[Congressional Record Volume 153, Number 93 (Monday, June 11, 2007)]
[Senate]
[Pages S7454-S7458]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
By Mr. BINGAMAN (for himself, Mr. Kerry, Mr. Akaka, Mr. Salazar,
Mr. Whitehouse, and Ms. Mikulski):
S. 1589. A bill to amend title XIX of the Social Security Act to
reduce the costs of prescription drugs for enrollees of Medicaid
managed care organizations by extending the discounts offered under
fee-for-service Medicaid to such organizations; to the Committee on
Finance.
Mr. BINGAMAN. Mr. President, I rise today to with Senators Kerry,
Akaka, Salazar and Whitehouse to introduce the Drug Rebate Equalization
Act of 2007.
As you know, the Medicaid drug rebate ensures that State Medicaid
programs receive the best price for prescription drugs for their
beneficiaries. Unfortunately, health plans that serve over 10 million
Medicaid beneficiaries cannot access the same discounts
[[Page S7455]]
through the Federal drug rebate program. Plans typically get no rebate
on generic drugs and about a third of the rebate on brand drugs as
States receive. Therefore, States are paying more for the acquisition
of prescription drugs for these health plan enrollees than for
beneficiaries in fee-for-service Medicaid, raising costs for Federal
and State governments.
Even with this price disadvantage, the total cost of prescription
drugs for health plans is less on a per member per month basis because
of health plans' greater use of generics and case management.
Unfortunately, many States are considering carving prescription drugs
out from health plans for the sole purpose of obtaining the rebate,
thereby undermining plans' ability to maintain a comprehensive care and
disease management program that includes prescription drugs. Not only
will this legislation save money, it will eliminate this incentive and
ensure that health plans can maintain a comprehensive care coordination
system for their patients.
This policy change was passed by the Senate during last year's debate
over the Deficit Reduction Act. This year's version of the bill
improves on last year's bill in several important ways. First, the bill
ensures that health plans can continue their good work by using their
own integrated care coordination and disease management protocols.
Second, the bill will maintain the fee-for-service prohibition against
health plans ``double dipping'' into the Medicaid drug rebate and the
340b discount drug pricing program. Finally, it will ensure that plans
can use so-called positive formularies while simultaneously ensuring
that enrollees will have access to off-formulary drugs through the
regulated prior authorization process. These changes significantly
improve the bill and will help improve its chances of passage.
This policy enjoys widespread support. Extending the Medicaid drug
rebate to enrollees in health plans is supported by the National
Governors Association, the National Association of State Medicaid
Directors, the National Medicaid Commission, the National Association
of Community Health Centers, the Partnership for Medicaid, the
Association for Community Affiliated Plans, and the Medicaid Health
Plans of America. I am entering into the record copies of letters
provided by these organizations over the last few years memorializing
their support for this concept.
Last year, the Congressional Budget Office estimated that the
Bingaman amendment would have saved Federal taxpayers $1.7 billion over
5 years. Likewise, the CMS Office of the Actuary estimated that
extending the drug rebate to health plans would save Federal taxpayers
$2.2 billion over 5 years. I think that we can say that this policy
will provide significant savings to Americans, whatever the number.
I urge my colleagues to join me in supporting this legislation.
I ask unanimous consent that the text of the bill and letters of
support be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
S. 1589
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Drug Rebate Equalization Act
of 2007''.
SEC. 2. EXTENSION OF PRESCRIPTION DRUG DISCOUNTS TO ENROLLEES
OF MEDICAID MANAGED CARE ORGANIZATIONS.
(a) In General.--Section 1903(m)(2)(A) (42 U.S.C.
