member Dingell had a 
series of questions that he presented on prior authorization and appeals 
procedures under Part D plans.  And we were, in offering those 
questions, interested to know how many beneficiaries had not been able 
to fill needed prescriptions or have had to go through complicated 
administrative hoops. 
	So first, Ranking Member Dingell asked for data on the number of 
appeals filed to date, the types of appeals filed, whether it was resolved 
in favor of the beneficiary or in favor of the plan, and the most 
commonly appealed drugs.  I am wondering whether you have the data 
that was requested here with you today.
	MS. NORWALK.  I don't, but I am happy to get it for you.
	MS. BALDWIN.  Okay.  
	A second area of inquiry was a request for a listing of the different 
medicines across plans that are subject to restrictions, what sort of cost 
sharing is charged for those medications that are restricted.  And I don't 
know if you have any of that data with you today--
	MS. NORWALK.  It is available on our website, Medicare.gov, so if 
you have someone in the office, I am happy to print it off for you, but it 
is one of those things that you can look at by plan and actually with each 
of the plans--there is another way, as well, but let me finish the 
Medicare.gov.  It is important for beneficiaries or anyone who is looking 
at which prescription plan to choose, for example, what requirements 
there would be.  Is there step therapy, prior authorization, other 
utilization management techniques that help keep the cost down?  And if 
they exist, they are actually on our website by drug with an asterisk so 
that you can find out--if you are interested in a particular--drug, you can 
find out what plans in your area, in Wisconsin, for example, have 
varying requirements.  Not all the plans do, but many do.
	MS. BALDWIN.  Well, we are certainly interested in aggregate data, 
and I--
	MS. NORWALK.  I will see if we have--
	MS. BALDWIN.  In terms of--
	MS. NORWALK.  I don't know that we have aggregate, but I will 
check.
	MS. BALDWIN.  In terms of propriety, I certainly hope that the 
Ranking Member Dingell's specific questions will be responded to 
before they are posted on the web.  I mean, there was a series of 
questions, the last area, by the way, being on plan performance with 
respect to appeals, which plans in each State were the best and worst 
with respect to meeting CMS-required appeals time frames, and which 
plans did beneficiaries have to appeal the most, et cetera.
	MS. NORWALK.  My understanding is the plans have to submit the 
specific data to us by the end of this month.  We haven't seen that data 
yet.  We do have some preliminary data from the appeals that went to the 
Center for Health Dispute Resolution, our contractor who looks at the 
second level.
	MS. BALDWIN.  But my understanding is that CMS requires 
reporting on a quarterly basis, and the end of the quarter would have 
been March 31--
	MS. NORWALK.  We certainly hope that we can promptly get--
because of our transition policy, we expect to have very few appeals 
because we required plans to cover those drugs for the first 90 days.  I 
wouldn't expect a whole lot for the first quarter.  The second quarter is 
really going to be important.
	MS. BALDWIN.  We certainly hope that in a timely fashion these 
questions that were posed on March 1 by Ranking Member Dingell can 
be reported to us on the committee.
	I wanted to just move to a different topic briefly, and that is the 
donut hole.  You know, when Congress was debating this legislation, I 
certainly was very concerned about this particular policy, and I know 
many of my colleagues are.  Just to remind everyone, the donut hole is 
the point at which the beneficiaries reach $2,251 in drug spending and 
once they reach this point, there is no drug coverage at all for them until 
they surpass $5,100 in spending.  I guess one of my concerns is how we 
are going to educate beneficiaries and pharmacists about this.  Many of 
our constituents will be affected.  I think many will walk into their 
pharmacies one day to have their prescription filled and suddenly 
discover that their prescription is no longer covered because they have 
fallen into the donut hole.  I know I am trying to get the word out so that 
people are fully educated, but I would like to hear what CMS is doing to 
work with pharmacists and beneficiaries to prepare everyone for this.
	MS. NORWALK.  Well, there are a number of different things.  In 
terms of some statistics, you might find it interesting that of the 
beneficiaries, of the 38 million beneficiaries with prescription drug 
coverage, 75 percent, for whatever reason, don't have a donut hole at all.  
Either they have employer coverage, they have chosen a plan that doesn't 
have a donut hole, because it was an option for beneficiaries to choose a 
plan without one.  Twenty percent of beneficiaries who chose plans 
chose a plan with coverage in the gap, either brand or generic, or generic 
only.  So many beneficiaries won't have that, because that is the choice 
they made before May 15.  Of the remaining 25 percent, we anticipate 
now probably between 10 to 15 percent of them would actually reach a 
gap in coverage.  Beneficiaries are required by CMS policy to ensure that 
beneficiaries know where they are from an EOB perspective so they 
know how much they have spent in prescription drugs, how much they 
have, and so forth.
	So really, it is up to the plan to ensure that the beneficiary knows 
where they are on that coverage and the plans are required to let them 
know what they have spent thus far in terms of prescriptions and have 
that available to them, say, if they were to call their 1-800 number at the 
plan, how much is left before I reach the coverage gap, for example.  So 
there are lots of different ways.  I appreciate that this is going to be a 
very important point for beneficiaries who don't understand what this 
means, that it is a second deductible and what happens if they were to get 
there.  
	One of the other things that we have been doing is working very 
closely with patient assistance programs, and we appreciate that many 
beneficiaries who didn't have coverage often look to these patient 
assistance programs to get help.  The Senate Finance Committee had a 
hearing not too long ago, and many of the companies pledged to work 
with CMS and the Federal government to continue those programs, even 
when beneficiaries do have prescription drug coverage under Medicare.  
So we are hopeful to work with a number of different ways to ensure that 
those beneficiaries at least understand that they do get discounts once 
they reach the coverage gap, something they may not have had before if 
they didn't have coverage, or that they can have access to other help 
through pharmaceutical manufacturers' assistance programs.
	MR. DEAL.  The Gentlelady's time has expired.
	Mr. Shadegg is recognized for questions.
	MR. SHADEGG.  Thank you, Mr. Chairman.  I apologize that I could 
not get here earlier.  I commend you for holding this hearing.
	Ms. Norwalk, I think CMS is performing a very important role here, 
and I am encouraged that your study has found progress in this area.  I 
am, however, concerned.  I come to this kind of from the earlier debates 
over patients' rights and the issue of prompt pay.  I am concerned, and I 
would like to know whether when you looked at billing errors as the 
reasons for delay in payment, when I hear from doctors back home, I 
hear doctors in the billing context with doctors tell me well, the errors 
were minute.  The errors were not really the kind of thing that prevented 
the insurance company from paying the bill, or the information they 
claimed they needed was new and added on.
	One question I would like you to briefly address is in your study 
when you found, in fact, that it wasn't part billing errors or lack of 
information which caused the pharmaceutical industry perhaps to delay 
in paying the pharmacies, were they legitimate absences of information 
supplied by the pharmacists, or did you look at the character of the 
missing information?
	MS. NORWALK.  I don't know that we studied in particular whether 
or not something was a clean claim, which was the vernacular, of course, 
for what information is missing, although I understand anecdotally that it 
is pretty consistent with what is seen in the commercial market.  You 
might want to ask the second panel their impression about this, but that 
has been my understanding.  I don't know that we did a systematic study 
of why claims were denied as opposed to paid late.  We looked more 
specifically at claims that were paid beyond the billing cycle that the plan 
had contracted for.
	MR. SHADEGG.  Although I understand that part of the reason for 
them being delayed late is that there were errors or lack of 
communication?
	MS. NORWALK.  Right.
	MR. SHADEGG.  One of the problems is that in this situation, late 
payment means more money in the pocket of one party and less money 
in the pocket of the other party, because of time value of money.
	My second question is when I negotiate with my credit card 
company, and quite frankly, I don't do much negotiating, they tell me 
that there is a very stern late fee, and if I pay my bill with the credit card 
company late, they don't discuss with me whether or not there was some 
dispute, they just impose the fee.  You mentioned earlier that you are 
prohibited from injecting yourself in the negotiation between the 
pharmacist and the plan.  I guess one of my questions would be do you 
know why?  And is it, I suppose, a lack of bargaining power, the 
pharmacies do not insert automatic late penalties, late fees, for late 
payment of fees as a contractual matter?
	MS. NORWALK.  And I don't know.  I haven't looked at enough 
contracts to say definitively whether or not--some may, in fact, have a 
late fee.  Some may not.  I really can't speak to that.  It wasn't a part of 
what we look through, but again, maybe some of the next panel may 
have some idea whether that is included.  It certainly is up to the 
pharmacy and the plan to negotiate that, and it could be incorporated in 
the contractual requirement if they wanted.
	MR. SHADEGG.  I appreciate all your planning and the report you did.  
	I would yield the balance of my time to my colleague from Georgia, 
Mr. Norwood.
	MR. NORWOOD.  Thank you, Mr. Shadegg.  I appreciate that.
	Ms. Norwalk, just a quick follow-up on preauthorization.  Explain to 
us exactly--when I walk in with a prescription and I have got a 
temperature of 105 and I am ready to get that prescription filled and I 
hand it to the pharmacist, and he says, hey, I have got to get this 
preauthorized.  Take us from there.
	MS. NORWALK.  Well, it depends.  One of the things that we have 
been working on is to allow the pharmacy to have information at the 
pharmacy counter through the NCPDP standards so they can get a 
standard message as to what the problem is with a particular prescription.  
Does it require prior authorization and do you need to call the plan?  Is a 
generic available?  With prior authorization, one of the issues that we 
found, for the most part, was that if the Medicare Part B program, the 
physician benefit was intended to pay for this drug, in many instances 
under Part B, sometimes it did not pay for it under Part D and so on.
	MR. NORWOOD.  Well, how long does that--excuse me, the time is 
running out.  How long does that take, and how many plans require 
preauthorization on prescription drugs?
	MS. NORWALK.  I don't have the exact number.  A significant 
number of plans do it, particularly for B versus D.  Sometimes they do it 
for safety reasons.  In terms of how long it takes will probably depend on 
the issue for prior authorization, whether it is Part B versus Part D, 
whether it is a safety issue, whether it is gee, don't they want to take the 
generic question, and if they can call the plan and so forth.
	So a lot of that can be adjudicated online, which means little time, 
sometimes over the phone.
	MR. NORWOOD.  Does the pharmacist or the physician have to get 
the preauthorization?
	MS. NORWALK.  Well, typically the pharmacist will need to get it in 
order to bill, but in certain instances they may need to call the physician, 
which is why we have allowed physicians to write a diagnosis on the 
script to shortcut that step.
	MR. NORWOOD.  But is this out of hand?  Is it going too far?  That is 
the last question.
	MS. NORWALK.  We haven't heard so many complaints thus far to 
lead me to believe it has gone out of hand.  We do pay attention to this 
sort of complaint, so I don't think so.  I do think we could make it more 
smooth, which is something that we are working on, and it is one of the 
things that the Pharmacy Quality Alliance is working on.  I don't think 
that it is out of hand.  We do allow an emergency exception, of course, so 
that beneficiaries can get an emergency fill if necessary, even without 
prior authorization.
	MR. NORWOOD.  Thank you, Mr. Shadegg, thank you, Mr. 
Chairman.
	MR. DEAL.  Thank you. 
	Ms. Eshoo is recognized for questions.
	MS. ESHOO.  Thank you, Mr. Chairman.  Ms. Norwalk, welcome.
	I would like to examine the area of those that change over from one 
plan to another.  Since the benefit has been available to America's 
seniors, can you give us an outline of approximately how many changes 
there are every month in switching from one plan to another?
	MS. NORWALK.  We do have the numbers; I don't think I have them 
with me, but we do have the numbers of those who are dually eligible 
who switch from one plan to another.  Sometimes they switch--
	MS. ESHOO.  Those as well.
	MS. NORWALK.  Yes, there are others.  I will have to see if we 
actually--I have seen the numbers on duals.  I will have to see if we can 
find the others.  Of course, after May 15, while the duals can continue to 
switch month after month, other beneficiaries will need to wait until the 
November 15 open enrollment period--
	MS. ESHOO.  I understand, but dual eligibles are not the only ones 
that--
	MS. NORWALK.  No, that is true.
	MS. ESHOO.  --that have changed.
	MS. NORWALK.  I will see if we have got them.
	MS. ESHOO.  The title of the hearing is "Examining the Federal 
Government's Partnership with America's Pharmacists," and so my 
question goes to that partnership.  If, in fact, and it is fact that individual 
insurers put out their plans and then have a relationship with those that 
they insure, it seems to me that the Federal government needs to 
understand very well and know the movement of those plans and where 
some of the glitches might be.  So I would very much appreciate getting 
a number on not only the dual eligibles, but on everyone. 
	I want to continue in this vein.  Whatever that number is, say 
someone changes, walks into a pharmacy on the 27th and they are 
changing, that becomes a burden for the pharmacist in order to be able to 
track, to know what they have moved to, what is included, what is 
excluded.  And that is the real point of my question, but we need to 
examine what the changes are and then take a look at what we might be 
able to do about it.  Going into my local pharmacy--and I have a mix of 
chains and small pharmacies in my district--this is a real issue for them.  
They have to be kind of the--not kind of, you know, the doctor, the 
pharmacist, the social worker, the good neighbor, and the business 
person at the counter all at once.
	MS. NORWALK.  Absolutely.
	MS. ESHOO.  So it does present a problem.  We are going to say we 
have examining the Federal government's partnership with them, we are 
all extolling pharmacists.  They are the trenches.  So this is an area I 
think we need to not only know what the numbers are, but then how 
smoothly it can go.  
	I mean, what I am struck with is I can go into any department store 
and I like to use just one credit card, but they always want to have you 
open an account at their store.  They are going to give you an additional 
15 percent off, so open an account with us.  They can issue a store credit 
card.  Now, has CMS looked at being able to help pharmacists and 
seniors with faster data transactions?
	MS. NORWALK.  We have, actually.  One of the things that I 
mentioned earlier was something called the E-1 system, and this system 
was designed specifically for the problem that you mentioned, to address 
that problem so that a pharmacy--
	MS. ESHOO.  Is it in place?
	MS. NORWALK.  It is in place.
	MS. ESHOO.  And where is it?
	MS. NORWALK.  It is in place at every pharmacy counter across the 
country.  Almost all pharmacies do use this transaction.  It has been used 
over 14 million times thus far to figure out what plan is the beneficiary 
in, even if they switched.
	Now, as I was talking with you--
	MS. ESHOO.  And the data, I mean, the system functions within what 
period of time?  Is it--
	MS. NORWALK.  Split seconds.
	MS. ESHOO.  Split second?
	MS. NORWALK.  If all the data--
	MS. ESHOO.  Why are my pharmacists complaining, then?
	MS. NORWALK.  Well, it may well be--
	MS. ESHOO.  They don't know about it, or--
	MS. NORWALK.  --they may not know about it.  We have done a 
significant amount of outreach, but we are more than happy to work with 
your office to make sure that they do know about it and do know what 
sorts of questions to use to query the system, whether it is the Social 
Security number of the beneficiary, whether it is their birthday, their last 
name, and so forth.  We have tried to make it as easy as possible just by 
putting in a few patient identifiers that the system will tell them exactly 
what plan that beneficiary is in instantaneously.  
	We have also been working diligently with the plans to ensure that 
they submit that information to us as quickly as possible so that we can 
put it into the system.
	MS. ESHOO.  But that is where it originates.
	MS. NORWALK.  There--we have--
	MS. ESHOO.  Wait a minute.  How much time is there between a 
requirement for them to report the change so that it can go into this 
system?
	MS. NORWALK.  It typically happens within days of the enrollment.
	MS. ESHOO.  Well, but that is my very point.  I mean, if Mrs. Smith 
goes to the pharmacy, she has changed who she is insured by, and you 
are saying that it is split second information for the pharmacist but it is 
not entered, how is it split second?
	MS. NORWALK.  Well, as soon as it is entered it is split second.  That 
is one of the--
	MS. ESHOO.  Wait a minute, that is a little misleading, though.  Wait 
a second here, all right.  I mean, the system has to be able to record it in 
order for the pharmacist to get split second information.  So it is not split 
second information first, it has to be processed.  That is really the heart 
of my question, and I mean, I am not fabricating this.  This is an area of 
great discomfort, and the pharmacists are the ones that are caught in this 
glitch.  So tell me what you propose to do about it and by when, or what 
we can look forward to, or what I say back to them?
	MS. NORWALK.  As Chairman Deal pointed out earlier, in fact, his 
first question looked at the enrollment lag and what does that mean.  If 
you sign up for the benefit on, let us say, April 30 and it is in effect May 
1, there will be a time lag before that information is actually input into 
the system.  It typically is about a week for that lag to occur.  What we 
suggest and what we tell beneficiaries is to bring in information so that 
the pharmacist knows what plan that beneficiary has either changed to, 
what is the name, and we have required the plans in sending letters to 
beneficiaries to ensure that it has something called a bin PCN number so 
the pharmacist knows exactly what to input and what plan to use.
	So we have done an effort--
	MS. ESHOO.  I appreciate your response.  I have to tell you that I 
think that people look for answers that are a bit more nimble than that, 
but this is really a function of such a complex system that, you know, it 
renders these problems.
	So thank you.  I didn't make an opening statement, Mr. Chairman, 
but I think I am still being held to having made one.  Thank you.
	MR. DEAL.  Dr. Burgess is recognized for questions.
	MR. BURGESS.  Thank you, Mr. Chairman.
	Ms. Norwalk, if we could just stay on that for just a second, the 
enrollment lag.  Is the Part D system any more or less nimble than other 
insurance products that are already out there?
	MS. NORWALK.  It depends on the date in which they can enroll 
versus the date in which the enrollment is effective.  The statute tells us 
that you can enroll--they specifically define a time period and also tell us 
when the enrollment is effective, so it is a matter of when the beneficiary 
signs up.  I would suspect in most employer plans, they have an 
opportunity to choose between two or three plans and are often given--
even, I think, under FEHB I would be willing to bet--I can't remember 
when our open enrollment period ends.  So FEHB ended December 9 
this year, so there was a three-week lag between the time in which you 
chose a plan and the time in which the beneficiaries--or, you know, the 
Federal employees had that enrollment effective.  So I suspect that is 
pretty standard that Medicare is unusual.
	MR. BURGESS.  Medicare is unusual?
	MS. NORWALK.  Yes.
	MR. BURGESS.  How long is your enrollment lag?  If FEHB is three 
weeks--
	MS. NORWALK.  Zero.  Which is to say if you would sign up at April 
30 at 11:59 p.m., at 12:01 a.m., two minutes later, your enrollment is 
effective in the plan you chose.
	MR. BURGESS.  But there is still a lag until somebody inputs the data, 
correct?
	MS. NORWALK.  But in terms of--that is the coverage begins then, 
which is to say, let us say you have got a prescription and you went to 
the pharmacy after midnight on the first day of the month.  You could 
submit your claim and get reimbursement, so you do have coverage.  I 
think the point being made was that may be difficult for the pharmacy to 
determine well, what plan are you in if you don't remember.
	MR. BURGESS.  But is that degree of difficulty any more or less than 
people encounter when they change insurances and jobs?
	MS. NORWALK.  No.
	MR. BURGESS.  January seems to me to be a time when a lot of that 
happens, and people encounter that every day in other insurance 
products.  This is not unique to Part D.
	MS. NORWALK.  I would even argue the opposite, that because of the 
E-1 query system that we do have, we make it significantly easier for 
pharmacists because we provide for almost all of our beneficiaries split 
second information for them to determine what plan a beneficiary is in.
	MR. BURGESS.  Okay.  Now, we heard from one of the pharmacists 
when we had this hearing earlier in the year, one of the complaints was 
that when they would get a coverage denial, there would be no 
explanation that came along with that, which left them then having to 
phone back to the physician's office and try to figure out what the 
appropriate next steps would be.  Are we working on that?
	MS. NORWALK.  Absolutely.  It is one of the top priorities of the 
Pharmacy Quality Alliance, which is a combination of plans, 
pharmacists, and CMS, as well as ARC so that we can ensure that the 
pharmacist knows why something is denied.  Is it an excluded drug, is it 
a barbiturate or benzodiazepine?  Is it something that requires prior 
authorization?  Is it a drug that is not on the formulary because there is a 
generic available?  Standardized messaging is one of the most common 
complaints and burdens that I heard from pharmacists, particularly early 
on, and it is something that the PQA has already begun to address so that 
through the same type of system, this E-1 query, similar type of HIPAA 
standard, standard messages can be passed from plans to the pharmacist 
in order to reduce the burden at the pharmacy and provide instantaneous 
messaging, the same for each plan.
	MR. BURGESS.  But I would also offer that that is not a whole lot for 
those who haven't been in the business of writing prescriptions and 
holding on 800 numbers from PBMs.  That is not unusual in the real 
world, even before Medicare Part D came along.
	MS. NORWALK.  Right.
	MR. BURGESS.  Dr. Norwood was asking some questions about the 
authority you have to police Part D plans and their payment practices.  
Have you got a big enough stick to police the plans?
	MS. NORWALK.  We do have pretty significant authority.  At the end 
of the day, of course, if we don't think the plans are meeting up to our 
expectations, we won't renew their contracts for the following year.  
Typically, if you look at the past, most of the problems we have had with 
our Medicare Advantage plans have been in the marketing arena, and we 
would not permit new enrollment, for example.  We also have, under 
certain circumstances, civil monetary penalties that we can do.
	MR. BURGESS.  You do?
	MS. NORWALK.  We do.  It depends on the violation.
	MR. BURGESS.  Now, the coverage gap was also brought up, and I do 
feel obligated to mention that there are a number of plans, at least in my 
State, where if, in particular, is willing to select a generic product, there 
is no coverage gap, and I think I would like to encourage more people to 
look at that when they sign up.  In fact, there is one plan in my State that 
has branded and generics in the gap.  I hope that product is still available 
next year.  I don't see how it is possible, but presumably they have a 
business model they think will work.
	In the coverage gap, though, some of the large pharmaceutical 
companies have made their patient assistance plans available, but there 
was concern from the Office of Inspector General that this may be 
regarded as an illegal inducement for them to continue doing that.  Have 
we got that squared away?
	MS. NORWALK.  Well, the OIG has put out something called an 
advisory opinion for a company.  I think it is widely known to be 
Schering-Plough, that allows Schering-Plough to provide coverage for 
beneficiaries without regard to the fact that they are in the prescription 
drug program.  So there is a way to go about that.  I understand that other 
companies have submitted to the OIG advisory opinion requests.  So 
some ways are problematic, other ways are not, and I know that the 
companies are working with the OIG to ensure that if they do have a 
patient assistance program, they are not getting Federal reimbursement 
for the drugs that are provided under that program, and that is really the 
key to ensure it is not a kickback.
	MR. BURGESS.  Finally, are there any areas of the country where you 
have identified that people have trouble obtaining a prescription, whether 
it be through mail order, mom and pop, or a large name pharmacy?
	MS. NORWALK.  Not that I am aware of.  I don't think that we have 
heard complaints about people being able to obtain prescriptions 
anywhere.  We were very serious when we went through the Tricare 
Access Standards to ensure that plans would not be approved unless they 
had met those standards that pharmacies were available for beneficiaries, 
and not just mail order, but also retail.
	MR. BURGESS.  Okay.  Mr. Chairman, thank you.  You have been 
very helpful.  I will yield back.
	MR. DEAL.  Well, thank you, Ms. Norwalk.  We appreciate your 
presence here today, and I am sure there will be some follow-up that you 
will have on written questions.  Thank you very much.
	MS. NORWALK.  Thank you.
	MR. DEAL.  May I ask panel two if they would take their seats at the 
table?  I thank the gentlemen for being here today, and I will introduce 
the second panel.
	First of all, Mr. Mark Merritt, President and CEO of Pharmaceutical 
Care Management Association; Mr. Timothy Hopkins, Vice President of 
Retail Mail Service Operation for Pharmacy Management of WellPoint; 
Mr. Kenneth Couch, President of Smith Drug Company in Spartanburg, 
South Carolina; Dr. Buddy Harden, Executive Vice President and CEO 
of the Georgia Pharmacy Association, and my token beneficiary on the 
panel; Mr. Gary Wirth, the Director of Professional Services of Ahold, 
USA, and on behalf of the National Association of Chain Drug Stores; 
Dr. Larry Galluzzo, am I pronouncing that close enough?  That is 
correct, all right.
	MR. GALLUZO.  I am a little bit embarrassed by being called a 
doctor.  There is a doctorate program for the college of pharmacy.  I have 
not taken that, so I am not a physician.  I am not a Doctor of Pharmacy, I 
am Mr. Larry Galluzzo.
	MR. DEAL.  Well, Mr. Galluzzo, we are pleased to have you here.  
He is the President of Skilled Care Pharmacy in Mason, Ohio.  And Mr. 
Charles Hallberg, President of MemberHealth, Inc. of Cleveland, Ohio.  
	Gentlemen, we are pleased to have you here.  As I said at the outset 
of the first hearing, your written testimony has already been made a part 
of the record.  We would ask you in the 5 minutes allotted if you would 
summarize that.
	Mr. Merritt, we will begin with you.

