[Senate Hearing 109-780]
[From the U.S. Government Publishing Office]
S. Hrg. 109-780
INCREASING GENERIC DRUG USE:
SAVINGS FOR SENIORS AND MEDICARE
=======================================================================
HEARING
before the
SPECIAL COMMITTEE ON AGING
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
WASHINGTON, DC
__________
SEPTEMBER 21, 2006
__________
Serial No. 109-33
Printed for the use of the Special Committee on Aging
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SPECIAL COMMITTEE ON AGING
GORDON SMITH, Oregon, Chairman
RICHARD SHELBY, Alabama HERB KOHL, Wisconsin
SUSAN COLLINS, Maine JAMES M. JEFFORDS, Vermont
JAMES M. TALENT, Missouri RON WYDEN, Oregon
ELIZABETH DOLE, North Carolina BLANCHE L. LINCOLN, Arkansas
MEL MARTINEZ, Florida EVAN BAYH, Indiana
LARRY E. CRAIG, Idaho THOMAS R. CARPER, Delaware
RICK SANTORUM, Pennsylvania BILL NELSON, Florida
CONRAD BURNS, Montana HILLARY RODHAM CLINTON, New York
LAMAR ALEXANDER, Tennessee KEN SALAZAR, Colorado
JIM DEMINT, South Carolina
Catherine Finley, Staff Director
Julie Cohen, Ranking Member Staff Director
(ii)
C O N T E N T S
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Page
Opening Statement of Senator Herb Kohl........................... 1
Opening Statement of Senator Gordon Smith........................ 3
Opening Statement of Senator James Talent........................ 4
Panel I
Mark McCllelan, M.D., Ph.D., administrator, Centers for Medicare
and Medicaid Services, U.S. Department of Health and Human
Services, Washington, DC....................................... 5
Panel II
William Vaughan, senior policy analyst, Consumers Union,
Washington, DC................................................. 34
Timothy Antonelli, R.Ph., clinical program manager, Blue Cross
Blue Shield of Michigan, Southfield, MI........................ 46
William H. Shrank, M.D., MSHS, Division of Pharmacoepidemiology
and Pharmacoeconomics, Brigham and Women's Hospital, Harvard
Medical School, Boston, MA..................................... 55
APPENDIX
Prepared Statement of Senator Susan Collins...................... 77
Prepared Statement of Senator Ken Salazar........................ 77
(iii)
INCREASING GENERIC DRUG USE: SAVINGS FOR SENIORS AND MEDICARE
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THURSDAY, SEPTEMBER 21, 2006
U.S. Senate,
Special Committee on Aging,
Washington, DC.
The Committee met, pursuant to notice, at 10:06 a.m., in
room SD-562, Dirksen Senate Office Building, Hon. Herb Kohl
presiding.
Present: Senators Kohl, Smith, Collins, Talent, Nelson and
Lincoln.
OPENING STATEMENT OF SENATOR HERB KOHL
Senator Kohl. We will call this hearing to order now and
welcome our witnesses. As always, I thank Chairman Smith for
allowing us to put together this hearing.
Everywhere I go in my State of Wisconsin, I see how
prescription drug costs are a drain on seniors, families and
businesses, all of whom are struggling to pay their health care
bills. They need help, and we can respond by expanding access
to generic drugs. Generics, which on average cost 63 percent
less than their brand-name counterparts, are a big part of the
solution to health care costs that we all know are spiraling
out of control.
Prescription drugs make up 11 percent of national health
care spending, but are one of the largest and fastest growing
health care expenditures. The U.S. spent over $250 billion on
prescription drugs in 2005, with generics accounting for 56
percent of the prescriptions, but only less than 13 percent of
the cost. One study estimates that every 1-percent increase in
generic use can save up to $4 billion. That means that a modest
5-percent increase in generic use could save as much as $20
billion.
The private and public sectors are looking for relief, and
our Committee has heard some remarkable success stories from
some who have turned to generic drugs. General Motors, for
example, testified that in 2005 they spent $1.9 billion on
prescription drugs--40 percent of their total health care
spending--and their program to use generics first saves General
Motors nearly $400 million a year.
We know generic drugs have the potential to save seniors
thousands of dollars and curb health care spending for the
Federal Government, States, employers and families. Every year,
more blockbuster drugs are coming off patent, setting up the
potential for billions of dollars in savings, and so the
question is what are we going to do about it.
Well, first, we need to get the word out to Medicare
beneficiaries. This month, millions will exceed the initial
$2,250 drug benefit and will fall into what is called the donut
hole, where they must pay full price for their drugs. CMS needs
to steer seniors more so toward generic drugs to help them
survive the donut hole and publicize the 13 percent of drug
plans that actually cover generic drugs during this gap so that
seniors can seek out those plans during the open season.
Second, we need to do a better job of educating seniors.
Many are still reluctant to switch to generic drugs because
they think that expensive or brand name means better. Many
don't know or don't believe that generic drugs are just as safe
and effective as the brand-name drug that they see advertised
on television. Often, their own physicians compound the
problem. With little information available to doctors comparing
brand name to generics and patients demanding the newest drugs,
doctors too often prescribe medications that are more
expensive, but not necessarily more effective.
CMS and HARQ are currently compiling some comparative
information about different drugs that treat the same diseases,
but we need more comprehensive studies. We need to get this
information into the hands of doctors so that they can
prescribe better, and we should get it to the Medicare drug
plans, also, so they can consider it when designing their
formularies.
It is clear that generic drugs can be a big part of reining
in health care costs. The first battle in this fight is to
break through the roadblocks that stop generics from reaching
patients. In the agricultural appropriations bills, we are
boosting funding for the FDA to reduce their backlog in
approving generics, and I and others are also sponsoring
legislation to end back-room deals and frivolous citizen
petitions used by the pharmaceutical industry to prevent
generics from coming to market faster. It is also time to
create a system to approve generic biologics which are
increasingly used to treat disease, but currently have no
generic equivalents at all.
Once generics are on the market, it is just as important to
win the next battle, which is to make sure that every senior,
every family, every business and every government program knows
the value of generics and uses them to bring costs down. So we
look forward to hearing more from our panels.
Now, we turn to our Chairman, Gordon Smith, for his opening
comments.
OPENING STATEMENT OF SENATOR GORDON H. SMITH, CHAIRMAN
The Chairman. Thank you, Senator Kohl, and my thanks to you
for helping to organize this hearing and to your staff. We
appreciate so much the working relationship we have with you.
But, more, we thank you for all that you have done to help
seniors reduce their prescription drug costs and what you
continue to do.
I also want to make note of what I have been told. This may
be Dr. Mark McClellan's last Senate hearing. I don't know
whether that makes you happy or sad, but we are honored that
you would come here, Mark, to this Committee, it being one of
your last hearings, if not the last. You have presided over
this enormous program, this enormous agency, at a historic and
important time, and I know you have had your full measure of
challenges. But I just think heart-felt thanks are due on
behalf of the Senate, on behalf of this Senator, and certainly
on behalf of the seniors of this country, who I think in
increasing numbers are recognizing that while we didn't pass a
perfect bill for you to administer, we have passed a bill that
is proving already a real benefit to their lives and to their
quality of living.
Today, we turn our focus to the demand side of the equation
by exploring ways generic drugs can be used more frequently
when they are deemed medically appropriate. We are familiar
with the skyrocketing costs of prescription drugs and the
potential savings that could be achieved if generics were used
more effectively in our Nation's health care system. This is
true both for individual consumers and the government, but
neither can achieve those savings unless we continue working to
break down the barriers that Senator Kohl just talked about.
Medicare's new prescription drug benefit is saving seniors
a great deal of money on their health costs, but they could
save even more by choosing to use generic alternatives their
plans offer. Considering some reports show that drug prices and
Medicare Part D are increasing at rates equal to or even faster
than the rest of the market, the gains seniors have made with
their new benefit may soon be lost.
We cannot afford to allow out-of-control drug prices to
erode seniors' access to vital drug therapies. But simply
getting more prescription alternatives to the market will not
guarantee that they will be used by doctors or patients. The
savings generics could provide our health care system can only
be fully realized if we raise awareness about their
effectiveness and their affordability.
In order to accomplish this, there needs to be more
information available to the public regarding generic drug
benefits. Fortunately, interest from the government and other
health care purchasers has sparked more research in this area.
Programs like the Drug Effectiveness Review Project,
spearheaded by the Oregon Health Sciences University, are
providing policymakers and health care purchasers a wealth of
evidence-based materials about the effectiveness and safety of
prescription drugs, including generics.
We are all aware of concerns that brand-name marketing
efforts influence physicians' prescribing behavior. Since
generic drug companies typically do not engage in such
activities, a doctor may not be aware of the availability of
more affordable drug options. If we expect to realize all the
benefits generics have to offer, both providers and patients
need greater access to objective prescription drug information.
The Internet is one source consumers are using to make
comparisons between brand-name and generic drugs. Hopefully, as
seniors learn more about their options, they will more readily
talk to their doctors about finding the prescription drugs that
are not only most effective, but most affordable.
So I look forward to our discussion today and I expect it
will provide us with more ideas on how we can further raise
awareness about the value and safety of generic prescription
drugs. Senator Kohl has assembled a fine group of witnesses and
I know their input will be very useful.
Senator Kohl. Thank you very much for your fine statement,
Mr. Chairman. Now, we turn to Senator Talent.
OPENING STATEMENT OF SENATOR JAMES TALENT
Senator Talent. I want to join Senator Kohl and the
Chairman in welcoming Dr. McClellan. Thank you for your
tireless efforts in implementing the Medicare prescription drug
program which is benefiting over 700,000 seniors in Missouri.
While there are certainly things about the bill that I want to
improve--and you and I have talked about some of them--I am
pleased about the benefit to Missourians and the fact that the
model has succeeded in getting prescription drug costs
discounted and then paying a part of the discounted price for
our seniors around the country.
