ASHP Government Affairs Legislative Issues Summary September and October 1999 Vol. 6/Nos. 8 and 9

• Congress Looks Into Internet Pharmacy/Prescribing Practices
• More on Drug Coverage for Seniors
• Congressional Developments Regarding Confidentiality and Privacy
• MedPAC Report to Congress: "Rethinking Medicare´s Payment Policies for Graduate Medical Education and Teaching Hospitals"
• Senate Aging Committee Looks at Medicare HMO Drug Benefits

• Adding “SPICE” to Medicare—Bipartisan Bill Seeks to Expand Access to Drug Coverage for Seniors
• Senator Grams Introduces Medicare Drug Benefit Legislation
• Senator Jeffords Introduces “DrugGap” Legislation to Lower Drug Costs for Seniors
• Jeffords/Graham Bill Provides Coverage for Preventive Services
• Alternatives for A Medicare Prescription Drug Benefit—Providing Federal Grants to State Medicare Drug Programs

Congress Looks Into Internet Pharmacy/Prescribing Practices

At a July 30, 1999, hearing, entitled "Drugstores on the Net: The Benefits and Risks of Online Pharmacies," the House Commerce Committee, Subcommittee on Oversight and Investigations, heard testimony from a variety of witnesses including consumers, the Food and Drug Administration (FDA) and representatives of PlanetRx.com and Drugstore.com. The hearing focused on striking the correct balance between regulating e-commerce for patient safety, while not over-regulating legitimate Internet sites that utilize appropriate safeguards. William Razzouk, Chairman and CEO of PlanetRx.com, aptly summarized the goal of the hearing: "The question before us then, is how to eliminate unprincipled operators, while fostering the responsible, legitimate online pharmacy business in a way that will benefit consumers and protect their health interests."

Consumer witnesses emphasized that online pharmacies provide consumers with low cost, easily available pharmaceutical products at their fingertips. The representatives of the two popular on-line pharmacies stressed that their organizations operate just like traditional neighborhood pharmacies: authenticating prescriptions before filling them, confirming that the prescribing physician is a properly licensed physician with a current DEA number, and acting merely as a dispenser and not a prescriber of drugs — and therefore not interfering with the physician-patient relationship.

Two television news reporters testified and shared with the Subcommittee the results of their investigations into illegitimate web sites. Several sites allowed for very easy access to Viagra and other potentially dangerous drugs, without verifying (or even requiring) a prescription or evaluating the patient´s health history.

FDA Center for Drug Evaluations and Research Director Janet Woodcock, M.D., testified that the FDA has increased the number of Office of Criminal Investigations employees focused on Internet pharmacy issues from ten to twenty as part of an agency effort to track sites that illegally distribute prescription drugs.

Woodcock reported that the FDA will focus online drug sales enforcement activities on unapproved new drugs, fraud, and drugs sold without a valid prescription.

Federal Trade Commission Bureau of Consumer Protection Director Jody Bernstein provided the Subcommittee with the results of an FTC investigation which found that 70% of the pharmacy web sites were registered to a U.S. address and 40% provided a physical address on the site. 80% offered an online consultation as a way to obtain a prescription and most required a consultation. But 20% of the sites sold prescription drugs without a physician´s prescription and only four sites appear to require the patient to provide a prescription from the patient´s own physician before they sell the drug.

On the heels of the hearing, Representative Ron Klink (D-PA) introduced legislation mandating that online pharmacies provide identifying information on their web sites, and giving FDA the authority to determine which states would be allowed to have "primary enforcement responsibility." Introduced on August 5, the "Internet Pharmacy Consumer Protection Act" would require web sites to list the states in which the pharmacy and pharmacists are licensed. If the site provides medical consultations for prescriptions, the prescribers´ names and licensing information must be listed.

More on Drug Coverage for Seniors

Senate Health, Education, Labor and Pensions Committee Chairman James Jeffords (R-VT) is reportedly crafting legislation to create a Medigap policy that exclusively covers prescription drugs and that will be available to low-income beneficiaries (approximately 150% of poverty) who are not Medicaid-eligible.

In other Medicare reform developments, key Senators have intimated that "means-testing" Medicare benefits (i.e., requiring wealthier seniors to pay more for the entitled benefits) is not off the table. Senators John Breaux (D-LA) and Richard Bryan (D-NV), both members of the Senate Finance Committee, have publicly supported means-testing as a cost control measure. During a July 22, 1999, hearing before the Senate Finance Committee, Health and Human Services Secretary Donna Shalala reported that President Clinton remains open to an income test, but not for the drug benefit alone.

Congressional Developments Regarding Confidentiality and Privacy

As reported in the last issue of ASHP Government Affairs Legislative Issues Summary, a comprehensive financial services overhaul bill passed by the House contained provisions designed to address health data privacy. Amid a maelstrom of criticism that the provisions would actually jeopardize privacy, congressional conferees appointed to work out differences between the House- and Senate-passed versions of the bill have been instructed to drop the medical privacy provisions in the House version of the bill.

