February 25 , 2010 – The agreement the drug industry believed it had reached with the Obama administration to limit its total contributions to health care reform seems to have been forsaken in the White House proposal released this week.
At the same time, provisions of the Senate legislation that extend 340B discounts to the hospital inpatient setting appear, at least for now, to have made it into the president’s health reform proposal.
The package of measures released by the administration Feb. 22 and discussed at a White House summit with Republicans today, largely mirrors the Senate health reform bill passed in late December.
But it borrowed some measures included in the House version of the bill that the Senate skipped, including provisions that would have a significant impact on the pharmaceutical industry. Most importantly, the Obama proposal would completely close the coverage gap, or “donut hole,” that many Medicare Part D patients eventually run into when buying prescription drugs.
Those House provisions had been left out in deference to the agreement the Pharmaceutical Research and Manufacturers of America (PhRMA) reached with the White House in mid-2009. That agreement limited PhRMA’s liability under health care reform to a total of $80 billion.
The industry organization opposed the House provisions that have now resurfaced in the Obama package, saying they would bump up its members’ costs by tens of billions of dollars.
Rebate program expanded
Under Obama’s proposal, for example, drug companies would be responsible for capping most of the “donut hole.” They would do so by providing rebates on drugs dispensed to Medicaid enrollees who are enrolled in, and receive their drug benefit through, Medicare Part D – so-called dual eligibles.
The Congressional Budget Office (CBO) estimated in 2008 that collecting manufacturer rebates on drugs dispensed to dual eligibles would provide $110 billion in additional revenues to the federal government over 10 years.
In completely eliminating the Part D donut hole, the Obama package would be replacing a much less far-reaching PhRMA proposal included under its 2009 agreement with the White House. That would only have cut the price of branded drugs dispensed to patients in the Medicare Part D coverage gap in half.
340B providers may benefit if Medicaid rebates rise
The Obama package retains the increase in the Medicaid rebate for brand-name drugs included in the House and Senate bills, but eliminates a rebate increase from the Senate bill on generic drugs. Under that provision, the rebate would rise from 15 percent to 23.1 percent, producing savings to the federal government that the CBO projects at $7.24 billion over 10 years.
This will likely also help 340B providers, since the 340B program uses a similar mechanism to calculate discounts.
A win for 340B inpatient legislation?
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Other Highlights from Obama’s Health Care Proposal
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The Obama package released to the media and published on the White House website does little more than summarize what the White House intends to include, but it says that the Obama legislation “extends discounts on drugs to hospitals and communities that serve low-income patients.”
That means, the Monitor has learned, that the 340B provisions that add inpatient coverage and extend coverage to additional new covered entities remain intact in the Obama measure.
Safety Net Hospitals for Pharmaceutical Access (SNHPA), an association of about 500 safety-net hospitals nationwide, pushed hard to convince the Obama administration to incorporate the Senate version rather than the House version of the health care reform bill.
“As our nation gets ready to usher in a new era of health care reforms, 340B hospitals and their pharmacies will remain the first stop for traditionally underserved individuals who need expensive pharmaceutical and biological treatments,” SNHPA wrote in a Feb. 18 letter to Nancy-Ann Min DeParle, the administration’s director of health reform.