STATEMENTS OF MARK MERRITT, PRESIDENT AND CEO, PHARMACEUTICAL CARE MANAGEMENT 
ASSOCIATION; TIMOTHY HOPKINS, VICE PRESIDENT, RETAIL MAIL SERVICE OPERATION 
FOR PHARMACY MANAGEMENT, WELLPOINT, INC.; KENNETH COUCH, PRESIDENT, SMITH 
DRUG COMPANY; DR. BUDDY HARDEN, EXECUTIVE VICE PRESIDENT AND CEO, GEORGIA 
PHARMACY ASSOCIATION; GARY WIRTH, DIRECTOR OF PROFESSIONAL SERVICES, AHOLD 
USA, ON BEHALF OF NATIONAL ASSOCIATION OF CHAIN DRUG STORES; LARRY GALLUZZO, 
PRESIDENT, SKILLED CARE PHARMACY; AND CHARLES E. HALLBERG, PRESIDENT, 
MEMBERHEALTH, INC.

        MR. MERRITT.  Thank you, Chairman Deal, and other distinguished 
members.  We appreciate this opportunity to testify before you today.  
My name is Mark Merritt.  I am President of the Pharmaceutical Care 
Management Association.  I am pleased to be here to discuss how 
pharmacy benefit managers and Part D plans are working with 
pharmacists to deliver safe and affordable prescription drugs to 
America's seniors.
	Over the past two decades, private and public purchasers have turned 
to PBMs to help them manage drug spending and ensure that enrollees 
have access to the medicines that they need.  Typically, we save clients 
25 percent of what they would otherwise spend without our help.  PBMs 
are now helping to administer the Part D benefit.  So far, the results are 
promising.  Part D premiums are coming in 30 percent lower than 
originally projected and discounts on drugs being almost twice as deep as 
originally projected.  In this regard, we are exceeding expectations set by 
Congress and continuing to move forward.  Recent surveys show that 
seniors like the program as well, once they actually begin to use it.
	Retail pharmacists play a crucial role in the success of Part D.  PBMs 
understand this and contract with over 50,000 pharmacies across the 
country.  Our member companies directly employ well over 4,000 
pharmacists in our own industry.  We realize that the business 
environment for retail pharmacies has changed in recent years.  The 
advent of large chains like Wal-Mart and Walgreen's, the increase in 
third party coverage of drugs, the decrease in the number of cash-paying 
uninsured customers and reduced Medicaid payments are all forces at 
work here.  We understand that.  To their credit, in spite of these 
challenges, pharmacies continue to grow.  Just this Sunday, NCPA, the 
group representing the community pharmacists, said that of their 25,000 
independent pharmacies across America, that while 12 had closed their 
doors since the beginning of the year, 200 new independent pharmacies 
have opened in the past year.  Another recent article quoted a pharmacist 
repeating what many have said today, in that the early startup problems 
have largely been resolved.  There is always more to be done.  We 
understand that, but we think that we are moving ahead in the right 
direction.
	Nonetheless, to address the concerns expressed by the pharmacies 
and others, PCMA member companies recently pledged to pay pharmacy 
claims within 30 days.  This is the same standard used for doctors and 
hospitals in Medicare's Part A and B.  It is used by most of the 
commercial market, not just healthcare, but business generally in 
America, along with individual payments, and it is also the standard used 
by the community pharmacies own Medicare PDP, the CCRX.
	PCMA member companies process tens of millions of claims a 
month, and make payments to over 50,000 different pharmacies.  With 
such large volume, a 30-day standard helps improve quality, ensure 
accurate payments, reduce fraud and abuse, all of which cost the system 
billions of dollars each year.
	It is not clear that the legislative proposals to address pharmacists' 
concerns about prompt pay and medication therapy management would 
add value to seniors.  We do know that they cost a lot more money.  
Recently, PCMA commissioned a cost estimate of one proposal S. 2263, 
and found that the bill would increase costs by $9.4 billion over 10 years.  
Of that amount, $7.7 billion would be new costs to the Federal 
government, while $1.7 billion would come from increased beneficiary 
premiums.  Other proposals go even further.  H.R. 5182 includes many 
of the same provisions as the Senate bill, but would also mandate sharply 
increased dispensing fees.  PCMA believes that these measures would 
increase costs even more than $9 billion mentioned by the study of the 
other bill, the Senate bill.  The payment and design of clinical services 
we believe should be left to the private sector, not micromanaged by the 
Government.  Micromanagement would increase costs to the Medicare 
program, to beneficiaries, and taxpayers with no corresponding benefit to 
consumers.  
	PCMA member plans are proud of our achievements of the first few 
months of this new program.  We have faced hurdles along the way, but 
have worked collaboratively with pharmacists and others to address 
them.  The services we provide and the results we are seeking show the 
high standards that we place on quality and affordability.  In short, we 
believe that we are doing the job that Congress and America's seniors 
have asked us to do, although, of course, we can always do more and are 
willing to do so.
	I appreciate the opportunity to testify today, and I am happy to 
answer any questions you might have.
	[The prepared statement of Mark Merritt follows:]

PREPARED STATEMENT OF MARK MERRITT, PRESIDENT AND CEO, PHARMACEUTICAL CARE 
MANAGEMENT ASSOCIATION

        Good Morning Chairman Deal, Ranking Member Brown and all the Members 
of the 
Health Subcommittee. I am Mark Merritt, President and CEO of the 
Pharmaceutical Care 
Management Association (PCMA).  I'm pleased to be here today to discuss how 
pharmacy benefit management (PBMs) companies and Medicare Part D plan sponsors 
are working together with pharmacies across America to deliver safe and 
affordable drugs to patients.
        PCMA is the national association representing America's PBMs and 
Medicare 
Prescription Drug Plans (PDPs.)   PCMA represents both independent, 
stand-alone PBMs 
and health plans' subsidiaries.  Together, PCMA member companies administer 
prescription drug plans that provide access to safe, effective, and affordable 
prescription 
drugs for more than 200 million Americans in private and public health care 
programs, including five of the ten national Medicare Part D PDPs.  

MARKET CHANGE AND CONSUMER DEMAND
        By way of background, I want to share with you some information about 
what plans and PBMs do, and why we exist in today's marketplace. 
        As Members of this committee know, the pharmaceutical marketplace has 
changed 
significantly in the last 20 years with an unprecedented number of new drugs 
coming to 
market, many with "blockbuster" sales potential.  A significant growth in 
utilization of 
prescription drugs began in the mid-1980s as a result of the availability of 
new 
medicines.  As more and more people demanded access to these medicines, 
employers 
and the government expanded insurance coverage to include prescription drugs. 
In 1990, 
31 percent of payments for prescriptions came from third-party payers and 
Medicaid; by 
1999, that figure grew to almost 70 percent.   Health care payers soon 
realized that 
prescription drug cost growth was outpacing other areas of health benefits and 
began 
looking for solutions.  The PBM industry as we know it today was born out of 
this need.
        PBMs' track record for delivering quality prescription drug benefits 
with generous 
savings for consumers and employers is a good one and one in which we are 
proud.  
PBMs do this by using cost containment, clinical and utilization management 
tools 
designed to balance the payers' need for affordability with the beneficiary's 
need for choice and access.  Such tools include:
        ? Pharmacy and therapeutic (P&T) committee formulary development and 
review;
        ? pharmacy network management; 
        ? negotiation and administration of product discounts, including 
manufacturer rebates; 
        ? mail-service pharmacy;
        ? drug utilization review (DUR);
        ? generic substitution;
        ? clinical prior authorization and step therapy;
        ? consumer and physician education;
        ? disease management; and
        ? consumer compliance programs.
        The results cannot be denied.  A recent study published in Health 
Affairs by CMS 
actuaries revealed that prescription drug spending in 2004 slowed to its 
lowest growth 
rate in the past 10 years, rising 8.2 percent. Overall, health spending grew 
in 2004 at a 7.9 
percent clip, down from 8.2 percent in 2003.   The study's authors cited four 
key reasons for the slowdown in prescription drug spending: 
        ? Rapid growth in the use of lower-price generic drugs; 
        ? Increased use of over-the-counter medications; 
        ? A shift toward greater mail-order dispensing; and 
        ? Reduced consumption of certain drugs over safety concerns. 

MEDICARE PART D: NEW CHALLENGES AND OPPORTUNITY
        Now plans and PBMs are bringing to Medicare the knowledge and 
experience 
developed through managing drug benefits in the commercial marketplace.  The 
new Part 
D benefit approved by Congress in the Medicare Modernization Act of 2003 
presents new opportunities and unique challenges for our industry.
        The opportunities lie in the ability to extend the cost-saving and 
clinical 
management tools used so successfully in private plans to millions of seniors 
and the 
disabled in Medicare.  In this regard, I believe we have met and are exceeding 
expectations set by Congress and Medicare beneficiaries.  

Cost Savings
        In a recent analysis of prescription drug spending trends, CMS 
actuaries found that 
program-wide Medicare prescription drug plans (PDPs) are achieving 
deeper-than-
expected discounts of 27 percent - up markedly from the 15 percent discount 
projection 
they made a year earlier.  In turn, these discounts are driving overall 
estimates of 
prescription-drug trend lower.  According to the report, total prescription 
drug 
expenditure growth for 2006 is revised downward from 8.1 percent to 7.7 
percent to reflect actual Part D discounts available.   
        PCMA conducted its own survey of five member plans discounts on the 
top 100 
drugs used by seniors.  Our own data shows that PCMA member PDPs are saving 
beneficiaries an average of 35 percent on medications purchased at retail 
pharmacies and 
46 percent for drugs dispensed through mail-service pharmacies when compared 
to pharmacy usual and customary prices.  
        And seniors like the program.  A recent Washington Post/ABC News Poll 
reported 
that 63 percent of seniors said they were saving money with the new program 
and 74 
percent said they had an easy time enrolling in the program.   Another recent 
poll 
performed by AARP found that 78 percent of those enrolled in a Medicare drug 
plan are satisfied with their plan.   
        As we are all well aware, these results have not come without some 
effort.  
Implementing a program of this scale is a massive undertaking.  I give Dr. 
Mark 
McClellan, Leslie Norwalk and all those at CMS great credit for the hard work 
they've 
done.  Even with all the hard work, however, it would be unrealistic not to 
expect some challenges in the beginning.

Challenges
        We were faced with data problems from the onset of enrollment.  Some 
Medicare 
beneficiaries, particularly the low-income and dual-eligibles, were 
inadvertently enrolled 
in two different plans at the same time; due to late enrollment or incomplete 
files, some 
seniors did not get their enrollment information on time for the January 1 
start date.  
These issues alone, as pharmacists and Members of this Committee are aware, 
created a 
lot of problems when beneficiaries showed up at the pharmacy counter without 
their drug 
card or with the wrong drug card.  This, in turn, created long waits on 
telephone lines to 
clear up eligibility issues and link the right benefit with the right person. 
        Most of these start up problems have been resolved and operations are 
moving much 
more efficiently now.  Part D plans have had to maintain significant 
flexibility in 
partnering with the government to resolve these issues and adjust to changing 
rules.  For 
example, plans were initially asked to provide 30-days of transitional 
medicines to new 
enrollees; we ultimately provided 90-days of transitional medications.  Plans 
waived co-
pays or automatically placed individuals in low-copay tiers when information 
on 
eligibility and formulary status was missing.  PCMA member Part D plans hired 
hundreds of additional staff to answer pharmacist and customer call lines that 
were 
beyond the scope of our initial contract requirements.  All these activities 
added un-
reimbursed costs to our plans.  Throughout it all, our industry has worked 
collaboratively 
with CMS and has adapted to this changing environment.  As a result, we have 
seen 
significant improvement in data file accuracy and ease of enrollment.
        Aside from the practical details of signing up beneficiaries and 
getting their 
prescriptions filled, Part D represents a significant departure for PBMs from 
normal 
business practices.  In our commercial business, we typically contract 
directly with 
employers or health plans to provide services to their employees and members.  
In Part 
D, we are selling our services directly to the consumer.  What's more, we are 
making all 
our drug prices and formulary information available to consumers to help them 
make 
informed choices.  This is the first time this type of information has ever 
been available 
on such a massive scale and it speaks to our member company's commitment to 
engage 
the consumer directly and incentive to ensure people are happy with the 
coverage they choose.

PLANS AND PBMs WORKING WITH PHARMACY
        The increase in third-party coverage of prescription drugs, including 
the new 
Medicare Part D benefit, coupled with increasing competition from large retail 
chain 
pharmacies and recent Congressional action to reduce Medicaid payments for 
prescription drugs has challenged many pharmacists.  As such, it is not 
possible to tie the 
financial woes some pharmacists are experiencing to any one source.  Nor is it 
accurate to 
assume that the more competitive reimbursement that has accompanied these 
marketplace 
changes and government actions has had a universally negative impact on 
pharmacists.
        PBMs have great respect for America's pharmacists.  In fact, 
collectively, PCMA 
member companies employ over 4,000 pharmacists nationwide.  We need 
pharmacists to 
help reach the consumers we serve.  We believe pharmacists benefit in return.  
For 
example, today plans and PBMs contract with about 95 percent of the 55,000 
pharmacies 
nationwide, meaning that virtually all pharmacies are in plan and PBM 
networks.  By 
increasing access to drug coverage, we have also increased volume of 
prescription sales 
in pharmacies.  Our electronic claims processing systems have ensured that 
claims can be 
paperless and receive fast and efficient adjudication.  Finally, we provide 
vital 
information to pharmacies that they may not have about individual patients and 
the drugs 
they take, such as possible drug-to-drug interactions and drug recall notices.  
        It is important to note all the elements of payment to pharmacies for 
filling 
prescription orders.  Pharmacists are reimbursed for the ingredient cost of 
the drug, a 
dispensing fee for filling the order, and the patient co-pay (this is retained 
by the 
pharmacy.)  PBM and plan contracts with pharmacists include all these 
components 
which make up pharmacy reimbursement and therefore it is important to view 
compensation as a whole as opposed to its individual elements.
        Working with pharmacists, we believe we have brought value to payers 
and 
consumers and improved the efficiency of pharmacy transactions.  But pharmacy 
today is 
about more than individual prescription fills at the drug counter; it is about 
coordinated patient care management that provides: 
        ? Integrated data systems that allow for an understanding of a 
patient's complete drug history; 
        ? Flexibility to design and tailor different clinical services to 
specific disease states and patient needs; and 
        ? Accountability for both the cost of care and quality of patient 
outcomes.  

Prompt Pay
        Much has already been said regarding prompt payment of Medicare Part D 
claims to 
pharmacists.  In light of the expressed concerns that pharmacists were not 
being paid in a 
timely manner under Part D, PCMA member companies recently publicly pledged to 
pay 
pharmacies submitting clean electronic Part D claims within 30 days.   
        For some perspective on the issue, it helps to understand what is 
considered standard 
payment cycles in other health and pharmacy benefit programs.  The industry 
standard 
for payment of clean claims filed electronically for doctors, hospitals, and 
other providers 
in Medicare Parts A & B is 30 days.  A 30-day timeframe is the pharmacy-claims 
standard in 43 states and is the standard applied to the Federal Employee 
Health Benefit 
Plan (FEHBP), Members of Congress' own health plan.  The 30-day standard is 
applied 
to medical providers in the commercial marketplace and for business 
transactions and 
payments associated with credit cards and utilities.  A 30-day standard helps 
improve 
quality, ensure accurate payments, and prevent fraud and abuse, which costs 
the health 
care system billions of dollars annually and increases costs for consumers and 
purchasers.
        It also helps to understand how payment systems work.  Because we are 
processing 
literally millions of claims per day for over 55,000 pharmacies, it is 
extremely inefficient 
to pay on a per-claim basis.  Consistent with how other health providers are 
paid, Part D 
plans batch process claims in order to write one check per payment cycle to 
pharmacies.  
This is a system pharmacy is very familiar with as it is how payment works in 
the private sector today.  
        Finally, it helps to understand the activities plans and PBMs engage 
in to adjudicate 
claims.  Claims adjudicating involves more than simple verification of plan 
eligibility and 
formulary status.  Plans and PBMs review individual claims not only to ensure 
they are 
"clean" from an auditing standpoint, but also for clinical management 
purposes.  This 
typically involves large system audits that match claims against certain 
criteria to identify 
outliers that may indicate possible fraud or other abuses.  Audit criteria 
include claims 
that have a high cost, involve excessive quantities, and/or may have incorrect 
dosages or 
days of supply.  Claims that raise red flags require an auditor to contact the 
pharmacy to 
resolve.  If there are recurrent red flags in auditing for a particular 
pharmacy, further 
more intensive reviews are needed that may include involving the prescribing 
physician.  
Such programs are important tools to ensure plans and PBMs are accountable to 
health payers.  