I also join with you in the belief that in addition to just
providing a benefit that people need, it is going to be very
important in moving Medicare toward a system that focuses on
helping people manage their health and manage any diseases they
may have so they stay as healthy as possible, rather than just
paying bills when they get sick. That is the key to the health
of our seniors in the future. Certainly, increased reliance on
generics is an important part of that and we need to keep
emphasizing that, and I am glad you are here today to talk
about what you think we can do.
Thank you, Mr. Chairman.
Senator Kohl. Thank you, Senator Talent.
We will turn now to our first witness, Dr. Mark McClellan.
Dr. McClellan has been the Administrator of the Centers for
Medicare and Medicaid Services, known as CMS, since March 2004.
Unfortunately, as we know, Dr. McClellan recently announced
that he will be leaving his job. Of course, we wish you the
very best. We certainly appreciate how accessible you have been
to this Committee, and we thank you for agreeing to come here
today.
Dr. McClellan will discuss CMS' efforts to encourage
generic drug use under Medicare and their preparations for the
upcoming open season, when beneficiaries can switch their drug
plans.
We welcome you here today and we look forward to your
testimony.
STATEMENT OF MARK McCLELLAN, M.D., Ph.D., ADMINISTRATOR,
CENTERS FOR MEDICARE AND MEDICAID SERVICES, U.S. DEPARTMENT OF
HEALTH AND HUMAN SERVICES, WASHINGTON, DC
Dr. McClellan. Thank you, Senator Kohl, and Mr. Chairman,
Senator Talent. Thank you very much for your kind words, for
your bipartisan leadership on the issue of generic drugs, and
especially for your leadership on safe and effective ways to
lower drug costs for Americans.
Generic drugs are just as safe and effective as the brand
name version, they are inexpensive in the United States as a
result of our competitive pricing system, and they are a
critical element to providing health care to Americans that is
effective and affordable. As a result of the new Medicare
prescription drug benefit, generic drug use is up
significantly, leading to billions of dollars more in savings
for people with Medicare and taxpayers.
I am pleased to report that the Medicare drug benefit is
proving less expensive than anticipated at any previous time
and that we expect continued savings throughout 2007. These
savings are in part being driven by promoting the use of
generics, where appropriate, in the design and implementation
of the drug benefit, and I am pleased to have the opportunity
to discuss how we can do even more in this area.
Based on updated figures from the 2006 mid-session budget
review, the estimated cost of the drug benefit over 5 years is
down by $35 billion compared to the estimates earlier this
year, and is $110 billion lower than the estimates just a year
ago. The average Part D premium for 2006, now estimated to be
under $24 a month, is lower than estimates from last year which
came in at over $37 a month. Based in part on these strong
competitive bids for 2007, average premiums next year will
again be around $24 if beneficiaries stay in their current
plan.
Because the vast majority of beneficiaries will have access
to Medicare drug plans that have lower premiums, actual
premiums in 2007 are likely to be even lower if some
beneficiaries decide to switch. With lower bids and smart
choices by our beneficiaries, costs to taxpayers will be even
lower in 2007 than the much lower than expected costs we are
already seeing in 2006.
Along with aggressive drug price negotiation and effective
benefit design, the utilization of generics has played an
important role in bringing down these Medicare drug benefit
costs. As you pointed out, generic drugs typically cost 50 to
70 percent less than their brand-name counterparts, and prices
for generic drugs in the United States, drugs that account for
most of the prescriptions in this country, are much lower than
in many other countries. For example, a study by the National
Opinion Research Center at the University of Chicago reported
that people living in Canada pay 37 percent more for generic
drugs than people living in the United States.
Because of these low prices and strong competition, the
Medicare drug plans are providing excellent low-cost coverage
for generic drugs. Generics are widely available on planned
formularies and co-pays for these drugs are typically low,
often just a few dollars, and some Part D plans are even
providing generic prescriptions for free.
Because of the low prices and because of the personalized
information that Medicare beneficiaries are getting about how
they can save using generics, Medicare beneficiaries are using
generics at a high rate. Nationwide, the proportion of generic
usage stands at 51.9 percent. Data that CMS is gathering on the
drug benefit show that generic usage among all types of Part D
plans was 60.1 percent in the first two quarters of 2006.
In addition, many Part D plans report an increased growth
rate of generic utilization that is faster than in the overall
market. This is very good news for Medicare beneficiaries in
the Medicare program because it translates into billions of
dollars in savings, while still delivering the same high
quality of health care.
One of the most important tools in helping beneficiaries
find out about how much they can save using generics is our
Drug Plan Finder tool which is available online at Medicare.gov
and on the phone at 1-800-MEDICARE. Millions of beneficiaries
and the family members and counselors who work with them have
seen how much they can save personally by switching to generic
versions of their drugs. We are enhancing this tool for 2007
for the upcoming fall open enrollment period, and we will also
highlight generic availability in the Medicare & You Handbook
which is being sent out next month.
Additionally, during our outreach events and through our
extensive partner network, we are advising beneficiaries that
asking their doctor or pharmacist about generics or lower-cost
brand-name drugs that treat the same condition can help them
delay reaching the coverage gap if they choose a plan that
doesn't fill in the coverage gap. Consumers Union has concluded
that seniors can save hundreds, if not thousands of dollars by
switching to generics, potentially enabling them to avoid any
coverage gap altogether. Other studies have found similar
savings of 60 to 75 percent by switching to generics, and next
year I am pleased to report that even more plans will offer
coverage of generics in the gap.
CMS is also working with a broad range of stakeholders in
the Pharmacy Quality Alliance to develop consensus measures of
pharmacy quality that will be available starting later this
year. Generic utilization is expected to be one of these key
quality measures. Low-cost generic drugs are one of the reasons
why a broad range of recent surveys, including J.D. Power and
the Kaiser Foundation, are consistently showing high
beneficiary satisfaction rates with the new drug benefit.
Satisfaction rates are consistently over 80 percent, with even
higher rates for dual-eligible beneficiaries.
We are continuing to work hard to build on these successes
and improve the benefit further. For example, in 2007 more
plans will be offering options with coverage in the gap, and as
I have already mentioned, Part D costs will be lower for
taxpayers. The cost savings are due in no small part to price
negotiation on drugs, and also to effective use of generics
that cost much less than drugs that seniors have used in the
past.
Mr. Chairman, Senator Kohl, Senator Talent, thank you again
for inviting me to speak with you today about generic drugs and
how we can work to continue providing a high-quality, low-cost
prescription drug benefit for people with Medicare. The drug
benefit provides much-needed coverage for our beneficiaries,
and generic drugs serve as an important and safe way to save a
lot of money for beneficiaries and the Medicare program. I look
forward to any questions that you all may have.
Senator Kohl. Thank you for your statement. You say that
generic drug use rates under all Part D plans during the first
two quarters were just a bit above 60 percent, which is very
good. I assume that that is an average and that there are some
plans which did a better job and others which did not do so
well.
What kind of range are we talking about here? In other
words, what were the generic use rates of the plans with the
lowest and the highest generic use? Do you have some
information on that?
Dr. McClellan. This is preliminary data, Senator. We have
just gotten second quarter data recently. In the first quarter,
I am not sure that is going to be real representative because
that was the transition period for many people onto the benefit
and many people continued their previous drugs for the first 3
months of 2006.
We are going to keep analyzing these data and we do want to
make them available by plan. We hope to do so by November, so
we should have those numbers for you by plan soon. What I can
tell you is that some of the Medicare Advantage plans, the HMO
and PPO and private fee-for-service plans in Medicare, tend to
have a somewhat rate of use of generic drugs, over 60 percent,
but we don't have any systematic numbers on that quite yet. We
will have them soon.
Senator Kohl. Will that information be available to seniors
by the time the open season starts in November so that they and
we and everyone can know which plans are doing a better job and
which are not doing well?
Dr. McClellan. That is exactly our goal. I know that is
very important to you from our staff discussions and we intend
to make that information available by mid-November.
Senator Kohl. For those plans with well below the average
generic use, what is CMS intending to do to encourage them to
increase their use of generic drugs?
Dr. McClellan. Well, I think that those plans are going to
have a hard time doing well in this program in the longer term
because we are seeing strong competition. The premiums are very
low. The cost of the overall drug coverage is much lower than
expected and if plans aren't implementing effective ways of
telling people about the savings with generics and helping
people switch over, then they are not going to do well.
That is why I think we are seeing such good coverage for
generic drug use, with many plans having generic drugs
available for no cost at all. We are going to highlight those
plans this fall, and I think the most important message for the
drug plans is because we are making available information on
generic use, because we are telling people how much they
personally can save on their drug needs by switching to safe
and effective generic drugs, the plans that don't do well with
generics are not going to do well in this program.
Senator Kohl. Dr. McClellan, a growing number of drugs that
seniors take today, as you know, are biotechnology drugs, which
have been a growing expense under Medicare Part B and are now
also covered under Part D. Today, as you know, there are no
generic versions of biotech drugs because the FDA has no system
to approve them.
Don't you believe it is time that we do create a system to
approve generic biotech drugs, and wouldn't those generics
produce additional real savings for Medicare and for seniors?
Dr. McClellan. Senator, during my time at FDA, we spent a
good deal of effort starting to look into what would be
required for generic biologics to be available safely and
effectively and I know FDA is continuing to work very hard on
that issue.
The challenge that biologics present is, as you know, they
are much more complicated molecules. They are not a simple,
small-molecule drug. Many biologics are complex. They are part
of complex formulations with complex manufacturing processes,
and what that means is that they present some more challenging
safety issues.
