NLARx December 7, 2011 Newsletter

The news is all about deficits these days, whether federal or state. We have some suggestions about how politicians, if they can get the backbone to say no to the pharmaceutical industry, could save significant money without harming patient health.

** Read Ann Woloson's guest column for strategies to save prescription drug costs.

** Read this month's tip on how your state Medicaid program can save money without hurting patients. More

IN OTHER NEWS:

** Congress asks hard questions about the proposed Express-Scripts-Medco merger in a Senate hearing yesterday. NLARx was there to testify. Read more

** First Pfizer cut a deal with Medco, then with other PBMs to keep patients on brand-name Lipitor. Learn how this strategy may not be win-win when it comes to taxpayer and employer pocketbooks.

Check out the News Ticker for a variety of interesting articles from the past weeks. For more regular updates, the best way to stay current is to "like" us on Facebook and follow us on Twitter (where we tweet with the handle @nlarx nearly daily). Keep in touch!

Sincerely, Sharon Treat

Prescription Drug Savings Could Reduce Federal Budget Cuts

By Ann Woloson, Executive Director, Prescription Policy Choices

I'm not going to pretend I thought the congressional supercommittee would come to agreement on how to slash $1.2 trillion from the federal budget. With members of the committee drawing lines in the sand from the beginning over ideological differences in taxes and spending (half had previously signed a pledge not to raise taxes), it was clear that King Sisyphus has company.

I continue to be optimistic, however, given there are clear examples of savings which could be achieved, without raising revenues or forcing draconian cuts to programs we all depend on, including Medicare and Social Security.

One obvious example is our nation's continued obsession with unnecessary spending on health care services, including prescription drugs. Estimates show a third of our health care spending is unnecessary. Eliminating such waste could help to trim our budget, while at the same time ensure better quality and value in our public health programs. .....

Read rest of the Bangor Daily News Op-Ed

Visit the Prescription Policy Choices website for more information

Tip of the Month: Your Medicaid Program Can Save Money Without Hurting Patient Health

Consider using an Average Acquisition Cost (AAC) model for drug pricing, which uses actual pharmacy invoices in determining average acquisition costs to pharmacies. This approach enables states to get a better handle on the "spread" and is more reflective of acquisition and dispensing costs and also ingredient costs for certain specialty drugs.

Most states still use Average Wholesale Price (AWP) which has been subject to much gaming by the industry, resulting in many fraud case brought by state Attorneys General and earning the moniker "Ain't What's Paid."

The Centers for Medicare and Medicaid Services (CMS) is developing a database of National Average Drug Acquisition Costs and is encouraging states to adopt an AAC payment methodology based on this resource. CMS plans to distribute its database at the end of 2011 based on a CMS survey of retail pharmacies.

Alabama, the first state to receive CMS approval for using AAC, has projected savings of $30.5 million in the first year, or 6.1 percent of its current fee-for-service drug expenditures of $500 million. The new method was announced September 22, 2010 and went into effect March 23, 2011. Oregon expects to save $1.6 million, or 1 percent of its $160 million fee-for-service Medicaid drug expenditures. Idaho, which is in the process of implementing AAC, expects to save $2 million in state general funds and $4.6 million in federal funds, for a total of $6.6 million.

Want to learn more?

Issue brief from Community Catalyst

Policy paper from Kaiser Family Foundation

Information from Alabama's Medicaid Program

NLARx Testifies at US Senate Hearing on Express Scripts/Medco Merger

Yesterday NLARx presented testimony before a subcommittee of the U.S. Senate Committee on the Judiciary on the subject of the Express Scripts/Medco merger. The Association's testimony was presented by attorney and antitrust expert David Balto, who also represented Consumers Union, Consumer Federation of America, National Consumers League, and U.S. Public Interest Research Group.

