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Drug Wars
As pharmaceutical prices skyrocket, who will be left holding the bag for prescription-drug costs?
By Susan Beck
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Business New Haven
6/20/2000
By: Michele Beck
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If you look at where health care is, it's drugs that keep people out of hospitals and nursing facilities and able to manage on their own.” This is not only the opinion of Elizabeth Geary, health program supervisor for the state's Department of Social Services. It is also a self-evident truth.
Everyone has an older relative whose ability to function - if not his or her very life - depends on one or more prescription medications. In fact, the average person on Medicare now takes more than four prescription medications every day, according to statistics assembled for U.S. Sen. Tom Daschle (D-S.D.), sponsor of legislation to create a Medicare prescription drug benefit.
As everyone also is aware, the cost of prescription drugs has been escalating at a rapid rate for years now. It is not usual for one refill to cost several hundred dollars. How, then, do senior citizens cope? And how might the addition of a Medicare prescription drug benefit change things both for seniors and the health-care industry as a whole?
Today, all citizens over age 65 are entitled to national health insurance through the Medicare program. Medicare pays for all or part of many health costs regularly incurred by senior citizens, but one area in which the program's deficiencies have become glaring is that of prescription drug costs.
Medicare does not, as a rule, cover prescription drugs, which are usually defined as drugs that are self-administered. There are a very few exceptions to this policy, including 1) immunosuppressive drugs needed after a Medicare-covered organ transplant, 2) FDA-approved oral cancer drugs, 3) diabetic supplies (other than insulin), and several others.
Since the passage of the Balanced Budget Act of 1997, an option called Medicare + Choice - the term for Medicare managed care - has been available which sometimes provides some prescription drug coverage. Anyone who opts for a Medicare + Choice plan gets all the coverages included in regular fee-for-service Medicare, plus some extra coverages, in exchange for being limited to certain doctors and facilities as with any managed-care program.
The extra coverages offered in Medicare + Choice programs often (but not always) include some prescription drug coverage. And frequently, the programs that do offer prescription drug coverage charge a monthly fee. ConnectiCare's Medicare + Choice program, for example, has a $0 premium - but offers no more prescription drug coverage than does regular Medicare. Anthem Blue Cross & Blue Shield's Medicare HMO charges a $79 monthly premium in the New Haven area, but does offer some prescription drug coverage - a $10 co-pay on generic drugs and a $25 co-pay on brand name products, up to a total annual benefit of $600.
Seniors who have very low income and very few assets - and who are seriously ill - may qualify for Medicaid (Title 19). According to Geary, Medicaid covers prescription drugs “upside down and backwards.”
Connecticut seniors with slightly higher incomes may be able to take advantage of the state's ConnPace program to help with their pharmacy bills. In order to qualify for ConnPace, a person must be 65 years or older (or 18 or over with a disability) and have a total annual income of no more that $14,700 if single, or of $17,700 (combined income) if married. Those who qualify then pay a $25 annual fee and a $12 co-pay on every prescription.
ConnPace does not contract with pharmaceutical companies to purchase specific drugs in quantity in order to get discounted pricing, as do many HMOs. Instead, the program receives rebates from drug companies based on the number of units billed. Because of this non-formulary approach, ConnPace program participants are under no pressure to use one drug rather than another, as often happens with HMO prescription drug plans.
There are currently 29,000 Connecticut seniors enrolled in ConnPace - not a very large number. The small numbers are due to the low income cut-off figure.
For older men and women who can afford them, Medigap policies can provide prescription drug coverage - for a price. Anthem Blue Cross & Blue Shield's two Medigap plans, for example, charge monthly premiums of $178.76 and $222.85, respectively. For those amounts subscribers get 50 percent of their prescription drugs paid for (after meeting a $250 deductible) up to an annual maximum of $1,250 (for the lower monthly fee) or $3,000 (for the higher fee).
The problem is, there are inevitably people whose income is not low enough to qualify for Medicaid or ConnPace, yet who cannot afford either the Medicare HMO plans with prescription drug coverage that charge a premium, or the still more costly Medigap policies. According to a recent White House press release, nationally, three out of five Medicare beneficiaries currently have no insurance coverage for prescription drugs.
