Drug Companies’ Lobbyist May Push to Expand U.S. Payments

Drugmakers may push to boost U.S. government spending on prescription drugs even as the U.S. Congress seeks to reduce health-care spending, according to internal documents from the industry’s top lobbying group.

The staff of the Washington-based group wants to expand the structure of the Medicare prescription medicine benefit known as Part D to other programs, according to the documents, which have been sent to the group’s board for final approval. Since 2006, the U.S. has spent $336 billion on the benefit, which enables recipients to choose coverage from private insurance plans governed by federal rules.

Making more Medicare programs similar to the Part D benefit would increase the negotiating power of the Pharmaceutical Research and Manufacturers of America group’s members, which include New York-based Pfizer Inc. (PFE) and London-based GlaxoSmithKline Plc. (GSK)

“Pricing and access controlled by the market, but big payments by the government,” said Erik Gordon, a business professor at the University of Michigan in Ann Arbor, in a telephone interview. “It’s the best of both worlds.”

Castellani Speech

John Castellani, president and chief executive officer of PhRMA, may talk about the group’s priorities tomorrow when he is scheduled to speak at the National Press Club on the policy choices faced by national and state lawmakers.

Matt Bennett, a spokesman for PhRMA, declined to say specifically what Castellani would say, only that he would talk about a “variety of issues.”

The staff said the group also should push for more access to drugs through state health exchanges to be established in 2014, according to the documents.

PhRMA staff said they would wait to determine specific lobbying action until they had “a better sense of how the political and legislative dynamics are developing,” according to the documents.

The report was presented to the board in July as lawmakers may look to restructure Medicare under constrained budgets and as the 2010 health law takes effect. Matt Bennett, a PhRMA spokesman, said the documents were prepared to give the board of sense of the future “landscape” for the industry. He declined to comment on the board’s response.

The Part D program in Medicare, the U.S. health program for the elderly and disabled, is “the best available framework for sustaining access to new medicines in an environment demanding cost containment,” according to the PhRMA documents.

Centralizing Government

“This position is grounded in the experience demonstrating that the principal alternative, centralized government decisions about the value of medicines, is nearly always used to restrict rather than improve access to medicines and should be avoided,” the documents said.

A Part D model in other parts of Medicare, such as those that cover payments for physicians and hospital care, would help drugmakers, said Joshua Cohen, senior research fellow at the Tufts Center for the Study of Drug Development in Boston.

“PhRMA doesn’t want reimbursement rate cuts for doctors and price controls,” Cohen said. “And even though PhRMA doesn’t have a direct interest in what hospitals get paid, they don’t want there to be some kind of strict budgeting of what hospitals can and cannot afford and can and cannot spend.”

Highest Priority

PhRMA staff suggested placing the highest priority on rules governing access to medicines and said they could accept modest changes in the Medicare eligibility age, according to the documents.

The report didn’t propose specific lobbying strategies. Instead, the staff said the group should continue to tout the success of Part D and its importance as a model for future reform until a plan is developed.

The U.S. Department of Health and Human Services last month said average monthly Part D premiums for 2013 will remain constant for the third year in a row. Premiums are projected to be about $30, 50 percent less than original estimates, according to PhRMA.

The lobbying organization would also like to use the example of Medicare Part D to shape how states set drug coverage under insurance marketplaces known as exchanges. The exchanges are scheduled to come into effect in 2014 under the federal Affordable Care Act approved in 2010.

Insurers Reaction

Insurers may not be on board. Health insurers can provide cost-effective drug coverage in the state exchanges “absent specific Part D restrictions that constrain our ability to fully mobilize our tools to provide even more value to consumers,” Daniel Durham, executive vice president of policy and regulatory affairs for America’s Health Insurance Plans, the lobbying groups for insurers, wrote in January to HHS.

The insurance group declined to comment on PhRMA’s Medicare proposal, Robert Zirkelbach, a spokesman, said in an e-mail.

PhRMA staff recommended the group work to allow patients maximum access to medicines by extending coverage through the state exchanges to more drugs rather than limited payments to a smaller group of preferred treatments.

One strategy to expand access would be to push for protected classes of drugs, which are categories of medicines, such as antidepressants, in which Medicare requires every therapy available be covered by insurers.

“They have gotten away from the political theory rhetoric,” Gordon said. “PhRMA is much more sophisticated. They’ve gotten into the argument that this is the most effective way of doing it. It is a pocketbook argument.”

The drug organization’s staff said their approach to the exchanges may face challenges from health plans and small employers because it could increase premiums.

To contact the reporter on this story: Anna Edney in Washington at aedney@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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