Nearly 400 organizations are opposing proposals to compel drug companies to give Medicare rebates for prescriptions dispensed to low-income beneficiaries. On Tuesday, they sent a letter to House members warning that such a change could increase premium costs by 20% to 40% for seniors and even limit access to drugs.
“We strongly urge Congress to reject any proposals that would undermine the current program's success in holding down premiums and taxpayer costs, while still producing high satisfaction rates among enrollees,” the letter states (PDF).
The lobbying campaign is a pre-emptive strike against budget negotiations that kick off on Monday when President Barack Obama releases his fiscal 2016 budget recommendations. The administration's budget proposals in recent years have included significant savings by implementing rebates for low-income Medicare Part D beneficiaries. Last year's budget included $117 billion in savings over a decade.
Similarly, legislation has been introduced in the House and Senate in recent years proposing similar plans. The most recent bills drew support exclusively from Democrats.
The idea is also certain to come up in the context of debating ways to pay for a permanent repeal of Medicare's sustainable growth-rate formula for paying doctors. In testimony last week before the House Energy and Commerce Committee, the AARP backed a prescription-drug rebate plan as one means of covering the roughly $140 billion price tag over a decade.
Supporters of implementing a rebate program point out that before the Medicare Part D drug-benefit program was created, low-income beneficiaries who were dually eligible for both Medicare and Medicaid got their drugs through Medicaid, which receives rebates from drugmakers. But that changed when Congress created the Part D program in 2003. It was claimed those rebates were not necessary because competition in drug plans would hold costs down. But now Medicare is on average paying more for drugs than Medicaid.
The campaign against requiring drug manufactures to pay rebates is being spearheaded by the Council for Affordable Health Coverage. That group's members include the Pharmaceutical Research and Manufacturers of America, the leading group representing the interests of drug manufacturers in Washington. Among the other signatories: the National Alliance on Mental Illness, the National Association of Manufacturers and the National Hispanic Medical Association.
“For the past 10 years, lawmakers have protected Part D's structure and its underlying market principles, and it is critical they continue to do so for years to come by rejecting short-sighted and harmful changes to the program,” Joel White, president of the Council for Affordable Health Coverage, said in a statement.
Opponents of a rebate program point to a study by researchers at the conservative American Action Forum, including former Congressional Budget Office Director Douglas Hotlz-Eakin, to back their arguments. That analysis found that implementing a rebate program could cause premiums to rise by as much as 40% for Part D beneficiaries.
But a 2012 article published by researchers in Health Affairs questioned the validity of that analysis. In particular, they argued that the American Action Forum study assumed that drug manufacturers had been charging lower prices than the marketplace would allow.
“The notion that the industry consciously has been pricing so as not to maximize profits flies in the face of decades of economic analysis of the industry,” wrote Jack Hoadley, of Georgetown University's Health Policy Institute, and Harvard University's Richard Frank. “Therefore this concern does not likely pose a meaningful risk to the effectiveness of the Medicare drug-rebate proposal.”
Hoadley said that there's no reason to believe that the basis for their conclusions has changed in the ensuing years and that he supports the proposal to implement a rebate program for the Medicare prescription-drug program. He points out that the high cost of brand-name drugs has been a particular source of controversy since six-figure hepatitis C treatments entered the marketplace.
“I think the proposal makes a lot of sense,” Hoadley said. “There's lots of concern about high drug prices in general.”
But White compares the perennial debate over a Medicare Part D rebate program to Republicans' repeated futile efforts to repeal the Patient Protection and Affordable Care Act. “It's the same old tired idea,” White said. “We think there's better ways to spend our energy than to keep talking about the same idea that never goes anywhere.”
Follow Paul Demko on Twitter: @MHpdemko
