PBMs delivering a drug benefit under Medicare would be subject to quality and consumer satisfaction comparisons under Sen. Bob Graham's (D-Fla.) Medicare Rx bill.

HHS would disseminate "information comparing the plans offered by eligible" pharmacy benefit managers, including "the quality and performance of the eligible entity offering the plan" and "the results of consumer satisfaction surveys regarding the plan and the eligible entity offering such plan," Graham's bill states.

Graham introduced the "Medicare Outpatient Prescription Drug Act" (S 2625) June 14 with 28 Democratic cosponsors, including Senate Majority Leader Tom Daschle (D-S.D.) (¹ Also see "Medicare Rx Bills Unveiled: Does Provider Reimbursement Take Precedence?" - Pink Sheet, 6 May, 2002., p. 5).

Other comparative information would include "the benefits provided under the plan, including the prices beneficiaries will be charged for covered outpatient drugs, any preferred pharmacy networks used by the eligible entity under the plan, and the formularies and appeals processes under the plan" as well as "the cost-sharing required of eligible beneficiaries under the plan."

HHS could contract with a Medicare consumer coalition to gather and distribute comparative information, the legislation suggests.

A Medicare consumer coalition - "a nonprofit organization operated under the direction of a board of directors that is primarily composed of beneficiaries" - could contract with HHS "to conduct the informational activities in each such area, with a preference for broad participation by organizations with experience in providing information to beneficiaries," the bill states.

The requirement for comparative information is part of a broader mandate in the bill for participating PBMs to meet "performance requirements" when administering a drug benefit.

When awarding a contract to a PBM, HHS "shall consider the comparative merits of each bid, as determined on the basis of the past performance of the entity and other relevant factors," the bill states.

Factors would include "how well the entity (and the plan offered by the entity) meet such minimum standards"; "the amount that the entity will charge the secretary for managing, administering, and delivering the benefits under the contract"; and "the performance requirements for which the payments to the entity will be subject to risk."

HHS would also consider "the proposed negotiated prices of covered outpatient drugs and annual increases in such prices"; comparative information on benefits, quality, cost-sharing and consumer satisfaction; "prior experience of the entity in managing, administering, and delivering a prescription drug benefit program"; and "effectiveness of the entity plan in containing costs through incentive and utilization management."

Contractors would be paid a management fee for administering a drug plan as well as be reimbursed for the costs of drugs provided to beneficiaries.

However, part of the management fee would be at risk to ensure that the company "pursues performance requirements" laid out in the bill.

The performance requirements include "control of Medicare and beneficiary costs," as measured by generic substitution rates, price discounts and other factors to be determined by HHS.

"Quality clinical care" would be another performance requirement to be determined by the "level of adverse drug reactions and medical errors" among beneficiaries and "providing specific clinical suggestions to improve health and patient and prescriber education."

A PBM's "quality service" performance requirement would be measured by "sustained pharmacy network access, timeliness and accuracy of service delivery in claims processing and card production, pharmacy and member service support access, response time in mail delivery service, and timely action with regard to appeals and current beneficiary service surveys."

HHS would be able to withhold up to 100% of management fees tied to performance. However, to maintain program "stability," HHS could not set the percentage "at a level that jeopardizes the ability of an eligible entity to administer and deliver the benefits," the bill says.

HHS would also be permitted to take into account each plan's population: "to the extent that an eligible entity is at risk," the bill states, payment procedures can include "a methodology for risk adjusting payments...based on the differences in actuarial risk of different enrollees being served."

Plan sponsors would have to report rebates and discounts received from manufacturers, which could result in lower HHS payments to the plan.

HHS "may establish procedures for reducing the amount of payments to an eligible entity...to take into account any rebates or price concessions obtained by the entity from manufacturers of covered outpatient drugs."

The bill language generally follows the specifics Graham outlined previously. The bill includes a $25 monthly drug premium with $4,000 stop loss coverage, leaving no coverage gap. It sunsets Jan. 1, 2011 to fit under the Senate budgetary cap.

The three-tier copay structure requires a $10 copay for generics, $40 for preferred brands and $60 for non-preferred brands (² Also see "Senate Medicare Rx Bill Uses Fixed Co-Pays; House May Take Two Tracks" - Pink Sheet, 17 June, 2002., p. 28). However, the PBM could "require cost-sharing that is higher for a nonformulary drug that is higher" than the $60 fixed copay, but could not exceed the negotiated price for the drug.

Beneficiaries could receive "medically necessary" non-preferred drugs if a formulary drug were determined "to have a significant adverse effect on the enrollee."

Beneficiaries would receive "access to negotiated prices (including applicable discounts) for payment for covered outpatient drugs, regardless of the fact that only partial benefits may be payable under the coverage with respect to such drugs because of the application of cost-sharing," the bill adds.

HHS would award at least two contracts in each of at least 10 service regions. Contracts would last for at least two and no longer than five years. A PBM could "submit a single bid for multiple areas if the bid is applicable to all such areas," the bill says.

The bill also includes a provision that would require HHS to conduct studies on "the feasibility and advisability" of "establishing a uniform pharmacy benefit card" and the development of an electronic prescription system within two years of enactment. The House Medicare Rx bill mandates that plan sponsors should have electronic prescribing capability.

The General Accounting Office would also initiate a study analyzing the Medicare drug benefit within nine months of enactment of the Graham bill.

The GAO study would assess "(1) the extent to which the competitive bidding process under such program fosters maximum competition and efficiency; and (2) the savings to the Medicare program resulting from such outpatient prescription drug program, including the reduction in the number or length of hospital visits."

Daschle said during a press conference June 19 that he expects the Senate will take up the Medicare Rx bill in early July.

Daschle indicated that Senate Democrats intend to attach at least two amendments to the legislation: the McCain/Schumer bill which makes adjustments to the Waxman/Hatch generic drug provisions and a bill authorizing reimportation of prescription drugs into the U.S. Daschle said he would support the addition of the two amendments.

Democrats want to push for McCain/Schumer because generics are "only at 40% of the market today and our goal is to make it at least 60% of the market within the next five years," Daschle said.

Sen. Jay Rockefeller (D-W. Va.) is expected to release his generic drug reform bill shortly (see ³ Also see "Rockefeller Generic Rx Bill Would Penalize Brands For Failed Patent Defense" - Pink Sheet, 24 June, 2002. ).

"The second issue is reimportation," Daschle explained. "We think that if you can buy drugs that are cheaper...somewhere else, Canada or other country, you ought to have the chance to buy them here. There should be an international opportunity for purchasers."

Sen. Byron Dorgan (D-N.D.) introduced legislation that would allow pharmacists and wholesalers to reimport FDA-approved drugs from Canada (⁴ Also see "Blame Canada: Rx Reimportation To Be Subject Of Senate Hearing" - Pink Sheet, 29 April, 2002., p. 29).

Sen. Debbie Stabenow (D-Mich.) is also understood to be interested in offering her bill that would limit direct-to-consumer advertising as an amendment to the Medicare Rx bill (⁵ Also see "Senate DTC Bill Is Latest Candidate For Inclusion In Bioterrorism Conference" - Pink Sheet, 13 May, 2002., p. 10).

PBM Quality Comparisons Feature In Senate Dems’ Medicare Rx Bill

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