Rep. Waxman To Investigate Profits of Medicare Prescription Drug Plans, Whether Plans Pass Negotiated Savings on to Beneficiaries

Kaiser Daily Health Policy Report

Monday, February 12, 2007

Capitol Hill Watch

Rep. Waxman To Investigate Profits of Medicare Prescription Drug Plans, Whether Plans Pass Negotiated Savings on to Beneficiaries

The House Oversight and Government Reform Committee on Friday held a hearing about how private insurance plans and pharmacy benefit managers negotiate prices with drug manufacturers for government prescription drug programs and whether these discounts get passed on to consumers, CQ HealthBeat reports. Committee Chair Henry Waxman (D-Calif.) also on Friday said that he planned to send a letter to the Medicare program and to insurers that offer Medicare prescription drug plans requesting information about the discounts offered by drug manufacturers and how the discounts impact beneficiaries. At the hearing, witnesses discussed the impact of the 2003 Medicare law, which prevents public disclosure of the prices that drug plans pay manufacturers for prescription drugs. The lack of transparency means that the federal government cannot assess how well market forces are operating in Medicare Part D, according to Gerard Anderson, a health policy professor at Johns Hopkins Bloomberg School of Public HealthHHS secretary would need to know the actual prices paid for drugs by private plans and PBMs, Anderson said. The administration counters that private plans and PBMs that negotiate with drug manufacturers on behalf of the government are able to negotiate lower prices and government inference is unnecessary. The hearing also discussed the prices paid by Medicaid and the "340B Program" run by the Public Health Service, which provides federally funded health clinics with access to lower-priced brand-name and generic prescription drugs. Meanwhile, CMS released data showing that prescription drug plans under the Medicare drug benefit are widely distributing generic drugs, accounting for 60% of drugs dispensed through Medicare drug plans (Reichard, CQ HealthBeat, 2/9). who spoke at the hearing. If legislation passes mandating government negotiation for prescription drug prices, the

Comments
Waxman said he worries that "billions of federal dollars that should be buying needed care are instead adding to drug company profits." He added that he would use responses to the letter to "assess whether high drug costs are increasing beneficiary costs and wasting taxpayer dollars in the Medicare drug program" (Brady, Congress Daily, 2/9). HHS spokesperson Christina Pearson said, "We have a substantial record showing that a competitive marketplace is working for seniors in Part D. Premiums have gone down, the Part D program costs less than originally estimated." She continued, "Those have gone down but enrollment and beneficiary satisfaction continue to go up as shown by multiple independent surveys. The numbers show that Part D is a very successful program for people with Medicare and taxpayers" (CQ HealthBeat, 2/9).

Medicare Fraud
At the hearing, Waxman also indicated that he will boost federal efforts to bring fraud cases against pharmaceutical firms, CQ HealthBeat reports (CQ HealthBeat, 2/9). James Moorman, president of Taxpayers Against Fraud, said that drug makers have "plenty of ways in the complicated system to inflate prices" (Congress Daily, 2/9). The Department of Justice has a backlog of 150 cases of alleged fraud by pharmaceutical companies, according to Associate Deputy Attorney General Ron Tenpas. Since 1999, the federal government has collected more than $5.3 billion from fraud investigations, Tenpas said (CQ HealthBeat, 2/9).