1396b(m)(2)(A)) is amended--
(1) in clause (xi), by striking ``and'' at the end;
(2) in clause (xii), by striking the period at the end and
inserting ``; and''; and
(3) by adding at the end the following:
``(xiii) such contract provides that (I) payment for
covered outpatient drugs dispensed to individuals eligible
for medical assistance who are enrolled with the entity shall
be subject to the same rebate required by the agreement
entered into under section 1927 as the State is subject to
and that the State shall allow the entity to collect such
rebates from manufacturers, and (II) capitation rates paid to
the entity shall be based on actual cost experience related
to rebates and subject to the Federal regulations requiring
actuarially sound rates.''.
(b) Conforming Amendments.--Section 1927 (42 U.S.C. 1396r-
8) is amended--
(1) in subsection (d)--
(A) in paragraph (1), by adding at the end the following:
``(C) Notwithstanding the subparagraphs (A) and (B)--
``(i) a medicaid managed care organization with a contract
under section 1903(m) may exclude or otherwise restrict
coverage of a covered outpatient drug on the basis of
policies or practices of the organization, such as those
affecting utilization management, formulary adherence, and
cost sharing or dispute resolution, in lieu of any State
policies or practices relating to the exclusion or
restriction of coverage of such drugs; and
``(ii) nothing in this section or paragraph (2)(A)(xiii) of
section 1903(m) shall be construed as requiring a medicaid
managed care organization with a contract under such section
to maintain the same such polices and practices as those
established by the State for purposes of individuals who
receive medical assistance for covered outpatient drugs on a
fee-for service basis.''; and
(B) in paragraph (4), by inserting after subparagraph (E)
the following:
``(F) Notwithstanding the preceding subparagraphs of this
paragraph, any formulary established by medicaid managed care
organization with a contract under section 1903(m) may be
based on positive inclusion of drugs selected by a formulary
committee consisting of physicians, pharmacists, and other
individuals with appropriate clinical experience as long as
drugs excluded from the formulary are available through prior
authorization, as described in paragraph (5).''; and
(2) in subsection (j), by striking paragraph (1) and
inserting the following:
``(1) Covered outpatients drugs are not subject to the
requirements of this section if such drugs are--
``(A) dispensed by a health maintenance organization other
than a medicaid managed care organization with a contract
under section 1903(m); and
``(B) subject to discounts under section 340B of the Public
Health Service Act.''.
(c) Effective Date.--The amendments made by this section
take effect on the date of enactment of this Act and apply to
rebate agreements entered into or renewed under section 1927
of the Social Security Act (42 U.S.C. 1396r-8) on or after
such date.
____
Controlling Pharmaceutical Costs through Greater Efficiencies and
Better Administration of the Drug Rebate Program
Background
Medicaid fee-for-service and managed care spent an
estimated $36.8 billion in FY 2003 on pharmaceuticals.
Prescription drugs are one of the fastest growing categories
of Medicaid expenditures, having quadrupled between 1992 and
2003. Between 2000 and 2003, spending on drugs increased by
17 percent per year, faster than any other major type of
Medicaid service. In 1998, less than 8 percent of Medicaid
expenditures were for drugs--by 2003 drugs claimed over 13
percent. After 2006 drugs for Medicare beneficiaries will be
paid for by Medicare. These recipients currently account for
about half of all Medicaid drug spending. State Medicaid
programs will still be responsible for the drug costs of
children and families and other non-Medicare eligibles.
Drugs are paid for by Medicaid through 3 separate
mechanisms. First, the state pays the pharmacists for the
ingredient costs of the drug. Previously, most states paid
pharmacists based on the average wholesale price (AWP) less
some percentage. AWP is the average list price that a
manufacturer suggests wholesalers charge pharmacies. Federal
reimbursements to states for state spending on certain
outpatient prescription drugs are subject to ceilings called
federal upper limits (FULs), also known as the maximum
allowable cost (MAC). The effect of the FUL is to provide a
financial incentive to pharmacies to substitute lower-cost
``generic'' equivalents for brand-name drugs. The Deficit
Reduction Act (DRA) expanded the impact of FULs by applying
them to multiple source drugs for which the FDA has rated at
least 1 other drug (instead of the previous 2) to be
therapeutically and pharmaceutically equivalent. The DRA also
changed the FUL formula from a percentage of the AWP to a
percentage of the Average Manufacturer Price (AMP), which is
the average price paid to a manufacturer by wholesalers. For
those drugs, the FUL would be equal to 250 percent of the
AMP. The result of the AWP-to-AMP change is to make Medicaid
pharmaceutical payments closer to actual cost. The DRA also
expanded the required reporting of AMP and best price data,
allowing states to have access to reported AMP data for the
first time, and requiring HHS to make AMP data available to
the public.
