Final report of the Senate Study Committee for Developing a Federally Funded Prescription Drug Benefit for Seniors / prepared by the Office of Senate Research

Bill Littlefield Managing Director
Martha Wigton Director

The State Senate
Senate Research Office
204 Legislative Office Building 18 Capitol Square
Atlanta, Georgia 30334

Telephone 404/ 656 0015
Fax 404/ 657 0929

FINAL REPORT OF THE
SENATE STUDY COMMITTEE FOR DEVELOPING A FEDERALLY FUNDED PRESCRIPTION DRUG BENEFIT FOR SENIORS
COMMITTEE MEMBERS: Senator Tate of the 38th, Chairperson Senator Price of the 56th, Senator Ragan of the 11th, Senator Stokes of the 43rd and Senator Thomas of the 10th

2001
Prepared by the Office of Senate Research

CREATION AND DUTIES The Senate Study Committee on a Federally Funded Prescription Benefit for Seniors was created by Senate Resolution 262 and appointed by Lieutenant Governor Mark Taylor. The Committee was charged with conducting a study of viable solutions to offer elderly Georgians affordable pharmaceutical costs. The Lieutenant Governor appointed Senator Tom Price, Senator Harold Ragan, Senator Connie Stokes, Senator Nadine Thomas and Senator Horacena Tate as committee members, with Senator Horacena Tate serving as Committee Chair. The legislative staff members assigned to the committee included: Clemmie Riggins, Legislative Assistant to Senator Tate; Dodie Lawton, Office of Senate Research; and Sandy Laszlo, Office of Legislative Counsel.
SCOPE OF THE COMMITTEE The focus of the committee was to examine prescription drug coverage for the elderly and disabled "who use a disproportionately high volume of prescriptions."1 These populations are more likely to have multiple conditions treated with pharmaceuticals. The committee held three public hearings: Savannah on July 16, 2001and Atlanta on August 7, 2001 and October 18, 2001. During the public hearings, the committee heard from various consumers, advocates and providers with knowledge and expertise in the areas of concern.
INTRODUCTION
There are three different payment sources from prescription drug purchases, 1990-1998.
Department of Health and Human Services, Office of Assistant Secretary for Planning and Evaluation (2000).
1Brian Bruen and John Holahan, Medicaid Spending Growth Remained Modest in 1998, But Likely Headed Upward (Washington, D.C.: The Henry J. Kaiser Family Foundation, February 2001).
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Pharmaceutical drug coverage has become an increasingly important part of health care. To a large extent, this trend is due to the introduction of new drugs that prolong life, improve the quality of life or replace more intensive and more expensive medical treatments.2 Just as there are different kinds of pharmacies and institutions that buy drugs, different revenue sources pay for drugs. The elderly are a percentage of our population that live on a fixed income and are on Medicare which does not offer a prescription drug benefit. The government states that 27 percent of the 40 million Medicare beneficiaries have no prescription drug coverage even though most of the beneficiaries take more than five medications per day. According to a recent study, seniors enrolled in Medicare without a prescription drug benefit fill fewer prescriptions than beneficiaries with drug coverage.
SUMMARY OF FINDINGS AND COMMITTEE RECOMMENDATIONS
MedBank
During the Savannah meeting on July 16, 2001, the committee heard testimony from Holly Smith, Executive Director, MedBank Foundation Inc. MedBank Foundation, Inc. is a 501(c)(3) volunteer organization that makes prescription medications available to the elderly, disabled and uninsured residents of Chatham and Effingham counties. "MedBank helps people access drug manufacturers' patient assistance programs to obtain prescription medications free-of-charge." MedBank staff and 55 volunteers provide an invaluable service to the community by filling out applications for prescription drugs to which residents would otherwise not have access. The signed and processed applications are mailed to the pharmaceutical companies and the physician receives a 30-90 day supply of the medication who in turn provides it to the patient. "MedBank's work reduces the incidence of emergency room visits, hospital and nursing home admissions attributable to involuntary non-compliance of medications. It increases selfsufficiency among senior citizens and the disabled. Since 1994, MedBank has assisted over 5,000 people."
The MedBank of Maryland Inc., now funded in part with state funds authorized in 2001, is the Central Coordinating Office for the statewide expansion and the Regional Coordinating Office for the Baltimore Metro area. The Maryland MedBank Program has a goal of serving 20,000 patients this fiscal year. The Maryland MedBank Program is administered by the Maryland Health Care Foundation with funding through the Maryland Department of Health and Mental Hygiene.3
It is a recommendation of this committee to develop five MedBank replication sites around the state. The total cost of one site for 12 months is approximately $147,913.00 with monthly expenses estimated at $8,773.00. In September of 2001, MedBank was awarded one of nine RFPs accepted by the Department of Community Health to help assist the uninsured.
2The Policy Book: AARP Public Policies 2001, 6-122.
3Http://www.medbankmd.org
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Pharmacy Benefit Managers (PBMs)
In the private sector, health insurers have become more active in managing their prescription drug benefits. Many insurers have turned to pharmacy benefit managers (PBMs) and mail-order pharmacies to help administer prescription drug benefits and/or reduce the costs of prescription drugs.4 Pharmacy Benefit Managers are private third parties that manage drug benefits for large groups of individuals, such as enrollees, in an insurance plan or employees of a self-insured company.