Medication Therapy Management and Quality Improvement
        Part D plans and PBMs support the inclusion of Medication Therapy 
Management 
(MTM) programs in the Part D benefit.  All PDPs included MTM programs in their 
bids 
that were approved by CMS.  In fact, we believe that many of the services PBMs 
helped 
pioneer, such as drug utilization review, disease and therapeutic management 
and drug 
compliance programs, meet many of the goals of this program.  However, we are 
concerned about efforts to establish rigid rules for MTM participation and 
services that would create a one-size-fits-all standard for this program.
        MTM requires a coordinated effort between payer, providers and 
beneficiary to truly 
be of value.  With the average senior taking five or more medications and 
visiting two or 
more different doctors and multiple pharmacies per year, a complete drug 
history is 
critical to an effective MTM program.  Individual pharmacists often do not 
have this 
history, but the drug plan does and therefore can ensure patients are not 
taking drugs that 
conflict with one another or that may have deadly interactions.
        MTM requires flexibility in design as no single model meets the needs 
of different 
patients and disease states.  Models may include working directly with a 
retail pharmacist 
or utilizing the pharmacist or health care professionals in a plan or PBM.  
Many clinical 
programs offered by plans and PBMs today have produced impressive results 
because 
they are able to refine and improve programs with experience and innovate 
around 
services that work and rid the program of those that don't.  CMS intentionally 
allowed for 
flexibility and discretion in MTM services in Part D for this reason.

FLEXIBITY REMAINS KEY TO THE SUCCESS OF PART D
        As businesses that negotiate many contracts with employers and 
pharmacists, we 
believe matters of payment and design of clinical services should be left to 
contractual 
agreements between plans and pharmacies, not micromanaged by the government.  
Doing 
so will only add additional costs to the Medicare program, its beneficiaries 
and taxpayers.
        PCMA commissioned a cost-estimate of S. 2563 a bill recently 
introduced by 
Senator Thad Cochran (R-MS).  This legislation would establish a prompt 
payment rule 
for Part D that would require pharmacy payment within 14 days for clean claims 
filed 
electronically and 30 days for clean claims filed on paper.  Penalties would 
be assessed 
for claims not paid in that time frame.  In addition, this legislation would 
place new 
requirements on the Part D MTM program, such as: mandating (as opposed to 
allowing 
flexibility, as current law does) what services MTM programs must provide; 
mandating 
the setting these services must be provided in (i.e., "face-to-face"); adding 
new network 
adequacy standards on health plans to ensure community-based pharmacies 
provide 
MTM services; and adding new requirement regarding fees paid to pharmacists.
        This legislation is estimated to cost a total of $9.4 billion over ten 
years.  Of that 
amount, $7.7 billion would be new federal Medicare outlays while $1.7 billion 
would 
come from increased beneficiary premiums.  
        While the Cochran bill would add substantial costs to the Medicare 
program, PCMA 
requested an examination of this proposal because it appears to be less 
onerous than 
other, more expansive measures pending in Congress that would, among other 
things, 
mandate dispensing fees that must be paid to pharmacists.  PCMA believes 
strongly that 
theses measures would increase costs even more than the Cochran bill and that 
$9 billion 
is the minimum price tag of the various pharmacy proposals.  
        We believe this is an unacceptable and unneeded new cost burden on 
both taxpayers 
and Medicare beneficiaries and would urge Members to carefully consider this 
as they evaluate legislative proposals before them.

CONCLUSION
        PCMA and its member plans are proud of our achievements in the first 
five months 
of this historic new program.  We've faced hurdles along the way, but have 
worked 
collaboratively with consumers, pharmacists, doctors, CMS and others to 
address them 
and put many of them behind us.  We believe the services we provide and the 
results we 
are seeing speak to the high standards we place on quality and affordability. 
In short, we 
believe we are doing the job Congress and America's seniors have asked us to 
do.  
I appreciate the opportunity to testify and am happy to answer any questions 
Members may have.



	MR. DEAL.  Thank you.  Mr. Hopkins.
	MR. HOPKINS.  Chairman Deal, Representative Brown, and 
distinguished members of the subcommittee, thank you for the 
opportunity to discuss WellPoint's perspective regarding the Federal 
Government's partnership with America's pharmacists in the Part D 
program.  I am Tim Hopkins, Vice President in charge of Retail and Mail 
Service Operation for the Pharmaceutical Benefits Management Division 
of WellPoint, Inc.
	WellPoint is the largest publicly traded commercial health benefits 
company in terms of membership in the United States.  I am a licensed 
pharmacist in the State of Ohio, and prior to joining WellPoint, served as 
a pharmacist with a national pharmacy chain.  My background in 
pharmacy practice is diverse, with 15 years experience in pharmacy 
benefits administration, retail chain pharmacy practice, independent 
community pharmacy practice, and hospital pharmacy services.  I played 
an integral role in developing the pharmacy provider network utilized by 
WellPoint for Part D beneficiaries.
	WellPoint is proud to include in its network Anthem Blue Cross and 
Blue Shield of Georgia, which employs 2,700 Georgians and serves 2.4 
million members in the State, including 155,000 who live in your district, 
Mr. Chairman.  WellPoint is also proudly represented by Anthem Blue 
Cross and Blue Shield of Ohio, with 4,000 employees serving 2.2 million 
members, 81,000 who live in your district, Congressman Brown.  For 
other members of the committee, WellPoint serves members in 
California, Colorado, Illinois, Indiana, Maine, New Hampshire, Texas, 
and Wisconsin.
	WellPoint currently offers the prescription drug benefits through our 
Medicare Advantage prescription drug plans in many parts of the 
country, including the newly available regional preferred provider 
organization in three regions, as well as stand-alone prescription drug 
plans in 34 regions encompassing the 50 States and the District of 
Columbia.  WellPoint also administers the facilitated enrollment program 
for CMS.  Over 238,000 individuals have been served through this 
program, including 24,000 dual eligibles missed or in the auto enrollment 
program process.  Our pharmacy network encompasses 56,437 
pharmacies nationwide, representing 98 percent of available retail 
pharmacies.  To date, we have dispensed over 18.5 million prescriptions 
for 1.4 million Part D enrolled members.
	WellPoint is committed to supporting the effective implementation 
of Part D.  WellPoint's primary goal is to ensure that beneficiaries 
receive all the benefits of their health coverage, including access to 
prescription drugs in a timely and beneficiary-friendly manner, and that 
pharmacists are paid promptly for the prescriptions they fill.
	WellPoint realizes that Part D program success requires extensive 
communication between plans and pharmacies.  To this effort, we have 
taken the following steps: adopted an inclusive network development 
strategy to contract a range of pharmacies, including independent and 
rural pharmacies; enhanced outreach programs through constant 
communication with pharmacies through Faxblast, conference calls with 
independent pharmacy associations, and chain drug stores; engaged in 
active trading through our PBM for pharmacists when they call in; and 
provided direct technical assistance to pharmacies and their vendors as 
needed to address software issues.  WellPoint has agreed to the 
standardization efforts of AHIP, NACDS, and NCPA to address issues 
involving pharmacy claims transactions.
	We recognize that pharmacies are concerned about prompt 
reimbursement.  In response to these concerns, we have made a strong 
commitment to promptly pay all Part D pharmacy claims.  Although 
legacy Anthem and legacy WellPoint are currently paying on two 
separate claims systems, legacy Anthem uses a weekly cycle and legacy 
WellPoint uses a bimonthly cycle.  Payment is received by the 
pharmacies within seven to ten days of the cutoff date; thus, if a 
pharmacy files a clean claim, the longest time that elapses between 
claims submission and payment receipt is 17 days for legacy Anthem and 
25 days for legacy WellPoint.  The claims submission and payment 
process for Part D program is virtually identical to that used by 
pharmacies for commercial business.  We make electronic payment 
available to all pharmacies, which enables pharmacies to receive 
payment more quickly.  However, many independent pharmacies do not 
take advantage of this option.  
	WellPoint's payment policy is consistent with or better than the 
industry standard.  The industry standard is a 30-day cycle.  Plans 
generally pay on a two-week cycle, and depending on when a claim is 
processed in that cycle, it is paid between 15 and 30 days from the date 
of submission.  This standard is consistent with the commercial sector, 
Medicare fee-for-service, mandates in 43 States, the Federal Employees' 
Health Plan, and the Community Pharmacy Association's own Part D 
plan.  Plans typically batch payments to pharmacies, resulting in greater 
efficiency and cost savings that are passed through to the Federal 
government and the beneficiaries in lower premiums.
	In conclusion, Congress entrusted the private sector to administer the 
Part D benefit in the same manner in which it has successfully 
administered drug benefits in the commercial sector, driving down costs, 
improving efficiency, and enhancing care and safety for beneficiaries.  
We recommend Congress stay consistent with this policy.
	The January 1 effective date for the launch of the Medicare Part D 
program brought with it a surge of business operations activity.  
WellPoint did extensive advanced implementation planning and outreach 
with pharmacists as well as other stakeholders.  Our hope was that we 
anticipated and addressed the major barriers that might arise as seniors 
navigated the enrollment system and pharmacists attempted to fill 
prescriptions and receive payment.  While it was not possible to foresee 
all the challenges that this enormous undertaking would pose, WellPoint 
is committed to being part of the solution.
	Thank you for your time today.  I would be happy to answer any 
questions that you have.
	[The prepared statement of Timothy Hopkins follows:]

PREPARED STATEMENT OF TIMOTHY HOPKINS, VICE PRESIDENT, RETAIL MAIL SERVICE 
OPERATION FOR PHARMACY MANAGEMENT, WELLPOINT, INC.

Introduction
        Chairman Deal, Representative Brown, and distinguished members of the 
Subcommittee, thank you for allowing me the opportunity to discuss WellPoint's 
perspective regarding the federal government's partnership with America's 
pharmacists and the Part D program.
        I am Tim Hopkins, Vice President in charge of Retail and Mail Service 
Operations 
for the Pharmaceutical Benefits Management division of WellPoint, Inc.  
WellPoint is the 
largest publicly traded commercial health benefits company in terms of 
membership in 
the United States.  WellPoint was formed on November 30, 2004 from the merger 
of 
Anthem Inc. and WellPoint Health Networks.  WellPoint is an independent 
licensee of 
the Blue Cross Blue Shield Association and serves its members through Blue 
Cross and 
Blue Shield plans in fourteen states.  WellPoint's UniCare brand serves 
members in all 50 states.  
        I am a licensed pharmacist and, prior to joining WellPoint, served as 
a practicing 
pharmacist with a national pharmacy chain.  My background in pharmacy practice 
is 
diverse, with fifteen years experience in pharmacy benefits administration, 
retail chain 
pharmacy practice, independent community pharmacy practice, and hospital 
pharmacy 
services.  At WellPoint, I am building on my experience by developing pharmacy 
products, programs and services that meet the needs of our beneficiaries.  A 
key focus of 
mine over the last year has been the planning and application processes 
associated with 
the participation of WellPoint companies in the new Medicare Part D program.  
I played 
an integral role in developing the pharmacy provider network utilized by 
WellPoint Part D beneficiaries.

WellPoint Participation in Part D Prescription Drug Benefit Program 
        WellPoint has a long history of providing services to Medicare 
beneficiaries, 
including offering Medicare supplemental insurance and Medicare Advantage 
programs.  
We serve over 1.2 million beneficiaries in these programs across the country.  
Prior to the 
launch of Part D, we offered the interim prescription drug card.  WellPoint 
currently 
offers the prescription drug benefit through our Medicare 
Advantage-Prescription Drug 
Plans (MA-PDs) in many parts of the country, including the newly available 
Regional 
Preferred Provider Organization (PPO) in three regions, as well as stand-alone 
Prescription Drug Plans (PDPs) in all 34 regions, encompassing the 50 states 
and the 
District of Columbia. WellPoint also administers the Facilitated Enrollment 
Program for 
CMS.  To date, over 238,000 individuals have been served through this program, 
including 24,000 dual eligibles missed during the auto-enrollment process.
        Our pharmacy network includes 56,437 pharmacies nationwide, 
representing 98% of 
available retail pharmacies.  To date, we have dispensed over 18.5 million 
prescriptions for 1.4 million Part D enrolled members.   

WellPoint Commitment to Part D Success
        WellPoint is committed to supporting the effective implementation of 
Part D.  
WellPoint's primary goal is to ensure that beneficiaries receive all the 
benefits of their 
health coverage, including access to prescription drugs, in a timely and 
beneficiary-
friendly manner, and that pharmacies are paid promptly for the prescriptions 
they fill.  
        As all stakeholders work to continually improve the implementation of 
this program, 
we must all keep in mind the tremendous value of adding a comprehensive 
prescription 
drug benefit to the Medicare program.  Millions of seniors will not only see 
cost savings, 
but true improvements in their quality of life.  The mindset at WellPoint is 
to focus on 
enabling seniors and disabled beneficiaries to receive their prescriptions.  
The recent 
report that nearly 38 million now have prescription drug coverage is great 
news, but it is 
also a reminder that we must keep our full attention on resolving barriers to 
service.  As 
Part D members begin using their new prescription drug coverage, the confusion 
in the 
marketplace is abating and a solid foundation for the Part D program is taking 
hold.  

Part D Success Requires Collaboration and Communication
        The level of collaboration required between CMS, plans, pharmacies, 
and other 
stakeholders to make the Medicare Part D program operate successfully is 
unprecedented.  
Continuing to improve on the progress we've made requires maintaining this 
collective 
effort. A shared approach to problem solving is the essential ingredient for 
making this 
new program work for all beneficiaries.  Stakeholders are stepping up to the 
plate and 
accepting mutual accountability for meeting the challenges and ensuring the 
success of 
the Part D program.  When all parties are bound by a common interest in 
putting the 
beneficiary first, an environment is created that allows for constructive 
criticism and open 
dialogue, the result being timelier implementation of the steps needed to 
achieve a 
smooth transition, faster identification of new issues, and smarter problem 
resolution.
WellPoint realizes that Part D program success requires extensive 
communication between plans and pharmacies.  To this effort, we have:
        ? Adopted an inclusive network development strategy to contract with 
a range of 
pharmacies, including independent and rural pharmacies, to increase pharmacy 
access to network advantages and to enhance beneficiary access to affordable 
prescription drugs.
        ? Enhanced outreach through constant communication with pharmacies 
through 
fax blasts, conference calls with independent pharmacy associations (e.g. 
National Association for Independent Pharmacies and other independent chain 
groups) and chain drug stores (e.g. National Association of Chain Drug Stores 
and smaller work groups formed from major chains). 
        ? Engaged in active training through our PBM for pharmacists when they 
call in.
        ? Provided direct technical assistance to pharmacies and their vendors 
as necessary to address software issues.
        ? Agreed to the standardization efforts of AHIP, NACDS, and NCPA to 
address issues involving pharmacy claims transactions.

WellPoint Pharmacy Payment Policies 
        WellPoint has made a strong commitment to promptly pay all Part D 
pharmacy 
claims and has a payment system that exceeds the industry standard.  Although 
legacy 
Anthem and legacy WellPoint are currently paying on two separate claims 
systems, 
legacy Anthem uses a weekly cutoff cycle and legacy WellPoint uses a biweekly 
cutoff 
cycle.  Payment is received by the pharmacy within 7 to 10 days of the cutoff 
date.  This 
means that if a pharmacy files a clean claim, the longest time that elapses 
between claim 
submission and payment receipt is 17 days for legacy Anthem and 25 days for 
legacy 
WellPoint.  The claims submission and payment process is, in fact, little 
different for the 
Part D program than that used by pharmacies for commercial business.  We make 
electronic payment and 835 claims reconciliation detail available to all 
pharmacies, 
which, in turn, enables them to receive payment and claims detail information 
more 
quickly.  However, many independent pharmacies do not take advantage of this 
option.  
We stand ready to provide assistance to independent pharmacies interested in 
converting to an electronic payment system.

The Importance of the Standard Payment Cycle
        The industry standard is a 30-day cycle.  Plans generally pay on a 
two-week cycle, 
and, depending on when a claim is processed in that cycle, it is paid between 
15 and 30 
days from the date of submission.  This standard is consistent with the 
commercial sector, 
Medicare Parts A & B, mandates in 43 states, the federal employees' health 
plan, and the 
Community Pharmacy Association's own Part D plan.  Along with the rest of the 
members of the Pharmaceutical Care Management Association (PCMA), WellPoint 
recently pledged to pay pharmacists for Medicare Part D pharmacy claims within 
30 days 
of receipt of clean claims.  This pledge signals WellPoint's continued 
commitment to fair 
and timely claims payments to America's pharmacists, who have provided 
tremendous 
assistance to seniors since the start of the Part D program.  
        Plans using standard pay cycles typically "batch" payments to 
pharmacies resulting 
in greater efficiency and cost savings that are then passed along to both the 
federal 
government and the beneficiary in the form of lower premiums.  Arbitrary 
payment 
requirements, such as those proposed in legislation currently before Congress, 
will 
increase the likelihood of fraud by decreasing the breadth and depth of claims 
audits.  
These audits control costs and improve safety by flagging claims that have 
incorrect 
dosage, days supply, or higher than usual quantities.  Reducing the 30-day 
cycle will 
ultimately result in higher costs for the federal government and 
beneficiaries.  

Congress Intended for Part D Program to Operate Like Commercial Sector
        Congress entrusted the private sector to administer the Part D benefit 
in the same 
manner in which it has successfully administered drug benefits in the 
commercial sector: 
driving down costs, improving efficiency, and enhancing care and safety for 
beneficiaries.   We recommend Congress stay consistent with this policy. 

Conclusion
        The January 1st effective date for the launch of the Medicare Part D 
program brought 
with it a surge of business operations activity and customer service requests.  
Knowing 
that the program was complex, WellPoint did extensive advanced implementation 
planning and outreach with pharmacists as well as other stakeholders.  Our 
hope was that 
we had anticipated and addressed the major barriers that might arise as 
seniors navigated 
the enrollment system and pharmacists attempted to fill prescriptions and 
receive 
payment.  While it was not possible to foresee all the challenges that this 
enormous 
undertaking would pose, WellPoint is committed to being a part of the 
solution.  We will 
continue to strive to get past the hurdles because the Medicare Part D 
prescription drug program is worth it.  
        Thank you for your time.  I would be happy to answer any questions you 
may have.