The FDA is working hard to find ways to address those
safety issues, but frankly I think we need to put some
resources into developing methods that can assure the safety of
generic versions of biologic drugs and maybe focus first on
some of the relatively simple generic biologics. FDA has
already got a process underway for a generic version of
Omnitrope, which is a relatively small biologic molecule. There
are several other biologics that were approved a long time ago
under the FDA's new drug authority, as opposed to the BLA, the
biologics authorities, and that might be a good place to start.
But I agree with you that it is time to look closely at the
safety issues, and if we can address those safety issues, then
this is an important policy to consider.
Senator Kohl. Thank you.
Mr. Chairman.
The Chairman. Thank you, Senator Kohl.
I wonder, Mark, in your view, to the degree that there is
resistance to generics, is it just perhaps a placebo belief
that the brands are just better, because, in fact, aren't the
medicines darn near identical?
Dr. McClellan. They are identical; the active ingredients
are identical. They are regulated in the same way. They have to
meet the same safety and effectiveness standards. According to
the FDA, the oversight is tight.
I think, Mr. Chairman, it is maybe a bit of a carryover
from when people hear the term ``generic,'' they think about
knock-off purses or watches that you might buy on the street
that aren't the same as the brand-name version. It is very
important for the public to know that that is absolutely not
the case when it comes to FDA-approved generic drugs in the
United States. These drugs are just as safe and just as
effective as the brand-name version.
We have been making that information available every
opportunity we get. It is on our website. It is in, as I
mentioned, our outreach materials to beneficiaries, and I think
as long as we have a concerted effort with all of us focusing
on this very important education message about safe and
effective and low-cost medicines, we can make sure that all
Americans are aware of it.
The Chairman. Ultimately, will the best educator be the
price savings that people individually can enjoy?
Dr. McClellan. What we have found is what seems to motivate
a lot of seniors is being able to give them personalized
information about the price savings, not just telling them, in
general, that generics are 50 to 70 percent, or more, savings
compared to the brand-name drug, but being able to give them a
print-out when they call us 1-800-MEDICARE or when they go to
Medicare.gov. If you tell us what drugs you are on, we will
tell you if there is a generic version available and we will
tell you how much you can save each month by switching to that
drug.
That is a print-out that you can take with you the next
time you see your doctor or pharmacist. In many States, you
don't even need to go to the doctor to switch over to a generic
version of your drug; you can just do it. So that has proved to
be a strong motivator for many of our beneficiaries.
The Chairman. It keeps them out of the donut hole for a lot
longer, doesn't it?
Dr. McClellan. It sure does. That is what Consumers Union
has said that you can save hundreds or thousands of dollars by
switching over, and that can keep you out of the donut hole if
you choose a plan that has a donut hole.
The Chairman. If I hear any complaint at this point on
Medicare Part D. it is the donut hole. I think that was
foreseeable, but again I hope your Department is getting that
message out. If you want to stay out of the donut hole for a
lot longer, use generics.
Dr. McClellan. It is very important. On our website and
when people call us at 1-800-MEDICARE, we have a whole set of
steps that people can take to lower their drug costs. Even if
they are not in the donut hole, these are important things to
look at anyway to keep your drug costs down. It includes
getting this personalized information about generic drug
availability and lower-cost brand-name drugs for your medical
needs, something you can talk about with your doctor and
pharmacist.
It includes using your Medicare card because you get
discounts on the drug prices when you do that. It includes
looking at a lot of programs that are out there to help you
with costs in the donut hole. So we want people to get in touch
with us about all of these opportunities for saving.
The Chairman. I describe generics as nearly identical, and
I want to emphasize your response was that they are identical.
Dr. McClellan. Just as safe and effective. They have the
same active ingredient, they work in the same way in the body
as the brand-name drug.
The Chairman. Mark, something that is not specifically to
generics, but Medicaid, and a concern I have on Medicaid. I
want to talk to you about some recent news reports that I am
aware of that a couple of States, specifically Kentucky and
Idaho, are offering Medicaid so-called benchmark plans without
describing to the beneficiaries that that doesn't disqualify
them from Medicaid. Frankly, they need to be told what the
differences are, and they shouldn't be asked to make a choice
between a benchmark plan and Medicaid. If they are going to
make that choice, they need to be given the choice.
I am wondering, has CMS authorized these two States to
pursue these alternatives without making clear their choice?
Dr. McClellan. Mr. Chairman, under the Deficit Reduction
Act, as you know, because I know this is a provision very
important to you, for certain populations the States must
continue to offer a traditional Medicaid option as well as
these new kinds of benefit plans.
What we have heard from beneficiaries in the two States is
that they are pleased by the new benefits coming along. In
Idaho, there are some additional benefits to help people stay
well that they didn't get before. In Kentucky, there are new
home and community-based services that are very important and
very much supported by many advocates for people with a
disability to help people get services that they need in their
homes.
But I want to be very clear that under the law and under
our interpretation of the law, the States must offer the basic
traditional Medicaid version, too, for people who want it. For
beneficiaries that feel that they are not getting access to
needed benefits, they have appeals rights and we intend to
enforce that provision.
The Chairman. As far as you know, are Kentucky and Idaho
making clear----
Dr. McClellan. Well, Idaho has not yet even initiated their
program. It is not even underway yet. In Kentucky, people do
have the option of staying in the traditional Medicaid program,
and we will be happy to provide you with additional information
on this.
The Chairman. You have provided no waiver from the statute?
Dr. McClellan. No. I want to be very clear that the States
must provide the basic traditional Medicaid approach as an
alternative for beneficiaries.
The Chairman. One other comment I have. My staff is working
with your agency to try and work out a solution to the problems
that have occurred with Part D premium withholding. I
appreciate your willingness to develop solutions, but I want to
make clear that CMS and SSA need to work with beneficiaries to
develop options to repay past-due premiums over a period of
time. This is a problem not of their making.
Dr. McClellan. Absolutely.
The Chairman. So I hope, come November, or whatever the
deadline is for an individual, they won't have their check
confiscated in one lump sum. I think too many seniors would
face a real financial burden.
Dr. McClellan. If I can just say a word about that, this
was our mistake and it is our responsibility to fix it and to
make sure that the money that the seniors wanted to go to pay
their drug plan premium does go to do that, but does it in a
way that is not burdensome on the senior.
The Chairman. So you are not proposing a--you are not just
going to grab their money?
Dr. McClellan. You know, some people do want to just get
the money back and be done with it, and that is fine. For most
people, the amount of money involved was under $200, and so
many people just want to be done with it. None of our low-
income beneficiaries were affected. But some people want to
have the option of paying it out over time and we have made
available an option of paying out for as much as 7 months, and
we will talk to beneficiaries about even longer if they have
concerns.
We have a toll-free number set up for people to call in if
they have any questions about this, and we definitely want to
work with our beneficiaries to make sure the money goes where
they intended it to go in the least burdensome way possible.
The Chairman. Well, I thank you for your flexibility on
that very much.
Thanks, Mr. Chairman.
Senator Kohl. Thank you, Mr. Chairman.
Senator Nelson from Florida.
Senator Nelson. Thank you, Mr. Chairman.
Dr. McClellan, as you know, there have been 45 of us
Senators that have introduced what is called the Medicare Late
Enrollment Assistance Act, including several of the members of
this Committee. It is headed up by Senator Grassley and Senator
Baucus.
We filed this bill the day after the deadline, the deadline
having been May 15, in order to eliminate the 1-percent-a-month
penalty which, in effect, for senior citizens that did not sign
up, as they sign up at the end of the year for the Part D
Medicare prescription drug benefit, they are going to be
penalized with a 7-percent increase in their premium. It is
estimated by one of the agencies--I think it might be CBO--that
this includes 3 million senior citizens in the country.
So I would like to know if your outfit, CMS, supports
waiving this late enrollment fee for these seniors at this
particular time.
Dr. McClellan. Senator, we have very strong interests in
making sure that everyone takes advantage of this benefit, so
we certainly share your goal of getting more people into the
program. I think we did have some concerns about the way that
this bill might be paid for by taking away money that is needed
for providing other benefits to seniors, Medicare Advantage
support and things like that that many seniors are counting on.
What I can tell you, as well, is that we have been looking
at these numbers closely and it is not, we don't think, 3
million beneficiaries that would be subject to the penalty.
Remember that because of our authority, we have been able to
waive the penalty for any low-income beneficiaries that have
not yet enrolled, and that is a very hard population to reach
and they actually account for probably most of the people who
have not yet signed up, most of the few million people who are
not yet in good drug coverage.
We also want to emphasize that everybody who is in drug
coverage now can switch to a different plan with no penalty at
all later this year if they are not happy with their current
coverage. So it is a pretty small population that is subject to
this penalty. It is actually fewer people, we think, than would
be subject to the Part B penalty if they ended up enrolling in
Part B. So we will try to continue to work with you on this.
Senator Nelson. Well, I hope so because 3 million is not a
trifling number of people.
Dr. McClellan. It is less than that. I agree any
population, even if it is a few hundred thousand, that is
something that we are concerned about; we want to get them into
the coverage.
Senator Nelson. Particularly when you are dealing with
senior citizens who sometimes have to make the tough choices of
how they are going to make financial ends meet. If you wanted
to hang that penalty over their head in order to get them into
the system, OK, the system deadline came and went. Now, for
whatever reason, a number of them, many of them confused, did
not sign up. Now, they are going to sign up at the end of the
year. Why have that penalty of 7 percent on these people
forever?
Oh, by the way, you can pay for it with an offset because
there was a sinking fund, a set-aside fund that was to help the
private companies enroll people. Because people went ahead and
enrolled, there is money left there that can be used to offset
this penalty, so you have got a net no additional money. If it
is for the good of the seniors, we ought to do it.
Dr. McClellan. We definitely agree with you that we should
be doing what is for the good of the seniors. We are concerned
about taking away funds for other programs that may be needed
and make sure we continue to provide the best possible coverage
to seniors. Again, we have been watching the numbers closely.
