Washington Report: The Main Event Begins

Thorny issues are already emerging about Medicare Rx.
Mar 01, 2005

Jill Wechsler
In his first few days as secretary of the Department of Health and Human Services, Mike Leavitt made waves by announcing plans to revise Medicaid and ensure drug safety. But the "main event" of the year, he emphasized, will be the implementation of the Medicare Part D prescription drug coverage program. The White House has a great deal at stake in persuading insurers and pharmacy benefit managers (PBMs) to set up prescription drug plans (PDPs) in all 34 Part D regions—and in getting seniors to sign up for coverage. The industry has much to lose if the program fails to emerge as promised, so pharma companies plan to use their PR resources to help Medicare beneficiaries understand and join the program. Marketers already are discussing discounts and rebates with PDPs, which face tight deadlines for getting their packages in place.

The Part D application and bidding process begins this month. Plans have to submit Part D applications to the Centers for Medicare and Medicaid Services (CMS) by March 23 and file formularies next month. That gives CMS a month to review the proposals in order to launch a bidding process in June and award contracts in September. PDPs will start marketing their plans and enrolling seniors in October. For plans to establish formularies and calculate bids, they will need to know what deals manufacturers will offer.

Devilish Details The CMS Part D final regs, which were issued on January 21, spell out procedures for implementing this massive program. (See Pharm Exec, "Medicare Drug Benefit," February 2005.) But as the industry and healthcare community digest the regulations—more than 1,100 pages on the drug benefit alone—several thorny issues have emerged that will shape pharma participation in the program and its likely impact:

No more giveaways Manufacturers have been expanding programs that provide drugs to low-income patients at no or low cost, but companies will face new challenges in structuring these patient assistance programs to fit Part D. One key problem: Free drugs provided to seniors do not count as true out-of-pocket (TrOOP) costs—and TrOOP costs have to reach a certain level (about $3,600) for a beneficiary to qualify for catastrophic coverage. A possible solution lies in the fact that CMS regs permit state pharmacy assistance payments to count for TrOOP, an approach that marketers consider necessary to continue PA programs for seniors.

Pressure for formulary exemptions Beneficiaries may be hit twice if they have to pay for non-formulary drugs. Not only do they lose co-payments, but their outlays do not count as TrOOP for reaching the catastrophic floor. The policy puts a lot of pressure on patients and doctors to file for exceptions to gain coverage for non-listed medicines.

Setting tiers Plans have to tell beneficiaries which drugs they cover, but not necessarily which drugs fall into which co-payment tiers. CMS plans to issue marketing guidelines in April to clarify this and a host of disclosure and coverage issues.

Scrutinizing off-label coverage Off-label drug use, of course, is always a thorny issue, and CMS is trying to walk a fine line between supporting coverage of appropriate off-label uses and allowing PDPs to limit excessive prescribing. CMS acknowledges that physicians can prescribe drugs for off-label uses and says it will weigh whether plans erect barriers to off-label prescribing in evaluating a formulary program. But the Part D rules specify that PDP formularies don't have to cover off-label drug uses and don't have to establish classes where there is no FDA-approved drug. The pressure is on pharma companies to document the benefits of off-label uses to get them listed in appropriate formulary categories.

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