	MR. DEAL.  Thank you.  Mr. Couch, you are recognized.
MR. COUCH.  Thank you, Mr. Chairman and members of the 
subcommittee, for inviting me to testify today on behalf of the 
Healthcare Distribution Management Association, HDMA.
My name is Ken Couch.  I am President of Smith Drug Company 
located in Spartanburg, South Carolina, with a second distribution center 
in Paragould, Arkansas.  I am a former chairman of HDMA, and 
currently serve on the Association's Board of Directors.  
	HDMA represents the Nation's primary full-service healthcare 
distributors.  These 40 distributor members include large and regional 
companies, some of which are family owned and employee owned.  
Smith Drug Company is a distributor of pharmaceuticals and other 
healthcare sundry products that you would find in a community 
pharmacy.  Our customers are overwhelmingly community professional 
pharmacy practitioners that own or work for family-owned businesses.  
They are the corner drug stores of rural areas, towns, cities, and inner 
cities of the Southeast.  Most people taking medications give some 
thought to the pharmaceutical company that made the product or to the 
pharmacy or pharmacist that dispensed that product, but few patients 
understand how that product moves through the system, starting with the 
manufacturer and ending with the patient.  A typical distribution center 
will store 24,000 products purchased from 800 manufacturers and 
distribute to 900 pharmacies on a daily basis.  On an average day, a 
single distribution center will ship out 60,000 products.  Industry-wide, 
we deliver nine million products to the Nation's 142,000 pharmacy 
settings every day.  By providing daily delivery with extremely high 
service levels and business efficiencies in this intricate supply chain, 
distributors save the healthcare system $10.5 billion per year, and we do 
it with razor thin margins, as evidenced by our industry net profit margin 
of 0.75 percent.
	While distributors are not reimbursed by Medicare and therefore not 
directly impacted by the Medicare Modernization Act, the impact it has 
on our pharmacy customers is directly felt by our distributors.  It is 
important for you to understand that some distributors, like Smith Drug, 
community pharmacies constitute in excess of 90 percent of our 
customer base.  Our industry sought to help prepare community 
pharmacists through education and awareness so that they would be more 
knowledgeable and comfortable in answering the Medicare beneficiaries' 
questions.  Distributors provided thousands of pharmacists with a variety 
of learning and outreach tools.  HDMA members, for example, 
developed and sponsored continuing education programs, focusing on 
the benefit, drafted fact sheets, provided calendars with key 
implementation dates and milestones, sponsored brochures and 
advertisements reminding beneficiaries that their pharmacists are a 
valuable information resource and some established well-based resource 
centers.  
	However, since implementation, a recurring problem for many of our 
pharmacy customers has revolved around cash flow issues, and again, 
my industry has stepped up.  On a case-by-case basis, distributors have 
worked individually with their pharmacy customers to reach mutually 
acceptable agreements on payment plans.  In some cases, credit may 
have been extended, in other cases, payment terms may have been 
adjusted.  Let me cite my company as an example.  By background, 
Smith Drug submits weekly manufacturer purchase orders for the 
upcoming forecasted need of our pharmacy customers.  We usually 
receive that product within a few days, or up to several weeks.  It is our 
job to balance that inventory.  Our pharmacy customer places an 
electronic order daily, usually at the close of their business.  We deliver 
their requested products the next morning.  Even though Smith Drug has 
better than a 99 percent service level on pharmaceuticals, to break even, 
we must have better than 13 inventory turns per year.  In other words, we 
must sell and pay for the value of our warehouse and inventory in less 
than one month.  Out of my customer base, approximately 60 percent of 
them have payment terms that require them to pay us twice a month.  
About 20 percent pay us weekly, 15 percent pay us daily, and the 
remainder have some variation.
	To help those customers who are facing significant cash flow 
challenges due to Part D implementation, our company has been working 
with our community pharmacy customers by providing payment 
concessions to help them through these hard times.  Most of these are at 
no interest or with no fees charged; however, there is a cost to Smith 
Drug Company.  We went to our bank and asked for an extended line of 
credit to ride us through our customers' cash flow shortfall.  We 
explained that we needed to prepare for a 15-day setback in cash flow, 
and that number that that bank would have to give us for our small 
company is $100 million.
	As the members of this committee know, community pharmacists are 
an essential component of our Nation's healthcare system.  Their 
viability is important to ensure that all patients are able not only to 
receive their medicines, but for the counseling and medication therapy 
management services that pharmacists can provide.  The challenge now 
is to ensure that community pharmacies be continued to keep their doors 
open to serve the millions of Americans who depend upon them for their 
prescription medications.
	Thank you very much for your attention.  I will be glad to answer 
any questions.
	[The prepared statement of Kenneth Couch follows:]

PREPARED STATEMENT OF KENNETH COUCH, PRESIDENT, SMITH DRUG COMPANY

Introduction
Thank you, Mr. Chairman and members of the subcommittee for inviting me to 
testify today on behalf of the Healthcare Distribution Management Association (HDMA).  
My name is Ken Couch, and I am President of the Smith Drug Company, located in 
Spartanburg, South Carolina with a second distribution center in Paragould, 
Arkansas.  I 
am a former chairman of HDMA and currently serve on the association's Board of 
Directors.
        HDMA represents the nation's primary, full-service healthcare 
distributors.  These 
40 distributor members include large and regional companies, some of which are 
family-
owned. HDMA member distributors work to secure a safe, efficient and reliable 
healthcare supply chain that is able to provide life-saving health products 
and services.  
These distributors are responsible for ensuring that billions of units of 
medication are 
safely delivered to tens of thousands of community retail pharmacies, 
hospitals, 
nursing homes, clinics and other provider sites in all 50 states in the safest 
and most efficient manner possible.   
        Smith Drug Company is a distributor of pharmaceuticals and other 
health and 
sundry products that you find in a community pharmacy. Smith Drug Company 
distributes products to 14 states and services more than 1,200 pharmacies. Our 
customers 
are overwhelmingly community professional pharmacy practitioners that own or 
work for 
family-owned businesses. They are the corner drug stores of rural areas, 
towns, cities, and inner cities of the Southeast.
        Most people taking medicines give some thought to the pharmaceutical 
company 
that made the product, or to the pharmacy and pharmacist that dispensed that 
product.  
But few patients understand how that product moves through the system - 
starting with manufacturer and ending with the patient. 
        A typical distribution center will store 24,000 products purchased 
from 800 
manufacturers and distribute to 900 pharmacy customers on a daily basis.  On 
an average 
day, a single distribution center will ship out 60,000 products per day; 
industry-wide, we 
deliver 9 million products to the nation's 142,000 pharmacy settings every 
day.  By 
providing daily delivery with extremely high service levels and business 
efficiencies in 
an intricate supply chain, distributors save the healthcare system $10.5 
billion per year.  

Preparing for Medicare Part D Implementation
        While distributors are not reimbursed by Medicare and are therefore 
not directly 
impacted by the Medicare Prescription Drug Improvement and Modernization Act 
of 
2003, the impact it has on our pharmacy customers is directly felt by their 
distributors.  
That is why last year the distribution industry worked very hard to help 
prepare the 
nation's pharmacists for the establishment of the Medicare drug benefit.  
        It is important to understand that for some distributors, like Smith 
Drug, community 
pharmacies may constitute in excess of 80 or 90 percent of their customer 
base.  Their 
problems are our problems. They are more than just customers, they are 
partners.  I am 
proud that my company and my industry have proven to be such a reliable 
partner 
working together to address the challenges that now confront community 
pharmacy as a 
result of the implementation of the Medicare drug benefit.     
        Our industry sought to help prepare community pharmacists through 
education and 
awareness so that they would be more knowledgeable and comfortable in 
answering the 
Medicare beneficiary's questions.  Distributors provided thousands of 
pharmacists with a 
variety of learning and outreach tools.  HDMA members, for example, developed 
and 
sponsored continuing education programs focusing on the benefit; drafted fact 
sheets and 
FAQs; provided calendars with key implementation dates and milestones; 
sponsored 
brochures and advertisements reminding beneficiaries that their pharmacists 
are valuable 
information resources; and establishing web-based resource centers.       

Post Implementation Cash Flow Issues
        As could be expected with such a massive undertaking, there were some 
significant 
"start-up" problems.  It is my sense that many of these problems have been 
addressed or 
have decreased significantly. I and HDMA commend all those involved - CMS, 
pharmacy, prescription drug plans, states and all the other stakeholders - for 
working 
together in an effort to do what is best for the patient.   
        However, a recurring problem for many of our pharmacy customers has 
revolved 
around cash-flow issues.  Again, my industry has stepped up.  On a 
case-by-case basis, 
distributors have worked individually with their pharmacy customers to reach 
mutually 
acceptable agreements on payment plans.  In some cases, credit may have been 
extended, 
in other cases, payment terms have been adjusted.  For anti-trust reasons, our 
trade 
association has not surveyed the membership as to what they specifically have 
done in this area.  However, I can share what my company has done.
        By way of background, Smith Drug submits weekly manufacturer purchase 
orders 
for the upcoming, forecasted need of our pharmacy customers. We usually 
receive that 
product within a few days but sometimes it can take weeks. Our pharmacy 
customer 
places an electronic order daily, usually at the close of business, and we 
deliver the 
requested products the next morning.  Even though Smith Drug has a better than 
99 
percent service level, to break even we must have better than 13 inventory 
turns per year. 
In other words, we must sell and pay for the value of our warehouse inventory 
in less 
than a month. Our margins are razor thin, as evidenced by our industry net 
profit margin of 0.75 percent.
        Of my customer base, approximately 60 percent of them have payment 
terms that 
require them to pay us twice a month, about 20 percent pay us weekly, 15 
percent daily 
and the remainder have some variation. This twice a month payment terms needs 
some 
explanation. In our industry it is generally called semi-monthly pay terms. 
Payment for 
pharmaceuticals purchased by the pharmacy from the 1st through the 15th of the 
month 
are due in full on the 25th. The payment must be "in hand" or electronically 
transmitted. 
Products purchased from the 16th through the last day of the month must be 
paid in full 
by the 10th of the following month. Therefore, a prescription submitted on the 
30th of the 
month would contain product that must be paid to the pharmacy's distributor by 
the 10th 
of the following month. If the payer just changed his payment position to 30 
days, the 
pharmacy would most likely have missed two pay periods to his distributor.
        To ease this burden, our company has been working with our community 
pharmacy 
customers by providing payment concessions to help them through these hard 
times.  
Most of these are at no interest or with no fees charged. However, there is a 
cost to Smith 
Drug.  We went to our bank and asked for an extended line of credit to ride us 
through 
our customer's short fall of cash flow. We explained that we needed to prepare 
for a 15-
day setback in cash flow. We were asked how much would that be, and we replied 
$100 million dollars.

Conclusion
        As the members of this committee know, community pharmacists are an 
essential 
component of our nation's healthcare system.  Their viability is important to 
ensure that 
all patients are able to not only receive their medicines, but for the 
counseling and 
medication therapy management services pharmacists can provide.    
        As noted, to help our pharmacy customers prepare for Medicare Part D, 
HDMA 
distributor members proactively worked to provide educational programs and 
tools.  The 
amount of preplanning on pharmacy's part was heroic. I believe that had 
pharmacists not 
prepared themselves for this major paradigm shift for their patients, the 
program would 
have experienced even more severe problems in the first two weeks.  The 
challenge now 
is to ensure that community pharmacy will continue to be able to keep their 
doors open to 
serve the millions of Americans who depend on them for their prescription 
medications.  
        I thank you for your attention and will be glad to answer any 
questions.  

	MR. DEAL.  Thank you.  Dr. Harden.
	DR. HARDEN.  Mr. Chairman and members of the committee, my 
name is Buddy Harden.  I am a pharmacist from Georgia.  Thank you for 
allowing me the opportunity to tell you some of the positive things that 
happened with Medicare Part D, but also maybe to mention some things 
that could be done to improve it.  I would like to talk this morning about 
some of the provisions of the House bill that have been introduced by 
Mr. Brown and Mr. Allen, I believe, that do correct some of the 
problems that we see.  
	I have been privileged to practice pharmacy in a variety of settings, 
including community, chain, and independent, hospital, long-term care, 
and military.  For 26 years, I owned and operated two independent 
pharmacies in Albany, Georgia, and Sylvester, Georgia.  Currently, I 
serve as CEO of the Georgia Pharmacy Association.  
	I have a personal interest in Part D in that we do have a beneficiary 
on the panel this morning, because I brought my card, and quite frankly, 
I applied for this card because I have helped dozens of my constituents 
and family and friends to apply for cards.  I wanted to apply for one that 
I felt like would have the billboard of pharmacies on it that were 
confusing a lot of my patients and friends.  I am glad to see that CMS has 
taken some action in that arena.  I just wish that it would be immediate 
action rather than waiting until next year.
	I have a confession, because I have practiced pharmacy for close to 
40 years and I know some of the problems that have been a part of this 
situation.  I was interested in hearing that Ms. Norwalk mentioned that 
there were negotiated contracts between PBMs and pharmacies.  There 
are no negotiations.  They are take it or leave it.  I have, myself, on many 
occasions changed contracts to reflect terms that were more friendly to 
me and my business operation, sent them back to a PBM, and to have 
them returned that there are no changes to the contract.  You can be a 
part of our network if you will take it or not, if you leave it.  So those, I 
think, are some things that enter into this that may not be adequately 
understood, but there are no negotiations on contracts.
	Basically another thing that had been mentioned that I think that is 
interesting is that pharmacists receive discounts for paying their 
wholesalers on a two-week basis.  I think that Mr. Couch has mentioned 
that their business model is set up to be paid on a two-week basis.  If the 
pharmacist doesn't pay in that two weeks, then he is in violation of the 
terms of that contract.  So there is no way that we can merge the 30 days 
and the 14 days.
	Another problem that I would mention on prompt payment, and I 
think is addressed in the bill H.R. 5182, is that we find that yes, a check 
is cut, possibly, at the end of 14 days, or maybe takes 4 or 5 days to 
process, the check is cut on that date to basically come within the terms 
of the payment cycle.  However, that check may not be mailed for 
another six or eight days, and it may take another five or six days to get 
to the pharmacy.  This was the main problem I feel in the beginning with 
what we were experiencing on prompt pay.  It is just the processing of 
payment is sometimes slow.  My pharmacists tell me that even when 
they get the payment, they don't get the remittance advice at the same 
time.  It is very hard to reconcile payment against remittance advices.
	One thing that I do want to make sure I have time to talk about this 
morning is quality assurance.  You know, I am part of a Georgia 
technical adult education group with the people in the State of Georgia, 
and health literacy is a big issue.  One of their slogans is give a man a 
fish and you feed him for the day.  Teach a man to fish, and you feed him 
for a lifetime.  And I think the medication therapy management part of 
what the H.R. 5182 proposes is exactly that.  Quite frankly, medication 
therapy management would be difficult for the PDPs to institute because 
basically, they can't take the risk management of instituting true 
medication therapy management.  In this program, we have done a good 
job of getting to a cheap price on drugs.  Quite frankly, in some cases, a 
price that not even pharmacists can obtain those drugs at.  But we have 
not proposed cost-effective use of drugs.  I included in my written 
statement a study by Lyle Buchman in Arizona that proves that for every 
dollar we spend on drugs, we spend another dollar in correcting the 
problems of that drug as far as adverse drug events.
	We in Georgia have participated in quality assurance programs with 
local industries, and have proven that we can save up to 40 percent of 
total healthcare costs, but it must allow the pharmacist to do some 
medication therapy management, and in doing so, reduce overall 
healthcare costs.  This may increase the cost of pharmacy programs.
	With that being said, I would be glad to answer any of the questions 
that any of the committee members may have on our recognition of the 
need for medication therapy management and how that should be 
performed.  I do, again, highly recommend that this committee look very 
closely at Mr. Brown and Mr. Allen's bill, because it corrects, I believe, 
the problems we have seen develop.  CMS has done an outstanding job 
of implementing a very difficult program, and as we have heard today, 
sometimes they don't have the authority to correct the problems that are 
needed.  I think this legislation gives them that authority.
	And Mr. Chairman, with that, I will end.  My written testimony is in 
and I am glad to answer any questions, either from a beneficiary 
standpoint, a pharmacist's standpoint, or a personal standpoint.
	Thank you.
	[The prepared statement of Dr. Buddy Harden follows:]


PREPARED STATEMENT OF DR. BUDDY HARDEN, EXECUTIVE VICE PRESIDENT AND CEO, 
GEORGIA PHARMACY ASSOCIATION

        Good Morning,
        Chairman Deal and members of the Committee, my name is Oren Harden and 
I am a 
pharmacist from Georgia.  Thank you for allowing me the opportunity to relate 
some of 
the positive impact of the Medicare Modernization Act of 2003 (MMA) Part D and 
to 
voice some of the concerns that patients and pharmacists have expressed to me. 
        I have been privileged to practice pharmacy in a variety of settings 
including 
community chain and independent, hospital, long term care and military.  For 
twenty six 
years I owned and operated two independent pharmacies in Albany, Georgia and 
Sylvester, Georgia.  Currently I serve as the CEO of the Georgia Pharmacy 
Association. 
        I have a personal interest in Part D in that I am currently a 
beneficiary of Medicare 
Part A and D.  I have a patient interest in that I have worked with dozens of 
family, 
friends and neighbors to enroll in Part D.  I have a professional interest in 
that I represent 
some 2500 Georgia pharmacists who have made heroic efforts and personal and 
business 
sacrifices to see that Medicare Part D accomplishes its purpose in the 
healthcare of beneficiaries, their patients.
        I believe that Part D of the MMA has had a positive impact on the 
healthcare of 
Medicare beneficiaries.  People who were unable to afford medications prior to 
the 
passage of the MMA Part D can now afford those medications.   I also believe 
that the 
Centers for Medicare and Medicaid Services (CMS) has done an outstanding job 
of 
implementing a very difficult program to manage.  With changes that some House 
members are currently proposing MMA Part D can become significantly more 
effective 
both in quality of healthcare and cost effectiveness.  
        That being said, I would like to share with you some concerns of 
pharmacists and 
patients about the current structure of Part D and make suggestions that I 
feel would 
improve the program for the patient, the pharmacist and CMS management.
        For the patient the number of plans should be reduced.  There are far 
too many plans 
that are too similar in benefit design and that only serves to confuse the 
patient.  There 
are 43 different Prescription Drug Plans (PDPs) available in Georgia in 
addition to the 
Medicare Advantage Plans (MAPDs).  The web based tools available from CMS are 
very 
good but most Medicare beneficiaries are unable to properly utilize those 
tools.  They are 
forced in most cases to consult with insurance agents or other non-healthcare 
professionals who are not aware of the specific therapeutic needs of the 
patient and how 
to best create a medication management plan in one of the PDPs.  I believe the 
pharmacist whom the patient trusts and who is most knowledgeable of the 
patient's 
formulary needs should be given the authority to work with the patient to 
navigate the 
plethora of plans and advise the patient on how to make a choice based on the 
patients 
medication needs and choice of provider.  Issues such as formularies, tiering, 
utilization 
management, differential co-pays, varying deductibles, co-insurance, "donut 
holes" and 
differences in grievances and appeals are simply too complex to be made 
understandable 
to the layperson and therefore limit the help available from friends and 
family. 
        It would be very beneficial in that respect if CMS were given the 
authority to offer 
and administer a single dependable, defined benefit plan which could combine 
the 
purchasing power of over 40 million Medicare beneficiaries with that of the 
VA.  This 
would provide greatly reduced product cost allowing CMS to more effectively 
utilize 
funds for pharmacist management of medication therapy.  Why is pharmacist 
management of medication therapy plans so important?  Validated studies have 
been 
published that illustrate we spend as much of our healthcare dollar in 
correcting 
"medication misadventures" or drug reactions and interactions as we do on 
drugs 
themselves.  To provide proper outcomes patients must have access to the 
pharmacist's 
clinical expertise.  Under the current commercial plans there is no such 
provision at this 
time.  A pharmacy benefit is not a drug product alone at the cheapest price as 
most PDPs 
or PBMs would have you think.  Without the clinical knowledge and guidance of 
the 
pharmacist the drug product can do more harm than good to patient care while 
dramatically increasing the cost of healthcare.    
        Although the MMA provides for medication therapy management (MTM) in 
Part D, 
there is a disincentive to PDPs to offer proper management.  The disincentive 
being that 
the major indicator of PDP performance is measured in the reduced cost of drug 
product 
not quality of outcomes. Many PDPs will opt to offer MTM via telephonic or 
electronic 
means using individuals other than the drug expert, the pharmacist.  This is 
far less 
effective for quality outcomes improvement than face to face interaction 
between the 
patient and the pharmacist in constructing and managing a medication therapy 
plan.  
Medication Therapy Management should be defined by CMS, patients identified by 
the 
pharmacist and management performed by the pharmacist.  Currently MTM is 
defined by 
each PDP differently and may be performed by "others" as stated in the MMA.
        The Georgia Pharmacy Foundation (GPhF) working with the American 
Pharmacists 
Association and major pharmaceutical manufacturers has implemented a 
medication 
therapy management patient education model with several industries in our 
state to prove 
the increased quality of patient outcomes and the cost effectiveness of 
pharmacist 
directed MTM.  One such project with a three year track record has data that 
illustrates 
that over the first two years of the MTM program, the overall annual 
healthcare cost for 
diabetic patients was lowered by 41% over the projected cost for those two 
years.  The 
41% per patient savings was in current hard dollar costs.  Clinical indicators 
illustrate that 
future savings will be even more significant by virtue of the prevention of 
the 
complications of diabetes.  In addition the absenteeism for the managed 
diabetic was 
reduced to almost zero and the workers compensation claims were reduced to 
absolute 
zero.  The quality of life of these patients was so improved that production 
also increased.  
To accomplish improvement in quality of outcomes and reduction in overall 
healthcare 
expenditures the cost of physician's visits, pharmacist's medication therapy 
management 
and the expenditure on pharmaceuticals may increase in order to produce a 
savings in an 
individuals total healthcare costs.  This local industry was so impressed by 
the significant 
improvement in the quality of life of their employees and the healthcare cost 
savings that 
GPhF is beginning implementation this week of the same type of pharmacist 
directed 
MTM with hypertensive patients at that plant.  GPhF is four months into this 
type of 
program with five other employers.  The structure of MMA Part D, while 
authorizing 
MTM, has the disincentive I mentioned to the utilization of this approach to 
medication therapy management. 
        Currently the Georgia Pharmacy Foundation (GPhF) and the Georgia 
Medical Care 
Foundation (GMCF), Georgia's Quality Improvement Organization (QIO) are 
structuring 
a pharmacy quality improvement pilot project in Georgia in partnership with 
CMS.  The 
purpose of this pilot is to document the healthcare quality improvement and 
cost 
effectiveness of the previously mentioned method of MTM in the Medicare 
population.  
We are certain that this pilot will illustrate the benefits to be gained in 
funding intensive 
MTM performed by a pharmacist not only to dramatically improve quality of care 
and 
augment positive outcomes but also to produce significant savings in 
healthcare expenditures.   
        Far too many plans did not at implementation and still do not have the 
support 
services to efficiently serve the patient and/or the pharmacist.  Many are 
more interested 
in selling than in servicing.  I am aware of and have reported to CMS plans 
that are 
contacting physicians without the patient's knowledge to gain access to 
protected health 
information in order to send medications by mail order.  CMS has been very 
responsive 
to take corrective action when abuses are reported.  Another marketing issue 
that has 
confused many patients is co-branding.  My Part D ID card has the names of 
only six 
major chains on the card itself.  Many patients have assumed that they must 
use only 
those pharmacies printed on the card thereby increasing the patient's 
confusion and decreasing their choice.  
        Form letters sent to patients who have applied for Part D can also be 
confusing.  I 
received a form letter from the company with whom I applied that informed me 
of a 
potential for delay in obtaining confirmation of my enrollment.  The letter 
stated 
"Information we have received indicates one of the following conditions may 
apply to 
your application which would make you ineligible". The two situations listed 
were that 
(1) you are not enrolled in Medicare Part B and/or you are not entitled to 
Medicare under 
Part A and (2) you have End State Renal Disease (ERSD) or you have had a 
kidney 
transplant and still require a regular course of dialysis.  First of all if I 
was not very 
familiar with Medicare and Part A, B and D, I would be very concerned that I 
was not 
eligible for Part D on statement number one.  Secondly, if I was not a 
healthcare 
professional, I would be terrified that I might have End State Renal Disease 
(ERSD, 
whatever that was).  Of course I would surely know that I had not had a kidney 
transplant 
and did not require dialysis.  I called the 800 customer number during the 8 
am to 6 pm 
time frame twice and the first time after navigating an extensive menu of 
options received 
a recording that due to the popularity of their plan and high call volume no 
customer 
service representatives (CSRs) are available at this time.  Upon eventually 
reaching 
customer service representative Jason on May 18th, I requested information as 
to why the 
delay.  I was told that if I did not have both Part A and B I was not eligible 
for Part D.  
The most interesting part of this scenario is that I received my card the same 
day as I 
received the letter concerning the "problem" and was told by Jason ten days 
later when I 
reached customer service that I was enrolled.  This on the same call in which 
he informed 
me that I was not eligible for Part D unless I had both Part A and Part B.  In 
addition to 
not having sufficient CSRs this plan does not have adequately trained CSRs.  
This plan has one of the highest enrollments nationwide. 
        From the pharmacist's perspective, the main issues in implementation 
were 
inadequate provider service and customer service from PDPs, too little 
compensation for 
services and long delays in the payment for medications.  Many of the 
pharmacists that I 
represent borrowed substantial sums to be able to continue to provide service 
for their 
patients.  In rural Georgia, had they not been willing to shoulder the 
financial burden, 
access for the patient would have been severely restricted.  In order to make 
Part D 
successful, pharmacists devoted the extra time, worked through cash flow 
problems and 
met patient's needs when there was no guarantee that they would be 
compensated.  Their 
efforts were recognized by HHS Secretary Leavitt and I quote "The efforts of 
pharmacists over the last month have been nothing short of heroic.  I've 
visited with and 
heard from pharmacists all over the country.  They have been selfless, 
compassionate and committed to service".  
        Bi-Partisan Legislation has been authored in both the House and Senate 
at this time 
that addresses many of the issues important to both the patient and 
pharmacist.  The 
House Bill H.R. 5182 allows for prompt payment of pharmacy claims. In regards 
to 
MTM, H.R. 5182 requires HHS/CMS to define a minimum package of services a plan 
must provide, allows healthcare providers to identify patients who should 
receive MTM 
and requires plans to pay pharmacists and other providers based on the time 
and intensity 
of services.  Other provisions on MTM assure access to services and establish 
a Best 
Practices Commission that would ensure a model that would allow for quality 
outcomes.  
H.R. 5182 also provides access to all pharmacists by eliminating branding on 
Medicare 
ID cards.  This is a giant step toward solving the issues that I have 
discussed and 
improving the Part D program for patients and for pharmacists and for 
Medicare.  I 
applaud the members of the House for this insightful approach to correcting 
issues that 
were detrimental to Medicare Part D.   At the time of this writing H.R. 5182 
has 38 
Republican and 24 Democratic co-sponsors.  I would like to thank 
Representatives 
Sherrod Brown and Tom Allen of this Committee for their co-sponsorship of this 
legislation.  The Senate Bill addressing these issues is S. 2664. 
        I would like to add a final comment on a related issue before Congress 
at this time.  
If the concerns that are being addressed in Medicare Part D are also addressed 
prior to the 
implementation of the drug cost provisions affecting Medicaid in the Deficit 
Reduction 
Act of 2005, then quality of care and cost effectiveness will result 
immediately upon 
implementation of that legislation.  A pharmacy benefit cannot be viewed as a 
drug 
product alone but must also include provision of the pharmacist's clinical 
services to 
ensure the proper utilization of a drug product to avoid costly complications 
associated 
with drug therapy and to provide for positive outcomes.
        Thank you for the opportunity to share my thoughts how to make 
Medicare Part D 
more patient friendly, more cost effective and most importantly more focused 
on positive patient outcomes and quality of care.