Ninety percent of people already have drug coverage. Most of
those who don't, we have already said do not have to pay any
penalty at all.
If you are a low-income senior, there is no penalty. Please
find out about this program and enroll in it right away. So it
is only that smaller group, and again we do want to keep
working with you on this to make sure we are using the dollars
that we have as effectively as possible to help as many seniors
as possible.
Senator Nelson. Why can't you just say yes? [Laughter.]
Dr. McClellan. People ask me that a lot, but there is----
Senator Nelson. Well, I mean it is not funny.
Dr. McClellan. I don't think it is funny. I think that the
issue is a very important one and that is why we have tried to
get the word out and that is why we are very pleased that so
many people did enroll in drug coverage, and that is why we
have done all we can under the authority we have to eliminate
the penalty for low-income seniors. It is that remaining group,
and again we want to continue to work with you. I just don't
want to take money away from one important priority and put it
on this one unless we are sure that that is the best thing to
do.
Senator Nelson. Well, since I have an opportunity to give
you a little advice here, I would suggest also, since we have
had a discussion here about the donut hole and I think a good
discussion has come out here about how you can avoid having
seniors go into the donut hole with the generic drugs--and by
the way, Wal-Mart is starting a pilot project in my State, in
Tampa, FL, in which they are going to start promoting the
generics giving people prescriptions at something like four
bucks a prescription. So on the basis of this experiment, this
pilot project, maybe it will work.
But over and above that, I would, Mr. Chairman, like to
take the privilege of suggesting that one way that we could pay
for the donut hole is to let the free market private enterprise
work by having Medicare be able to negotiate through bulk
purchases the price of the drugs down and take those savings
and start to plug the donut hole.
Thank you, Mr. Chairman.
Senator Kohl. Thank you, Senator Nelson.
Senator Talent.
Senator Talent. Dr. McClellan, in your testimony you gave
some figures about savings on the Part D program, updated
figures, and I was writing them down and I didn't see them in
your written testimony. Would you give me that again?
Dr. McClellan. Sure, and we can give you a full report.
This was included in the President's mid-session budget review
update for 2007, and then we also made some further
announcements in August when we released information on the
2007 bids, the costs that the plans will have for the drug
coverage in 2007.
Based on the numbers that we saw through the budget in
2006, the costs for the drug benefit in the first 5 years,
starting in 2006, are $110 billion lower than had been
projected just a year ago.
Senator Talent. That is over 5 years?
Dr. McClellan. That is over 5 years. The costs in 2006 are
25 percent lower than had been projected just a year ago. That
is billions of dollars in savings for beneficiaries through
lower premiums and savings for taxpayers.
Senator Talent. So the taxpayers are spending less than we
thought?
Dr. McClellan. Taxpayers are spending a lot less. Now,
those numbers don't yet account for the fact that the cost of
the prescription drug benefit is going to go down in 2007, and
that is because the average bid, the average cost for providing
a drug plan to beneficiaries--the average cost to taxpayers is
going to go down by 10 percent. It may go down even more if
seniors do what they did this year, which is look into the
program and take some effort.
I know it wasn't easy especially this first time for many
of them, but they looked into it and they overwhelmingly chose
low-cost plans. They are very satisfied with those plans, and
so we could see even more savings.
Senator Talent. The cost to the taxpayers is $110 billion
less over 5 years than we thought?
Dr. McClellan. Yes, and again I think those numbers are
going to be down----
Senator Talent. The cost to the seniors, because the
average premium is staying the same----
Dr. McClellan. It is 40 percent lower than had been
projected.
Senator Talent. Yes, 40 percent lower. It sounds like there
is some bargaining going on someplace, isn't there?
Dr. McClellan. There is a lot of bargaining going on and we
are going to see even more savings.
Senator Talent. So it is costing the taxpayers less and it
is costing the seniors less.
Dr. McClellan. A lot less.
Senator Talent. The two objects of the bill were to force
the prescription drug companies to discount their prices, which
they have, and then pay a part of the discounted price for the
seniors. It is an insurance feature.
Dr. McClellan. If I could just add to that, we have an
update. We have been tracking the cost of drugs in the program
and tracking the prices that the plans are negotiating over
time. We are going to have an update on those numbers released
this afternoon. What we are seeing is large and stable savings
of typically 50 to 70 percent for commonly used combinations of
drugs by seniors. In the drug plans, the average price of the
drugs for the first 8 months of the program has increased by
less than one percent. So it is not only below medical
inflation, it is below general inflation.
Senator Talent. Of the folks who haven't signed up--and I
support waiving the penalty, too, in part because the cost of
that will be so much less than we think since there are just
not that many people that we haven't already waived it for
anyway.
Dr. McClellan. Yes.
Senator Talent. But in any event, most of the folks who did
not sign up are eligible for the more generous benefit that
lower-income Americans can get. Isn't that right?
Dr. McClellan. That is correct.
Senator Talent. My experience in Missouri was that part of
the problem was there were so many allegations about the plan
being thrown out there that a lot of people, I think, were
afraid. They just didn't get the information adequately, and
now that they have got it, I am hopeful that they will sign up
because those are exactly the folks who need it.
Now, you mentioned in your testimony on page 7 that the
Pharmaceutical Care Management Association released a study
earlier this year indicating that Medicare drug plans offer
significant price discounts compared to what beneficiaries
would pay without coverage. Now, you are talking about just the
discounts off the original prescription drug price. Is that
what study----
Dr. McClellan. That study was looking just at the discounts
off the price.
Senator Talent. Not the insurance feature that the
government pays?
Dr. McClellan. Not the insurance, not the payments.
Senator Talent. Did that study give an average discount? I
mean, can I get some figures on that?
Dr. McClellan. They did, and I am sure PCMA would be happy
to talk about it. I think they have actually testified before
this Committee, too, and I think the numbers are in the range
of 30 to 50 percent.
Senator Talent. OK, that would be good. Now, one other
thing you mentioned--and it was kind of you to talk about the
strong support that Members of Congress gave. I know that you
are testifying before members of the Senate, and so I
understand why you said that. But I want to just point out--and
I am sure you will agree with this--that we had tremendous help
on the ground, and continue to have it, from our community
pharmacists and from our senior centers and those who implement
the Older Americans Act.
Dr. McClellan. Yes.
Senator Talent. We found in Missouri that those two groups
absolutely were priceless and indispensable in getting
information about the Medicare benefit, and I hope you feel the
same way.
Dr. McClellan. They have been phenomenal, and I think they
are going to be so. The No. 1 source for beneficiaries was
pharmacists and these local counselors. Senator, we are
continuing that same grass-roots approach for the open
enrollment period for 2007. We have launched a new initiative
called My Health, My Medicare. We looked at what happened this
past year and we found that this personalized support really
helps people get better care. It is, as you were saying
earlier, turning Medicare from a program that just pays the
bills when people get sick to a program that is a partner to
help them stay well.
In addition to the information about lower-cost drug
coverage options for next year and generics, they will also be
helping us get the word out about our new preventive benefits.
Medicare has closed the preventive benefits gap, but we still
have a prevention gap among our seniors where many seniors
aren't taking advantage of it. I know you know about the fact
that we have got free screening for heart disease and diabetes
and many types of cancers.
Senator Talent. One more comment and then I am done. Thank
you for your patience, Senator Kohl.
I have been talking a lot with pharmacists about the
medicine management program, the pilot program that we put in
the Medicare Modernization Act, and I want to encourage you to
continue moving in this direction and I am going to do this
with your successor. Also, you are talking about wellness and
it is very important to move Medicare in that direction.
It is very important that we have people who have regular
contact with their patients, helping them to understand
wellness programming and move in that direction. Well, who is
that if not the pharmacists? As we begin to implement
electronic medical records more and more, we can network in all
these health care professionals. I just want to urge you to
think in these terms. Getting these pharmacists more involved
and expanding that pilot program so they get compensation for
how they work with seniors is not going to cost us money. It is
going to save us money because they are part of the group of
people who will show these seniors how to do these wellness
aspects. So think in those terms about it because we have had
some resistance on that.
Dr. McClellan. I agree completely with you, and because of
your interest in this issue, we helped support a new Pharmacy
Quality Alliance that is being led by pharmacy groups that
includes all the health care stakeholders to help make these
better medication therapy management and other quality pharmacy
services available not just to Medicare beneficiaries, but we
need this throughout our health care system, Senator.
Senator Talent. I completely agree, and one of the things I
regret about the bill is that the pharmacists have borne such a
burden under it and, as you know, they are economically
squeezed and this would be a great way to help them, but also
to help move this progress toward a wellness system.
Dr. McClellan. We will follow up on this.
Senator Talent. Thank you and your staff.
Thank you, Senator.
Senator Kohl. Thank you, Senator Talent.
Senator Susan Collins from Maine.
Senator Collins. Thank you.
Dr. McClellan, the debate over the use of generic drugs
versus brand-name drugs becomes largely an academic debate if
patients don't have access to physicians that can diagnose them
and write the appropriate prescription. So though I am
extremely interested in this issue and very concerned about it,
I am going to use my time this morning to question you about
policies that the Department is pursuing that threaten a number
of small medical residency programs in the State of Maine that
provide absolutely critical family physicians for the most
rural areas of my State.
I also have to express some frustration to you because I
have called your office every single day for a week to talk to
you about this issue and have been unable to get a return call.
So with the Chairman's indulgence, I am going to use my time
here today to pursue this issue and then I will submit my
questions for the record on the generic drug issue, which is an
extraordinarily important issue.
As I have said, we have five small medical residency
programs in Maine. They have been the subject of audits by the
fiscal intermediary focusing on their graduate medical
education programs, specifically their use of non-hospital
teaching sites. Over the past 4 years, they have been asked to
repay millions of dollars and have had the cap on their overall
FTE reduced.