Second, the states pay the pharmacists a dispensing fee
which typically ranges from $3 to $5 per prescription. This
fee is expected to cover a wide range of services associated
with dispensing drugs to Medicaid patients. The need to
adequately reimburse pharmacists for these services was
recognized by Congress under the Medicare Modernization Act
of 2003, which included a provision requiring Medicare Part D
drug plans to reimburse pharmacists for ``medication therapy
management services'' administered to patients with multiple
chronic conditions.
Third, states receive a rebate directly from the
manufacturers based on their utilization. The brand name
rebate is the greater of a flat rebate amount of 15.1 percent
of average manufacturers price (AMP) or the difference
between AMP and the best price offered to any nongovernmental
buyer. Manufacturers
[[Page S7456]]
have to pay an additional rebate if their drug prices have
risen faster than the rate of general inflation. The DRA also
made limited changes to the Medicaid drug rebate program. In
addition, some states have entered into supplemental rebate
agreements with manufacturers in return for putting their
drugs on a preferred drug list. CBO estimates that the
average rebate received by the states equaled 31.4 percent of
AMP with the average basic rebate of 19.6 percent and the
inflation adjustment rebate equal to 11.7 percent. States
also receive a rebate on generic drugs of 11 percent of AMP.
In return for the rebates, states must provide access to all
FDA-approved drugs, although they may and do have extensive
prior authorization programs, step therapy, limited
prescriptions per month and co-payments.
Medicaid managed care plans do not receive the statutory
rebate levels, and instead must negotiate rebates on their
own.
Issues to Consider
Administration of the rebate program is inadequate. The
Government Accountability Office has found significant
shortcomings in the Centers for Medicare and Medicaid
Services' (CMS) administration of the Medicaid drug rebate
program, including lack of clear guidance to manufacturers
for determining AMP, poor reporting of certain group purchase
prices in setting ``best price'' levels, and limited audits
of manufacturer price setting methods. Moreover, the Health
and Human Services (HHS) Office of the Inspector General
(OIG) recently found that CMS's failure to add qualified new
drugs to the Federal upper limit list had resulted in state
Medicaid programs paying more than they otherwise would have
for these drugs. Changes to the rebate program in the DRA are
minimal and are not expected to have a major effect on it.
Reimbursement is not reflective of the true costs of drugs
and pharmacy services. The DRA-driven changes in
pharmaceutical acquisition prices, by moving to an AMP-based
system, may result in some system savings, though how much is
not clear. However, the dispensing fee is also considered by
many to be inadequate for reimbursing pharmacists for the
range of services they provide. These services may include
managing inventory, counseling patients on proper medication
use, and complying with federal and state regulations in
addition to storing, warehousing, and dispensing the drug.
Without an adequate dispensing fee, some pharmacies may elect
not to participate in Medicaid rather than assume financial
loss.
Exemption for managed care plans inefficient. Over 10
million Medicaid beneficiaries receive their drugs through
Medicaid managed care plans which do not have access to the
Medicaid drug rebate. Under the drug rebate, States receive
between 18 and 20 percent discounts on brand name drug prices
and between 10 and 11 percent for generic drug prices.
According to a recent study, Medicaid-focused managed care
organizations (MCOs) typically only receive about a 6
percent discount on brand name drugs and no discount on
generics. Because many MCOs (particularly smaller
Medicaid-focused MCOs) do not have the capacity to
negotiate deeper discounts with drug companies, Medicaid
is overpaying for prescription drugs for enrollees in
Medicaid health plans. The Congressional Budget Office
(CBO) recently estimated that this change would save $2
billion over 5 years.
