Drugmakers Set Drug Prices, Not Medicare PDPs

(Washington, DC)—A new report released today by the minority staff of the House Government Reform Committee examining prescription-drug price increases in the new Medicare prescription drug benefit is at odds with numerous studies documenting the savings the drug benefit is providing to seniors and fails to recognize that Medicare prescription drug plans (PDPs) do not set drug prices, but negotiate discounts with drugmakers, the Pharmaceutical Care Management Association (PCMA) said today. In addition, the report fails to acknowledge the savings available to seniors through increased use of generics and mail-service pharmacies.

PCMA is the national association representing America’s pharmacy benefit managers (PBMs). PBMs administer prescription drug plans for more than 200 million Americans with health coverage provided through small businesses, Fortune 500 employers, health insurers, labor unions, and Medicare.

“Regrettably, this new study ignores two fundamental cost-savings options available to Medicare beneficiaries: mail-service pharmacies and generic drugs. It also ignores recent news that premiums in the new drug benefit are 30 percent lower than anticipated,” said PCMA President Mark Merritt.

Mr. Merritt added, “According to two recent, separate analyses of Medicare drug prices on the top 25 drug seniors use most, Medicare PDPs are doing their part to hold down drug prices for seniors and disabled beneficiaries, especially when compared to what cash-paying consumers with no drug coverage would pay at pharmacies. Medicare PDPs do not set drug prices, but negotiate discounts based on what drugmakers choose to charge. PCMA’s own data shows that Medicare PDPs are generating deep discounts â?? averaging 35 percent at drugstores and 46 percent through mail-service pharmacies â?? while providing seniors access to a wide range of clinically proven brand-name and generic drugs.”

Using the Government Reform Committee’s minority staff report’s logic, one could in fact derive a completely different and opposite conclusion: by looking at the lowest-priced drugs, instead of an average, the report would find drug savings that are 14 percent deeper than the minority staff’s own analysis of these same basket of drugs (see below).

PCMA believes the Government Reform Committee’s report also contains the following flaws:

The Government Reform Committee’s minority staff report is at odds with other recent data showing meaningful discounts in Medicare part D. Recently, PCMA conducted an analysis of Medicare drug prices examining drug prices posted on Medicare’s “Prescription Drug Plan Finder” for the top 25 drug products most commonly used by seniors in five national prescription drug plans (PDPs). PCMA’s analysis of drug prices was based on PDP negotiated prices of February 3, 2006. The findings are contained in a recent report, Medicare Drug Discounts Real & Holding Steady. PDPs are saving the Medicare program and beneficiaries an average of 35 percent on medications purchased at retail pharmacies and 46 percent on medications purchased through mail-service pharmacies.

The Government Reform Committee’s minority staff report fails to include any generic drugs. Twelve of the top 25 drugs used by seniors â?? based on the number of prescriptions written â?? are generic drugs. Generics typically cost 30 to 60 percent less than their brand-name counterparts. In 2006, an estimated $11 billion in drug sales are expected to lose patents and generic alternatives for at least 15 branded drugs will become available.

The Government Reform Committee’s minority staff report fails to look at the savings available to seniors through mail-service pharmacies. All seniors have access to a Medicare part D plan providing access to prescriptions through mail-service pharmacies. Mail-service pharmacies typically provide a 10 percentage-point savings beyond the discounts available to seniors at chain drugstores and independent pharmacies. According to an August 2005 analysis from the Lewin Group, utilizing mail-service pharmacies to their full potential in Medicare would save seniors and the program $86 billion over the next ten years.
###

The Pharmaceutical Care Management Association (PCMA) is the national trade association representing America’s pharmacy benefit managers (PBMs). PCMA member companies provide pharmaceutical care management services to more than 200 million Americans.

Contact Information:
Phil Blando, 202-207-3614
Charles Coté 202-207-3605