Mid-Atlantic Health Law TOPICS

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Brother, Can You Spare A Pill?

Public opinion has forced federal and state governments to ponder solutions to the rapidly rising costs of prescription drugs.
Since prescription drugs are generally not covered by Medicare, the perceived need to provide drug coverage for seniors has pushed Medicare reform to the top of the national agenda. However, due to the cost of the project, and the vastly different opinions as to the proper coverage levels, many experts predict that it will be at least three years before a Medicare drug benefit package is enacted.
In the meantime, the Bush administration has proposed several initiatives aimed at getting prescription drugs to the elderly at reduced prices. However, one of these initiatives, a Medicare sponsored prescription drug card, has already been struck down by the courts. Moreover, it is uncertain whether the administration's other interim initiatives will obtain necessary Congressional approval.
Frustrated with the progress being made by the federal government in enacting Medicare reform, 29 states have created their own programs aimed at getting prescription drugs to senior citizens. The following is a guide to the types of state plans that have been enacted.
A. State Funds Many states have programs that utilize state funds to provide limited relief from prescription drug costs to their low-income, elderly citizens. Pennsylvania, Maryland and Maine, among others, pay for a portion of the cost of prescriptions. Maryland's program covers Medicare recipients with annual incomes below 300% of the poverty limit, and provides a maximum annual benefit of $1,000 per individual in return for a $10 per month premium. Nevada provides subsidies to residents to buy drug insurance from private companies, and other states, including Michigan and Missouri, have created tax credits to offset the amounts spent on prescription drugs.
B. Purchasing Pools Several states, including Iowa, New Hampshire, Washington, West Virginia, and California have created buyers' clubs or purchasing cooperatives for low-income senior citizens to purchase prescription drugs. Some states have also banded together to form multi-state purchasing pools to further increase their purchasing power. Pharmacy participation in many of these programs is on a voluntary basis, causing some experts to question their effectiveness. However, when states have tried to impose mandatory participation, the programs have met with resistance from the drug companies and pharmacies, and some plans, such as the Washington "AWARD" program, have been struck down by the courts.
C. Price Controls A few states have mandated that drug companies provide discounts to seniors and other low-income individuals, either through direct price controls or through the use of more subtle coercive tactics. Under the "MaineRx" program, state officials negotiate with drug companies to try to procure discounts on drugs. If acceptable discounts are not obtained, then price controls go into effect upon the request of the insurance commissioner. In addition, if discounts are not forthcoming, Maine requires doctors to obtain prior authorization from the State before prescribing the drug to Medicaid patients. This provision of the law was challenged by the Pharmaceutical Research and Manufacturers of America (PhRMA), on the grounds that it violates the Medicaid statute and the commerce clause of the U.S. Constitution. The matter is before the U.S. Supreme Court, and implementation of the plan is on hold until the Court decides whether to hear the case. Other states have also used participation in the state's Medicaid program to extract drug discounts for non-Medicaid eligible citizens. California requires pharmacies participating in its Medicaid program to extend Medicaid discounts to seniors. Maryland has adopted, but not implemented, a plan that would condition a pharmacy's participation in Medicaid on an agreement to offer drug discounts to eligible Medicare recipients. A recently enacted Michigan program requires drug manufacturers to meet price requirements to be included on a preferred list of drugs approved for use by Medicaid and seniors in state-sponsored programs. The PhRMA has filed suit to block the Michigan program. In addition, six of the largest drug companies have stated that they will not offer Michigan any price concessions, even if it means losing market share.
D. Medicaid Waivers Last year, Vermont applied for and received a Medicaid waiver from the federal government allowing it to provide low-income senior citizens access to discounted drug prices. Under the Vermont program, pharmacies would charge seniors discounted Medicaid prices for prescription drugs. Vermont would then reimburse the pharmacies for the amount of the discount, and simultaneously bill the drug manufacturer for the difference. The Vermont program was struck down, however, by a federal court of appeals, because the Department of Health and Human Services did not have the authority under the Medicaid statute to approve the plan. The Medicaid statute authorizes rebates only if they reduce the cost of Medicaid, and the Vermont program offered no such reduction. Nevertheless, a Maine program, similar to Vermont's, went into effect in June of last year. Moreover, the Bush administration is trying to expand the use of Medicaid waivers to provide drug discounts to seniors, and such a waiver has recently been granted to Illinois. It is not clear, however, if the Vermont ruling will thwart these other efforts.
E. The Canadian Option Several New England states offer programs that enable senior citizens to take advantage of the lower drug prices available in Canada. Under Vermont's "MedicineAssist" program, physicians order and receive three month supplies of drugs for their patients from Canadian pharmacies. Another program, sponsored by the Vermont Council of Aging, organizes bus trips for seniors to Canada, where Canadian physicians review the seniors' medical history and rewrite their prescriptions to be filled at Canadian pharmacies.
F. The Drug Companies' Response In addition to actively challenging those programs that they believe to be unfair, several of the largest drug companies and some of the larger pharmacies have implemented their own discount programs for seniors. Although Congress may eventually provide assistance to seniors nationwide in regard to the cost of drugs, until that occurs, it appears that the number and variety of responses to this issue will continue to grow at a dizzying pace.


March 22, 2002




Rosen, Barry F.


Health Care