Potential Solutions
Tighten administration of the rebate program. Inconsistent
and inaccurate calculations of AMP, best price, and other
components of the rebate formula have cost Medicaid millions
of dollars. By improving CMS oversight over the program and
increasing manufacturer accountability over proper
calculation of rebates, Medicaid would reap the full benefits
of the Medicaid drug rebate program.
Increase the basic level of rebate. CBO has estimated that
setting the basic rebate level at 23 percent would result in
savings of $3.2 billion over 5 years. Available information
supports setting the rebate at a higher level than it is at
today.
Payment for pharmacist services should be realigned to
reflect true costs, including medication therapy management
services. With the Congress having addressed the issue of
pharmaceutical acquisition prices, now is the appropriate
time to adjust reimbursement for pharmacists' services to
reflect their increased role in managing medication-based
therapies, counseling patients, and providing other critical
pharmacy services to Medicaid patients.
Encourage evidence-based formularies where appropriate.
Development of formularies should provide access to necessary
treatments, and encourage and support benefit management best
practices that are proven in widespread use today.
Effectiveness, not cost, should be the main objective when
developing formularies. The goal is for plans to provide
high-quality, cost-effective drug benefits by using effective
drug utilization management techniques. Although
effectiveness data do not exist for all classes of
medications, and are not appropriate for certain populations,
well-designed evidence-based formularies that take into
account comparative effectiveness data have the potential to
provide access to high quality, cost-effective medications.
Allow Medicaid managed care plans to have access to the
drug rebate for non-340B drugs. All Medicaid beneficiaries
should have their drug costs reduced to the maximum extent
possible, either by the Medicaid rebate or by the 340B
program. While recognizing that managed care plans should
have access to the Medicaid drug rebate, it is also important
to be mindful of the need to protect 340B-covered entities
from the risk of creating a ``duplicate discount'' due to the
overlap of the rebate and the 340B program.
Extend the 340B drug discount to Inpatient Pharmaceuticals.
The Safety Net Inpatient Drug Affordability Act (S. l840/H.R.
3547) would require that 340B hospitals and Critical Access
Hospitals rebate Medicaid a significant portion of their 340B
savings on inpatient drugs administered to Medicaid patients.
In addition, to the extent that any Critical Access Hospitals
operate outpatient pharmacies, they would be required to pass
through to Medicaid their 340B savings for Medicaid patients.
These savings to Medicaid also accrue to taxpayers by
reducing costs for federal, state and local governments. The
proposal allows health care providers to stretch limited
resources as they care for America's neediest populations.
The Public Hospital Pharmacy Coalition (PHPC) estimates that
the Safety Net Inpatient Drug Affordability Act (S. 1840/H.R.
3547) would provide significant savings to the Medicaid
program and lower costs for taxpayer-supported safety net
institutions that care for low-income and uninsured patients.
PHPC estimates that this legislation would reduce Medicaid
costs by over $100 million per year.
____
American Public Human Services Association, National Association of
State Medicaid Directors
policy statement: mco access to the medicaid pharmacy rebate program
Background
The Omnibus Budget Reconciliation Act of 1990 (OBRA '90)
established a Medicaid drug rebate program that requires
pharmaceutical manufacturers to provide a rebate to
participating state Medicaid agencies. In return, states must
cover all prescription drugs manufactured by a company that
participates in the rebate program. At the time of this
legislation, only a small percentage of Medicaid
beneficiaries were enrolled in capitated managed care plans
and were primarily served by plans that also had commercial
lines of business. These plans requested to be excluded from
the drug rebate program as it was assumed that they would be
able to secure a better rebate on their own. Though
regulations have not yet been promulgated, federal
interpretation to date has excluded Medicaid managed care
organizations from participating in the federal rebate
program.