	MR. DEAL.  Thank you.  Mr. Wirth, you are recognized.
	MR. WIRTH.  Good afternoon, Chairman Deal, Ranking Member 
Brown, and members of the subcommittee.  My name is Gary Wirth.  I 
am the Director of Professional Services at Ahold, USA.  Many of you 
might not know that that includes Stop and Shop Supermarkets, Giant 
Supermarkets, and Topps Markets on the Eastern seaboard.  Together, 
we operate over 1,100 supermarkets with more than 600 pharmacies and 
employ over 100,000 associates in our stores.  My office is at nearby 
Giant's headquarters in Landover, Maryland.
	We thank you for your attention to the importance of community 
pharmacies to both the Federal government and neighborhoods 
throughout the United States.  I appreciate this opportunity to speak, and 
I am very happy to see that the committee seems to understand many of 
these issues already.
	Recently, some of your representatives visited one of our stores and 
also saw firsthand how we support the Medicare beneficiaries.  I would 
also like to applaud CMS for their hard work in making the Medicare 
program successful.  In our view, it is working well for beneficiaries.  
They have solved a lot of problems.  They have had regular conference 
calls with pharmacies to help us to understand the program and to hear 
our feedback.  We also have worked very hard.  At our pharmacies, 
every pharmacy associate, that is 4,000 people, had to go through two 
hours of Medicare Part D training.  We provided written materials for 
pharmacists and beneficiaries.  We beefed up our own help desks and 
expanded hours of operation and number of people available to answer 
questions.  We think that played a large role in our pharmacists being 
able to help beneficiaries to understand the program to enroll properly.  
We also added a link to the CMS Formulary Fnder program directly to 
the pharmacy computers, so when a beneficiary came in and wanted to 
know what plans would be good for them, our pharmacists could click a 
button and get that information for them.  
	Day in and day out, our pharmacy teams are working for the 
Medicare beneficiaries; however, there are still some problems.  We have 
heard a lot today about the enrollment lag.  I would like to do a flip side 
of that of the actual dis-enrollment lag.  When a beneficiary is able to 
dis-enroll on the last day of the month and be eligible in a new plan on 
the first day of the month, that dis-enrollment information does not get 
transmitted either as well as the re-enrollment information.  So we can 
process a claim on the first of the month to the old plan, receive a paid 
response, go ahead and dispense the medication.  Two weeks, four weeks 
later, we get the rejection, the back end, and are being asked to then 
correct the billing, two to four weeks after the fact.  That is a severe 
problem for us to do, and we urge policy makers to address this issue by 
establishing an enrollment deadline prior to the end of the month.
	We are also concerned about the lack of a level playing field in the 
marketplace.  The pharmacy benefit managers are controlling the 
everyday implementation of the Part D program.  Many of them have 
their own mail order facilities and have an incentive to have prescriptions 
filled at those facilities.  This continues today in the Part D benefit.  It 
has gone on in the open market as well.
	We are surprised that given all the work that the community 
pharmacies have done to make this program successful that CMS 
continues to allow steering of prescriptions to mail order pharmacies at 
the expense of the community pharmacy.  The community pharmacists 
were there to help with the enrollments, to educate the beneficiaries, and 
we think we should have equal access to fill those prescriptions, so 
eliminate the co-pay steering, eliminate some of the other contractual 
things that are going on.  For instance, a mail order rate could apply to 
every maintenance drug, even though it is not dispensed in a 
maintenance quantity.  So why should I have to be paid the mail order 
pricing for a 35-day supply when in fact, it should only apply to a 90-day 
supply of drugs?
	You have already heard a little bit about the formulary issues and the 
standardized messaging.  It is very confusing at the pharmacy to get a 
rejected claim message and not know is it because it is non-formulary, 
because it is an excluded product, or if it is because the patient is not 
eligible?  There are serious coordination benefit issues that if the 
pharmacist knows, they can take care of.  Some plans will, rather than 
reject such a claim, will process that claim at a 100 percent co-pay so it 
looks like a payable claim.  We don't find that out until the patient comes 
in to pick up the medication when they question why did I pay so much 
for that medication?  Again, we applaud CMS for working on it.  We 
hope they work a little harder to get standardized messaging back to the 
pharmacists so we know what to do with these patients.
	The last thing I would like to point out is that again, we worked very 
hard, and I am surprised that in thanks for our hard work, we receive a 
deficit reduction act with a $10 billion withdrawal from pharmacy 
reimbursement to start next year.  We appreciate that CMS has chosen 
not to publish the AMP data this summer, but we urge policy makers to 
tell State Medicaid directors and Governors that they need to provide a 
corresponding increase in the dispensing fee to keep pharmacies whole, 
otherwise, we have no incentive to dispense generic drugs at a loss.  That 
will hurt the program and hurt the pharmacies as well.  Ultimately, it 
becomes an access issue.
	Finally, I would just like to mention that Medicare Part D does not 
work in a vacuum.  When we have trouble servicing Medicare Part D 
patients, there is a ripple effect to all the other patients who are waiting 
for their medication.  Solving these problems helps everyone.  In 
addition, when the Federal government makes a stand and says we are 
going to pay pharmacists acquisition costs plus a dispensing fee based on 
AMP, the rest of the industry is going to follow.  I am certain the PBMs 
are looking at AMP and trying to determine how can we also follow the 
Federal standard that has been put in place.  Therefore, again, we urge 
you to push the States to increase the dispensing fee for their pharmacies.
	Thank you, and I apologize for going over my time.
	[The prepared statement of Gary Wirth follows:]

PREPARED STATEMENT OF GARY WIRTH, DIRECTOR OF PROFESSIONAL SERVICES, AHOLD 
USA, ON BEHALF OF NATIONAL ASSOCIATION OF CHAIN DRUG STORES

        Good afternoon Chairman Deal, Ranking Member Brown, and Members of the 
Energy & Commerce Health Subcommittee.  I am Gary Wirth, Director of 
Professional 
Services at Ahold USA.  I am pleased and honored to be here today to 
participate in this important hearing.
        Ahold USA, owned by Ahold of the Netherlands, currently operates four 
prominent 
supermarket companies along the eastern seaboard including The Stop & Shop 
Supermarket Company, headquartered in Boston, MA; Giant Food LLC, based in 
Landover, MD; Giant Food Stores LLC, based in Carlisle, PA and Tops Markets 
LLC, 
with headquarters in Buffalo, NY.  Jointly they operate over 1,100 
supermarkets with 670 
pharmacies, and employ over 122,000 associates.  Ahold (NYSE: AHO) is a 
leading food 
provider in the United States and elsewhere in the world with 2004 
consolidated net sales of approximately USD 50 billion.
        Ahold USA commends you on holding this hearing to examine the federal 
government's partnership with America's pharmacists.  Indeed, this is a 
critical time for 
pharmacists and community pharmacy.  We face greater demand for our services 
as a 
result of factors such as the aging of the population and increased 
prescription drug 
volume.  Simultaneously, our industry is challenged by increasing competition 
within 
community pharmacy as well as from both legitimate mail order facilities and 
illegal 
prescription drug importation and Internet pharmacies.  Furthermore, there is 
continued 
pressure from both public and private payers to lower reimbursement.  
        As the community pharmacy industry continues to evolve in response to 
these 
changing market forces, we also recognize our relationship with the federal 
government 
is paramount.  In addition to its role as our largest payer, the federal 
government is also 
the architect of public programs and policy changes that dramatically effect 
community 
pharmacy.  I'd like to spend the majority of my time before you today 
discussing the 
current status of one of these bold policy initiatives, the Medicare Part D 
prescription drug benefit.
        Ahold USA is proud to have played a key role in assuring that millions 
of additional 
seniors now have access to prescription drug coverage as a result of the Part 
D benefit.  
As we all know, there were significant problems in the early days of the 
program, most of 
which stemmed from technological and data integrity failures.  Fortunately, 
while there 
are ongoing challenges, many of these issues from the early days of 
implementation have stabilized.
        There was a striking consistency in many of the reports about the 
early difficulties of 
the Part D benefit - the unique role of pharmacists and their efforts to serve 
Medicare 
beneficiaries.  The Part D rollout was a strong reminder of community 
pharmacists' 
unique position as one of the most accessible and trusted health care 
providers, and the 
importance of a strong and vital retail community pharmacy infrastructure to 
our nation.
        As I mentioned, many of the early issues with the Part D benefit have 
been resolved.  
However, there are ongoing issues that we think can be corrected to continue 
to ease the 
administrative burdens placed on pharmacists and to facilitate beneficiary 
access to their 
medications.  Ahold USA has several suggestions on how some of the ongoing 
implementation issues can be addressed:
        Fix Enrollment Lag:  Individuals become eligible for Medicare every 
day, and dual 
eligibles have the option of changing plans every month.  As a result, there 
is a 
systematic issue, commonly referred to as the "enrollment lag," that is 
problematic for pharmacies and beneficiaries.
        Currently, a Medicare beneficiary can enroll in a Part D plan at any 
time and expect 
their enrollment to be effective the first day of the following month.  If a 
beneficiary 
applies for the Part D benefit in the last few days of the month, it is simply 
not possible 
for CMS and health plans to process the beneficiary's application, confirm 
eligibility 
with CMS, and provide the necessary billing information so that it is 
available to 
pharmacists in time for the beneficiary to receive their prescriptions the 
first day of the next month.
        Unless policymakers address this "enrollment lag" issue, late-month 
enrollment or 
plan switches may continue to be the single most challenging issue that 
beneficiaries and 
pharmacists face with Part D.  If pharmacists don't have the necessary data, 
they cannot 
fill a prescription.  This takes pharmacists away from serving their patients, 
and forces a 
series of calls to CMS and health plans to obtain billing and enrollment 
information.  
Pharmacists and other pharmacy staff find this experience very frustrating, 
but even more 
importantly, so do Medicare beneficiaries, who are forced to wait for extended 
periods of 
time at the pharmacy or return at a later date to obtain their prescriptions.
        A variety of options exist to address this issue, and Ahold USA and 
the chain drug 
industry are committed to working with CMS and health plans to find the best 
solution.  
CMS is trying to address this issue by educating beneficiaries that enrolling 
late in the 
month will result in delays in activation of prescription drug coverage. This 
is a step in 
the right direction.  Optimally, there should be an enrollment deadline 
established each 
month so there is sufficient time to process applications and enter the 
billing information in the system.  We urge policymakers to address this 
issue. 
        Improve and Reward Quality:  Ahold USA welcomes the recent 
announcement by 
CMS Administrator Mark McClellan on the formation of the Pharmacy Quality 
Alliance 
(PQA), a collaborative effort among the pharmacy community, health plans, 
employers, 
government payers, and others to improve health care quality.  We believe 
initiatives like 
PQA are an ideal way to further strengthen the partnership between the federal 
government and pharmacists.  Identifying tools that result in better health 
outcomes and 
reduce health care costs for payers benefit pharmacists, the government, and 
patients.
 	In addition to developing strategies to define and measure pharmacy 
performance, 
CMS has indicated that PQA could also lead to new pharmacy payment models 
based on 
optimizing patient outcomes.  Ahold USA supports efforts that focus on 
controlling costs 
by paying for better care and improved outcomes, and not by reducing payment 
rates to providers.
        Level Playing Field:  Community pharmacy is a highly efficient, 
competitive 
industry, operating on an average profit margin of 2 percent.  Traditional 
chain 
pharmacies, supermarkets and mass merchants with pharmacies, and independent 
pharmacies use service, convenience, pricing, and other factors to compete 
aggressively.  
In recent years, mail order pharmacies have also become an increasing source 
of 
competition for community pharmacy.  Confident of our patients' preference for 
their 
local pharmacy and the service it provides, we are certain of our ability to 
compete with 
mail order.  Our request to policymakers when considering the use of mail 
order in public 
programs such as Medicare has always been to ensure a level playing field with 
community pharmacy.
        In private sector contracts, pharmacy benefit managers (PBMs) often 
restrict the use 
of retail pharmacies in order to drive beneficiaries to use their mail order 
facilities.  For 
example, typical contracts prohibit retail pharmacies from dispensing extended 
days 
supply (i.e. 90-day supplies) of medication, and require these maintenance 
supplies of 
drugs to be obtained via the PBMs' mail order pharmacy.
        Recognizing the importance of patient choice and the value of the 
community 
pharmacist, the Medicare Modernization Act (MMA) attempted to limit this 
steering.  
Largely as a result of the efforts of many Members of this Subcommittee and 
broad 
congressional support, MMA was very clear that retail pharmacies could fill 
extended 
day supplies of prescription drugs as long as they agreed to the same level of 
payment as 
a mail order pharmacy.  This provision, while not ideal for local pharmacies, 
at least 
offered them the opportunity to continue to dispense these prescriptions.
        Unfortunately, CMS' current interpretation of this provision, as well 
as tactics being 
used by Part D plans, are inconsistent with congressional intent.  Seniors are 
being denied 
the choice of obtaining these prescriptions at community retail pharmacies. 
        For example, some plans are telling pharmacies that they can only 
provide extended 
days supply under Medicare Part D if they accept this mail order rate for the 
plan's non-
Medicare commercial business.  Other PDPs will only allow a retail pharmacy to 
offer an 
extended days supply if the pharmacy agrees to accept the mail order 
reimbursement rate 
for all claims that are submitted, for both short term prescription quantities 
and extended 
days supply quantities.
        Schemes such as these make it more difficult for retail pharmacies to 
offer an 
extended days supply, and deny the beneficiary the choice between retail and 
mail.  We 
also believe that they are inconsistent with the intent of Congress. 
        Formulary Issues:  There have been some difficulties for both 
beneficiaries and 
pharmacists with understanding Part D drug formularies and how they work.  
Many 
beneficiaries that come into our pharmacies are concerned that in the future a 
plan could 
remove the drugs they are taking from the Part D plan's formulary.  Our 
pharmacists are 
also concerned about the quality of care impact of switching beneficiaries 
from a 
medication they have been taking for a long time to a different medication. 
There are also 
concerns about whether beneficiaries - especially low income dual eligibles 
- will be 
able to navigate the exceptions and appeals process. That is why we think that 
CMS' 
recent decision to allow a beneficiary to continue taking a formulary 
medication - even if 
the plan changes the formulary - is good for quality health care and will 
reduce the 
administrative burdens on beneficiaries, physicians and pharmacists to switch 
medications for Medicare beneficiaries. 
        Coverage Gaps:  We are rapidly approaching the middle of the year when 
many 
seniors may fall into the "donut hole" or coverage gap.  We are concerned that 
many 
Medicare beneficiaries do not fully understand the issues relating to the 
"donut hole" and 
how it will affect their Medicare coverage.  Many of our pharmacists are 
concerned they 
will bear the brunt of beneficiary frustrations when they find out they are 
still paying 
premiums while in the "donut hole," but not receiving any coverage for their 
prescription medications.
  	We believe another public-private sector collaboration to develop 
assistance 
programs for beneficiaries when they hit the coverage gap would go a long way 
toward 
improvement of the program.  Community pharmacy is held to charging the 
beneficiary 
no more than their discounted contract rate and therefore contributes directly 
to assisting 
beneficiaries in the coverage gap.  However, many beneficiaries will 
undoubtedly need 
additional assistance to assure their access to needed medications, so we 
believe other 
parts of the system should step forward and do their part as well.
        While the focus of my testimony has been on Medicare, I would like to 
address 
another critical component of the federal government's partnership with 
pharmacists - the Medicaid program.
        While Ahold USA and other pharmacies across the country are still 
making 
adjustments as a result of Part D, we will again be asked to shoulder an 
incredible burden 
only one year later when drastic changes to the Medicaid program are 
implemented.  We 
are very concerned with the changes to the Medicaid program as part of the 
Deficit 
Reduction Act (DRA), which will dramatically impact community pharmacy's 
ability to serve Medicaid patients.
        Community pharmacy worked closely with this Subcommittee on the 
Medicaid 
provisions of the DRA.  We were supportive of the Subcommittee's goal to pay 
pharmacies fairly and accurately for both the prescription drug product, and 
the 
professional services associated with dispensing.  Recognizing these two, 
discrete 
components of pharmacy reimbursement, the House version of the Deficit 
Reduction Act 
included a minimum dispensing fee of $8 for generic drug prescriptions.  This 
provision 
recognized the importance of reimbursing pharmacy for the costs associated 
with 
dispensing prescription drugs, and also attempted to maintain an incentive for 
dispensing 
generic medications.  Unfortunately, the minimum dispensing fee for generic 
drugs was 
not included in the conference report.  The loss of this important provision 
makes the 
DRA's dramatic reductions to product reimbursement event more devastating for 
community pharmacy.
        The DRA reduces payments to pharmacies for generic medications by 
about $6.3 
billion over the next four years.  Beginning January 1, 2007, federal upper 
limits (FUL) 
for generic drugs will be based on Average Manufacturers Price (AMP), rather 
than 
Average Wholesale Price (AWP).  We believe that the reduction in payment will 
be so 
severe that it will take away much of the incentive for pharmacists to 
dispense generic 
medications.  This is counterproductive, given that less than 25 percent of 
the average 
state's Medicaid pharmacy payments are for generics, even though generics 
account for 
more than 50 percent of prescription volume.  Public and private payers should 
be doing 
everything they can to increase, not decrease, the dispensing of generic 
drugs, since 
generic drug utilization is one of the most effective ways to control 
prescription drug costs.
        The Deficit Reduction Act also requires CMS to make Average 
Manufacturers Price 
data available to states and the public soon.  In theory, AMP is supposed to 
reflect the 
average prices paid to manufacturers by wholesalers for drugs distributed to 
the retail 
class of trade, which include retail pharmacies.  However, we are very 
concerned that 
since there are no guidelines as to how manufacturers should calculate AMP, 
the AMP 
data released by CMS will be inaccurate and will not reflect the actual prices 
that retail 
pharmacy pays for brand and generic medications.  As a result, states, 
Medicare plans, 
and consumers could receive a misleading picture about the true acquisition 
costs of retail 
pharmacies.  Medicare plans and other payers could conceivably change their 
pharmacy reimbursement based on faulty AMP data.
        This data will be publicly available before CMS is required to issue a 
rule 
instructing drug manufacturers on how to calculate AMP.  Because of its 
potential 
damaging impact to community pharmacy, we believe that this data should not be 
made 
public or shared with the states until AMP is accurately and consistently 
defined.
        Reductions of this magnitude in Medicaid, coupled with the current 
economic 
impact of the Medicare Part D program, will unquestionably reduce access to 
pharmacies.  
We do not believe that policymakers have taken into account the cumulative 
economic 
impact that changes to Medicare and Medicaid will have on retail pharmacies 
and the 
communities they serve.  We hope that you will continue to partner with 
America's 
pharmacists and pharmacies in developing public policy that benefits patients, 
payers, and pharmacies.
        Thank you again for this opportunity to share Ahold USA's perspective.  
We look 
forward to continuing to work with Congress and the Administration on these 
issues.  I 
would be happy to answer any questions.  Thank you.