For news coverage of the hearing and the issues under investigations, see these Pharmalot and NY Times articles as well this Bloomberg article about the PBMs touting their supposed successes. By the way, while oversight hearings are going on, other members of Congress - some of whom got PBM cash - have weighed in on the other side. In addition to the consumer groups represented by David Balto, community pharmacists testified in opposition to the merger.

NLARx has long supported greater regulation of PBM practices and signed on to a letter of concern to the Federal Trade Commission when the merger was first announced.

"Three very large pharmacy benefit managers, or PBMs, control most of the market, and the Express Scripts/Medco merger will shrink that number to two. State legislators have legitimate concerns, backed up by past practice and current PBM strategies, that if permitted to proceed, this merger will end up hiking prescription drug costs, limiting consumer choice, and exacerbating the secrecy of already murky PBM business practices," said NLARx Executive Director Sharon Treat in a prepared statement on the hearing.

"State legislators have been at the forefront protecting consumers from the practices of these middlemen, which are largely unregulated by the federal government and operate out of public view and understanding," said Treat. "We commend Senator Kohl and the Subcommittee on Antitrust, Competition Policy and Consumer Rights for holding this important hearing."

In his testimony, Balto stated: "The loss of competition caused by this merger will make it more likely for Express Scripts to charge more for its services and to pass along less of the savings they obtain to their customers, the plan sponsors, ultimately harming the millions of consumers who need these services."

Balto specifically noted the impact of the merger on specialty drug pricing, where the PBMs in question have significant conflicts of interest, owning their own specialty drug businesses. Balto stated:

"This merger would combine the two largest specialty pharmacy businesses, Express Scripts' Curascript and Medco's Accredo, giving the joint company a 52 percent share of this market. This incredible consolidation of the specialty market is of particular concern given the fact that specialty drugs are expected to be the single greatest cost-driver in pharmaceutical spending over the next decade. The cost of specialty drugs is rising rapidly-increasing by 19.6 percent in 2010 and expected to reach as high as 27.5 percent by 2013. Meanwhile, by 2016, 8 of the top 10 prescription drugs are expected to be specialty."

Mr. Balto's complete testimony is posted on the NLARx website

For additional hearing details, visit the Senate Judiciary Committee website.

Pfizer Slows the March of Time and Jacks Up Taxpayer and Employer Costs with Strategy Postponing Generic Lipitor Use

If you read the pharmaceutical industry press, then you will see glowing articles touting Pfizer's forward-looking strategy to slow the march of time and the introduction of generic versions of its top-selling blockbuster drug Lipitor. As the NY Times points out, Lipitor has been Pfizer's "cash cow" for 20 years (the corrolary is its been a cash drain on state budgets.) But if you are a state legislator worried about Medicaid or state employee or pension costs, or an employer wondering how to pay for health insurance, you'd be wise to question Pfizer's aggressive policy. Maybe it isn't win-win for you.

As Merrill Goozner explains in this analysis of the "unprecedented" Pfizer strategy, with the drug company cutting side deals with PBMs and insurers to keep Lipitor prices competitive with generic versions, Pfizer is doing an end-run around the Hatch-Waxman Act and its promise that generics will speed to market as soon as patents expire. Of course with pay-to-delay deals this promise has already been breached repeatedly, and state Medicaid directors looking to see their prescription drug bills cut as patents expire have seen their hopes dashed on a regular basis.

Pfizer's strategy hasn't gone unnoticed in the halls of Congress, where hearings have already been held on PBM side deals, an issue in the ongoing merger review. The triumvirate of Kohl, Grassley and Baucus sent letters to Pfizer on the issue last week. Even Forbes had a surprisingly critical article about the Pfizer strategy. Can anything be done? Unfortunately, cutting deals with PBMs is par for the course, and one of the reasons we have been so critical of these middlemen. There's a reason that despite the lives saved by the pharmaceutical industry, people are very cynical about Big Pharma (an industry poll found only 29% of the public had a positive view of the industry - and that was down 2 points from the previous year).

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