Transcript Presentation - Consumer Project on Technology

State Strategies: Expanding
Prescription Drug Access
Dee Mahan
Families USA
November 1, 2002
U.S. Insurance Coverage for
Drugs: A Patchwork
Non-Elderly Population
23%
Medicare Population
27%
33%
61%
11%
12%
4%
1%
Employer Based
Medicaid
Other
18%
None
Private, non-group
10%
Source: Prescription Drug Trends,
Kaiser Family Foundation (November
2002)
With Individuals Paying Much of the Cost
Percent of US Drug Expenditures by Payer, Projected 2000
45
40
35
30
25
20
15
10
5
0
43.9%
34.3%
21.8%
Private Plans
Individuals
Government
Source: Prescription Drug Trends, Kaiser Family
Foundation (November 2002)
State Coverage Programs Help
• Medicaid
– State/Federal funded program for low-income
individuals
– All states currently cover prescription drugs
• Several states offer pharmacy assistance
programs
– 34 states have authorized or enacted programs;
programs operate in 27 states
– Eligibility usually limited to Medicare beneficiaries
But States Aren’t Addressing All
Needs
• Variations in income eligibility: examples of
state pharmacy assistance programs
• Kansas: $11,961
• Connecticut: $20,000
• New York: $35,000
• Variations in coverage: examples of state
pharmacy assistance programs
• Kansas: 30% co-payment, max covered $1,200/yr
• New Jersey: $5 co-payment for low-income
program
And Drug Spending Increases are
Squeezing States and Individuals
• Prescription drug spending rose 17.1% in 2001
• From 1997 to 2000, Medicaid spending on
prescription drugs rose at twice the rate of total
Medicaid spending
• In a survey, 44 states list prescription drugs as
one of the 3 most important factors increasing
Medicaid costs in 2002
Source: Prescription Drug Expenditures in 2001, National Institute
for Health Care Management (May 2002); Medicaid Spending
Growth, Kaiser Commission on Medicaid and the Uninsured
(September 2002).
Factors Contributing to Rising Drug
Spending
• Increased utilization
– More drugs being prescribed
• Increased use of higher cost drugs
– Physicians switching patients
• Increased drug prices
– Lack of true competition in the market
Factors Contributing to Rising Drug
Spending
Drug Company Spending and Profits, 2001
(Dollars in Millions)
Merck & Co., Inc.
Pfizer, Inc.
Bristol-Myers Squibb Co.
Abbott Labs.
Wyeth
$0
$2,000
R&D
$4,000
Profits
$6,000
$8,000 $10,000 $12,000
Marketing
Source: Profiting from Pain, Families USA (July 2002)
“Marketing” captures spending on “marketing, advertising and
administration.”
Price Increases: A Major Part of the
Spending Problem
• Study of calendar year 2001 price
increases for the 50 prescription drugs
most frequently used by seniors
– Prices rose nearly 3 times inflation
– Average increase for generics was 1.8%; for
brands, 8.1%
– Average annual cost of brand-name drugs
was $1,106 versus $375 for generics
Source: Bitter Pill, Families USA (June 2002)
Price Reduction Strategies
Targeting Manufacturers
• Negotiated Manufacturer Rebates
– Discount programs opened to the public;
rebates paid on drugs used by program
enrollees
– States negotiate additional rebates in their
Medicaid program
• Bulk purchasing
– Consolidating multiple state programs
– Multi-state purchasing pools
Elements of Price Reduction
Strategies
Reasons to Consider
Considerations
- Targeting manufacturers
can mean better discounts
than targeting pharmacists
- Drugs are made more
affordable
- Additional rebates for
Medicaid can mean other
cuts are avoided
- Rebate programs generally
include some limits on drugs
from mfrs that don’t offer
rebates; consumer
protections required
- Discounts are not
insurance coverage
- The drug lobby has brought
lawsuits to halt the programs
Other State Approaches
• Addressing anticompetitive behavior
– Attorneys General bringing pricing fraud and antitrust
lawsuits
• Addressing industry driven demand
– Using “counterdetailing” to offset drug industry
advertising
• Assisting patients to access manufacturer drug
cards and patient assistance programs
Status and Future Outlook
• States likely to pursue strategies to reduce
prices assuming success in court cases
• Still short of real price competition,
continuing need to remove barriers to
generic market entry