	MR. DEAL.  Mr. Galluzzo.
	MR. GALLUZO.  Chairman Deal, Ranking Member Brown, fellow 
Buckeye, and other distinguished committee members, which today right 
now is Mr. Burgess from Texas.  I want to thank you for giving me this 
opportunity to testify in front of this committee and representing the 
long-term care pharmacy community.  My name is Larry Galluzzo.  I am 
a pharmacist and I own a long-term care pharmacy in Mason, Ohio.  I 
have owned the company for 25 years, and I have 230 employees, and I 
serve the residents in Ohio, Kentucky, and Indiana.
	The first thing I wanted to say before I actually get started with most 
of my talk is that I want to thank CMS, and I want to thank them for 
being able to listen and learn about long-term care pharmacy and the 
problems that we have with the new Medicare drug bill.  Most of those 
problems have been worked out, but there are three major concerns that 
the long-term care pharmacy community have that I am going to address 
today.
	It has been quite clear through this whole implementation process 
that long-term care pharmacy and retail pharmacy are totally different 
types of pharmacies.  A resident in a long-term care facility does not go 
to the pharmacy, the pharmacy goes to that resident, and when we go to 
that resident, we bring them specialized packaging, drug reviews, 
monthly medical records, e-boxes, stat orders, continuing education for 
the nurses, and other specialized services that you just don't get from the 
retail pharmacy.  Some of them may provide some of those services, but 
normally, you don't get those from a retail pharmacy.  
	From my experience, I will tell you that when you have a resident in 
a nursing facility, the first thing they expect when they are admitted is to 
get their medicines on time.  Now, imagine your mother or your father 
being admitted to a nursing facility and not being on the correct plan and 
denied necessary medications that they want.  And to go one step further, 
let us suppose that they change the plan that they are on to a new plan 
that is going to give them access to their drugs.  Well, guess what?  That 
plan doesn't kick in until the first of the next month.  So you can go one 
day or you can go 30 days without having access to the medications that 
you need.  That has got to be fixed.  The one thing that has to be fixed is 
there is no reason why when you start a new plan in the middle of the 
month, there is no reason why it shouldn't take effect immediately.  I 
mean, we are in the 21st century.  The technology is there.  As Ms. 
Norwalk said, sometimes it takes a split second to see what that plan is, 
so why can't we start that plan in the middle of the month instead of 
having to wait until the end of the month?
	Now, the second thing about this whole thing is if your mom and dad 
are in the facility, how do you know what plan to be on?  You may not 
know, but you need to be educated.  I can understand where CMS wants 
to protect the beneficiaries against unethical and overzealous marketing 
practices.  It may be a conflict of interest.  But the problem I have is that 
they have lost the opportunity to have one of the most trusted 
professionals in the United States of America to guide them, to educate 
them on the new prescription drug plans.  And who is that?  It is the 
pharmacist.  If you looked at the Gallup Poll over the last 5 years, who 
was always in the top three?  Unfortunately, it is not attorneys, and I 
don't mean to be disrespectful, but it is the pharmacists.  The elderly, 
whether they go to a retail pharmacy or they are in a nursing home and 
their drugs are supplied by a long-term care pharmacy, they depend on 
us.  And for us not to be able to advise them, counsel them, with them of 
course having the free choice to use whatever plan they want, but to take 
that away from us is really a sad thing.  I don't think there is anyone on 
this committee that will disagree with me.
	So the two things that really have to happen, and I think we can do 
this without much hardship to anybody, is to enact the plan as soon as 
they change that plan, and also give the pharmacists a chance to educate 
and counsel the residents and their families.  I think that is just extremely 
important.
	I know when I go out and do drug and resident reviews, I don't just 
sit at a nursing station.  We go into the resident's rooms.  We may take a 
pulse, we may check blood pressures, we may check for edema.  We will 
ask them how their new medications are working out.  But they are going 
to ask me, Larry, what do you think I should do about Medicare Part D?  
Well, right now, my hands are tied.  I can't say anything to them.  In fact, 
in the State of Ohio, State surveyors are going into our facilities, our 
nursing homes, and asking the question, are the pharmacies steering 
people to different drug plans?  Well, we are not steering anybody, but 
what we would like to do is be able to educate them.  That is really pure 
and simple.
	The last thing that I want to talk about, because I did say there were 
three, and that is co-pays.  Dual eligibles in nursing facilities don't have 
co-pays, but unfortunately there has been a miscommunication from 
CMS to the prescription drug plans, and some of those are harshed with 
co-pays.  Now obviously, they are not going to pay them, they are dual 
eligibles.  So we are trying desperately to get the right information to the 
prescription drug plans so that we can be paid properly.  
	You heard today that 90 percent of the claims are paid within 15 to 
20 days.  In my pharmacy, that is not true.  We used to be paid every 21 
days by the State Medicaid program.  Now, the time lag is an average of 
45 days.  When it comes to mis-billings, it used to be about $175,000 a 
month.  Now, it is up to $380,000 a month.  So there is a critical shortage 
in cash flow that could be fixed immediately if they just get the 
communication right between CMS and the prescription drug plans so 
they don't have co-pays on the dual eligibles, which they are not 
supposed to have.
	That is all I have to say right now.  I want to thank you for your time.  
If you have any questions for me later, I will be more than happy to 
answer them.  Thank you.
	[The prepared statement of Dr. Larry Galluzzo follows:]

PREPARED STATEMENT OF DR. LARRY GALLUZZO, PRESIDENT, SKILLED CARE PHARMACY

        Chairman Deal, Ranking Member Brown and distinguished Committee 
Members:
        Thank you for the opportunity to testify today as a representative of 
the long term 
care pharmacy community.  I am a pharmacist by training and the president of a 
specialized pharmacy company that serves residents of long term care 
facilities in Ohio 
and Kentucky.  Our company's pharmacists are experts in the field of 
pharmaceutical 
care for the frail elderly and have been working on the "front lines" to 
assist in implementing the new Medicare prescription drug benefit.
        The long term care pharmacy community strongly supported the goals of 
the 2003 
Medicare Modernization Act (MMA) to expand access to prescription drug 
coverage for 
all Medicare beneficiaries.  While many of the MMA's provisions focused on 
beneficiaries who reside outside institutional settings, the Act also included 
important protections for vulnerable residents of nursing facilities.
        Long term care pharmacies have worked in close partnership with the 
Centers for 
Medicare and Medicaid Services (CMS) to identify and solve the inevitable 
problems 
associated with the introduction of a major new benefit under the Medicare 
program.  
Like other pharmacy providers, long term care pharmacies have been severely 
impacted 
by extended delays in payments from prescription drug plans, as well as a 
multitude of 
burdensome documentation requirements that vary widely among plans.
        CMS has issued important guidance to implement appropriate protections 
and 
ensure long term care residents' access to necessary medications.  We commend 
the 
Agency for its attention to these issues, however, a number of significant 
concerns 
remain unresolved.  We look forward to working with this Committee and the 
Agency to address those challenges.

Overview
        The typical nursing home resident is 84 years of age, female, has 
seven distinct 
diagnoses, and takes approximately eight different drugs at any given time.  
The patients 
we serve are among the oldest and sickest Medicare beneficiaries, and until 
January 
2006, a majority received their drug coverage through State Medicaid programs.  
On 
average, 70 percent of nursing home residents received drug coverage under 
Medicaid, 
another 15 percent received coverage under Medicare Part A, and the remaining 
20 
percent either were private pay patients or covered by a third-party plan. 
        This situation changed dramatically on January 1, 2006, when dual 
eligible 
beneficiaries were auto-enrolled randomly in plans with premiums at or below 
the 
benchmark amount.  The 70 percent of nursing home residents who are dually 
eligible for 
Medicaid and Medicare may now be enrolled in as few as six or as many as 16 
different 
prescription drug plans.  As a result, long term care pharmacists face a 
daunting task in 
attempting to manage these patients' drug regimens across a wide variety of 
plans' formularies.
        As implementation of Medicare Part D continues, several "course 
corrections" 
are needed to ensure that residents of long term care facilities continue to 
receive the specialized pharmacy benefits anticipated under the program.

Network Access
        Unlike beneficiaries residing outside institutional settings, long 
term care residents 
do not go to the pharmacy - the pharmacy comes to them.  For that reason, a 
"retail" 
standard of access is inappropriate for long term care patients.  To ensure 
access nursing 
home residents' access to necessary medications, the MMA authorized CMS to 
establish 
long term care pharmacy network standards for prescription drug plans.
 	However, CMS has not developed an objective standard to evaluate the 
adequacy of 
a plan's long term care pharmacy network.  As late as November 2005, CMS 
continued 
to encourage plans to contract with long term care pharmacies to ensure 
convenient access to necessary services.
        Under guidance issued by CMS in March 2005, plans were required to 
provide a list 
of enumerated services to residents of long term care facilities .  CMS 
expected plans to 
contract with pharmacies that could certify their ability to provide these 
services.  In 
theory, each of the participants in these negotiations had equal incentive to 
compromise:  
the pharmacies needed access to provide services to nursing home residents, 
and the 
plans needed in-network pharmacies to fulfill their obligations for convenient 
access.
        As the negotiations progressed, however, it soon became clear that the 
pharmacies 
had much less bargaining power than the plans.  If a nursing home resident was 
enrolled 
in a plan that did not include the facility's long term care pharmacy in 
network, the 
pharmacy was forced to agree to the plan's standard agreement in order to 
provide 
services to the beneficiary.  Even if the beneficiary changed to a plan that 
included the 
pharmacy in network, the new assignment would not take effect until the first 
day of the 
following month.  As a result, many pharmacies were forced to accept plans' 
default 
provider agreements to avoid a lapse in coverage for beneficiaries in long 
term care facilities, particularly those in rural areas.
        To remedy this problem, CMS should allow changes in beneficiaries' 
coverage 
to take effect immediately upon enrollment in a new plan.  This approach would 
ensure beneficiaries' continued access to necessary pharmacy services without 
imposing undue hardship on plans.

CMS Marketing Guidelines
        In implementing Part D, CMS has gone to significant lengths to protect 
beneficiaries 
from unethical and overly aggressive marketing techniques that raise the 
potential for 
conflicts of interest.  Long term care pharmacies strongly support this 
objective.  At the 
same time, beneficiaries must have access to useful information necessary to 
select the 
best plan to meet their needs.  Unfortunately, efforts by CMS to protect 
beneficiaries 
have made it almost impossible to help nursing home residents choose an 
appropriate plan.
        CMS issued its guidance on marketing activities last summer.  This 
guidance is 
extremely prescriptive and effectively prevents long term care residents from 
receiving 
specific advice in selecting their drug plans.  The simple act of suggesting 
to a 
beneficiary that certain drug plans are more responsive to the needs of long 
term care 
residents is, by CMS standards, considered a violation of the marketing 
guidelines.
        CMS officials have expressed repeated concern that health care 
providers will 
recommend plans based on their own financial interest rather than on the 
interest of the 
beneficiary.  Yet beneficiaries face a multitude of plan choices, and a recent 
analysis by 
the Kaiser Family Foundation  highlighted significant differences among plan 
formularies.  Clearly, some plans are more appropriate for residents of long 
term care 
facilities.  Professional caregivers should be able to communicate this 
information to 
beneficiaries, while emphasizing that they are free to choose the plan they 
prefer.
        Compounding this problem, CMS recently issued a letter to state 
nursing home 
surveyors  outlining their responsibility to inspect nursing homes for 
evidence of 
steering, coaching, or requesting residents to select or change plans for any 
reason.  This 
document has served to raise the stakes among nursing home operators for any 
well-intended effort to help residents choose an appropriate Part D plan.
        Given the frail medical condition and high level of cognitive 
impairment among 
residents of long term care facilities, CMS should allow professional 
caregivers to 
provide recommendations on plan selection to Medicare beneficiaries, while 
assuring them of their right to choose whatever plan they prefer.  This simple 
change would enable them to provide effective counseling without undermining 
residents' freedom to choose any available Part D plan.

Cost Sharing
        Under the MMA's provisions, dual eligible beneficiaries residing in 
long term care 
facilities are not required to pay cost sharing for Part D covered drugs.  Due 
to data 
exchange problems between the states and CMS, however, many dual eligibles 
were erroneously assigned co-payments under their Part D plans.  
        In these cases, plans have reimbursed pharmacies at a lower amount 
after wrongly 
deducting the cost sharing amounts.  To avoid delay in providing needed 
medicines, long 
term care pharmacies have typically dispensed the drugs and attempted to 
resolve the problem later.  
        CMS continues to work with the states to improve the accuracy of data 
on dual 
eligible beneficiaries.  In addition, CMS has provided guidance to plans that 
they may 
reimburse long term care pharmacies for inappropriately assigned co-payments.  
This 
guidance should help resolve historic claims from pharmacies owed 
reimbursement for 
uncollected cost sharing, but not all plans are cooperating with efforts to 
clear up this backlog.  
        This problem persists, and long term care pharmacies are now owed 
millions of 
dollars in improperly-assigned co-payments.  While the Agency's efforts to 
date are 
commendable, CMS must require plans to act promptly to resolve the significant 
backlog of uncollected, and improperly assigned, co-payments for dual eligible 
beneficiaries residing in long term care.  

Conclusion
        Acknowledging the challenges inherent in implementation of a major new 
Medicare benefit, the long term care pharmacy community recognizes the 
importance of the Part D program.  We are committed to its success and 
determined 
to ensuring that the nation's frail elderly continue to receive the 
medications they 
need.  Again, thank you for the opportunity to testify today, and I would be 
glad to answer any questions you may have.

	MR. DEAL.  Thank you.  Mr. Hallberg.
	MR. HALLBERG.  Good afternoon, Chairman Deal, Ranking Member 
Brown, Congressman Burgess, nice to see you again, and other members 
of the committee.  I am happy to testify today on the partnership with 
pharmacists and the implementation of Medicare Part D.  My name is 
Chuck Hallberg.  I am President and the founder of MemberHealth, Inc., 
sponsor of the Community Care RX program, the fourth largest 
standalone Part D program in the country, with about one million 
enrollees.
	MR. DEAL.  Could you pull your microphone a little closer?
	MR. HALLBERG.  I am sorry, is that better?
	I founded MemberHealth in 1998 as a PBM.  We operate now as a 
prescription insurance company and other programs with a national 
network of over 60,000 pharmacies.  Prior to the start of Part D, we 
supported a successful Medicare discount card with approximately 
450,000 enrollees.  
	As we approach the MMA, we thought this was a tremendous 
opportunity to align the business, providing prescription drugs to ensure 
that the beneficiaries, pharmacies, physicians, and plans and the 
Government all faced consistent incentives.  To help us achieve this goal, 
we did collaborate with the National Community Pharmacists 
Association to build a program that leverages the pharmacist's skill to 
provide the best clinical outcome and the most financial value for the 
Medicare beneficiary.  In designing our program, we focused on the idea 
that meeting the beneficiaries' needs is paramount.  If we do that, 
everything else will follow. 
	We believe that it is in the beneficiariy's best interest to have the 
most appropriate care at the least cost, so we have implemented a 
program to help our pharmacists ensure that our enrollees take advantage 
of the savings available to them for generic drugs.  Our generic incentive 
program provides higher dispensing rates to pharmacies that meet 
generic dispensing goals.  This payment increase provides an incentive 
for pharmacies to spend extra time helping our enrollees save money, 
and has proven very effective.  The CCRX generic dispensing rate is 
about 60 percent and consistently comes in that percentage every day.  
This is well above the industry commercial standards, and we believe it 
is well above the Part D plan averages as well.  In addition to saving 
money for our enrollees, the high generic dispensing rate will save 
Medicare money, because as we control costs better, Medicare will save 
through lower bids and reduced risk quarter costs.
	We believe it is in the beneficiary's best interest to have a strong 
relationship with their pharmacist, so we designed our medication 
therapy management program to support this relationship.  While other 
Part D plans may have chosen to implement MTM programs via remote 
methods, phone calls, and other avenues, our program pays the 
pharmacist to work directly with our enrollees.  Once our system 
identifies enrollees who meet the MTM requirements, we send the 
information to the enrollee's pharmacy to schedule a session where the 
pharmacist reviews the enrollee's drugs to look for clinical problems or 
savings opportunities.  We believe that this close interaction will help our 
enrollees better manage their diseases, their costs, and taps into the 
pharmacist's expertise.  We believe that it is in the beneficiary's best 
interest to have an opportunity to review their drug use and ways to 
comply with our formulary with a pharmacist is part of their transition 
into the Community Care RX plan.
	As a result of that, we are currently implementing a change to our 
transition plan under which we will pay pharmacies to perform this 
review for all new enrollees starting June 1.  We developed this initiative 
because one of the lessons that we learned during the first months of Part 
D is the importance of ensuring a smooth transition for all new enrollees.  
Many of them do have questions, many of them don't understand how to 
transition if there is a drug on non-formulary, and many of them simply 
don't know how to take advantage of the best cost savings.  We are 
paying the pharmacists as part of this transition policy to help the 
beneficiary reduce that confusion, answer those questions, and transition 
into the Medicare program.  It is our welcome to Medicare medication 
review.
	While our focus has always been on serving the beneficiary, we 
recognize that our network pharmacies are businesses, and we work hard 
to ensure that we are the best business partners that we can be.  As noted 
above, we provided incentives for generic dispensing so that we pay for 
performance.  We pay our pharmacists to perform the MTM and 
transition reviews, recognizing that the pharmacists need to make a 
commitment to providing these services and must be compensated 
appropriately.  
	We also make timely payment to our pharmacies a priority.  We pay 
our pharmacies twice a month, on the 1st and the 15th.  These payments 
do correspond to two payment cycles per month.  Weekly payments are 
the standard for many of the State Medicaid programs.  The first cycle 
that we pay occurs from the 1st to the 15th, and of course, the second is 
from the 15th to the 31st.  To further improve the timeliness of our 
payments, we have also implemented EFT, electronic funds transfer, for 
pharmacies electing that option, starting March 31.  We currently pay 
about 35 percent of our claims electronically at the very day that the 
payment is due, and we look forward to getting all of our pharmacies on 
to this program in the coming months.
	Before I close, I would be remiss if I didn't mention the outstanding 
effort of our network pharmacies in dealing with Part D program's 
startup troubles.  I hope my testimony demonstrates that we at 
MemberHealth have sought consistently to support our pharmacies in 
delivering the best care to our enrollees, but the pharmacists in the 
community went way above and beyond the call of duty, and we will be 
eternally grateful for those efforts.
	In closing, let me reiterate my thanks for the invitation to address 
the committee, and say that we believe our focus on meeting the 
beneficiary's prescription drugs needs through strong patient/pharmacist 
relationships will provide tremendous value to the beneficiaries, the 
pharmacies, and the Medicare program for years to come.
	Thank you.  I would be pleased to answer any questions.
	[The prepared statement of Charles E. Hallberg follows:]

PREPARED STATEMENT OF CHARLES E. HALLBERG, PRESIDENT, MEMBERHEALTH, INC.

