Initial Thought on Committee “Chairman’s Mark”

By: Clarissa Crain, CIS Compliance Director
clarissacrain@cis-partners.com

On Wednesday, September 16th Senator Baucus, Chairman of the Senate Finance Committee, issued his Chairman’s Mark on America’s Health Future Act of 2009. The document outlines the Chairman’s proposals for reform. The plan is estimated to extend coverage to approximately 29 million uninsured Americans over a 10 year period, and cost approximately $856 billion. While the price tag is high, a factor in the lack of Republican support for the outlined reform, it is estimated to trim deficits by $49 million.[i]

The Chairman’s Mark is yet another piece in the ever evolving debate of healthcare reform. While Chairman Baucus and the Senate Finance Committee sought to present a unified, bipartisan position, support for the proposals is lacking. On Wednesday Baucus stood alone presenting the proposals, while Republican members of the Senate Finance Committee opposed the ‘costly and intrusive’ nature of reform, Democrats argued the proposals did not go far enough in ensuring access to affordable healthcare.

For those specifically interested in the impact of the proposals on Government pharmaceutical access programs, “Section V: Medicaid Prescription Drug Coverage,” presents proposals for reform to the Medicaid Drug Rebate Program (MDRP). Section V outlines the following proposals:

1. Prescription drug coverage would become a mandatory benefit within State Medicaid Programs. Today, states may elect whether or not to include this benefit. While all states in the Program currently do offer the benefit, the proposal would make such coverage a mandatory requirement for both categorically and medically needy persons covered by Medicaid.
2. The proposals would remove smoking cessation drugs, barbiturates, and benzodiazepines from the list of covered drugs. This would go into effect as of January 1, 2014.
3. Similar to the H.R.3200[ii], the current bill in the House, the Chairman’s proposals outline increases in manufacturer rebate liabilities. Single source (S) and innovator multisource (I) drugs would see an increase of the AMP basic rebate percentage from 15.1% to 23.1% for all drugs except those exclusively approved for pediatric use. Those with pediatric exclusivity would have a basic rebate percentage of 17.1%. While rebates would be increased, the total rebate liability for an S or I drug would be limited to 100% of AMP. (note: Best Price (BP) provisions are proposed to remain unchanged.)
4. The rebate on non-innovator or generic drugs (N) would be increased from 11% of AMP to 13% of AMP.
5. The rebate program would be expanded to make rebates payments for Medicaid managed care organizations (MCOs) utilization a requirement for manufacturers. The rebate payments would be made directly to states.
6. Line-extensions or other formulation changes of existing products would no longer be treated as new drugs for purposes of the MDRP. New versions of existing drugs would no longer be able to be associated with new baseline AMPs. Under the proposal, the original formulation’s baseline AMP would follow through to line-extensions. The only exemption to this would be line-extensions of orphan drugs.
7. Under the proposal of the Chairman, the Federal Upper Payment Limits (FULs) would be revised from the 250 percent as proposed by the DRA, to 175 percent (see Adam Fein’s Drug Channels Blog on this topic at www.drugchannels.net). Of interest to manufacturers, the utilization of FUL for pharmacy reimbursement is also associated with clarification on the inclusion of transactions, discounts, and other price adjustments in AMP and the disclosure of AMPs. Should this proposal be accepted, look for more changes in AMP calculations.

In addition to the changes proposed to the MDRP, Baucus’ plan includes the following provisions:

1. The plan refers to the 50% discount manufacturers have agreed to provide to the Medicare Part D program. The discount would be passed on the enrollees purchasing drugs in the “donut hole.”
2. Branded pharmaceutical manufacturers with sales of $5 million or more would incur a flat fee of $2.3 billion across the sector beginning in 2010. This non-deductible fee would be distributed across the industry according to market share.
3. Medical device manufacturers with sales of $5 million or more would incur a flat fee of $4 billion across the sector beginning in 2010. This non-deductible fee would be distributed across the industry according to market share. The only exemption to this payment would be sales of Class I products.
4. Drug manufacturers and distributors would be required to report information related to the number and type of drug samples provided to physicians, through “physician payment sunshine” type legislation.

It is important to note that these marks are only those of the Chairman. In the coming week it is expected that the Chairman’s marks will be debated within the Senate Finance Committee with concessions being made to gain at least some level of bipartisan support within the committee. It is then to be combined with another committee’s proposed bill and presented on the floor late this month or early next month. In the end, it seems inevitable that if healthcare reform legislation comes to fruition, pharmaceutical and medical device manufacturers will witness increased and/or changing compliance requirements and that the industries will be expected to help to shoulder the expense of increased coverage.

Sources:
Werner, Erica. Deep divisions over long-awaited health care plan. http://news.yahoo.com/s/ap/20090917/ap_on_go_co/us_health_care_overhaul. Accessed September 17, 2009.
H.R. 3200: America's Affordable Health Choices Act of 2009. http://www.govtrack.us/congress/billtext.xpd?bill=h111-3200
Chairman’s Mark. America’s Healthy Future Act of 2009. http://finance.senate.gov/sitepages/leg/LEG%202009/091609%20Americas_Healthy_Future_Act.pdf
Committee of Finance News Release. Baucus Introduces Landmark Plan to Lower Health Care Costs, Provide Quality, Affordable Coverage. September 16, 2009. http://finance.senate.gov/press/Bpress/2009press/prb091609a.pdf