It will come as no surprise that the war over the Medicare Part D program (free subscription required) is continuing to heat up, with Republicans touting the benefits for seniors while Democrats describe the program as a giveaway to the large pharmaceutical firms on the backs of the taxpayers.
As I have noted before, the entire Medicare Part D program, from the original budget estimates (remember the Medicare Chief Actuary was threatened with dismissal by the Administration (subscription required) if he revealed the true cost of the program before the Congressional vote) to the hold-harmless provisions protecting private companies from losses to the failure of the legislation to allow the Feds to negotiate drug prices to the cumbersome, complex, confusing program itself to the likelihood for adverse selection due to the benefit design is enough to make your head spin. And that’s exactly what is happening amongst potential beneficiaries.
An article in the New York Times on Part D describes the problems politicians of all stripes are facing when attempting to educate their constituents about this program

The State of Mississippi has filed lawsuits alleging 86 pharmaceutical companies have defrauded the state’s Medicaid program of hundreds of millions of dollars through deceptive and fraudulent pricing and marketing of drugs.
The core of the issue appears to be that old pretense for pricing, Average Wholesale Pricing, or AWP. According to Insurance Journal,
“From fiscal 1999 to 2002, Mississippi’s prescription drug costs for its Medicaid beneficiaries shot up an average of 26 percent a year, (Attorney General Jim) Hood’s lawsuit said.
So the state first limited the number of prescriptions that its Medicaid enrollees could get each month to 7 from 10 — and then cut the number to 5, Hood added.
Mississippi charged the drug companies set so-called average wholesale prices artificially high. The state uses the prices to calculate reimbursement rates for physicians, pharmacies and other providers, the suit said.
“The Defendants have reinforced this tactic with other deceptive tactics such as covert discounts, kickbacks and rebates to providers, and the use of other devices,” the suit said.”
Mississippi has a well-deserved reputation as a litigation happy state but that is not to say Mr. Hood does not have a point about AWP, which has long been recognized as a meaningless basis for estimating drug pricing.
Firms involved in the dispute include Abbot Labs, Novartis, GlaxoSmithKline, and Pfizer.
What does this mean for you?
Watch closely, as Mississippi’s discovery process may uncover some interesting aspects of the whole drug pricing methodology.

Sen Wyden (D-OR) claims he has enough votes in the Senate to pass legislation authorizing the Secretary of Health and Human Services to negotiate for Medicare drug prices with pharmaceutical companies. Critics were quick to decry the move, with the pharma industry claiming such a move would not reduce prices, would be counter-productive, and unfair.
Which begs the question, if it would not reduce prices, why are they so concerned?
In any event, despite the present budget crunch and moves by the HHS Secretary to reject providing access to Medicaid for victims of Katrina and Rita due to the increased expense, pundits claim the measure is not likely to pass because “it faces strong opposition from the Bush administration, Republican leaders and the pharmaceutical industry” (Las Vegas Sun)
In a related development, a study was released that compared pricing under the Veteran’s Administration’s negotiated pharma arrangement to the new Medicare Part D card. The net –
– prices for 49 out of the 50 most common drugs were higher under the Medicare program than the VA; and
– the average annual cost of drugs would be $220 higher under Medicare than the VA.
The VA is the only Federal governmental unit that is permitted to negotiate directly wtih pharma firms. The study was conducted by Families USA.
What does this mean for you?
Higher taxes to pay higher prices for drugs, but perhaps that is better than the cost-shifting that would occur if the Feds got tough with pharma and squeexed them for lower prices.

Medicare’s Part D program is gaining momentum with several large for-profit health plans expanding on their plans to offer the program to seniors. Among the plans, Aetna, United Health Group, and Cigna are launching programs nationally, with Humana doing so in over 40 states.
According to the Detroit Free Press,
“Goldman Sachs projects that nearly 17.5 million seniors — about 41% of those eligible to participate — will enroll in the drug plan in 2006….Participating seniors will spend an average $792 for prescription drugs in 2006, excluding premiums, or 37% less than the $1,257 cost without the benefit, according to a July 2004 report by the Congressional Budget Office.”
That begs the question – why won’t the other 59% enroll? The reason is simple – their premiums will be higher than the anticipated costs. Thus, the seniors that will join up will be those who will financially benefit, and the ones who won’t see savings won’t enroll.
Doesn’t sound like a money maker for the PBMs, unless their losses are subsidized by Uncle Sam.
I still can’t figure out what makes this so attractive to private health plans.
Anyone?

The Medicare Part D marketing wagon train has hit the road, with CMS Director Mark McClellan leading the effort to convince skeptical seniors to enroll in the program. By all accounts, the effort has yet to hit its stride (free subscription required), as some seniors are confused about the coverage, while healthy seniors appear uninterested in the benefit, and the chronically ill are concerned that the benefits will not be rich enough.
I have been saying for some months now that Medicare Part D is a bad idea primarily because it does not take into account adverse selection. Simply put, the only people who will sign up are those who need the benefit. Others will not sign up until they get sick; while there is a financial penalty for delayed entry into the program, it is so small that it is unlikely to act as a deterrent. In fact, a study by Brandeis University of seniors using drug discount cards indicates the cards were purchased disproportionally by seniors who were already significant drug consumers.
It is therefore difficult to see how this program will be a financial success. Yes, the government will subsidize money losing plans (where those funds will come from is somewhat of a mystery), yes there will be some price concessions on individual drugs as pharmacy benefit managers negotiate better deals with manufacturers, yes some employers will save money by having the Feds pick up their retirees’ Rx costs. But the fundamental flaw is that seniors will only sign up if they get more out of it then they pay in premiums.
Unless and until someone figures out how to overturn human nature, Medicare Part D is a dead duck.

Jon Coppelman at Workers’ Comp Insider has a great post on the influence of lunches, meetings, and sales reps (detailers) on prescribing habits of physicians. The quick take – MDs who attended Vioxx lunches prescribed four times more than those who just met with detailers. Oh, they weren’t consuming vioxx at the lunches, just hearing about their wonders.
MDs were also paid $750 – $1000 to present at these educational gastronomic events. The presenters talked about related conditions, indications, etc. Jon notes:
“the participating doctors insisted that they are not flacks for the drug companies — they say that they answer questions at these sessions honestly and candidly. In the example of the migraine headaches above, the lead doctor mentioned the availability of generic medications, in addition to those made by the sponsoring company.”
These are pretty common events – almost a quarter million of these doctor presentations took place last year, compared to under 140,000 detailer sales calls. Figure 237,000 events x $750 honorarium per presenter, that’s $178 million.
While the investment was huge, “The return on investment for the presentations involving a doctor was twice that of the other sessions.”
What does this mean for you?
If you are seeking ways to “counter-detail”, you better have a big budget.