Watchdog Committee Urged for Medicare Drug Plan
to Protect Against Drug, Insurance Company Influence

Consumer's Union
FOR IMMEDIATE RELEASE
Friday, Aug. 27, 2004
Contact: Gail Shearer, CU, 202-462-6262

LINK

(Washington, D.C.) As the government prepares to launch its plan for what types of medicines will be covered under the new Medicare drug benefit, Consumers Union is urging the creation of a watchdog committee to look out for the interests of consumers and police against undue influence of giant pharmaceutical companies.

"We are concerned that Medicare beneficiaries will end up the losers in this plan, caught in the squeeze between the nation's most powerful special interests - the drug companies and the insurance companies," said Gail Shearer, Consumers Union's director of health policy analysis. "Right now, there's a risk that seniors' voices will not be heard in this special-interest fight."

Shearer, a member of the Beneficiaries Advisory Forum, is testifying Friday before U.S. Pharmacopeia (USP) on the proposed guidelines it drafted. USP was charged by Congress to create a list of drug categories from which pharmacy benefit managers can fill prescriptions.

Drug companies want a large number of narrow categories in hopes of including more of their products under each category, while the pharmacy benefit managers want fewer, broader categories so they have more freedom to pick drugs or bargain on price.

Shearer said it is critical to create an independent watchdog panel made up of medical experts familiar with the various drug categories to watch over the process. Consumers Union also wants to ensure cost containment measures are implemented like those currently in use by the Department of Veterans Affairs, which bargains aggressively to lower prescription drug costs.

Shearer said the Medicare drug benefit, which will go into effect in 2006 and will pay for a portion of beneficiaries' drug costs, is fundamentally flawed because Congress specifically barred Medicare from negotiating deep discounts like the VA. She also urged Congress to appropriate money to study and disseminate to the public the comparative effectiveness of drugs : for example, telling consumers which types of cholesterol-reducing drugs are the most effective and inexpensive.

"We have to make sure the government is looking out for the pocketbooks of our seniors and disabled," Shearer said. "A Medicare drug benefit is no good if places the interests of the drug companies and the insurance companies over those it is supposed to help."

Read her testimony on the Medicare drug categories:

Statement of Gail Shearer
Director, Health Policy Analysis
Washington Office
CONSUMERS UNION

Before U.S. Pharmacopeia
on
Model Guidelines for Classes and Categories of Drugs
(Medicare Modernization Act)
Baltimore, Maryland
August 27, 2004

Thank you for providing Consumers Union with the opportunity to present our views today on the USP draft model guidelines for drug categories and classes for Part D prescription drug benefits under the Medicare Modernization Act. We appreciate the effort that USP has made to seek broad input. We are concerned that as the USP and the Centers for Medicare & Medicaid Services (CMS) continue to work to implement this legislation, the voices of powerful special interests will be loud and clear, and could potentially drown out the voice of Medicare beneficiaries who will continue to be confused by the complex and ever-changing choices in the marketplace and who are not in a position to understand the significance of the fine-points of therapy definition that are posed by these guidelines. The challenge of finding the right balance between too few categories (which could restrict access to drugs) and too many categories (which would make it more difficult to contain costs) will be difficult. We are concerned that the drug companies' interest in having a shot at marketing their latest and most expensive products will put pressure to expand the list of categories; the financial stakes of the pharmaceutical industry are impossible to over-estimate. Failing to constrain costs would create pressure to cut drug benefits and/or increase cost-sharing. We are concerned that the financial incentives that pharmaceutical benefit managers (PBM's) and insurance companies have to narrow the list of categories, if these lead to overly restrictive categorization, could ultimately reduce access of Medicare beneficiaries to needed medicines. In short, we are concerned that Medicare beneficiaries could end up being the losers - caught in the squeeze between powerful special interests, and without the expertise and loud voice to rise above the special interests. In order to end up with a system that best meets Medicare beneficiaries' needs, we urge you to establish a watchdog committee of independent experts to look out for the best interest of consumers and police against inappropriate influence by pharmaceutical interests.

Background: Flaws in the Medicare Modernization Act.

We appreciate that the USP is charged (by P.L. 108-173) with the narrow task of devising a list of therapeutic categories and classes. Our statement today, however, would be incomplete if we failed to point out that USP (and CMS) are charged with implementing legislation that Consumers Union believes is deeply flawed. We believe that in order to address some of the most serious mistakes in the legislation, Congress should enact new legislation that would:

Allow, and encourage, the federal government to negotiate deep discounts for prescription drugs;

Encourage effective cost containment approaches such as those used by the VA and those used effectively by other countries;

Build a uniform prescription drug benefit option through Medicare as part of the basic benefit (similar to Part A or Part B benefits); and

Use the savings to provide more comprehensive drug benefits (i.e., eliminate the gap in coverage, the 'doughnut hole').