        Good morning Chairman Deal and members of the Committee. I am happy to 
be here today to testify on the partnership with pharmacists to implement 
Medicare Part D. 
I am the founder and President of MemberHealth, the sponsor of the Community 
Care Rx program, the fourth-largest stand-alone Part D plans in the country 
with about 
one million enrollees. I founded MemberHealth in 1998 as a pharmacy benefit 
management company, and we operate prescription insurance and discount 
programs 
through our national network of over sixty thousand network pharmacies. Prior 
to the 
start of Part D, we supported a successful Medicare Drug Discount Card, with 
450,000 enrollees.
        As we approached the MMA, we thought this was a tremendous opportunity 
to re-
align the business of providing prescription drugs to ensure that 
beneficiaries, 
pharmacies, physicians, plans, and the government all faced consistent 
incentives. To 
help us achieve this goal, we collaborated with the National Community 
Pharmacists' 
Association (NCPA) to build a program that leverages the pharmacists' skills 
to provide 
the best clinical outcomes and most financial value for the Medicare 
beneficiary. 
        In designing the CCRx program, we focused on the idea that meeting the 
beneficiary's needs is paramount - if we do that everything else will work 
itself out.
We believe it is in the beneficiary's best interest to have the most 
appropriate care at 
least cost, so we've implemented a program with the help of our pharmacists to 
ensure 
that our enrollees take advantage of the savings available to them from 
generic drugs. 
Our generic incentive program provides higher dispensing rates to pharmacies 
that meet 
generic dispensing rate goals. This payment increase, provides an incentive 
for 
pharmacists to spend extra time helping our enrollees save money and has 
proven very 
effective. The CCRx generic dispensing rate is about sixty percent, well above 
industry 
averages and we believe well above Part D plan averages. In addition to saving 
money 
for our enrollees, this high generic dispensing rate will save Medicare money 
because as 
we control costs better, Medicare will save through lowered bids and reduced 
risk corridor costs.  
        We believe it is in the beneficiary's best interest to have a strong 
relationship with 
their pharmacist, so we designed our Medication Therapy Management (MTM) 
program 
to support this relationship. While other Part D plans have chosen to 
implement MTM 
programs via remote methods - phone calls or other avenues - our MTM program 
pays 
pharmacists to work directly with our enrollees. Once our system identifies 
enrollees who 
meet the MTM requirements, we send the information to the enrollee's pharmacy 
to 
schedule an MTM session, where the pharmacist reviews the enrollee's drugs to 
look for 
any clinical problems or savings opportunities. We believe that this close 
interaction will 
help our enrollees better manage their diseases and their costs by tapping 
into our pharmacists' expertise.
        We believe it is in the beneficiary's best interest to have an 
opportunity to review 
their drug use and ways to comply with our formulary with a pharmacist as part 
of their 
transition to CCRx. We are now implementing a process to pay our pharmacists 
to 
perform this review for all new enrollees to CCRx starting next month. We 
developed 
this initiative because one of the lessons we learned in the first months of 
Part D is the 
importance of ensuring as smooth a transition as possible for new enrollees, 
and we're 
enlisting our pharmacists to look for clinical red flags in our new enrollees' 
drug use as 
well as opportunities to move to formulary drugs or generics or to begin 
formulary exception processes early if need be.
        While our focus will always be on serving the beneficiary, we 
recognize that our 
network pharmacies are businesses and we work hard to ensure that we're the 
best 
business partner we can be. As noted above, we've provided incentives for 
generic 
dispensing so that we pay for performance, and we pay our pharmacists to 
perform MTM 
and transition reviews, recognizing that the pharmacists need to make a 
commitment to 
providing these services and must be compensated appropriately. 
        We also make timely payment to our pharmacies a priority. We pay our 
pharmacies 
twice per month - on the 1st and 15th of each month.  These payments 
correspond to two 
claims cycles per month.  Two cycles per month is the industry standard for 
the 
commercial marketplace. Weekly payments are the standard for many State 
Medicaid 
programs. The first cycle covers claims incurred from the 1st through the 15th 
of the 
month, while the second cycle covers the 16th through the end of the month.  
Payments 
for each claims cycle are issued 15 days following the end of a cycle.  As an 
example, 
claims incurred from March 1st through March 15th are paid to the pharmacies 
on April 
1st.  We have also issued a payment calendar so that our pharmacies can 
monitor their payments for the remainder of 2006.
        To further improve the timeliness of our payments, we recently began 
processing 
electronic fund transfers (EFTs), for those pharmacies electing that option 
for the claims 
cycle ending March 31st.  We currently pay electronically for about 35% of our 
claims, 
and we are working to have the majority, if not all, of pharmacies on our EFT 
program, 
because this will cut at least five days off of the payment cycle and allow 
for better 
controls to ensure that the pharmacies are paid the right amount at the right 
time.
        Before I close, I would be remiss if I didn't mention the outstanding 
efforts of our 
network pharmacies in dealing with the Part D program's start up troubles. I 
hope my 
testimony demonstrates that we at MemberHealth have sought consistently to 
support our 
pharmacies in delivering the best care to our enrollees, but the pharmacists 
in the 
community went above and beyond the call of duty and we will be eternally 
grateful for those efforts.
        In closing, let me reiterate my thanks for the invitation to address 
the Committee and 
say that we believe our focus on meeting the beneficiaries' prescription drug 
needs 
through strong patient-pharmacists relationships will provide tremendous value 
to the 
beneficiaries, the pharmacies, and the Medicare program for years to come.

	MR. DEAL.  Well, thank you.  That was interesting testimony.  We 
got you all here at one time, now we are going to try to sort some things 
out.
	Mr. Hallberg just mentioned electronic transfers that he is starting.  I 
think you said about 30 percent of your people are now using it.  Mr. 
Merritt, what percent of your payments are by electronic transfer?
	MR. MERRITT.  You know, I don't have that number.  I can get it for 
you.  We do know, again, we deal with about 55,000 different 
pharmacies, many of which are not equipped for EFT.  We definitely see 
it as something that is coming down the road as something in the future, 
but for right now I don't have those particular numbers on the 
percentages.
	MR. DEAL.  But if a pharmacist is equipped to do it on his end, you 
are prepared on your end?
	MR. MERRITT.  Yeah, we are prepared on our end to do that, and it is 
one of the options that we offer.
	We are a little concerned about mandating it right now, although we 
might be able to work with that.  Depending on the context, as well, 
because there are some startup costs to be involved, especially with a lot 
of the independent pharmacies who are not equipped for this and maybe 
aren't as interested in having it.  But certainly, it is something that we see 
coming down the road.
	MR. DEAL.  But it seems to me in this day and age that most 
everything else is done electronically, and we are talking about trying to 
eliminate the delay of getting the money in the hands of the person who 
has already had the drugs.  The quicker we do it, the better, and it seems 
to me that that would be an inexcusable delay time between the time the 
claim is submitted and having to wait on a check in the mail.  I think we 
can all do better than that.  I would just simply encourage everybody to 
move in that direction.
	Let me talk about some suggestions Mr. Wirth had, and we are 
talking about this enrollment lag issue.  Mr. Galluzzo would say we 
ought to be able to do that instantaneously too.  I would like to think that 
we at some point can, but we apparently are not there yet.  It takes 
everybody at this table to cooperate in doing that and achieving that goal, 
but in the meantime, would it be feasible, as Mr. Wirth suggests, that we 
pick a date that if you make your transfer from this company A to B?  If 
you do it before the 15th of the month that your changeover would be 
effective the 1st of the next month, but if you do it in that last half of the 
month, that you are going to have to wait maybe until the following 
month?  I mean, I know we would like to do it quicker than that, but 
what is a realistic solution to this?  It seems to me that the first question I 
asked was on this issue, because I don't see this one going away.  
Everybody that enrolls new every day, this problem is going to multiply.  
What is a realistic proposal on enrollment lag?  Anybody that wants to 
comment, not all at once.
	MR. WIRTH.  Chairman Deal, I would applaud a 15-day time period.  
That certainly works for us as a community pharmacy, but we are not the 
ones who have to implement the changes.  There is also a significant 
issue of beneficiary education that they understand.  CMS has worked 
hard to try to explain that to beneficiaries to enroll early, but that just 
isn't enough.
	MR. DEAL.  What about Mr. Hopkins?
	MR. HOPKINS.  One of the things that we have learned through 
facilitating enrollment and working collaboratively with the chains and 
the independent associations, and it has been recommended to CMS, is 
that modified E-1 transaction where you look at Part A, B, and D, and 
generally, when you are doing that, you can determine that if they are 
with WellPoint or Aetna for this service then they are probably with 
them for the drug component.  That is currently under discussion, but I 
think that would help the pharmacies determine where the claim is 
supposed to go.  
	In response to your question on the lag time, I think that 15 days is 
the time frame that I have heard  to resolve the enrollment issue.
	MR. DEAL.  What is it going to take for us to get there?  Can the 
industry do it on its own, or is it going to take somebody telling you to 
have to do it?
	MR. HALLBERG.  Chairman Deal, currently I believe under the 
statute, if someone signs up at 11:59 the last day of the month, we are 
obligated to scramble if we can.
	MR. DEAL.  So we may have to change that if we are going to dictate 
some of the time frame.  All right.
	MR. GALLUZO.  Chairman Deal, may I make a comment?
	MR. DEAL.  Sure.
	MR. GALLUZO.  There is approximately four percent of the 
beneficiaries that live in long-term care.  Those four percent take, 
depending on what analysis is made, anywhere from 25 to 50 percent of 
the drugs that Medicare pays for.  That is a lot.  So our main concern is 
access to those drugs, and even if they can't get the pay type right 
immediately, there is no reason why they can't retroactively pay the 
pharmacy for those prescriptions that the resident needs.  The doctor is 
not going to be willingly changing the regimen of those elderly, so the 
pharmacist is going to send that medication out regardless.  We just want 
to make sure that the resident has the access, which they will, because we 
will send them out, but we just want to make sure that we are going to be 
paid for those.  That has probably been a problem in the past for us, 
because we are not going to deny anybody any medications.  We just 
want a proper payment schedule and know that we are going to be paid 
for them.
	MR. DEAL.  Mr. Brown, you are recognized.
	MR. BROWN.  Thank you, Mr. Chairman.  
	Mr. Galluzzo, I caught your comment about we are not in the top 
three.  You assume we are all attorneys.  We are not all attorneys, but I 
assume probably Congressmen aren't in the top three, either, so that 
would be a better statement to make.
	Let me start with you, and then I would like to ask a question sort of 
from everybody, Mr. Hallberg down to Mr. Hopkins, Mr. Merritt, but 
start with a question for you, Mr. Galluzzo.  I have talked to pharmacists 
in darn near every part of Ohio, Norton and Troy and Cincinnati and 
Toledo, and one issue that always comes up is the whole issue with dual 
eligibles and the automatic enrollment and putting them in a plan that 
they didn't necessarily choose, assigned by random.  This study in 
Connecticut found that out of pocket costs for a dual eligible could vary 
by thousands of dollars a year, depending on their illness, depending on a 
lot of factors.  A study by Department of Health and Human Services, 
the Inspector General found that in California, Nevada, and Arizona, 50 
percent of the dual eligibles were auto-enrolled, were random 
automatically enrolled in the plans that covered less than 85 percent of 
the drugs that were prescribed for them.
	Comment, if you would, from a long-term care perspective, what has 
happened?  Comment, if you would, what it means to long-term care 
pharmacies, and comment, if you would, on what advice you would give 
CMS for how to deal with dual eligibles who will continually hit the 
system and continually be assigned to various plans randomly.
	MR. GALLUZO.  That is an interesting question.  I understand why 
they are randomly assigned, but the point of the matter is that there are 
some prescription drug plans out there that just aren't conducive to long-
term care.  If you run into those plans, and I have to admit that all the 
dust hasn't settled yet, but if you run into some of those plans, then it is 
best that that resident is switched to a better plan.  I will tell you why 
some plans aren't so good.
	Some of them aren't so good because they have a narrow formulary, 
although the first 90 days, 120 days is supposed to cover just about 
everything.  Some haven't taken the time to understand long-term care 
and some of the prior authorization that we have to go through is very 
cumbersome, and the residents aren't going to get their medication 
timely, or they will get it and then there won't be proper reimbursement.  
There are some PDPs that you can actually stay on the line for up to an 
hour waiting to get a question answered, and you don't dare hang up 
because when you call back, it is going to take another hour.  So in my 
billing department, we have had to hire four new people just to handle 
the new process.  The other problem I have with some PDPs is they just 
haven't cared to learn about long-term care and how we operate.  
	So my advice to CMS is give the pharmacist an opportunity to sit 
down with not only the resident, because these are the sickest of all of 
them, and some of those you can't talk to, so what you are going to end 
up talking to is the family.  But sit down with the family and discuss the 
drug regimen review, discuss formularies that they are on, because we 
are experts in drug formularies.  Then come up with a suggestion that is 
going to help them have better access to their medication.  
	The other thing is if you can start a plan on the last day of the month 
and you can start it on the next day, why can't you have a new plan on 
the 16th and start it on the 17th?  If you can do it on the 31st to the 1st, why 
not the 16th to the 17th?  That I don't understand.
	MR. BROWN.  Nor do I.
	MR. GALLUZO.  All right.
	MR. BROWN.  Thank you for that.
	Mr. Hallberg, and if everybody would just go down the line, my 
understanding, and I have heard it from some of you, too, there is no 
requirement either in the statute or CMS rules to ensure that plans pay 
pharmacies promptly.  I know that some plans have tried.  Do we stick 
with voluntary efforts on the part of plans to pay, or should Congress 
change the statute or CMS order some regiment that plans be paid within 
a specific time frame?  Just go up and down, give a short answer, if you 
would.
	MR. HALLBERG.  It is an excellent question, and it is a question of 
policy.  There are different business solutions out there, as I indicated in 
my testimony.  Although the commercial world is typically paid on a 
twice a month basis, many of the States for their Medicaid business have 
historically paid on a weekly basis.  As you have heard from some of the 
other folks here, particularly Mr. Couch and from the wholesalers, many 
of the business plans for the pharmacies across the country are well-
developed to work around the existing methodologies.
	The policy question is really whether or not all of those businesses 
should change to conform to a single commercial environment, or 
whether it is appropriate for Congress to enact legislation that essentially 
says okay, all you PBMs that were in the commercial world, you are now 
playing as a government contractor.  When in Rome, do as the Romans 
do.  If you are going to be in a government contract environment, and 
that historically has had a weekly type of time period for payment, then 
perhaps it is appropriate that the people who are the contractors adopt 
practices that are consistent with the existing policies that various 
governments across the country have been utilizing.
	So as you mentioned, it is purely an absolutely appropriate policy for 
this committee and Congress to consider.
	MR. BROWN.  Mr. Galluzzo, should it be required or left voluntary?
	MR. GALLUZO.  Well, are you asking me that question?
	MR. BROWN.  I am asking everybody.
	MR. GALLUZO.  I believe in competition, and I would hope that it 
could be voluntary, but I am not so sure that is going to get done.
	MR. BROWN.  Okay.  Mr. Wirth?  You are the guy that talks about 
lawyers too, so--
	MR. GALLUZO.  Some of my best friends are attorneys.
	MR. BROWN.  Mr. Wirth.
	MR. WIRTH.  I would like to see Congress and policymakers define 
what the payment cycle means based upon the day of receipt of a clean 
claim.  To say I am going to pay claims once a month does not mean the 
claims are paid in 30 days.  To say I pay on the 15th and 30th of the month 
does not mean I pay claims in 15 days.  So I prefer to see the standard be 
set by Congress and CMS that the payment cycle is based upon the date 
of receipt of that clean claim.  Thank you.
	MR. BROWN.  Thank you.  Dr. Harden?
	DR. HARDEN.  Mr. Brown, just a quick example.  Georgia Medicaid 
has for several years now paid all claims EFT.  Any claim submitted 
prior to Thursday of the week before was paid on Tuesday of the 
following week.  Therefore, I would challenge that particularly Georgia 
pharmacies are not equipped to accept EFT payments.  They have been 
doing so under Medicaid for several years, and the contract that the State 
had with that particular PBM required that it be done in that manner.  No 
other plan that I am aware of has offered to step forward and make that 
kind of access to payment to stop this, so I would think from that 
particular event that probably unless it is required, it will not happen.
	MR. COUCH.  Congressman Brown, I am technically a distributor, 
and that part of the issue.  I don't receive payments.
	Congressman Brown, I don't think it is appropriate for me to be in 
that position, but I will tell you this.  The whole system that we have, the 
business model that is producing unbelievably efficient, effective ways 
of getting drugs to patients at a very cost-effective number is based on 
quick turnaround and quick usage of rotating product and getting paid for 
it.  As a distributor, I need to be paid promptly.  My customers need to be 
paid promptly if I am going to be paid promptly. 
	I will speak to electronic payments.  Our company has been using 
electronic payments both ways for years and years, and I would bet that 
well over 80 percent in 14 States use electronic payments, so electronic 
payment is not a problem.
	MR. BROWN.  Thank you.  Mr. Hopkins.
	MR. HOPKINS.  WellPoint agrees that pharmacists should be paid 
promptly and accurately.  WellPoint has the processes in place to ensure 
that this happens.  I was the architect of legacy Anthem's payment 
process, how the payment process was set up.  The electronic fund 
transfers, the electronic reconciliation, and our chain partners, 80 to 90 
percent of them use this process.  We have this process in place for our 
high volume independent pharmacies.  I think the independents could be 
more effective if more chose to use this process with WellPoint.  So I 
think this process or changing the payment rules should be left voluntary.
	MR. BROWN.  Thank you, Mr. Hopkins.  Mr. Merritt?
	MR. MERRITT.  I would just harken back a little bit to what the 
purpose of the claims payment process is.  There are a number of 
responsibilities that we have, and of course, the question of how we do it.  
It is important that we pay the right amount of the claim, and that we do 
so in an efficient and cost-effective way.  We also need to make sure 
there aren't improper drug interactions of people being prescribed one 
drug from one doctor, another from another doctor, maybe filling it at a 
different pharmacy as well.  PBMs have that information where we can 
sort that out.  Also, we have to comply with a number of laws from 
Medicare, HHS, OIG, and of course, our private payers and so forth.
	Now, in terms of prompt pay, we do think it is happening right now 
voluntarily.  Our companies pledge to pay it within 30 days because that 
is our standard business practice in the commercial marketplace.  That is 
also the way FEHBP does it.  That is the way Medicare pays doctors and 
hospitals.  So in terms of do in Rome as the Romans, that is the way 
doctors and hospitals get paid, in 30 days, 95 percent clean claims and 
Medicare.  So we would ask that as this is being considered, it should be 
viewed as a level playing field and not changing the rules for one 
particular part of healthcare.
	MR. BROWN.  Thank you.  Mr. Chairman, I apologize for the length.  
I have a unanimous consent request from a beneficiary testimony that we 
would just like to submit, if that is possible.
	MR. DEAL.  Without objection.
	[The information follows:]