Most recently, the fiscal intermediary has told two of the
programs that they may have to pay $5.4 million. I have to tell
you, Doctor, if that stands, these programs will close; they
will be forced to close their doors. I am not crying wolf about
that; that is the financial reality. These hospitals and
teaching programs have dedicated themselves to training primary
care physicians and placing their graduates in rural Maine
communities. They are non-profit institutions that provide
health care to Maine's most vulnerable populations. With all
due respect to your fiscal intermediaries, they are doing their
best to comply with a set of regulations that are inconsistent,
vague and contradictory.
If we lose the two teaching programs that are at issue
right now, we will lose approximately one-third of our graduate
medical education population and our major pipeline for future
primary care physicians. The result of that is that citizens in
my State are going to have reduced access to health care. I
understand that CMS has a fiduciary responsibility, but I just
plead with you to take a look at the implications of the
decisions that are being made. I think your agency is not
seeing the forest for the trees.
Over the past 4 years, I have written letters to you. I
have talked to you personally about this, I have talked to
Secretary Leavitt, I have talked to your predecessor, and I
believe that CMS' actions are in direct conflict with
congressional intent, as expressed in the 1997 and 1999
Balanced Budget Act which were designed to encouraged rural and
out-of-hospital experiences in these residency programs.
Congress put in place a 1-year moratorium on the kinds of
payment denials as part of the Medicare Modernization Act. Yet,
the recent audits threaten to deny payments for rotations that
occurred during the moratorium. I don't even think you can
legally do that. It is extremely frustrating. I don't want to
take the time of this Committee to go into it in more detail,
but this has to be resolved.
These are small residency programs. They are not large
teaching hospitals, and we have reached a level of technicality
here that none of them, even with the best of intentions, can
meet. When my staff looks at the regulations, we can't figure
out why the denials are being issued.
Let me just give you one example. The most recent audit of
the Maine-Dartmouth Family Residency programs denies the
reimbursement for time if the written agreement between the
teaching program and the supervising physician is not dated
prior to the time training was begun even though everything
else was fine. Yet, we can't find any regulation that
stipulates that requirement. So this is extremely serious.
I would ask that you at least consider delaying the
issuance of the notice of program reimbursement by the fiscal
intermediary for Maine General Medical Center and Southern
Maine Medical Center so we can continue to work to resolve
these issues. I have to tell you the situation is dire. These
programs will close if we can't get this to be resolved, and
that means that senior citizens in our State and disabled
individuals are not going to be able to get the care they need.
It is not going to be a choice for them between a brand-name
and a generic drug; they are not going to be able to see a
physician in their community to get any kind of prescription.
So I plead with you to give this your personal attention before
you leave, and I hope we can talk further about it.
Thank you, Mr. Chairman, for your indulgence on this issue.
Dr. McClellan. If you don't mind, could I have a couple of
minutes?
Senator Kohl. Yes.
Dr. McClellan. This is a very important issue and, Senator,
one of the things I have come to appreciate in this job is that
no matter how hard my staff works, how well-meaning they are
out of Baltimore and our offices around the country to get the
program right and make sure it works for people, unless we
listen to those who are on the ground actually delivering
services, we aren't going to do an effective job in running
this program and we aren't going to serve all of our
beneficiaries as well as we should.
One of the things that I have truly appreciated in my time
working with you here at CMS is your input to us on those
issues in Maine. Maine, like many States, has very distinctive
kinds of provider arrangements that involve serving a lot of
beneficiaries who don't have great access to health care to
begin with and need all the help they can get to maintain and
improve quality of care.
I remember one of our first meetings when I came into this
job. You brought up this issue of the need for residency
training programs that work and the need for getting primary
care doctors out into parts of rural Maine that otherwise would
have no access to medical services at all and how important the
programs that Southern Maine Medical Center and Maine General
Medical Center are to achieving that critical public health
goal for the State of Maine.
You have been with us every step of the way over the last
couple of years that we have tried to work through this issue.
No one has put as much time and effort into identifying this
problem and trying to find constructive ways to address it as
you have. While we haven't connected over the past week, that
doesn't mean my staff hasn't been working on this.
What I would like to tell you right now is that as a result
of your actions and your involvement in this issue, we are
going to suspend the notice of program reimbursement. It is not
going to end up being many millions of dollars. We are going to
have to address this a little bit further and I intend to do
that over the next few weeks while I am still at the agency. So
you will hear from me about this first as we take further steps
to resolve this issue. I am not sure we are going to be able to
do every single thing that the medical centers would like, but
you have raised some valid and important and critical issues
all along in this process, and as a result of that we are
suspending the NPR while we work this out over the next few
weeks, and I will be giving that my personal attention before I
leave the agency.
Senator Collins. Thank you very much. I really appreciate
that answer. Thank you, Mr. Chairman.
Senator Kohl. Thank you, Senator Collins.
Senator Blanche Lincoln from Arkansas.
Senator Lincoln. Well, thank you, Senator Kohl and Chairman
Smith. Thank you both for the incredible work you all do in
this Committee. We appreciate so much Co-Chairman Kohl bringing
up such a great issue here on generic drugs. It is so vitally
important to getting it right in this program of providing the
kind of needed prescription needs that our seniors need.
Just a couple of quick comments, if I may, and I do want to
compliment my colleague from Maine, Senator Collins. I work
with her on many things and am proud to do so, and she does
bring up very critical issues for Maine and for those specific
residency programs she has. But I would like to also broaden
that issue, Dr. McClellan, to simply say she is exactly right;
without the physicians out there, there are no prescriptions
that are going to be written that will help our seniors get
either a brand name or a generic.
A couple of issues that I think we could certainly address
there are the physician reimbursements, which we time and time
again here have tried to address in terms of the cuts that they
are going to see in January 2007. I was doing a seniors meeting
in northwest Arkansas and visited with several constituents who
said, you know, we have just now hit 65, but we can't find
doctors that are taking new Medicare patients. Physicians are
waiting to see what it is we are going to do in terms of the
priorities and the values we place on this program and the
importance of seniors getting that kind of health care and
being able to see the medical professionals they need to see.
One of the other things that we have written to you about,
or we actually wrote the President about and many of us are
concerned about was that the funding for the geriatric
education centers was eliminated in the budget. Just bringing
it back to 2005 levels would provide the medical professionals,
the physicians and others the ability to access training and to
get those services out to the seniors particularly in rural
areas, but all across the country.
So I hope that we will take a very serious look at the
whole package of health care delivery to our seniors, not just,
as Senator Collins mentioned, in the major medical areas and
teaching hospitals, but also how we get that information out. I
know your group saw it firsthand because they traveled across
the State of Arkansas with me last fall as we had those seniors
meetings and talked to seniors out there.
Being able to access information over the Internet about
what drugs are available in a generic form is just not
sufficient; it is not enough. I have way too many seniors that
don't access the Internet, don't have a way to access the
Internet. So I hope is that we can certainly look at some of
these delivery programs that have been successful that are
being cut out of the budget that could be very helpful in that
education.
I know my colleague from Florida mentioned what one of our
constituents in Arkansas is doing. Wal-Mart has piloted a
program in Florida, in the Tampa Bay area, making generics
available to the insured and the uninsured for a co-pay, which
I think is a wonderful start to test and see how it is that we
can get delivery and confidence among consumers about generics.
I think that is great, so we are looking forward to seeing how
that gets expanded.
I would like to also just follow up a meeting we had with
you in the Finance Committee about the premium refunds. I know
you have been working extra hard with Kentucky. When we were in
that meeting, we knew we had some constituent problems; we
didn't know how many. I would like to see if I can't get the
same kind of attention Kentucky is getting on those premium
refunds.
Dr. McClellan. Absolutely. We will follow up with you.
Senator Lincoln. We are starting to hear an awful lot about
that from our constituency, so we appreciate that.
I guess the last thing I would just like to add is I know
you are not representing FDA here today, but I would like to
know the steps you are taking at CMS in the encouragement of
moving the generics through FDA. There was a front-page story,
I guess, on Monday in USA Today talking about some of the
issues of FDA, not necessarily with generics, but just getting
through those processes and a lot of drugs that have not been
approved that are out there on the market and being used.
What are we doing to encourage FDA to step up to the plate
and deal with the backlog that they have in terms of generics
and really get the process going of making sure that our drug
industry is being properly regulated and put out into the
marketplace?
Dr. McClellan. Well, on this last issue I know that the FDA
is very concerned about that. When I was there, faster access
to generic drugs was an important priority. We were able to
increase the budget for the staff that reviewed the generic
drug applications, and we also took some steps to help the
generic manufacturers get their applications right the first
time so you could reduce the time it takes to determine that a
generic is equivalent to the brand-name drug and it is just as
safe and effective, which is the FDA standard.
Senator Lincoln. Did they stop doing that when you left?
Dr. McClellan. Well, I know the agency is very concerned
about continuing this priority. I think one thing that they
really need, frankly, is confirmation of their commissioner.
Andy von Eschenbach is very passionate about these issues of
affordable access to innovative medicines, and getting him as a
fully confirmed commissioner would definitely help the FDA move
on in important----
Senator Lincoln. He is acting now, correct?
Dr. McClellan. Right, and as a fully confirmed commissioner
it would definitely help him undertake initiatives like that
this that I know are very important to him and to the agency.
There are a couple of constraints. One is how good the
applications are coming in. If they are not acceptable, if they
don't meet the safety standards, they are not going to get
approved and it is going to take another round of going back
and filling in the additional safety data and evidence that is
needed to approve the generic drug.
Second is just the resources that FDA has available to deal
with the applications. With tight resources, that is a
challenge, and I know that, frankly, additional resources for
reviewing the generic drugs could help with that, too.
Senator Lincoln. So resources is something we should be
pushing for. Will you help us do that? It certainly benefits
your program.
Dr. McClellan. It certainly does, and I mean working with
the generic industry on getting those applications right the
first time is another step that could really help.
