Politicians in Washington, DC and state capitols across the country have claimed the remedy for high-priced prescription drugs is to be found in enacting price controls on medications sold to senior citizens.
But in several laboratories of democracy, state officials are finding the proposed cure worse than the disease.
Rebellion in Missouri
Missouri officials and advocacy groups for the elderly say large generic drug manufacturers are not participating in the state’s prescription drug program. At an August news conference, AARP claimed some drug manufacturers have refused to participate in the Missouri SenioRx Program because it requires them to pay a 15 percent rebate on top of existing federal rebate charges.
While 1,400 pharmacies and 100 drug manufacturers take part in the Missouri program, AARP said major generic drug companies Geneva Pharmaceuticals of New Jersey and two Pittsburgh-based companies, Mylan Laboratories, Inc. and TEVA Pharmaceuticals USA, have refused to offer their products for sale in the state.
In a news release issued immediately after AARP suggested foul play, TEVA said it is willing to participate in the Missouri program, but only at the federal rebate level. A 1990 federal law requires drug companies to offer rebates to states in exchange for reimbursement from Medicaid.
A TEVA spokesperson said, “The imposition of larger rebates on generic drugs is likely to have the perverse effect of reducing competition as generic companies discontinue products that cannot be produced and sold in a way that makes economic sense.” TEVA participates in 50 state Medicaid programs and 41 supplemental programs like Missouri SenioRx.
The revised Missouri prescription drug benefit became available July 1 for more than 26,000 low-income senior citizens. The program pays 60 percent of the prescription costs for seniors after they meet an annual deductible. It replaces a state income tax credit, worth up to $200 annually, that was intended to help offset seniors’ medicine costs.
Democratic Governor Bob Holden expressed concern about the decision of generic drug manufacturers to pull out of the Missouri program. “I was extremely disappointed to learn that some generic pharmaceutical manufacturers have decided not to participate in the program,” Holden said in a news release. “I encourage these manufacturers to reconsider their decision not to participate in the Missouri SenioRx Program.”
The General Assembly authorized the new benefit during a special session in September 2001. The initial enrollment period ended May 30, 2002, but seniors who turn 65 during the next year can still apply.
Pharmacies Leave Massachusetts Medicaid
Following CVS Corp.’s lead, drugstore chains Brooks Pharmacy and Walgreen Co., as well as some independent operators, have announced they will no longer participate in Massachusetts’ Medicaid prescription drug program.
A July 29 move by Acting Governor Jane Swift (R) led to the pharmacies’ decision. As part of the state’s budget revision, Swift announced she would reduce Medicaid payments to pharmacies, from 10 percent above the wholesale cost to 2 percent below wholesale.
Department of Health officials report the pharmacy payment cuts are expected to save about $60 million a year. According to research conducted by the Boston Herald, the three chains, which run 555 of the state’s 1,014 pharmacies, fill 60 percent of prescriptions for Medicaid beneficiaries. CVS alone fills about one-third of those prescriptions.
Robert Gittens, Massachusetts’ secretary of health and human services, has asked CVS to continue to serve beneficiaries for at least 60 days, during which time lawmakers intend to hold hearings on the market disruption created by mandates and rebates.
CVS spokesperson Todd Andrews told the Boston Globe the chain would consider returning to the program only if Linda Ruthardt, the state commissioner of health care finance and policy, agrees to increase the reimbursement rate “down the road.”
Any rate change, however, would have to be approved by the state legislature, which has concluded its formal session for the year. State Senate Ways and Means Chair Mark Montigny (D) said lawmakers would need more information before making such a change, adding, “If there is a feeling that we have been irresponsible, then [the pharmacies should] tell us in a public hearing.”
Discontent in Washington State
To offset a “ballooning state Medicaid drug budget,” Evergreen State lawmakers are imposing pharmacy reimbursement cuts, including a 3 percent reduction in payment rates for name-brand drugs and a massive 44 percent cut for generic drugs. A report issued by the inspector general of the U.S. Department of Health and Human Services concluded states have been overpaying for medications for Medicaid beneficiaries.
The payment rate cuts will affect the nearly 500,000 beneficiaries enrolled in the traditional Medicaid plan offered by Washington State. The 400,000 beneficiaries enrolled in the state’s Medicaid managed-care plan, Healthy Options, will not be affected.
According to Rod Shafer, CEO of the Washington State Pharmacy Association, up to 25 percent of the state’s 1,100 pharmacies will stop participating in the state’s Medicaid program as a result of the cuts. Some large pharmacy chains, including Bartell Drug, Safeway, Fred Meyer, and Rite Aid, are considering but have not yet decided whether to discontinue their participation in the program.
Many independent and smaller chain pharmacies have said the cuts in reimbursement rates will make it financially impossible for them to remain as Medicaid participants.