In other developments, the U.S. General Accounting Office (GAO) issued a report at the end of July that criticizes the Health Care Financing Administration´s (HCFA) policies and practices for protecting the privacy of personally identifiable information being transmitted between and among contracting fiscal intermediaries and carriers. The report, entitled "Medicare: Improvements Needed to Enhance Protection of Confidential Health Information," states that HCFA does not always clearly inform Medicare beneficiaries how their information is being used, and reports that the Office of the Inspector General "continues to find vulnerabilities in HCFA´s and its contractors´ management of electronic information that could lead to unauthorized individuals reading, disclosing, or tampering with confidential information."

In response, HCFA officials have stated that the agency intends to take new steps to protect beneficiary information, while pointing out that over the past four years, the agency has received only seven complaints regarding the inappropriate disclosure of information.

To view the GAO report, go to: http://www.gao.gov/new.items/he99140.pdf (PDF File, requires an Acrobat Reader, which is free).

ASHP members may also be interested in viewing a comprehensive report that compares state laws governing privacy and confidentiality and highlights areas where federal legislation is needed to fill in the gaps. The Georgetown University Health Privacy Project´s state-by-state survey of privacy laws is available online at http://www.healthprivacy.org/.

MedPAC Report to Congress: "Rethinking Medicare´s Payment Policies for Graduate Medical Education and Teaching Hospitals"

As directed by the Balanced Budget Act of 1997, the Medicare Payment Advisory Commission (MedPAC) issued a report to Congress in August 1999 making recommendations regarding: changes in federal policy affecting graduate medical education (GME), Medicare´s payments to teaching hospitals, and federal health care workforce issues. MedPAC was also directed to examine and make recommendations regarding Medicare´s current support for nursing and allied health professions training programs. ASHP-accredited pharmacy residency programs are currently eligible to receive Medicare payment for approved GME activities.

Principal among MedPAC´s recommendations in the August report is the suggestion to combine indirect medical education (IME) payments and direct medical education (DME) payments into one lump sum to be paid on the basis of the diagnosis-related group (DRG) system. MedPAC´s rationale for combining the two is that Medicare should compensate teaching hospitals for the enhanced quality of care provided, rather than paying for the teaching per se. The report also states, "...the direct costs attributed to GME programs also reflect [enhanced] patient care, and that Medicare´s payments for such costs should be viewed in this manner and not as payment for training" (emphasis added).

The report also recognizes that Medicare should pay for patient care in teaching settings other than hospitals, while recognizing that it may take some time to develop an enhanced patient care adjustment for care provided outside the hospital. This is an issue that MedPAC will continue to work on. The report does specifically recognize that "care may be enhanced by the presence of other types of health professional training programs."

The Commission´s report concludes by laying the foundation for MedPAC´s upcoming agenda in the area of GME. In the coming months, MedPAC will consider whether differences in patient care associated with other health professionals´ training programs justify similar payment adjustments.

Senate Aging Committee Looks at Medicare HMO Drug Benefits

At recent Senate Aging Committee hearing a representative of the U.S. General Accounting Office reported that the formularies used by Medicare HMOs vary widely in the prescription drugs that are covered, and that most Medicare HMOs cap yearly prescription drug coverage at $1,000. Beneficiaries, therefore, need to read the fine print and ask questions to determine the exact coverage of their plan.

Adding “SPICE” to Medicare—Bipartisan Bill Seeks to Expand Access to Drug Coverage for Seniors

The “Seniors Prescription Insurance Coverage Equity (SPICE) Act,” (S. 1480/H.R. 2782) was introduced by Senators Ron Wyden (D-OR) and Olympia Snowe (R-ME) with the companion bill introduced in the House by Representatives Frank Pallone (D-NJ) and Marge Roukema (R-NJ) in early August. The bill models a voluntary Medicare prescription drug benefit program after the Federal Employees Health Benefits plan intended to expand access to drug benefits for seniors.

Under the terms of the bill, all eligible Medicare beneficiaries would have access to “SPICE” drug coverage either through enrollment in an existing Medicare+Choice plan (e.g., a Medicare HMO), enrollment in a SPICE Medicare supplemental policy (i.e., Medigap plan), or coverage under a private group health plan. Low-income beneficiaries would receive assistance on a sliding-scale, with those under 150% of poverty receiving 100% financial support.

To fund the plan, the bill establishes a trust fund with monies from a $0.55 per pack increased tobacco tax, and with part of the on-budget surplus.

A “SPICE Board” would be established to administer the program and conduct studies on drug utilization, premiums and the impact of the program on private plans. The Board would also disseminates information to eligible beneficiaries and perform certain quality assurance functions, such as approval of marketing materials to prevent “cream skimming.” The Board would have the authority to approve/deny the participation of drug benefit plans from participating in the program. The Board will also be directed to request the National Association of Insurance Commissioners (NAIC) to revise model standards for Medigap policies, to define “outpatient prescription drugs” and specify a threshold level of benefits for SPICE coverage. The NAIC will be directed to consider FEHBP benefits and other large group health plans.