In addition, we urge Congress to appropriate funds to allow AHRQ to implement section 1013 of the Medicare Modernization Act, allowing for more study and dissemination to the public of the comparative effectiveness of drugs.

The Environmental Scan by Booz Allen Hamilton points out that there is a wide range of numbers of drug categories and drug classes used by various health systems. We are very concerned that the large number of categories and classes included in the draft guidelines could result in inadequate price competition and higher than necessary prescription drug expenditures, at a great cost to Medicare beneficiaries and taxpayers. If the guidelines allow for too large a degree of "product differentiation," this would preclude competition between drugs that should be allowed to compete with each other on the basis of therapeutic outcome. At the same time, we are concerned that there is no guarantee that Medicare beneficiaries will have access to the full range of medically necessary medicines. We believe that it is up to Congress to change the law to allow meaningful discounts, to assure a fair appeals mechanism (to guard against overly restrictive access to needed drugs), and assure that the overall system is accountable to the public interest, not the interest of pharmaceutical companies or insurance companies. There is only so much that USP or CMS can do in the context of the flawed legislation.
Early Experience with the Impact of the Medicare Modernization Act

In the absence of these needed changes, USP and CMS are charged with what may be an impossible task, to select therapeutic categories that allow for the ideal balance between providing access to needed, quality medicines while aggressively controlling prescription drug expenditures. This year's experience with Medicare discount drug cards provides some insight into the flawed marketplace models incorporated in the MMA. In our view, the discount drug card program has provided a case study of the challenges created by experimenting with an untested free market insurance model with Medicare beneficiaries. In our view, seniors and the disabled are not the ideal target population to experiment with a new free market insurance model. The complex choices have overwhelmed millions of beneficiaries, to the point where a small portion have voluntarily enrolled in the discount cards program, even though studies indicate that many could receive discounted drug prices. (We note that the discounts are relatively small compared with the prices available from reimported drugs or compared with the prices paid by the VA on behalf of veterans.)

Based on the recent experience with discount drug cards, we are very concerned that 2006 implementation of the Medicare Modernization Act will bring:

Confusion: beneficiaries will be confused about whether the drugs that they take (or will need to take in the future) will be covered;

Disappointment: when beneficiaries learn that they have inadvertently (or even consciously) selected a plan that does not cover some of the drugs that they need;

Anger: when plans change the drugs covered mid-year;

Financial hardship: when their out-of-pocket costs grow (if their drugs are not on the formulary), and do not even count toward their catastrophic benefit.

Need for Intense Intervention On Behalf of Medicare Beneficiaries

It's clear that the stakes are very high. Pharmaceutical companies could lose or gain billions of dollars, based on decisions made by USP and CMS. Similarly the choices you make will result in costs or savings of billions of dollars for consumers and taxpayers, and will mean the difference between access to needed medication and continued denied access or financial hardship. In the absence of legislative fixes, we urge you to increase your vigilance against maneuvering by pharmaceutical companies by:

Establishing a watchdog board of independent medical experts who are familiar with various therapeutic categories and can advise the best course of action. You might consider drawing heavily on VA doctors and other doctors who are independent of the marketing influences of the pharmaceutical industry.

Put the government's top health economists to work advising the process to minimize decisions that put the interest of pharmaceutical industry above the interests of consumers.

Put a high priority on cost containment. Without adequate cost containment, all Medicare beneficiaries and taxpayers will be losers, in the long-term, with continued financial hardship or denial of needed medicines. In order to contain costs, establish a system (that might include, for example, step therapy, restricted formularies with a fair appeals process, and/or reference pricing, where appropriate) to lower costs without inordinately restricting access. The CMS appeals process should be clear and definitive to physicians, health plans, and beneficiaries. There can be no such thing as a perfect formulary or perfect therapeutic categorization system. Exceptions are the rule. Therefore the rules about exceptions become very important.

In the absence of legislative change, the outlook for implementation that provides meaningful access and cost containment is not good. The first step, though, is to create checks and balances that assure that the most independent, best thinking is brought to bear on these most important decisions.
Thank you for considering our views.

USPtestimonyAugust27