Senator Lincoln. What is the difference between being
acting and confirmed? Can't he still do the same job?
Dr. McClellan. Well, he is still acting in the job, but,
you know, speaking as someone who had the privilege of being a
confirmed FDA Commissioner, it is just different. I mean,
people look to you to lead the agency in new directions and to
undertake major new initiatives. When you are acting without
the support, the endorsement of the Senate, it is a little bit
harder to do that.
Senator Lincoln. Thank you.
Senator Kohl. Thank you, Senator Lincoln.
We thank you again, Dr. McClellan. You have been great this
morning, you have been wonderful to work with, and we wish you
well.
Dr. McClellan. Thank you so much, Senator.
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Senator Kohl. On our second panel, the first witness will
be Bill Vaughan, who is a senior policy analyst in the Health
Sector for Consumers Union. Consumers Union is the non-profit,
independent publisher of Consumer Reports. Since 1965, Bill has
worked for various members of the House of Representatives on
the Ways and Means Committee and has served as director of
Government Relations for Families USA. He is here today to
describe Consumers Union's national drug project to help
consumers and doctors use the most effective, safest and
lowest-cost drugs.
The second witness will be Tim Antonelli. Mr. Antonelli
serves as Pharmacy Services Clinical program manager at Blue
Cross Blue Shield of Michigan. He is responsible for developing
programs to encourage efficient prescription drug utilization.
He will explain the success of the Blue Cross Blue Shield of
Michigan program; the Unadvertised Brand, it is called, which
is a program to promote generic drug use.
Our third witness will be Dr. William Shrank. Dr. Shrank is
an internal medicine physician at the Brigham and Women's
Hospital and an instructor at the Harvard Medical School. His
research focuses on improving the efficiency and effectiveness
of drug coverage policies. Dr. Shrank will discuss physician
prescribing behaviors and a project that he is working on with
the State of Pennsylvania to educate physicians on low-cost
drug alternatives, including generic drugs.
We thank you, gentlemen, for being here. Mr. Vaughan, we
will take your testimony.
STATEMENT OF WILLIAM VAUGHAN, SENIOR POLICY ANALYST, CONSUMERS
UNION, WASHINGTON, DC
Mr. Vaughan. Thank you all very much for inviting us to
testify. Consumers Union do publish Consumer Reports, and we
don't just test cars and toasters; we try to help people with
better drugs and with good health insurance policies. I would
like to take just a second and say we at Consumers Union's
Washington office strongly second your very kind comments about
Dr. McClellan's very excellent public service.
We strongly encourage the use of generics as a way for
consumers to save money, while obtaining quality health care.
We also try to help consumers use the most effective drugs
through our Best Buy Drugs program, a free service to everyone.
I have attached in the testimony several examples of these
projects by class of drugs. Basically what it comes down to is,
don't believe all the hype you hear in the TV ads. There is a
lot more to what is a good drug than what you see on
television.
Briefly, we take the scientific work that the Chairman
mentioned, the work of the Oregon Health and Science
University's Drug Effectiveness Review Project, DERP, and
translate their very technical reports into plain English. Then
we match the findings of drug safety and effectiveness with
recent average prices for the various drugs to come up with
recommended best buy drugs. This is not cookbook medicine. We
really stress you have got to talk to your doctor, one-by-one.
But this best buy drugs list is a starting point to have the
discussion. We clearly recognize that different people may need
different drugs, and that is why we strongly support effective
exceptions and appeals processes in private insurance and
public insurance programs.
But where safety and effectiveness is similar, usually the
best buy drug is a generic. As you see, Dr. McClellan often
cites the studies we have done. I would just say they also
apply to folks under age 65. But if a senior switched from
brands to generics, they could save so much that in many cases
they would not fall into the donut hole.
In my testimony there is an attached press release. We have
done these in December and in March and just yesterday, showing
that on five drugs that a senior often uses, switching to a
generic you could save somewhere between $2,300 and over
$5,000. I might say we are also doing some of the academic
detailing work that Dr. Shrank will describe in his testimony.
But having said all that, I want to make it clear we would
like to see the donut hole eliminated. But until such
legislation is enacted, using the free tools of the Best Buy
Drug program can help many seniors safely and effectively avoid
the gap.
We hope Congress can do more to help consumers and doctors
increase the use of generics.
As for this autumn, there is great news today that CMS will
make Part D plan specific generic dispense rates public so that
enrollees can pick the plans that are really good for the
pocketbook. We all need to publicize that list. I suspect that
that decision was speeded up by the scheduling of this hearing,
so congratulations to you all.
Second, this fall when Congress deals with the physician
payment problem or considers pay for performance, we hope you
could put in as one of the performance items how much a doctor
cares about finding the generic drug to help his patients so
they can actually fill the prescription and take it.
In the 110th Congress, we hope that Congress will do more
to promote generics in the FDA. As Senator Lincoln has
mentioned clearly next year there has to be major FDA
legislation that will involve, we hope, increased resources to
that agency that could end this huge backlog they have in
generics. As Senator Kohl said, that legislation could begin to
get us to deal with the biogeneric issue that the Europeans are
dealing with--we are just not dealing with it and close the
loopholes, the bill that you are sponsoring, sir, S. 2306, that
lets the PhRMA big drug companies delay the entry of generics
into the market.
We also hope that people might take a look at all the drugs
out there and say, gee, could some of these move to over-the-
counter, where they would be a lot cheaper, if they are safe.
Claritin moved a few years ago and the price came way down. I
am not sure what the difference is with, say, Allegra. It would
be a good review.
As for the long run, someone has said that the whole
Medicare prescription drug debate is silly. The real debate
should be why the cost of drugs is so high. We believe that the
high cost of drugs could be moderated by better funding and
aggressive use of the MMA's. Section 1013 where the AHRQ agency
does comparative studies on what works and doesn't work, and we
need to quit paying for things that don't work well.
We also hope that you might consider a hearing on whether
there are more effective ways than patent monopoly and high
consumer prices to encourage the research on really
breakthrough, life-saving drugs. For example, there is the
prize idea that is out there, or using Medicare's buying
power--I describe this in our statement--to encourage research.
Thank you very much for your time. I would like permission
to enter the full statement in the record, if I may. Thank you,
sir.
[The prepared statement of Mr. Vaughan follows:]
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Senator Kohl. Thank you, Mr. Vaughan.
Mr. Antonelli.
STATEMENT OF TIMOTHY ANTONELLI, R.Ph., CLINICAL PROGRAM
MANAGER, BLUE CROSS BLUE SHIELD OF MICHIGAN, SOUTHFIELD, MI
Mr. Antonelli. Good morning, Chairman Smith, Ranking Member
Kohl, members of the Committee. I am Tim Antonelli, a
pharmacist and clinical program manager at Blue Cross Blue
Shield of Michigan. We are a non-profit health care corporation
that provides or administers pharmacy benefits to more than 2.7
million members, including 183,000 Medicare Part D
beneficiaries. I am pleased to be here to share our efforts to
educate our members, professional providers and the public
about the safety, effectiveness and value of generic drugs.
Generic drugs provide considerable value to consumers,
especially those over age 65 who have the highest average per
capita prescription use compared to all other age groups. In
2001, we began the Unadvertised Brand Campaign, a comprehensive
effort to provide useful, authoritative information on generic
drugs and to encourage their use. Since that time, our members'
use of generic prescriptions has increased from 37.7 percent of
total prescriptions to over 52 percent.
Of course, we do recognize that various market forces,
including access to first-time generics, are important pieces
of the puzzle here. Nonetheless, what we have learned through
our experience is that it takes concerted, ongoing efforts to
provide practical information and to ensure that effective
incentives are in place to promote the use of generic drugs
when appropriate.
Today, our campaign continues to evolve and to date has
included a pharmacy competition, a consumer awareness campaign,
a health care professional conference, a website dedicated just
to generic drugs, a shift in benefit design and a move to value
partnerships with physicians, all of which I will talk about
briefly in the next few minutes.
In the fourth quarter of 2001, we launched our campaign
with a pharmacy competition. It was designed to enlist
pharmacists as contacts to educate consumers about generics and
increase their use. As a result, we saw the first uptick in
generic use in 4 years. Following our competition, we launched
a $1 million, five-part series of consumer awareness ads. The
ads appeared in many Michigan newspapers and business journals,
and helped to promote generics as safe, effective, low-cost
alternatives to expensive brand-name drugs. We then used our
brand marketing survey to measure the impact and found that
after the advertising, 6 percent more respondents agreed that
generic drugs produced the same effects as their brand-name
counterparts.
Also, in response to our marketing efforts, we garnered
early interest from many within the managed care industry which
resulted in our hosting a full-day generic drug marketing
conference for health care professionals. This conference was
attended by more than 100 representatives of 50 different
organizations, including representatives from the U.S.
Department of Defense.
We also created a consumer generic drug website,
www.theunadvertisedbrand.com, which provides consumers with
generic drug facts, cost comparisons, and more. As well,
because member cost-sharing can play such a vital role in
engaging members in the choice between brand and generic
medications, there has also been a shift in benefit design
offerings from flat co-payment designs into benefit offerings
that encourage the use of generics, such as dual-tier, triple-
tier and percentage co-payment options. Our Medicare Part D
program is included in this segment of tiered benefits and
currently has a generic dispensing rate around 60 percent.
In addition, we also work closely with 4,500 Michigan
physicians through our Value Partnerships program. This program
focuses on generic drug opportunities, as well as a wide range
of health care quality, safety and cost initiatives, and
rewards performance and best practices. Through the efforts of
these physicians, in 2005 alone they have helped save $7
million through increased generic use.
Last, in addition to all the efforts previously mentioned,
we also continue to explore and use new opportunities to
encourage generic use with co-pay waiver programs, e-
prescribing initiatives and other clinical programs.