Senator Grams Introduces Medicare Drug Benefit Legislation

Senator Rod Grams (R-MN) recently introduced legislation to provide a Medicare prescription drug benefit to all eligible beneficiaries. Under the “Medicare Ensuring Prescription Drugs for Seniors Act” (S. 1535) the government would fund 75% of the cost of the drug benefit. Beneficiaries above 135% of federal poverty level would pay a monthly deductible of $150, but the bill would not impose any spending limits. After the deductible is met, the government pays 75% of the cost of outpatient prescription drugs. Grams is proffering this limited approach to drug coverage as a means of providing assistance to seniors if their drug costs soar in a given month, and to provide catastrophic protection.

S. 1535 does not authorize the exclusion or payment denial for any specific covered outpatient drug, or specific class of covered outpatient drug.

Eligible pharmacies, as defined under the bill, must agree not to refuse to dispense covered outpatient drugs stocked by the entity to any Medicare beneficiary, and must agree not to charge any Medicare beneficiary more for drugs than the amount charged to the general public.

Participating pharmacies must also agree to offer to counsel, or to offer to provide information (consistent with State law respecting the provision of such information) to each Medicare beneficiary on the appropriate use of a drug to be dispensed and whether there are potential interactions between the drug and other drugs dispensed to the beneficiary; and to advise the beneficiary on the availability (consistent with State laws respecting substitution of drugs) of therapeutically equivalent covered outpatient drugs.

The bill also calls for the establishment of a Medicare Prescription Drug Payment Review Commission, an 11-member advisory commission charged with monitoring increases in drug costs, utilization levels and administrative costs stemming from the coverage of outpatient drugs through the Medicare program. The commission would be composed of individuals with expertise in the provision and financing of covered outpatient drugs.

Senator Jeffords Introduces “DrugGap” Legislation to Lower Drug Costs for Seniors

According to a plan summary issued on September 13 in his home state of Vermont, Senator James Jeffords’ (R) “DrugGap” plan would require benefit providers to offer their lowest discounted price for prescription drugs to Medicare beneficiaries for out-of-pocket purchases as well as insurance-covered prescriptions. This provision is similar to a provision in President Clinton’s plan to require contracting pharmacy benefit managers to provide a 10-15% discount on drugs for seniors making out-of-pocket purchases.

The Jeffords plan calls for a restructuring of the existing 10 Medigap plans to address the lack of drug coverage in the plans. The legislation would also create three new drug-only Medigap plans with varied out-of-pocket costs and spending limits.

Jeffords sees the plan as a short-term fix to assist low-income beneficiaries who are not Medicaid-eligible, while not standing in the way of broader Medicare reforms.

Jeffords/Graham Bill Provides Coverage for Preventive Services

Along with Democrat Bob Graham (FL), Senator James Jeffords (R-VT) recently introduced the “Medicare Wellness Act.” A more limited approach to drug coverage, this measure would waive beneficiary cost-sharing obligations for preventive services (e.g., screening services for hypertension, glaucoma, vision and hearing loss, osteoporosis and cholesterol, counseling for tobacco cessation and hormone replacement therapy options), and would add seven new preventive benefits to the Medicare program. The bill would also fund prevention-related research and provide for education on preventive health care.

Alternatives for A Medicare Prescription Drug Benefit—Providing Federal Grants to State Medicare Drug Programs

House Commerce Health Subcommittee Chair Michael Bilirakis (R-FL) has proposed a plan to assist states in establishing and expanding programs to help low-income beneficiaries obtain prescription drugs and establishes federal stop-loss protection for beneficiaries who have high annual prescription drug costs.

The Bilirakis bill would provide federal financial assistance (in the form of block grants) to states for the provision of outpatient prescription drug coverage for low-income Medicare beneficiaries. The plan would also provide stop-loss protection for outpatient prescription drug expenses, covering out-of-pocket expenditures for Medicare beneficiaries whose drug costs exceed $1,500 per year. Prior to reaching the $1,500 threshold, beneficiaries would pay a $500 deductible and up to 50% cost-sharing.

Bilirakis has made it clear that his plan would not be an expansion of states' Medicaid programs, nor would the Medicaid rebate system apply.

During a September 28 hearing to address seniors' access to drug coverage, Robert Reischauer, senior fellow at the Brookings Institution, told the House Commerce Committee, Subcommittee on Health and the Environment, that expanding state pharmaceutical assistance programs could take two to three years. Reischauer noted that only 14 states currently have pharmaceutical assistance programs, and therefore it would take some time for other states to implement similar programs. General Accounting Office Associate Director for Health Financing and Public Health Issues, Laura Dummit, added that of the 14 states with existing programs, only three are truly viable in their present form, and would need a lot of restructuring to be up to speed.

The powerful Health Insurance Association of America favors the approach of expanding state drug assistance programs, fearing other proposals that would require Medigap plans to cover prescription drugs.