“The guidelines [for ConnPace] are so low that a lot of people are above the income limit,” says Jackie Szonzo, a staffer at the Milford Senior Center who regularly helps seniors with billing problems. “If they're $100 over, they don't qualify. And with the HMOs, if their benefit is $1,000, after they exhaust their quarterly amount of $250 they have to pay full price. Prescription coverage in itself - the supplemental coverage to Medicare - is very expensive.”
Al Ragozzine, owner of Phil's Pharmacy in Milford, concurs. “There are people who fall through the cracks.”
The problem has been compounded by the fact that even those fortunate enough to be able to afford some kind of prescription drug coverage have found that coverage steadily shrinking over the years. Spokespersons for both Anthem Blue Cross & Blue Shield and Cigna confirm that they have had to cut back on their drug benefits due to the rising costs of pharmaceuticals.
“Increases of 20 to 30 percent have not been uncommon in recent years,” explains Anthem Blue Cross & Blue Shield spokesperson George Siriotis. Cigna has coped by completely eliminating the option of using brand-name drugs on its plans, according to spokesperson Howard Drescher. And as of next January 1, Cigna will phase out all Medicare coverage. The reason for the decision to eliminate the Medicare coverage was rising medical costs, Drescher said. Pharmaceutical costs have undoubtedly been key among these.
A growing recognition of the prescription drug crisis among senior citizens has led to a growing push in Congress to enact legislation that would create some sort of government-funded prescription drug benefit for Medicare beneficiaries. There are currently a number of senators and congressmen - as well as the President himself - who are proposing various approaches to the problem. While there are only a few weeks left before most congressmen and senators actively hit the campaign trail, there is still a chance of one of these being passed.
The Democratic approach, as seen, for example, in the bill introduced by Daschle last month, favors a universal program that would be guaranteed accessible and affordable (although on a voluntary basis) to all beneficiaries.
Many Republicans - and some Democrats - prefer a plan that takes a private-sector approach, allowing beneficiaries to choose among an array of private insurers' plans and providing premium assistance for seniors whose incomes fall below a certain level.
There is almost universal agreement that some kind of plan needs to be adopted. Even pharmacists and pharmaceutical companies - those who most stand to lose - concede the urgency of the need.
“I'm sure the rate of reimbursement would be very low and the volume would increase so the time we can spend with patients would decrease,” says Ragozzine of Phil's Pharmacy about the prospect of a new Medicare drug benefit. Still, he says, “I'm in favor of anything that will help people be more compliant with their medications.”
“We think Congress should pass legislation and expand drug coverage under an improved Medicare program,” says Jeff Trewhitt, spokesperson for the Pharmaceutical Research and Manufacturers Association.
The drug companies are adamant, however, that any legislation that is passed should create a private sector-based program, thereby avoiding government price controls. “We would consider it [a stand-alone Medicare drug benefit bill] as long as it took a private-sector approach,” says Trewhitt.
Rob Kloppenburg, director of public affairs for the Pharmaceutical Division of Bayer Corp., explains why the private-sector approach is so important: “If you get into price controls you limit the ability of the pharmaceutical companies to come up with new drugs.”
“Rationing or government mandated price controls would stifle innovation because they don't take into account the high cost of research & development, the growing cost of research,” adds Trewhitt. “Our member companies in 1980 spent $2 billion on R&D. In 1999, they spent $24 billion.”
Kloppenburg also notes that, while living in Canada and dealing with that country's government health care system, he found there were serious access issues that impacted the quality of health care - because the government ran the formularies.
“It might be cheaper to treat someone with a newer [more expensive] drug that would keep that person out of the hospital,” he points out.
Those who favor a universal government-controlled plan, however, claim that as long as coverage is in the hands of the private sector, people will inevitably fall through the cracks - and that preventing this is more urgent than financing the drug companies' R&D programs.
As the debate about how to fashion of Medicare prescription drug benefit heats up, we - as well as Congress - will have the opportunity to come to terms, in microcosm, with some of the basic and most thorny issues in the larger national health-care debate.
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