Today, the situation is quite different. 58% of all
Medicaid beneficiaries are enrolled in some type of managed
care delivery system, many in capitated health plans. Some
managed care plans, especially Medicaid-dominated plans that
make up a growing percentage of the Medicaid marketplace, are
looking at the feasibility of gaining access to the Medicaid
pharmacy rebate. However, a number of commercial plans remain
content to negotiate their own pharmacy rates and are not
interested in pursuing the Medicaid rebate.
Policy Statement
The National Association of State Medicaid Directors is
supportive of Medicaid managed care organizations (MCOs), in
their capacity as an agent of the state, being able to
participate fully in the federal Medicaid rebate program. To
do so, the MCO must adhere to all of the federal rebate rules
set forth in OBRA '90 and follow essentially the same
ingredient cost payment methodology used by the state. The
state will have the ability to make a downward adjustment in
the MCO's capitation rate based on the assumption that the
MCO will collect the full rebate instead of the state.
Finally, if a pharmacy benefit manager (PBM) is under
contract with an MCO to administer the Medicaid pharmacy
benefit for them, then the same principal shall apply, but in
no way should both the MCO and the PBM be allowed to claim
the rebate.--Approved by NASMD June 24, 2002
We oppose the Senate provision that provides for mandatory
dispensing fee guidelines. States welcome more research in
dispensing fees throughout the US health care system.
Currently, there is very little information for states to use
when considering appropriate dispensing fees. New reference
information would be helpful; but mandatory guidelines should
not be imposed on states.
The effective date for any dispensing fee provisions should
be the date 6 months after the close of the first regular
state legislative session. A state may need extra time to
implement a pharmacy reimbursement system to determine
appropriate dispensing fees and make changes to separate out
the dispensing fee from the reimbursement in their systems.
Governors should maintain flexibility to establish
dispensing fees to maintain access to both pharmacies that
may provide specialty services as well as those that serve
beneficiaries in rural and underserved areas. Limiting such
pharmacies by arbitrary federal statutory definitions or
regulation will not help states to manage their pharmacy
programs. New federal mandates on how to consider dispensing
fees for such pharmacists are unnecessary and burdensome.
Preferred Drug List Restriction: NGA opposes House provision
The House provision (SEC.3105) that would limit states'
current ability to include mental health drugs on a state's
preferred drug
[[Page S7457]]
list should be dropped from the final bill. This provision
would be very costly--far beyond the $120 million estimated
by the Congressional Budget Office--and would undermine
states current ability to use common-sense tools that are
used throughout the health care system to manage expensive
mental health drugs. For example, Texas estimates the
provisions federal impact from its state would be a cost of
$50 million over five years and California alone estimates
$250 million cost to the federal government over the five
year budget window.
Tiered Co Pays for Prescription Drugs: NGA supports House
provision with modification
The House provision that would allow states to use tiered
co-pays to encourage use of more affordable drugs should be
maintained in the final package; however, the provision that
limits this flexibility and otherwise links Medicaid program
administration to TRICARE-approved formularies should be
dropped.
Rebates: NGA supports some Senate provisions, one with
modification
The Senate provision that would increase minimum rebates on
brand name drugs should be maintained in the final bill.
The Senate provision that extends rebates to managed care
organizations that care for Medicaid beneficiaries should be
maintained in the final bill.
Regarding the requirement in both the House and Senate bill
for states to collect rebates on physician administered
drugs, the provision in the House bill that provides for a
hardship waiver for those states that require additional time
to implement the reporting system required to collect these
rebates should be maintained in the final bill.
____
National Association of Community
Health Centers, Inc.,
Washington, DC, August 18, 2005.
Margaret A. Murray,
Executive Director, Association for Community Affiliated
Plans, Washington, DC.
Dear Ms. Murray. The National Association of Community
Health Centers (NACHC), the national trade organization
representing America's 1,100 federally qualified health
centers, has reviewed your proposed initiative to provide
Medicaid managed care organizations with access to the
Medicaid drug rebate found in Section 1927 of the Social
Security Act.