In summary, we have found that it takes concerted, ongoing
efforts to educate and create incentives that encourage generic
drug use and we remain committed to this effort because generic
drugs provide considerable value to consumers, especially those
over age 65. Furthermore, we applaud Congress for its
continuing efforts to address issues affecting timely
availability of generic drugs. Chief among those efforts is
ensuring adequate FDA funding and addressing loopholes in the
law that can delay the entry of generic drugs into the market.
We are pleased to have had the opportunity to testify here
today and I would be happy to answer any questions for the
Committee.
[The prepared statement of Mr. Antonelli follows:]
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Senator Kohl. Thank you very much, Mr. Antonelli.
Dr. Shrank.
STATEMENT OF WILLIAM H. SHRANK, M.D., MSHS, DIVISION OF
PHARMACOEPIDEMIOLOGY AND PHARMACOECONOMICS, BRIGHAM AND WOMEN'S
HOSPITAL, HARVARD MEDICAL SCHOOL, BOSTON, MA
Dr. Shrank. Good morning, Chairman Smith, Ranking Member
Kohl, members of the Committee. My name is William Shrank. I am
an internal medicine physician at the Brigham and Women's
Hospital and a drug policy researcher at Harvard Medical
School. I spend most of my time researching how to improve
efficiency and effectiveness of drug coverage policies. It is
an honor to testify before you today.
There is a tension at the heart of all prescription drug
policies in this country. On the one hand, we need to stem the
rising costs of prescription drugs. We spend well over $200
billion annually on prescription drugs, the fastest growing
sector of our health care economy. On the other hand, we have a
quality problem. There is substantial under-use of effective
medications, especially for chronic diseases, and we need to
make sure that more patients with chronic diseases get the
drugs they need.
So how do we reconcile this tension? By steering patients
toward less expensive, equally effective medications. Greater
use of generic drugs can do just that. A number of studies have
shown that greater use of generic drugs can lead to a
substantial savings, frequently estimated at over $20 billion
annually in this country, as noted by Senator Kohl.
In my research, I have also looked at how greater use of
generic drugs may improve the under-use problem. Most patients
who have drug coverage are enrolled in tiered plans that charge
them greater co-payments when they receive branded drugs and
smaller co-payments when they receive generic drugs. Virtually
all patients in Part D are enrolled in such plans. The idea is
that cost-conscious doctors and patients would make thoughtful
cost/benefit decisions about drugs and that market forces would
lead to efficiency.
I surveyed patients and physicians to explore their
knowledge and communication about patients' costs for drugs. I
found that doctors are rarely aware of patients' formularies
and costs, and they don't think it is their job to be aware.
Patients also are frequently unaware of their costs until they
reach the pharmacy and rarely communicate with their doctors
about medication costs. Overall, the basic market assumptions
are not being met.
My next study evaluated how the decision to prescribe a
generic versus a branded drug affects patients' adherence to
chronic medications. I studied patients in a large health
plan--all were enrolled in tiered drug coverage--and found that
when patients were started on generic drugs, they were
substantially more likely to adhere to chronic therapy, to take
the medications that they were prescribed. Patients had over
60-percent greater odds of adequate adherence when they
received generic drugs as compared to the most expensive
branded drugs. So steering patients toward more generic drugs
not only saves money for the system and for patients, it
increases the chances that patients will take important
medication.
That is not to say that generics are appropriate for
everyone. Branded drugs that do not have a generic equivalent
may offer clinical benefits not possible with generics, and for
some patients effectively treated with a branded medication it
may not be appropriate to switch to a generic. The best
opportunity to stimulate generic use occurs when new
medications are prescribed. For most conditions, patients
should be started on a generic and, if ineffective, can be
switched to a more expensive branded drug.
This leads to the first of three suggestions I would
propose to the Committee. First, we need better prescribing
systems that provide doctors and patients with information
about drug costs and formularies at the point of prescribing to
steer patients toward generic drugs when they are available.
Broader use of electronic prescribing could greatly assist in
providing this information.
Second, we must simplify coverage. In Part D alone, doctors
and patients are overwhelmed with the complexity of the dozens
of formularies they must navigate. Now that the Government is
the biggest purchaser of drugs in this country, the Government
should take steps to simplify prescribing decisions by reducing
the number of formularies that doctors must prescribe from.
Additionally, Medicare should develop and require coverage
standards for Part D plans, requiring all participating plans
to include highly cost-effective drugs for very low co-payments
or no co-payments at all.
Third, we need to educate doctors and patients about
generic drugs and drug costs. Branded manufacturers are winning
the education war, spending tens of billions of dollars to
provide free samples to physicians, to detail doctors, and to
educate patients through direct consumer advertising. Consumer
Reports' Best Buy Drugs and Blue Cross in Michigan should be
commended for providing information to patients, offering
objective resources about costs and benefits for drugs. But
many patients are not engaged enough or are incapable of
participating in these decisions.
Our division has developed a counter-detailing strategy
known as academic detailing to educate physicians. We train
nurses and pharmacists to visit doctors in their offices and
educate them about evidence-based, cost-effective prescribing.
The PACE program in the State of Pennsylvania has contracted
with our group to implement a statewide academic detailing
program. Such programs have been shown to reduce costs and
improve the quality of prescribing.
Considering that Medicare alone now spends well over $40
billion a year on prescription drugs, if they were to spend
just one-tenth of a percent of that budget to create academic
detailing programs to educate doctors, they would likely find
they could save resources for the Government, reduce health
care costs in general, and help create a culture of cost-
effective prescribing.
Thank you very much, and I would be happy to answer any
questions.
[The prepared statement of Dr. Shrank follows:]
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Senator Kohl. Thank you, Dr. Shrank. How much has been
invested in the academic detailing program that you have been
working on in Pennsylvania?
Dr. Shrank. It is about $1 million a year.
Senator Kohl. What is the potential of it in terms of
dollars?
Dr. Shrank. The potential is great. Previous studies have
demonstrated that there is generally about a two-to-one
benefit-to-cost ratio, that these plans tend to save money.
Senator Kohl. When you surveyed physicians in California,
you found that most are not only unaware of patients' out-of-
pocket drug costs, but they also don't believe it is their
responsibility to consider that when writing prescriptions. So
what can we do to change this and change the conversation and
make them more aware of it and more concerned about it?
Dr. Shrank. Well, I don't think it is a lack of concern. I
think it is a lack of time and easily accessible resources. We
have done some other studies that have shown that doctors do
really care about helping patients manage their out-of-pocket
costs, and they know that it is critically important to helping
patients access appropriate medications.
But it is not really feasible on a very busy schedule to go
look on the Internet or find a handbook or try to figure out
what any particular patient's costs are going to be for any
particular drug. Better systems can answer this, and there is a
lot of attention that has been given here in this Committee
about improving electronic prescribing. Electronic prescribing
with very specific standards that require that with electronic
prescribing comes some sort of information about the patient's
formulary and the comparative costs of medications that are
within the class that the patient could be prescribed could be
very, very useful for doctors.
Senator Kohl. For the panel--and, Mr. Vaughan, maybe you
want to respond first--Dr. McClellan made it clear that in most
every case the generic drug is just as effective and, without
any question, just as safe as the brand-name drug. That being
the case, if we don't want to challenge his statement, which I
think is for the most part accurate and true, what is the
responsibility of those of us who work here in the public
sector to see to it that every physician understands this and
knows what the alternative is to the high-cost brand-name drug
when or he she prescribes to the patient? Mr. Vaughan?
Mr. Vaughan. Well, again, I think we are moving toward pay
for performance. We hope so, and once the e-prescribing is in
place and the kinks are worked out on these hand-held devices--
doctors are busy and the formularies and all the complexity is
overwhelming for an individual doctor to just keep thinking,
gee, what generic will this person be covered for and is it on
their formulary. But once the electronics are there, let's have
that as a rating that people can either see or it is part of,
P4P, we will pay you extra for doing it or we will pay you less
if you don't. But Congress, as it amends Medicare and Medicaid,
in the future can reward the doctors who really say, gee, I am
going to be aggressive in helping my patients meet these costs.
It is not there today, but it will be there soon, and we ought
to plan for it and lay the groundwork.
Senator Kohl. Mr. Antonelli.
Mr. Antonelli. I would have to agree with the statements of
both my colleagues here. At Blue Cross Blue Shield of Michigan,
we have been involved in programs such as academic detailing.
In fact, that is what I started doing at Blue Cross Blue Shield
of Michigan in 1999 when I hired on board, and we continue to
do that today. It has been rolled into our Value Partnerships
program and we have found that it has been very, very
motivating for physicians because they now have a pay-for-
performance program which will allow them to get services from
pharmacists which provide information on their prescribing, as
well as new information about what drugs might be available as
generics, as well as cost information.
In addition, we also are pursuing e-prescribing efforts. We
have secured some work with the Southeastern Michigan E-
Prescribing Initiative and it is very exciting. We have about
600 physicians that have signed on to the program and we are
currently awaiting some study results from them; we expect it
this fall. It was actually a grant study by CMS which will
provide the answers to our questions of how much did e-
prescribing affect generic dispensing rates.
So at Blue Cross Blue Shield, we see this, too, as being
very important, both e-prescribing, academic detailing, as well
as all the other things I talked about because it is a very
comprehensive package that we have to think about. There is no
silver bullet to this.
Senator Kohl. To what extent are the pharmaceutical
companies involved in this whole thing? I don't want to call
them a villain because they are not, but they are the
opposition, in a sense, at least at this hearing. What is their
influence and what do you perceive their influence to be here
in Washington at the political levels as we try to move from
what it is now?
You know, 60 percent of all the prescriptions that are sold
are generic prescriptions, which is not at all bad, but we
understand for every one percent, you can save as much as $4
billion. So if you get from 60 to 80, well, you know, that is a
fortune; that is $80 billion in savings if you can get from 60
to 80.
