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States Step In With Plans To Lower Prescription Drug Costs for Seniors
by Richard A. Sherer
Geriatric Times January/February 2002 Vol. III Issue 1
"Zilch."
That was Gail Shearer's one-word response when asked about the chances for federal prescription drug legislation.
"I can't imagine any kind of drug benefit passing," she added. Shearer is director of health policy analysis in the Washington, D.C., office of Consumers Union. "Any change in Medicare: The chances are 0.1%. It is not going to happen. And I'll tell you a secret: It really was unlikely to happen before Sept. 11. Now it's definitely not going to happen."
In the best of times, the U.S. Congress has proven reluctant to tackle the thorny problem of rising drug prices for the nation's increasingly large pool of Medicare recipients, and the Bush administration's attempt at an end run around the lawmakers on the issue of a discount prescription card for Medicare beneficiaries ended in failure in the courts. Now, with Congress focused on security issues and tax relief, most experts believe that prescription drugs have dropped off Washington's radar screen.
Meanwhile, many states have taken up the cudgels. In 2001, five states passed legislation providing for subsidies for seniors and other low-income residents who depend on prescription drugs. This brings the total number of states with such plans to 26; five other states have programs that include other population groups as well. In addition, five states adopted legislation to improve or modify existing plans. Two groups of states are also exploring the idea of creating a buying pool that would enable government agencies to provide low-cost drugs to seniors, and one state is attempting to force pharmaceutical manufacturers to pay rebates into state coffers to provide prescription assistance. Arizona, Arkansas, California, Oregon, Texas and Wisconsin became the latest states to offer pharmaceutical assistance plans.
Arizona adopted a pilot program that will pay approximately 50% of enrollees' prescription purchases after they meet an annual deductible ranging from $500 to $1,000. The program is open to Medicare beneficiaries with an income of less than 200% of the federal poverty level (FPL) (which was set at $8,590 during 2001). Applicants must reside in a county that does not have a Medicare HMO or that has a Medicare HMO that does not provide drug benefits. The program is paid for out of tobacco tax money and will expire in October 2003 -- or earlier, if a federal program with equal or greater benefits is established.
In Arkansas, the legislature voted to seek a federal Medicaid waiver that would allow the state to provide prescription drug coverage for seniors whose income was 80% FPL (rising to 90% next year and 100% after June 2003). Eligible seniors would pay a $25 annual enrollment fee to participate in the program and would make co-payments of $10 for generic drugs and $20 for brand-name drugs. The benefit is limited to two prescriptions per month.
Like Arizona, Oregon tapped into cigarette taxes to offset some of the costs of its new "Senior Prescription Drug Assistance Program," which offers a state subsidy of up to 50% of the price Medicaid pays for a prescription drug. The subsidy may be increased by the U.S. Department of Health and Human Services, but it cannot exceed the Medicaid price for a drug. The subsidy is available to individuals 65 years or older with incomes up to 185% FPL. Enrollees may have no more than $2,000 in resources, not including their homes and cars. Benefits are capped at $2,000 per year, and the state is authorized to charge an enrollment fee of up to $50 a year. In addition, pharmacies may charge the same dispensing fee ($4.28) they receive from Medicaid.
A companion measure established a patient assistance program at Oregon State University College of Pharmacy. It is designed to assist low-income residents who are not eligible for public subsidy funds in obtaining access to patient assistance programs offered by pharmaceutical manufacturers.
In Texas, lawmakers set up a program aimed at the poorest Medicare recipients, with priority given to Medicare-Medicaid dual eligible beneficiaries. The legislation only gave broad direction to Texas' Health and Human Services Commission, with instructions to implement the plan by Jan. 1, 2002. The basic outline included optional co-payments, use of a formulary, authorization for payment for generic equivalents and creation of a utilization review mechanism.
Wisconsin included a drug subsidy provision in the state's 2001-2003 budget. It will cover seniors with incomes up to 240% FPL, with a $500 annual deductible for those with income above 160% FPL. There is a $5 co-payment for generic medications and a $15 co-payment for other drugs. The program is funded from Sept. 1, 2002 through June 30, 2003.
California, Maryland, Missouri, Nevada and New Jersey revisited their subsidy programs during 2001.
