Drugmakers Crafting Program To Address Medicare ‘Doughnut Hole’

A group of seven pharmaceutical companies is working on a plan that would provide discounted prescription drugs to Medicare beneficiaries whose annual drug costs fall into the so-called "doughnut hole," or the gap in coverage under the new Medicare drug benefit, the Wall Street Journal reports. Under the drug benefit, Medicare beneficiaries are responsible for all drug costs between $2,250 and $5,100 in total spending, or between $750 and $3,600 in out-of-pocket costs.

An estimated 6.9 million Medicare beneficiaries are expected to reach the doughnut hole in 2006, according to the Kaiser Family Foundation, the Journal reports.

According to documents filed on Jan. 12 with the HHS Office of Inspector General, the pharmaceutical companies are joining together to provide discounts of at least 50% on their drugs when qualifying Medicare beneficiaries reach the doughnut hole.

The Bridge Rx program, which the companies hope to announce in April and launch in May, would have copayments of at least 15%, the Journal reports. Medicare beneficiaries with annual incomes between $14,000 and $18,620 would qualify for the program, as would beneficiaries who have annual incomes lower than $14,000 and assets that make them ineligible for additional financial help under the drug benefit.

The projected budget for the program's first year is $30 million, with projected enrollment in 2006 of more than 500,000 Medicare beneficiaries. Companies that plan to participate in the program include AstraZeneca, Johnson & Johnson, Novartis and Bristol-Myers Squibb.

According to the Journal, the federal government has said the program could "run afoul of antikickback laws unless properly structured." According to the Journal, the small number of participating companies so far "is a potential problem, because the government worries that companies could use the discounts to steer patients to their drugs."

The HHS OIG on Jan. 16 in an informal response to the companies' Jan. 12 proposal raised several issues, including the need to provide uniform discounts for all drugs and safeguards to ensure participants do not switch from less-expensive generic drugs to brand-name medications. In an advisory bulletin issued last fall before the plan was presented, the federal government said the "risk" of a kickback "potentially may be reduced" if large numbers of companies participated in such a program and included all of their drugs.

CMS Administrator Mark McClellan said the government has been in discussions about the creation of a doughnut hole program, adding that the HHS OIG has said such a plan would work as long as it includes "a broad range of drugs."

The HHS OIG is expected to issue a formal opinion on the program by mid-February.

"It's uncharted waters, so we don't know what" the HHS OIG's office will decide, an unnamed person familiar with the plan said, adding that it is a "good sign" federal officials are in discussions about such a program.

The Bridge Rx coalition is working to persuade other large companies, including generic drug makers, to join the group. Pfizer, GlaxoSmithKline and Merck are some of the drug companies that have not yet joined the program.

A spokesperson for GSK said the company "is looking at a number of options in terms of ways in which we might be able to help seniors."

A spokesperson for Merck said, "[W]e'd certainly see what comes out of" Bridge Rx's efforts and "always examine our options."

A Pfizer spokesperson said the company is reviewing the Bridge Rx plan (Martinez, Wall Street Journal, 2/7).