ACAP and NACHC share a very special relationship. Many of
ACAP's member plans are owned and governed by community
health center representatives. This unique relationship often
creates a mutual policy interest and this proposal is an
example of such an intersection.
Your proposal to allow Medicaid managed care organizations
access to the Medicaid drug rebate makes sense given the
migration of Medicaid beneficiaries from fee-for-service to
managed care since 1990. Increasingly, states have not been
able to take advantage of the drug rebate for those enrollees
in managed care, thus driving up federal and state Medicaid
costs. The savings estimated in the Lewin Group study are
significant and may help to mitigate the needs for other cuts
in the program. In addition, it demonstrates a proactive
effort to offer solutions to improving the Medicaid program.
We applaud this effort.
While we are deeply concerned that Congress may engage in
budget-driven, rather than policy-driven, efforts to restrain
or reduce Medicaid spending, we also recognize that--as
providers to a substantial portion of the Medicaid-enrolled
population--we have a responsibility to put forth viable,
realistic alternatives that can help slow the growth on
Medicaid spending without throwing people off the rolls, or
cutting benefits or payment rates, Your proposal offers just
such a common-sense solution, one that we would be pleased to
support in the event that the Congress acts to constrain
costs without undermining the fundamental goals of the
program.
Sincerely,
Daniel R. Hawkins, Jr.,
Vice President for Federal, State,
and Public Affairs.
____
Association for Community
Affiliated Plans,
Washington, DC, June 5, 2007.
Hon. Jeff Bingaman,
Hart Senate Office Building,
Washington, DC.
Dear Senator Bingaman: On behalf of the Association of
Community Affiliated Plans (ACAP), our 32 member health
plans, and over four million Americans they serve, I am
writing to express our gratitude and support for your
legislation to extend the benefits of the Medicaid drug
rebate to the Medicaid beneficiaries enrolled in Medicaid
health plans.
Created by the Omnibus Budget Reconciliation Act (OBRA) of
1990, the Medicaid Drug Rebate Program requires a drug
manufacturer to have a rebate agreement with the Secretary of
the Department of Health and Human Services for States to
receive federal funding for outpatient drugs dispensed to
Medicaid patients. At the time the law was enacted, managed
care organizations were excluded from access to the drug
rebate program. In 1990, only 2.8 million people were
enrolled in Medicaid managed care and so the savings lost by
the exemption were relatively small. Today, 18 million people
are enrolled in capitated managed care plans. Pharmacy costs
in Medicaid Fee-for-Service settings are 18 percent higher on
a per-member-per-month basis than in the managed care setting
even though plans are at a disadvantage with respect to the
federal rebate. With the federal rebate as an additional
tool, plans could save the Medicaid program even more.
Extending the Medicaid drug rebate to Medicaid health plans
has been championed by ACAP for several years as a common
sense approach to reforming the Medicaid program, while
ensuring that all Medicaid beneficiaries receive the care
they need. The proposal to extend the drug rebate has been
endorsed by the National Governors Association, the National
Association of State Medicaid Directors, the National
Medicaid Commission, the Medicaid Health Plans of America,
the Partnership for Medicaid, and the National Association of
Community Health Centers. The Congressional Budget Office and
the CMS Actuary have said that this policy will save between
$1.7 billion and $2.2 billion in Federal tax dollars over 5
years.
Again, thank you for your leadership to help modernize the
Medicaid program in a commonsense manner by extending the
savings of the drug rebate to Medicaid health plans. Please
do not hesitate to contact me if I can be of any further
assistance.
Sincerely,
Margaret A. Murray,
Executive Director.
____
Medicaid Health Plans of America,
Washington, DC, April 7, 2005.
Margaret A. Murray,
Executive Director, Association for Community Affiliated
Plans, Washington, DC.
