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VA DRUG PLAN EYED BY COST-CONSCIOUS DEMOCRATIC
CONGRESS -- A Veterans Affairs program may
provide a
model to reduce U.S. spending for medicines.
Story here...
http://www.bloomberg.com/apps/news?
pid=20601103&sid=aisC.RCActMM&refer=us
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Veterans Drug Plan Eyed by Cost-Conscious Democrats
By Lisa Rapaport
(Bloomberg) -- A Veterans Affairs program may provide a model to reduce
U.S. spending for medicines sold by Pfizer Inc. and other drugmakers,
according to Democratic lawmakers.
The VA health-care plan for U.S. military veterans spent an average of
$1,000 on medications for each of its 4.3 million patients last year,
charging no insurance premiums and $8 for each prescription. Medicare
paid $1,358 on average for drugs to treat 22.6 million elderly and
disabled Americans, and the average patient spent an additional $1,056.
Democrats say the difference is that the VA is allowed by law to get
price discounts directly from companies like Pfizer, the world's largest
drugmaker; Merck & Co.; and Eli Lilly & Co. Medicare, barred by law from
haggling for price breaks, contracts out its drug coverage to private
insurance providers, which then negotiate with companies.
``For the millions of American veterans, we've bargained for the
lowest-priced drugs so they get the best medicine at the lowest cost,''
Senator Dick Durbin, an Illinois Democrat, said in an interview. ``The
same model has to be used for senior citizens.''
House Speaker Nancy Pelosi, a California Democrat, scheduled a Jan. 12
vote on negotiated Medicare drug prices. A measure introduced last week
by Representative John Dingell, a Michigan Democrat, would require the
government to negotiate for lower prices without specifying how.
Democrats say the provision may save patients as much as $96 billion
over 10 years.
Getting discounts as low as the VA's may require Medicare to limit
patient drug choices, according to the designer of the veterans'
program. Dingell's proposal specifies that the government wouldn't
restrict access to drugs. The different approaches may be critical, said
Ken Kizer, former VA undersecretary of health.
Excluding Lipitor
``The VA gets better prices because it has a single, nationwide
formulary,'' or restrictive list of covered medicines, Kizer, who
started the program a decade ago, said in an interview. ``Pharmaceutical
companies are willing to give very good prices to get on this list.''
Kizer is now chairman and chief executive officer of medical information
firm Medsphere, in Aliso Viejo, California.
The VA excludes some of the most expensive and profitable treatments.
The program won't pay the $3.40-a-day price for Pfizer's cholesterol
drug Lipitor, the world's best-selling medicine. Patients are instead
prescribed Zocor, a drug sold by Whitehouse Station, New Jersey-based
Merck, which costs less than Lipitor.
The cheapest Medicare price for 20 milligram Zocor tablets was $1,485.96
a year, more than 10 times the lowest VA price of $127.44, according to
a report released today by Washington- based consumer advocacy group
Families USA. Lipitor's lowest price under Medicare plans was 51 percent
higher than the VA would pay. The agency can cover the drug if a doctor
requests.
58 Percent Savings
VA prices are at least 58 percent lower for half of the top 20 drugs
prescribed to seniors than prices charged by the five insurers with the
largest enrollments in the Medicare drug plan, Families USA said today.
The drugmakers' trade group, the Washington-based Pharmaceutical
Research and Manufacturers of America, is against applying the VA system
to Medicare. In a report last month, the organization said the VA covers
just 62 percent of cholesterol treatments while Medicare includes them
all. Medicare covered 88 percent of diabetes drugs, while VA included 47
percent, the report stated.
The government's projected cost for the Medicare drug benefit over the
first decade, through 2015, is about $729 billion. Drug expenses reached
$30.7 billion last year, according to Medicare.
Savings for Patients, Government
Medicare patients could save more than $96 billion over 10 years on
premiums, co-payments and other out-of-pocket drug costs if Medicare
officials negotiated prices, according to an October report by
Representative Henry Waxman, a California Democrat.
Under standard Medicare drug plans, patients buy their drugs through
conventional or mail-order pharmacies. They pay the first $250 in costs,
and then the government covers 75 percent until medicine purchases total
$2,250. Patients pay the next $5,100 out of their own pockets, and the
government covers 95 percent of any additional drug expenses.
Some Democrats argue that by getting lower prices, Medicare could
eliminate the coverage gap, known as the ``donut hole.'' The provision
was written into the 2003 law to limit the government's outlays for
drugs. In 2006, 1.8 million people, or 8 percent of those in the
program, incurred costs because of the provision, according to Medicare.
Obama's Hope
``My hope is that we generate enough savings that will help fill the
donut hole,'' Senator Barack Obama, an Illinois Democrat, said in an
interview.
Medicare can't copy the VA system of operating its own medical
dispensaries, a key to its lower costs, said Jack Cox, a spokesman for
New York-based Pfizer, in an e-mail exchange.
``Scaling up the VA model for Medicare is a politically convenient
argument, but in practical terms, would never work for America's
seniors,'' Cox said.
The Congressional Budget Office and independent Medicare actuaries have
concluded that government price negotiation is unlikely to lead to lower
costs than what private health insurance companies get, Medicare
spokesman Jeff Nelligan said.
Passing legislation requiring government price negotiations may be
easier than putting it into effect, former Medicare chief Mark McClellan
said at a conference yesterday in San Francisco. The Dingell proposal
would bar the government from creating a preferred drug list.
``The House bill has a paradox,'' McClellan said. ``The specifics can
cause problems with patient access.''
To contact the reporter on this story: Lisa Rapaport in New York at
Lrapaport1@bloomberg.net
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Larry Scott
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