A fundamental difference between a PBM and a cash customer is that the cash customer has virtually no negotiation power with either the pharmacy or the manufacturer to lower prices. The PBM negotiates price discounts or rebates on behalf of large groups of customers and creates a formulary for its customers. In addition, rebates from manufacturers reduce the total amount that PBMs spend on drugs and these savings can be passed on to the insurer, employer, or beneficiary whose benefits are managed by the PBM.
It is a recommendation of this committee to develop a state-wide PBM for the uninsured elderly, not only for Medicare eligible individuals, but all seniors. It is the vision of the committee that all of Georgia's elderly population age 62 and older will eventually have access to this plan in the very near future.
Discount Pharmacy Card
In July of 2001, President Bush announced a new Medicare endorsed prescription drug discount card program designed to immediately help Medicare beneficiaries lower their out of pocket drug costs with enrollment beginning in November 2001.5 The presidential proposal has minimal federal costs and would primarily benefit Medicare beneficiaries with no coverage or limited drug coverage.6
Discount cards currently available in the marketplace include PBMs, some Medigap insurers, and retail drug stores. Many discount card programs charge an annual enrollment fee and enrollees present their card when they purchase a prescription. Discount cards are expected to save Medicare beneficiaries 10 to 25 percent on prescription drug prices. The cards are designed to give seniors greater purchasing power for their prescription drugs at a discount. Currently, six private sector or non-profit pharmaceutical discount cards are available in multiple states: AARP (Prescription Savings Service); Readers Digest (Your RxPlan); Citizens Health Corp (in CT, MA & RI); Novartis (CareCard); Glaxo Smith Kline (The Orange
4The Policy Book: AARP Public Policies 2001, 6-123.
5Http://www.hhs.gov/news/press/2001pres/20010712a.html
6U.S. Department of Health and Human Services Fact Sheet, (2001).
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Card) and, Pfizer (Share Card).7
It is a recommendation of this committee for Georgia to develop a discount pharmacy card for seniors age 65 and older. The purpose is to provide for coverage of prescription drugs that seniors are currently lacking by offering more negotiating power with drug manufacturers and more effective price competition.
OTHER STATES' INITIATIVES
The committee evaluated what other states are doing with regards to state pharmacy assistance programs. Many of the programs share common characteristics by providing benefits through direct subsidies or discounts. Rising state expenditures for pharmaceuticals may be attributed to eligibility expansions; an increase in prescription drug use among the elderly and persons with disabilities; new therapeutic agents for previously untreatable diseases; improvements in medical treatment guidelines for currently treated diseases; greater patient knowledge and, therefore, involvement in disease treatment; and rising health care expenditures in general.8 Eighty percent of the growth rate in overall pharmaceutical expenditures from 1994 through 1999 was related to an increase in utilization.9 In 1998 Medicaid payments for outpatient prescription drugs rose to $14.5 billion, from an estimated $4.8 billion in 1990, an increase of about 15 percent annually. In Georgia, average pharmaceutical expenditures per recipient increased by 20 percent in 2000.
The five most common state pharmacy assistance programs used by other states according to the AARP are: Direct Benefit Programs, Insurance Programs, Price Reduction Programs, Buying Pools, and Tax Credit Programs. Direct Benefit Programs are programs in which the state pays for all or part of the pharmaceutical costs. Insurance Programs are state-sponsored private or public stand alone insurance programs for prescriptions drugs that require payment of a premium, and are often used for lower income individuals. Price Reduction Programs have limitations on the prices that are charged for prescriptions, but do not pay for prescription drugs. Buying pools are state sponsored programs that enroll residents in a purchasing pool that contracts with private entities to negotiate discounts from pharmacies. Lastly, Tax Credit Programs provide state income tax credits for residents with high prescription drug costs.
* For further information please see the National Governors Association attachment for State
7National Conference of State Legislatures (NCSL), 2002, health policy listserve.
8National Governors Association Center for Best Practices, Issue Brief, State Pharmaceutical Assistance Programs, May 10, 2001.
9Ernest R. Berndt, "The U.S. Pharmaceutical Industry: Why Major Growth in Times of Cost Containment?" Health Affairs 20, no. 2 (March/April): 86.
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Pharmaceutical Assistance programs.10
CONCLUSION The recommendations provided in this report are just three critical components that the committee feels will help address the issue of a prescription drug benefit for seniors. All of our elderly citizens have contributed greatly to the growth of our state and have been an invaluable source of support for a great portion of their lives. Our elderly citizens have by and large been contributing members to our society with their talents and tax dollars and should be rewarded for their contributions to our great state. The programs outlined in this report that have been adopted by other states are quite diverse, varying in approach used, their target population, and in the amount of assistance provided to seniors. However, they all reduce the high costs of prescription drugs for seniors and/or Medicare recipients.
10National Governors Association. State Pharmaceutical Assistance Programs [online]. Updated December 17, 2001 [cited February 5, 2002]. Available from: <http://www.nga.org/cda/files/STATEPHARM.pdf>
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