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Part D 'Windfall Profits' Blasted

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The value of creating a larger government role in the negotiation of drug prices may be “overstated,” America’s Health Insurance Plans said last week in defending the prescription drug program under Medicare.

Indeed, AHIP said, creating a larger government role in the negotiation of rebates from drug manufacturers that would either compete with or take the place of the private plans that have successfully administered the Part D program “would be problematic.”

The only way it could achieve savings comparable to private plans would be establishing a national formulary akin to a VA-type system, the AHIP statement said.

Moreover, the AHIP statement said, “Part D prescription drug plans are exceeding expectations by offering more comprehensive benefits and lower premiums than originally anticipated.

“Plan sponsors have accomplished this by using tools and techniques to promote quality while holding down costs to beneficiaries, reducing medication errors, and promoting clinically sound drug usage,” the statement added.

AHIP’s comments were submitted to the House Oversight Committee at a hearing.

At the hearing, the panel charged in a report that switching drug coverage for poor seniors from Medicaid–a government run program–to the Medicare Part D program has resulted in “windfall” profits to drug companies and insurers.

The report said “taxpayers are paying far more for drugs under Medicare Part D than they do under Medicaid,” and that, “in effect, Medicare Part D has given the major drug companies a taxpayer-funded windfall worth billions of dollars.”

It said the “multi-billion dollar windfall is the result of a provision in the Medicare Part D law that switched drug coverage for the dual eligibles from Medicaid to Medicare Part D.”

The transfer took effect two years ago, the report said. “Since then, the drug manufacturers have been paid billions more for the drugs used by the dual eligible beneficiaries than they would have been paid if the dual eligibles had continued to receive their drug coverage through Medicaid.”

By contrast, in the statement it distributed at the hearing, AHIP said that seniors eligible for both Medicare and Medicaid under the Part D program–which it called “financially vulnerable” beneficiaries–”can expect to see exceptionally large savings because of the low-income subsidies the program provides.”

The AHIP statement said that more than 10 million Medicare beneficiaries receive the additional assistance the program provides, and that, on average, Medicare will pay more than 95% of prescription drug costs for low-income beneficiaries.

In defending the current system, AHIP said insurers are doing this by offering a range of prescription plans “with high quality coverage,” many of which go well beyond the minimum requirements of the 2003 law creating the program, the Medicare Modernization Act.

“Rather than establishing a one-size-fits-all benefits package, the Part D program creates incentives for plan sponsors to design different benefit packages that address beneficiaries’ needs in three key areas, cost, coverage and convenience.”

In its statement, AHIP also said it wanted to “emphasize the importance” of keeping confidential the insurance industry data that government officials are using to examine the program.

“The public release of highly sensitive proprietary information has the potential to fundamentally undermine the ability of Part D [insurance] plans to negotiate favorable terms with manufacturers,” AHIP said.


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