Government-sponsored Medicare prescription drug fallback plans would be more widely available under a bill introduced by Sen. Edward Kennedy (D-Mass.).

Kennedy's bill, the "Defense of Medicare & Real Medicare Prescription Drug Benefit Act" (S 1992), would redefine how an administrative region would qualify for a fallback plan by requiring that each region have at least two stand-alone prescription drug plans.

The bill would eliminate the current provision allowing for a Medicare Advantage integrated drug plan to count as one of the two drug plans needed to avoid establishing a fallback plan.

Because stand-alone drug plans are considered a riskier business than integrated plans, requiring two stand-alone plans per region would likely result in more fallbacks being created.

During development of the Medicare Rx law, the pharmaceutical manufacturers expressed concern that private insurers would decline to offer the drug benefit in specific regions and the resulting fallback plan would evolve into a government-administered benefit (¹ Also see "Medicare Rx Poised For Passage; $26 Bil. In New Funding For Drugs In 2006" - Pink Sheet, 24 November, 2003., p. 3).

However, the Medicare law includes marketing prohibitions and other restrictions on contractors offering fallback plans, allaying some fears that the fallback would emerge as a de facto Medicare-run benefit (² Also see "Fending Off The “Fallback”: Medicare Rx Bans Marketing Of Backup Plans" - Pink Sheet, 12 January, 2004., p. 26).

Bills introduced by Kennedy and other Senate and House Democrats - including Senate Minority Leader Tom Daschle (S.D.), Rep. Chet Edwards (Tex.) and Rep. Peter Deutsch (Fla.). - in the days surrounding President Bush's Dec. 8 signing of the Medicare Rx bill represent the party's virtual wish list of changes to the legislation.

However, Bush's statement in his Jan. 20 State of the Union address that he will veto changes to the legislation suggests few of the proposals will be seriously considered in 2004 (see ³ [A#00660040014] ).

Most of the Democrats' bills would give HHS greater power to control Medicare drug costs through direct pricing negotiations with manufacturers. A bipartisan measure (HR 3707) by Reps Jo Ann Emerson (R-Mo.) and Dennis Moore (D-Kan.) has the same goal.

The Kennedy bill would put the responsibility of establishing drug formulary classes and categories in HHS' hands. The U.S. Pharmacopeia is charged with the task of setting those categories under the current law (⁴ Also see "USP To Help Set Formulary Rules Under Medicare Rx Bill" - Pink Sheet, 24 November, 2003., p. 5).

Formularies would be prohibited in the Medicare drug benefit "unless the classes and categories used under such formulary are such classes and categories as the [HHS Secretary] shall specify," the bill says.

Kennedy also plans to introduce a bill that would allow drug imports from Canada or EU countries.

The importation debate has focused on Canada recently, but drug manufacturers have already demonstrated their abilities to restrict supply to Canadian firms exporting to the U.S. (⁵ Also see "GSK Selling Direct To Canadian Pharmacies, Auditing Orders To Curb Imports" - Pink Sheet, 17 February, 2003., p. 16). Allowing a larger number of exporting countries would take away that means of undermining the system.

Kennedy told a Families USA conference Jan. 22 in Washington, D.C. that he would also like to see limits on direct-to-consumer advertising and promotions for drugs. He said if price negotiations, importation and DTC limits do not bring drug prices down, he will pursue more extreme measures.

"We will need to consider whether the federal government should create a national purchasing pool that will negotiate with the pharmaceutical industry to make prescription drugs available to all Americans at reasonable rates," he said.

His bill includes several provisions aimed at reducing Medicare beneficiaries' out-of-pocket drug costs.

The bill would phase in elimination of the coverage gap in Medicare and allow Medicaid wrap-around for dual-eligibles. S 1992 would also allow Medigap drug policies to provide wrap-around drug coverage to beneficiaries. Elimination of the assets test for Medicare beneficiaries is also called for under the bill.

"To ensure that premiums of Part D eligible individuals are not increased as a result of this Act," the bill summary says, HHS would provide adjustment in payments to PDP sponsors and Medicare Advantage organizations providing prescription drug plans.

Medicare Rx Fallback Plan Would Be More Likely Under Sen. Kennedy Bill

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