Dear Ms. Murray: The Medicaid Health Plans of America
(MHPOA) supports your proposed initiative to provide Medicaid
managed care organizations with access to the Medicaid drug
rebate found in Section 1927 of the Social Security Act. We
support this effort and urge Congress to enact this common
sense provision.
Medicaid Health Plans of America, formed in 1993 and
incorporated in 1995, is a trade association representing
health plans and other entities participating in Medicaid
managed care throughout the country. It's primary focus is to
provide research, advocacy, analysis, and organized forums
that support the development of effective policy solutions to
promote and enhance the delivery of quality healthcare. The
Association initially coalesced around the issue of national
health care reform, and as the policy debate changed from
national health care reform to national managed care reform,
the areas of focus shifted to the changes in Medicaid managed
care.
Your proposal to allow Medicaid managed care organizations
access to the Medicaid drug rebate makes sense given the
migration of Medicaid beneficiaries from fee-for-service to
managed care since 1990. Increasingly, states have not been
able to take advantage of the drug rebate for those enrollees
in managed care, thus driving up federal and state Medicaid
costs. The savings estimated in the Lewin Group study are
significant and may help to mitigate the needs for other cuts
in the program. In addition, it demonstrates a proactive
effort to offer solutions to improving the Medicaid program.
We applaud this effort.
MHPOA is proud to support this legislative proposal and
will endorse any legislation in Congress to enact this
proposal.
Sincerely,
Thomas Johnson,
Executive Director.
____
The Medicaid Commission
(Report to the Honorable Secretary Michael O. Leavitt, Department of
Health and Human Services and The United States Congress September 1,
2005)
Proposal
The Commission recommends allowing states to establish
pharmaceutical prices based on the Average Manufacturer Price
(AMP) rather than the published Average Wholesale Price
(AWP). Additionally, reforms should be implemented to ensure
that manufacturers are appropriately reporting data. Such
improvements should include reforms to ensure: (1) clear
guidance from CMS on manufacturer price determination methods
and the definition of AMP; (2) manufacturer-reported prices
are easily auditable so that systematic oversight of the
price determination can be done by HHS; (3) manufacturer-
reported prices and rebates are provided to states monthly
rather than the current quarterly reporting; and (4) new
penalties are implemented to discourage manufacturers from
reporting inaccurate pricing information.
Estimated savings
$4.3 Billion over 5 years (CMS Office of the Actuary)
Extension of the Medicaid Drug Rebate Program to Medicaid Managed Care
Current law
Section 1927 of the Social Security Act, effective January
1, 1991 sets forth the requirements of the Medicaid Drug
Rebate Program. In order for Federal Medicaid matching funds
to be available to States for covered outpatient drugs of a
manufacturer, the manufacturer must enter into and have in
effect a rebate agreement with the Federal government.
Without an agreement in place, States cannot generally
receive Federal funding for outpatient drugs dispensed to
Medicaid recipients. Rebate amounts received by states are
considered a reduction
[[Page S7458]]
in the amount expended by States for medical assistance for
purposes of Federal matching funds under the Medicaid
program.
The basic rebate for brand name drugs is the greater of
15.1 percent of the Average Manufacturer Price (AMP) or AMP
minus Best Price (BP). Best Price is the lowest price at
which the manufacturer sells the covered outpatient drug to
any purchaser, with certain statutory exceptions, in the
United States in any pricing structure, in the same quarter
for which the AMP is computed.
The rebate for generic drugs is 11 percent of AMP.
Under current law Medicaid states cannot collect rebates
from managed care organizations in the Medicaid Drug Rebate
Program.
Proposal
The Commission recommends providing Medicaid managed care
health plans access to the existing pharmaceutical
manufacturer rebate program currently available to other
Medicaid health plans. States should have the option of
collecting these rebates directly or allowing plans to access
them in exchange for lower capitation payments.