	
        MR. DEAL.  Dr. Burgess.
	MR. BURGESS.  Thank you, Mr. Chairman.
	You know, as I hear you all talk, and Dr. Harden, I feel your pain.  I 
spent years in private practice of medicine, and yes, I recognize that you 
don't negotiate a contract with your price takers.  
	We fought the prompt pay issue a lot in Texas with physicians and 
insurance companies, and eventually worked out a program where we 
would be paid within 45 days.  Now, most of that was based on 
electronic fund transfers, and I guess I am a little surprised to find that 
with today's technology, 10 years later, that this isn't all done on 
electronic fund transfers.  I think that would obviate the difficulty with 
having to switch something in the middle of the month, but I mean, we 
have representatives here who tell us is this not a possibility that the 
turnaround on the claim is with 48 to 72 hours after it is submitted 
electronically?
	MR. MERRITT.  I harken back to, again, what our responsibilities are, 
and then I will answer your question directly.
	First of all, what happens is we have to detect a lot of things.  What 
happens at the pharmacy counter is a person walks up, and before he or 
she pays a co-pay, the pharmacist will plug in to the system to see is this 
person insured.  If so, is this drug part of their formulary?  If so, what is 
the co-payment?  The customer then pays the co-payment and walks out 
the door, but there is a lot of stuff that happens after that that we fit into a 
standard process, because we have such huge volume.  Typically--
	MR. BURGESS.  Well, I guess that really is where I have the question.  
If you have the huge volume, you are making it harder on yourself only 
paying once a month.  Oh, my gosh, you must be inundated with claims 
that one payment day.
	MR. MERRITT.  Well, we don't pay them just once a month.  We 
batch often.  It depends on the company.  Some people batch the claims 
weekly, maybe every two weeks, and then mail out a check when they 
have done the proper fraud checks and making sure that these are correct.  
First of all, a number of companies do sample up to 25 percent of the 
claims to make sure that they are being processed properly, that there 
aren't doctors who are liars, and pharmacies who are liars--
	MR. BURGESS.  I will grant you the regulatory environment we have 
given you to work in is probably not conducive to things happening 
quickly, but again, I have always been amazed that there have to be laws 
to tell people to pay their bills.  I mean, it used to bug me when I was in 
practice as well.
	Let me switch gears just for a moment, and Mr. Hallberg, you 
brought up the dispensing fee issue.  Now what do you pay your 
pharmacists on your CCRX plan?  Do you pay a dispensing fee?
	MR. HALLBERG.  Yes, sir, we do.  It does vary by the pharmacy and 
those are negotiated with the various chains and independents.
	MR. BURGESS.  Okay.  So you can't tell us--you don't have a set 
dispensing fees that you provide?
	MR. HALLBERG.  We have various sets.
	MR. BURGESS.  You also made the statement, which I like to hear, 
that you do encourage and you try to facilitate generic prescribing.
	MR. HALLBERG.  Yes.
	MR. BURGESS.  Has that been a burden for your pharmacists?
	MR. HALLBERG.  Has it been a burden, no.  In fact, our pharmacists 
are very, very engaged in the process as I indicated with a generic 
dispensing rate of 60 percent and climbing, it clearly indicates that the 
pharmacies are able and willing to outsurpass the industry standards.  
Generally, they are very committed to, you know--in this environment, 
not only does it save the Federal government sometimes--
	MR. BURGESS.  I will stipulate that.  Have you provided information 
to this committee before?  I would appreciate that you have more than 
one dispensing fee, but is that proprietary information that you can't 
make available?
	MR. HALLBERG.  Generally speaking it is proprietary information, 
but I would be glad to work with the committee to articulate the concepts 
and methodologies.
	MR. BURGESS.  Well, Mr. Chairman, if it is all right with you, I think 
that would be helpful to look at that.  At least, I would like to.
	Finally, in the time that is allotted to me, we have got 30 seconds.  
Can either Mr. Hopkins or Mr. Merritt define a clean claim for us?
	MR. HOPKINS.  WellPoint defines a clean claim that comes into the 
adjudication system, passes through all the edits that are in place, and the 
pharmacy receives an approved POS response back saying it is 
authorized for payment.
	MR. BURGESS.  And how long does that take?
	MR. HOPKINS.  Generally, if the systems are working appropriately, 
it is within a second, depending on how claims processing systems work.
	MR. BURGESS.  And so that claim would be presented for payment 
within that timeframe?
	MR. HOPKINS.  When WellPoint returns an authorization for 
payment, we are indicating to the pharmacy that the claim has passed 
through the edits and we are authorizing payment.  WellPoint will also 
do some analysis on the claims in between when we receive the claim 
and when we produce the electronic information.  We do this in case we 
find anything else, but generally, it is approved for payment.
	MR. BURGESS.  Give me an example, what would some of those 
edits be?
	MR. HOPKINS.  We do additional analysis on claims to make sure 
that there is an appropriate relationship between the day's supply 
dispensed and the dosage.  Some pharmacies will submit 100 quantity in 
a 30-day supply when it is a once-a-day drug, so we are looking for 
inappropriate relationships or inappropriate prescription prescribing.  
General safety precautions or precautions around fraud.
	MR. BURGESS.  But none of those edits would involve the 
reimbursement rate?
	MR. HOPKINS.  Some of the edits you can do in a point of sale 
system live which will stop the claim at the beginning, other edits you 
can't.  They are not generally tied around the reimbursement or the rate 
that is applied to the claim, but they are necessary to make sure that we 
are protecting the fiduciary responsibilities of our clients.
	MR. BURGESS.  Can anyone tell me is there any premium paid if a 
claim actually falls outside the agreed 30-day timeframe?  Do you then 
bill usual customary rate, or are you still bound by the negotiating rates, 
Dr. Harden?
	DR. HARDEN.  No, there is no premium paid.  
	MR. BURGESS.  There is no penalty or encouragement that CMS has 
to ensure that the payments are promptly received?  Obviously, cash flow 
is something that keeps coming up and keeps coming up.
	DR. HARDEN.  Not that I am aware of, and on the clean claims, I 
would say that high 90 percent of the claims are adjudicated 
immediately.  The type of review that is done by the PBMs after the 
claim is paid is the type that we have heard about today.  So the claim 
goes in basically as a clean claim almost immediately.  The patient needs 
the medication at that point.  The PBMs do audits later to ensure that the 
claims are, indeed, clean.  We found if they find that there may have 
been a mistake in the day's supply or something like that, a clerical error, 
they will recoup the entire amount of the prescription even though the 
patient had received the medication.  The medication was prescribed by 
the physician and they recoup that amount also because basically of a 
clerical error.
	So clean claims I would say, you know--
	MR. BURGESS.  Who negotiated your contract for you?  I am just 
kidding.
	Mr. Chairman, I will yield back.
	MR. DEAL.  We are going to go with a real quick second round of 
questions here.  Since we didn't have any beneficiaries I guess 
everybody left, but we have got a few more questions that some of us 
would like to ask.
	Let us talk about prior approval.  That has been one of the issues that 
has come up from time to time.  Dr. Harden, how much of an issue is 
prior approval at the pharmacy level?
	DR. HARDEN.  At the pharmacy level, it can be rather burdensome, 
and of course, we have got prior approval.  We have got step therapy, 
which means that you must try certain drugs beforehand.  Prior approval 
takes a lot of the time of physicians and pharmacists to try to get a prior 
approval through, and it takes the patients' time.  It delays the patient 
getting the needed medication in the proper amount of time.  I 
understand possibly why prior approval is needed in order to ensure that 
the drugs that PBMs receive the most rebates on are used first, but it does 
require a lot of time that should be spent with the patient and educating 
that patient on the drug, educating that patient on the management of 
their therapy.
	MR. DEAL.  Mr. Hopkins, Mr. Merritt, is that the basis on which 
prior approval is based is to make sure that the patient is using the drug 
that you have negotiated the best price with the manufacturer on?
	MR. HOPKINS.  There can be several different things that you look at 
for a prior authorization process.  One can be a safety program, one can 
be a formulary medication.  There are several different reasons, but you 
know, for Part D, the prior authorizations or the typical programs you 
would have in place in a commercial program have not been in place at 
the beginning of the year to ease the burden on pharmacists.  At some 
point this year, they will be put in place, but prior authorizations are not 
just about driving rebates.  You have to look at the quality and safety 
aspects of them also.
	MR. DEAL.  Mr. Merritt, do you want to add something?
	MR. MERRITT.  I would agree with that and I would say there are 
other compliance issues as well.  For instance, right now it is unclear on 
some drugs that could qualify in Medicare for Part B or Part D.  The 
Office of Inspector General has made it very clear they want us to put a 
good faith effort into determining that payments are made in the right 
accounts.  That is something that sometimes takes some time.  We are 
working with the Pharmacy Quality Alliance too.  Some of our member 
companies are involved with pharmacies' plans, CMS, and so forth, to 
streamline where there are issues in prior approval.  I think CMS put out 
a notice this morning that I haven't had a chance to fully read because we 
have been otherwise engaged on clearing up the messaging process and 
making messaging a little more streamlined between plans and 
pharmacies.  But there are good reasons on prior approval that we are 
concerned about.  There are other issues, for instance, with addictive 
drugs or narcotics like OxyContin and so forth.  We want to make sure 
there hasn't been doctor shopping going on or pharmacy shopping where 
people get two or three scripts and try to fill them simultaneously at 
different places.  We need to guard against that because PBMs have the 
clearinghouse of all this benefit information, and pharmacies and doctors 
don't have that.
	MR. DEAL.  Let me stop you right there.  Suppose you find that that 
is going on.  What do you do?
	MR. MERRITT.  Well, Tim may be in a better position to answer it 
from an operational point of view, but that would be something where 
we wouldn't pay that particular claim and would alert the pharmacist and 
the physician about the situation.
	MR. HOPKINS.  The PBM claims processing systems are generally 
set up with safeguards that will reject those types of claims at the point of 
sale, so if you have somebody who is going to multiple pharmacies on a 
given day getting the same drug, generally most systems will reject that 
claim at the point of sale.
	MR. DEAL.  So you leave it up to Dr. Harden to tell them he can't fill 
the prescription?  Does anybody report this to law enforcement officers?  
Are you allowed to do that?
	MR. HOPKINS.  Generally from my experience in pharmacy 
practicing as a practicing pharmacist in the State of Ohio, when you have 
something suspicious going on with a patient it is your obligation to 
report it.  Either report it to the physician or report it to law enforcement.
	MR. DEAL.  Do you tell the pharmacist why you are not giving 
approval?  Do you tell the reason or do you just say it is not approved?
	MR. HOPKINS.  On a situation that Mr. Merritt brought up, we would 
send a message back that said, you know, duplicate drug dispensed at 
multiple pharmacies.
	MR. DEAL.  Okay.
	DR. HARDEN.  Mr. Chairman, I would submit that that is not really a 
question of prior approval.  The earlier testimony was that they do track 
drugs and they have a central clearinghouse to ensure that a patient is not 
physician shopping or pharmacy shopping.  So that is not really a prior 
approval issue, because they do that on a regular basis as far as payment 
of claims.
	MR. DEAL.  Well, my time is just about gone, but I would say a few 
things that I think the industry needs to work on.  One is the prompt 
payment issue, and hopefully electronic transfers average will go up 
from the 30 percent Mr. Hallberg talked about to 90-plus percent.  I think 
that will take care of a lot of those issues.  The other is the prior approval 
issue, and the next one is the adjudication of appeals in a prompt and 
expeditious fashion.  We haven't had time to talk about that aspect of it, 
but I see those as being three of the major areas where we get the 
complaints and may be put in a position where we have to offer some 
solutions that we would much prefer if you all would offer those 
solutions.
	Mr. Brown.
	MR. BROWN.  Mr. Chairman, since my round of questions took 10 
minutes rather than 5; I will just relinquish my time to Mr. Burgess.
	MR. DEAL.  Dr. Burgess.
	MR. BURGESS.  Well, I thank the Chairman and Ranking Member for 
yielding.  Dr. Galluzzo, you mentioned in your testimony that in a long-
term care facility, you are not allowed to talk to patients about signing up 
for the drug plan, is that correct?
	MR. GALLUZO.  CMS considers anything really that we say to the 
residents and their family as steering.
	MR. BURGESS.  That was not the experience we had in Texas.  I had 
several nursing homes in Gainesville who complimented me on what a 
good job CMS had done coming in and getting people signed up for their 
plans.  Was that because CMS did it and not the nursing home operator?
	MR. GALLUZO.  It is not the nursing home operator.  It is the 
pharmacist that is not allowed to really talk to the resident about making 
suggestions about the prescription drug plans.  They consider that 
steering.  In Ohio, as I said earlier, State surveyors, when they go into the 
facilities, are actually questioning administrators, DON, and the 
residents--has the pharmacy been in to talk to you about your 
prescription drug plan?  They don't allow us to discuss it with the 
residents and their families.
	MR. BURGESS.  Mr. Chairman, I would just submit--
	MR. DEAL.  Would the gentleman yield?
	MR. BURGESS.  I would be happy to yield, Mr. Chairman.
	MR. DEAL.  Let me go to the next aspect of that.  It was alluded to by 
Mr. Wirth, I believe, and that is steering which is being allowed.  That is 
the complaint that is going against some of the companies that you were 
not disqualified from advising people as to how to sign up is my 
understanding.  Now some of the information that these people may have 
signed has become the basis for solicitations of those individuals by the 
companies to either go to a mail order plan or selling them other 
alternative insurance proposals.  Mr. Hopkins, have you heard that 
complaint?  If you haven't, you have heard it now.
	MR. HOPKINS.  At WellPoint, we have an open network philosophy.  
I don't see Dr. Harden's card, but it looks like it has got several chain 
logos on the card.  We don't have logos on the member's identification 
cards, and we encourage them to use pharmacies they want to use, 
whether it is an independent pharmacy or a chain pharmacy.
	MR. DEAL.  Specifically what I am talking about is when certain 
representatives of certain companies that were writing coverage were 
involved in the signup process.  Apparently certain forms may have been 
signed by those individuals so that their personal information now 
becomes a basis for solicitation of other products or alternative delivery, 
such as mail order drugs, rather than going to the local pharmacist to 
have the prescriptions filled.  It seems extremely inconsistent that we 
would prohibit these folks from being involved in the process as a 
conflict of interest, and then on the other hand, have their back stabbed 
twice when those who were not so prohibited are using that information 
to try to get people not to go use their services but to go mail order.  
That, to me, is the great inequity here.
	MR. MERRITT.  Congressman, I am not aware of that particular 
thing.  We will look into it.  I have not heard of that before you bringing 
it up.
	MR. DEAL.  If you talk to Dr. Harden, I think he can give you some 
specifics.
	MR. BURGESS.  Reclaiming my time, I guess I would just ask the 
Chairman, we are going to fine tune, obviously.  There will be a 
Medicare Part D 2.1 and 2.2 going forward, and this may be one of the 
areas where it does make no sense to cut the primary care pharmacist out 
of the discussions with the patients and their families about how they can 
best be served. 
	I would also offer that in my area of North Texas, I got Mr. 
McClellan to promise me that the next time he rolls up a Part D program 
that he won't include the dual eligibles until we have been in it for a 
month or six weeks.  In retrospect, that may not have been the smartest 
way to go about it, but people who were enrolled in the default program 
where they found that their medicines weren't covered or were only 
covered at great expense--I am talking about the dual eligible population-
-we were pretty aggressive in my Congressional office about if they were 
willing to let us take that on a constituent case, we would pursue that 
with CMS and got a favorable ruling every time we tried.  In fact, it was 
one individual that came to my Medicare events, very bittered about the 
program because now he is paying $300 a month for his daughter's 
Tegretol, and that didn't sound right.  We pursued it, and sure enough, 
the assignment was probably inappropriate for that individual, but it was 
a bed bound cerebral palsy patient who couldn't really participate in the 
discussion, and we got that straightened out for them.  It really was not 
difficult to do, it was just simply someone being willing to pick up the 
phone and call someone and say this is not working out.
	I just wondered, have you had similar input from Congressional 
offices in your district, in your area of Ohio?
	MR. GALLUZO.  We really haven't.  The program is only in its fifth 
month, and we are trying desperately to work it out with all the PDPs 
because the way things are going we are going to have to work with 
these PDPs for as long as I am in the business.
	MR. BURGESS.  Sure.
	MR. GALLUZO.  There are always going to be kinks when you start 
something.
	MR. BURGESS.  Exactly right, and that was my point.  These won't 
endure.  The things that were inappropriate during the first weeks of the 
program, if we can correct those and get the program working well for 
that patient, after all, that is the bottom line.  That is what all of us are 
wanting to do.  And I guess, you know, if it takes a Member of Congress 
to be involved in that, then I think that is one of our responsibilities and 
that is one of the things we should do, but if you find cases like that in 
your neighborhood, I would encourage you to get your Member involved 
and have him take it as just a regular constituent inquiry, just like you 
would a Social Security check or a GI benefit that didn't come around in 
the proper time.
	Mr. Chairman, just in the time I have left, I guess I would just offer 
the following observation.  This program, for all its faults, is something 
that has been necessary and needed by America's seniors for a long time, 
and I thank every one of you sitting at the table for the part you are 
playing in getting this thing up and off the ground.  To me, it has been a 
real revelation that a government program could, in fact, work as well as 
it did.  I don't know that I was optimistic that HHS Secretary and the 
Administrator would get to this point and have the program functioning 
as well as it is, and I think that is a tribute not only to them, but a tribute 
to everyone that is sitting at this table who has worked with this 
committee over the months and years that it has taken to provide this 
benefit.  There are a lot of rough edges that we can continue to knock off.  
I think you have heard the willingness of the Chairman to listen to those 
suggestions.
	Mr. Chairman, I really don't have anything else to say, but I think it 
will be helpful if there are suggestions from this group we have in front 
of us that we seriously take those to CMS and I know the Secretary is 
committed to having a better program next year than the program that 
exists this year.
	DR. HARDEN.  Dr. Burgess, if I might add to that.  CMS has been 
extremely helpful.  We have reported instances that we felt needed 
correction, and they are part of the program, and they have been 
extremely well to respond in a timely manner and to investigate and find 
out where the problems were.  We appreciate them very much.
	MR. BURGESS.  CMS or HCFA, not being HCFA anymore, but CMS 
is certainly a kinder and gentler form of government oversight.
	So thank you, Mr. Chairman.  I will yield back.
	MR. DEAL.  I would echo what Dr. Burgess has said.  We appreciate 
what all of you have done to make this program as successful as it has 
been.  It is not something that in 32 million people that you can enroll 
and get it going in the short timeframe we have been looking at, and we 
know that it was with the cooperation of each of you and the members of 
the groups that each of you represent.  We want you to express our 
appreciation for your efforts in that regard, and particularly we express 
our appreciation to each of you for taking time to be a witness today.
	With that, this hearing is concluded.
	[Whereupon, at 2:35 p.m., the subcommittee was adjourned.]

   U.S. Department of Health and Human Services, Report to the President: 
Prescription Drug Coverage, Spending, and Prices (Washington: DHHS, April 
2000). 

  Smith, Cowan, Heffler, et al, CMS National Health Accounts Team, National 
Health Spending in 2004: Recent Slow-Down Led By Prescription Drug Spending, 
Health Affairs, 25, no. 1 (2006: 186 - 196.    

  Borger, Smith, Truffer, et al, CMS National Health Accounts Team, "Health 
Spending Projections Through 2015: Changes on the Horizon," Health Affairs, 
25, no. 2 (2006): w61-w73.
  See "PCMA Analysis Finds Medicare Prescription Drug Discounts 'Real & 
Holding Steady' in First 30 Days" at 
http://www.pcmanet.org/newsroom/2006/pr_1_06/pr_2_06/pr_20706.htm.  NOTE: 
PCMA's study compared only PCMA Member plan PDPs prices for the top 100 drugs 
used by seniors to average retail usual and customary drug prices found on the 
New York Attorney General's prescription Drug website at: 
http://www.nyagrx.org/.  This study is not meant to be a 
comprehensive actuarial analysis of Medicare savings but a snap shot of 
possible savings available to beneficiaries compared to cash-paying customers. 
  "Most Seniors Enrolled Say Drug Benefit Saves Money," Jeffrey Birnbaum, 
Claudia Deene, The Washingoton Post, April 12, 2006 at 
http://www.washingtonpost.com/wp-
dyn/content/article/2006/04/11/AR2006041101685.html
  "New Medicare Drug Benefit is Meeting or Exceeding Expectations,"  AARP News 
Release, April 12, 2006 at http://www.aarp.org/research/press-center/presscurrentnews/medicare_drug_benefit.html

  See "PCMA Member Companies Pledge to Pay Medicare Pharmacy Claims Within 30 
Days," at http://www.pcmanet.org/newsroom/2006/Pr_5_06/pr_05_05.htm
  Centers for Medicare and Medicaid Services: Long Term Care Guidance (March 
16, 2005).
  Centers for Medicare and Medicaid Services: Medicare Marketing Guidelines 
for: Medicare Advantage Plans (MA); Medicare Advantage Prescription Drug Plans 
(MA-PD); Prescription Drug Plans (PDP); 1876 Cost Plans (August 15, 2005).
  Hoadley, et al.:  An In-depth Analysis of Formularies and Other Features of 
Medicare Drug Plans; Kaiser Family Foundation (April 2006).
  Centers for Medicare and Medicaid Services: Memorandum from Director, Survey 
and Certification Group to State Survey Agency Directors (May 11, 2006). 
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