In Maryland, the original program was established after Medicare HMOs pulled out of parts of the state in 2000. Under the new provisions, the annual premium drops to $10, there is no deductible and the program is expanded to cover all parts of the state. However, there is a benefit cap of $1,000. Individuals with incomes up to 300% FPL are eligible for the program, and the state will subsidize a privately managed plan as well as the state-operated program.
Missouri replaced its $200 tax credit with a broad program to provide assistance for seniors with annual incomes of $17,000 for individuals or $23,000 for couples. The plan features deductibles of $250 or $500 and an annual enrollment fee of $25 to $35, plus a 40% co-payment. The annual benefit is capped at $5,000. There also is a so-called wrap-around provision that would encompass any future federal drug benefit program.
In addition to direct assistance, the Missouri program also raises the allowable income level for eligibility for the elderly blind and disabled program over three years to 100% FPL and creates a public education program designed to push quality drug programs and cost-containment strategies.
Nevada approved legislation raising the insurance subsidy for prescription drugs to a maximum of 100% of the premium and increasing the maximum state payment from $480 to $1,280 a year. The program will have a single plan for seniors with incomes up to $21,500. Maximum co-payments will be $10 for generic drugs and $25 for nongeneric drugs.
New Jersey expanded its existing pharmaceutical assistance to the aged and disabled (PAAD) program to include seniors with income up to $10,000 above the existing PAAD eligibility limits. The income eligibility ranges from $19,238 to $29,238 for individuals and $23,589 to $33,589 for couples. There is a $15 co-payment plus 50% of the "reasonable cost" of the prescription.
Late last year, California adopted a program that would ask pharmaceutical manufacturers for voluntary discounts for a pool of 1.3 million Medicare beneficiaries. The state plans to create a list of preferred drugs and to attempt to negotiate larger discounts for those products. In addition, the state will create a list of preferred manufacturers who provide the largest discounts. The new program is on top of a 25% average discount the state mandated in 1999. Legislators say they are ready to introduce a mandatory program if manufacturers do not participate in the voluntary plan.
Maine's Rx Program currently is being challenged in the courts by the Pharmaceutical Research and Manufacturers of America (PhRMA), and last October, the U.S. Supreme Court asked the federal government for its opinion on the legality of the program. The Maine program would require manufacturers to pay rebates to the state to subsidize lower prescription prices for some state residents who are not eligible for Medicaid. The state would make manufacturers' participation in the program a requirement in order to sell to the Medicaid program.
Another far-reaching plan, Vermont's Pharmacy Discount Program, was suspended in June 2001, when the U.S. Court of Appeals declared that a waiver from the U.S. Health Care Financing Admin-istration (now known as the Centers for Medicare & Medicaid Services [CMS]) was invalid. The Vermont plan would have provided subsidies to seniors with incomes above 150% FPL who did not have drug coverage and for any individual with income up to 300% FPL who did not have drug coverage.
Eight states -- Connecticut, Maine, Massachusetts, New Hampshire, New York, Pennsylvania, Rhode Island and Vermont -- are currently exploring the possibility of creating a buying pool that would allow them to negotiate larger discounts for drug purchases. The talks are still at an early stage and could potentially include the states' Medicare programs. Another group of states including West Virginia, South Carolina, Missouri, Mississippi and Maryland may follow suit.
In a related move, Florida's Agency for Health Care Administration has launched a public-private partnership called "Florida: A Health State." In collaboration with Pfizer Inc., this program is designed to improve the health of Medicaid recipients and reduce the cost of the Florida Medicaid program. Through hospital-based disease management programs, onsite care managers will work with chronically ill patients on a regular basis. Care managers will use disease management software designed by Pfizer's clinical informatics subsidiary and the pharmaceutical company will donate any prescribed medications that it manufactures. (To find out what other pharmaceutical companies are doing to help seniors with prescription costs, please see the related article "Pharmaceutical Companies Offer Discount Plans to Seniors"--Ed.)
On the federal level, CMS is moving forward with plans for notice and comments on a national prescription discount card that would give seniors 10% to 25% discounts off retail prices. The program has received 28 applications from pharmacy benefit managers and consumer and retail pharmacy organizations to offer discounts and drug benefits. Tom Scully, CMS administrator, told the press, "We believe a drug discount plan is a first step to provide needed help to seniors -- but not a substitute for a drug benefit."