Estimated savings
$2 Billion over 5 years (CMS Office of the Actuary)
Change the Start Date of Penalty Period for Persons Transferring Assets
for Medicaid Eligibility
Current law
States determine financial eligibility for Medicaid
coverage of nursing home care using a combination of state
and federal statutes and regulations. Personal income and
assets must be below specified levels before eligibility can
be established. Personal resources are sorted into two
categories: those considered countable (those that must be
spent down before eligibility criteria is met) and those
considered non-countable (those that applicants can keep and
still meet the eligibility criteria such as real estate that
is the beneficiary's primary residence). Some assets held in
trust, annuities, and promissory notes are also not counted.
If it is determined that the applicant has excess countable
assets, these must spent before they can become eligible.
Personal income is applied to the cost of care after a
personal needs allowance and a community spouse allowance is
deducted.
Federal law requires states to review the assets of
Medicaid applicants for a period of 36 months prior to
application or 60 months if a trust is involved. This period
is known as the ``look back period.'' Financial eligibility
screeners look for transfers from personal assets made during
the look back period that appear to have been made for the
purpose of obtaining Medicaid eligibility. Transfers made
before the look back period are not reviewed.
Applicants are prohibited from transferring resources
during the look back period for less than fair market value.
Some transfers of resources are allowed, such as transfers
between spouses. If a state eligibility screener finds a non-
allowed transfer, current law (OBRA 1993) requires the state
to impose a ``penalty period'' during which Medicaid will not
pay for long-term care. The length of the penalty period is
calculated by dividing the amount transferred by the monthly
private pay rate of nursing homes in the state. The penalty
period starts from the date of the transfer. Using the date
of the transfer as the start date provides an opportunity for
applicants to preserve assets because some or all of the
penalty period may occur while the applicant was not paying
privately for long-term care.
We oppose the Senate provision that provides for mandatory
dispensing fee guidelines. States welcome more research in
dispensing fees throughout the U.S. health care system.
Currently, there is very little information for states to use
when considering appropriate dispensing fees. New reference
information would be helpful; but mandatory guidelines should
not be imposed on states.
The effective date for any dispensing fee provisions should
be the date 6 months after the close of the first regular
state legislative session. A state may need extra time to
implement a pharmacy reimbursement system to determine
appropriate dispensing fees and make changes to separate out
the dispensing fee from the reimbursement in their systems.
Governors should maintain flexibility to establish
dispensing fees to maintain access to both pharmacies that
may provide specialty services as well as those that serve
beneficiaries in rural and underserved areas. Limiting such
pharmacies by arbitrary federal statutory definitions or
regulation will not help states to manage their pharmacy
programs. New federal mandates on how to consider dispensing
fees for such pharmacists are unnecessary and burdensome.
Preferred drug list restriction
NGA opposes House provision
The House provision (Sec. 3105) that would limit states'
current ability to include mental health drugs on a state's
preferred drug list should be dropped from the final bill.
This provision would be very costly--far beyond the $120
million estimated by the Congressional Budget Office--and
would undermine states current ability to use common-sense
tools that are used throughout the health care system to
manage expensive mental health drugs. For example, Texas
estimates the provisions federal impact from its state would
be a cost of $50 million over 5-years and California alone
estimates $250 million cost to the federal government over
the 5-year budget window.
Tiered Co-pays for prescription drugs
NGA supports House provision with modification
The House provision that would allow states to use tiered
co-pays to encourage use of more affordable drugs should be
maintained in the final package; however, the provision that
limits this flexibility and otherwise links Medicaid program
administration to TRICARE-approved formularies should be
dropped.
Rebates
NGA supports some Senate provisions, one with modification
The Senate provision that would increase minimum rebates on
brand name drugs should be maintained in the final bill.
The Senate provision that extends rebates to managed care
organizations that care for Medicaid beneficiaries should be
maintained in the final bill.
Regarding the requirement in both the House and Senate bill
for states to collect rebates on physician administered
drugs, the provision in the House bill that provides for a
hardship waiver for those states that require additional time
to implement the reporting system required to collect these
rebates should be maintained in the final bill.
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