Democrats Plan Legislation To Overhaul Drug Benefit

Congressional Democrats on Tuesday plan to announce a proposal to alter the Medicare prescription drug benefit to allow the federal government to negotiate drug prices with pharmaceutical companies and to let beneficiaries choose a drug plan administered by the federal government rather than by a private insurer, the AP/Seattle Post-Intelligencer reports. Under the proposal, money saved through negotiated drug prices would be used to eliminate the drug benefit's so-called "doughnut hole," the gap in coverage under which beneficiaries are responsible for 100% of drug costs between $2,250 and $5,100.

House Minority Leader Nancy Pelosi (D-Calif.) said, "Democrats fought against Social Security privatization, and we are now working to fix the flaws in the Republican prescription drug program."

CMS Administrator Mark McClellan disputed Democrats' assertion that the federal government could negotiate lower prices than private plans, citing a 2005 memo from CMS actuary Richard Foster that states, "We believe that direct price negotiation by the secretary would be unlikely to achieve prescription drug discounts of greater magnitude than those negotiated by Medicare prescription drug plans responding to competitive forces" (Freking, AP/Seattle Post-Intelligencer, 6/26).

In related news, CMS will not consider a recommendation from 41 House Republicans that the agency enact new requirements that would ensure Medicare drug plans and pharmacy benefit managers promptly pay pharmacies for prescription claims, according to Larry Kocot, senior adviser to McClellan, The Hill reports.

Last week, the Republicans sent a letter to CMS asking that the agency require plans and PBMs to pay claims within 14 days and to offer electronic payments. Groups representing independent pharmacists have complained that payments from PBMs -- which operate under CMS-approved contracts with pharmacies -- are too slow for community pharmacists to cover their expenses.

The pharmacists have called for passage of legislation (S 2563/HR 5182) that would require plans to offer electronic payments and to provide payment within 14 days.

Kocot said on Monday, "We would feel hard-pressed to come in and dictate what exactly the terms should be" in the contracts between the PBMs and pharmacies. He added that a recent CMS analysis shows that most claims already are paid within 14 days. He said the analysis considers the payment schedules required by PBMs' contracts, rather than actual claims data.

"The reason we did this is to get a baseline," Kocot said, adding, "Once we have that baseline, it becomes a matter of enforcement." He said that complaints from pharmacies have "tapered off considerably" and that CMS has "basically remedied every complaint we've received."

Some lawmakers have criticized the CMS analysis because it does not examine claims data and does not include information from pharmacists.

Becky Ruby, communication director for Rep. Phil Gingrey (R-Ga.) -- one of the lawmakers who signed last week's letter -- said, "The best way to judge the wait times may not be to ask the plans." Ruby said the complaints are not from "just one or two community pharmacies," adding, "It is across the board."

An additional 10 co-sponsors joined in support for the House bill last week, bringing the total number of co-sponsors to 127. The Senate bill has 20 co-sponsors. If CMS were to act to require prompt payments, "Congress could avoid wading into a politically divisive debate over Medicare Part D in its inaugural year," The Hill reports.

"The Republican leadership has been reluctant to attempt to give Democrats a platform for a wider debate about the controversial Part D program," according to The Hill (Young, The Hill, 6/27).