How are the brand-name pharmaceutical companies involved in
this, and what do you perceive their influence to be here in
Washington and what do you think we should and can do about it?
Mr. Vaughan.
Mr. Vaughan. I think it is an enormous influence. If you
look at these Best Buy Drug examples, for example, the purple
pill that you see all the time is a tiny bit better for heavy
upper esophagal bleeders. But the difference in price is like
$171 a month compared to an over-the-counter that does just as
good for $24. Yet, Americans see it on TV and they say, my
gosh, I saw it on TV, I want the thing I saw on TV. There are
good peer-reviewed journals, studies showing where patients
come in to the doctor and the doctor wants to keep the patient
happy, so he writes a script for something he knows is way
over-priced and not particularly better.
When it comes to all the pressure on our social programs,
advertising is driving costs and you ought to consider a user
fee. Let's just say your advertising works; that is why they do
it. You are driving Medicare and Medicaid expenses up.
Therefore excuse us, we are going to have a user fee and we
will use it to make sure we check every ad for accuracy. Many
of the ads admit relevant adverse effects, but some fail to.
This user fee will help fund Medicare and Medicaid because you
are making the cost higher because of your ads.
We are the only country in the world that allows this kind
of direct-to-consumer advertising. I think the New Zealanders
still do it, but they are getting out of that business; they
are saying no thanks, this is crazy. The rest of the
industrialized world says no.
I am sorry. I get excited on this one.
Senator Kohl. Dr. Shrank.
Dr. Shrank. We have a very lopsided competition for how we
get information out about medications, and the drug companies
do this very, very well. They give $15 billion a year in free
samples to doctors, and that is incredibly effective at
stimulating that first prescription to be filled for the
branded drug. Certainly, in many cases that is not the right
drug or not the most cost-effective drug for that patient, but
that works. Once the patient is started on that free sample and
it worked and they feel comfortable with it, it is pretty hard
to switch.
The effect of direct-to-consumer advertising may be waning
a little bit in the setting of a lot of recent Vioxx problems
and things like that, but it is still very, very popular and it
is very common and it is very powerful. As a practicing
physician, many of my patients come into my office and say I
saw a commercial for the purple pill. There is nothing wrong
with the purple pill; it works just fine, but it is a lot more
expensive than an identical medication that would be able to
provide an equal amount of results.
So from the payer side, there are some very innovative,
smaller-scale programs that are happening, but there is nothing
that can compete with the massive educational approach that the
pharmaceutical manufacturers have undertaken. The great
opportunity here is that Medicare is a huge player in
purchasing prescription drugs. It is very hard for a single
insurer in a fragmented health care system to do much because a
big investment from a single insurer actually helps all of
their competitors as much as it helps the single insurer.
Medicare now is the big gorilla. It is a huge player and it
has an opportunity to really influence this debate. If Medicare
wanted to educate doctors or educate patients, they would have
the ability to do that.
Senator Kohl. A very good point.
Mr. Antonelli.
Mr. Antonelli. I would just like to add that when you see
products like Lunesta and Nexium having advertising campaigns
that are over $200 million direct to consumer and we have a $1
million advertising campaign for generics, it is quite
lopsided.
One thing that we have learned over time is that this
direct-to-consumer advertising is new and can be improved. The
FDA has been holding hearings over the last few years to
collect information from different resources to find out what
are the best means for making changes to this. One researcher
in particular from Duke University--her name is Ruth Day, a
very bright woman--has done some research on the advertising
and looked at these ads and found that most of the risk
information is functionally absent from these ads.
People watching these ads very easily understand what the
benefits are, but cannot figure out what the risks are. So they
are going to their physicians asking for the purple pill and
the physician feels obliged to actually take the purple pill
and write for it. It is kind of a conflict of interest and I
think the FDA does need to take a look at these guidelines and
really update what they have done in 1999 so that we do have
better quality advertising.
Senator Kohl. As you know--and I think you referenced it,
Mr. Vaughan--we have legislation here that we are trying to
move now that would it illegal for the pharmaceutical companies
to pay off generic companies when it comes to introducing new
products, either to delay or to go away entirely. I assume you
all would support this legislation.
Mr. Vaughan.
Mr. Vaughan. Absolutely, and congratulations. A bill that
has Senator Lott and yourself and Senator Stabenow on it should
have some legs.
Senator Kohl. Senator Grassley, too.
Mr. Vaughan. Grassley. That is great.
Senator Kohl. Hopefully Senator Smith. I get the sense here
that it really is important for an opposing force to confront
the pharmaceutical companies, and that takes a lot of money, as
we have all indicated. To the extent that it is legal and
possible, the Government ought to be doing this, ought to be
doing a better job on behalf of the people we represent all
across this country in seeing to it that the pharmaceutical
companies, with all of the financial resources they have, do
not succeed in overwhelming the system and getting their way
with consumers all across the country when it comes to
prescription drugs.
Would you agree with that, Dr. Shrank?
Dr. Shrank. I would certainly agree with that.
Senator Kohl. Any other comments you guys wish to make
before we conclude?
Mr. Vaughan. I think it is news today that Medicare will be
making those generic-specific data available on the plans. I
don't know if the Committee does prints or something on plan
quality, but this is something we will all want to publicize,
because it is a great advance for consumers to get that kind of
data.
Senator Kohl. To know which plan is doing a better job or a
worse job in getting generics in front of the people who are
with that plan.
Mr. Vaughan. Yes, sir.
Senator Kohl. That is very important.
Well, we thank you fellows for coming. You have been very
useful. I think this has been a really good hearing and we will
adjourn at this time.
[Whereupon, at 11:38 a.m., the Committee was adjourned.]
A P P E N D I X
----------
Prepared Statement of Senator Susan Collins
Mr. Chairman, thank you for calling this hearing to examine
current efforts to encourage broader use of generic drugs as a
means of keeping drug costs down for our nation's seniors.
The United States currently spends a staggering amount--
over $200 billion a year--on prescription drugs. Rising drug
costs are a particularly heavy burden for Americans who don't
have drug coverage. They are also putting the squeeze on our
nation's employers who are struggling in the face of double-
digit premium increases to provide health care coverage for
their workers. And they are putting increasing pressure on
public programs like Medicare, which will spend over $40
billion a year on the new Part D prescription drug benefit.
Today the average cost of a brand-name drug is $96, while
the average cost of a generic is less than $30. Generic drugs
therefore have the potential to greatly reduce the health care
cost burden for all consumers, but particularly for our
nation's seniors.
Earlier this year, the Consumers Union did a study the
found that Medicare beneficiaries who take five common drugs
could save between $2,300 and $5,000 a year by switching to
equally-effective, but lower-cost alternatives. Lower-cost
generics therefore have the potential to help seniors
significantly stretch their drug coverage under Medicare, and
can even help them to avoid falling into the coverage gap known
as the ``doughnut hole.''
There do, however, appear to be barriers that have
prevented more widespread use of generics. Physicians may not
be attuned to limitations in their patients' drug coverage and
they also may not feel it is their responsibility to help steer
them to lower-cost medications. The patients themselves may not
be aware of these limitations, and they may also be hesitant to
talk to their doctor about costs. Generic manufacturers also
don't tend to employ fleets of salespeople marketing their
products directly to physicians, and there also is far less
``direct-to-consumer'' advertising for generics. Many consumers
may simply not be aware that there is a lower-cost alternative
to ``that little purple pill.''
I do want to make it clear that I do not believe that
generic drugs are always the right choice for everyone. Many
patients are better served by the newer, branded drugs, and
efforts to increase the use of generics should not come at the
price of diminished patient care. Programs should be flexible
enough to enable the physician to prescribe the drug that he or
she thinks is most appropriate for the patient.
That said, I do think that we can do a better job of making
sure that consumers, pharmacists and physicians have all of the
information and incentives that they need to choose the safest,
most effective and lowest cost prescription drugs available.
This morning's hearing will give us an opportunity to learn
about some innovative programs that are working to do just
that, and once again, I want to thank the Chairman.
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Prepared Statement of Senator Ken Salazar
Thank you, Chairman Smith and Ranking Member Kohl for
organizing this hearing and for inviting this panel of experts
to discuss the importance of improving seniors' access to
generic prescription drugs. I also want to thank the Centers
for Medicare and Medicaid Administrator, Dr. Mark McClellan,
for joining the Committee today to discuss this important
issue. And thank you to the entire panel for your time, as well
as your work.
I look forward to hearing expert testimony on how the
federal government, the states, drug providers, drug
representatives, pharmacists and physicians can help our
seniors in gaining access to information on lower-cost and
generic drugs. I believe increased information for
beneficiaries about their drug choices is necessary to lower
their personal costs, and serves to educate them to become
better advocates for their own health care.
Medicare provides the majority of our seniors their health
care services. Colorado has an estimated 515,000 Medicare
beneficiaries. Over 38 percent of these beneficiaries are low-
income. Today America's seniors are living on tighter budgets
and paying the increased costs of living in this country. It
costs more today to heat homes, get transportation, purchase
food, and as we are discussing here today--pay for health care.
The costs of prescription drugs have increased dramatically
over the past two decades. According to the Kaiser Family
Foundation, U.S. spending for prescription drugs has more than
quadrupled since 1990. And prices continue to rise. Even the
cost of drugs being covered by the Medicare Prescription Drug
Plan have risen in the short time since it was implemented.
According to a report done by Families USA, ``virtually all
Part D plans raised their prices for most of the top 20
[medications] prescribed to seniors.'' The report estimates the
prices have increased by 4% since the program's implementation
in January.
Meanwhile, as our graying population grows, the need for
prescription drugs grows. We need to talk about solutions that
actually help in lowering the costs of drugs for Americans. One
such solution to lowering costs for Americans is the use of
more generic drugs.
This hearings casts light on the fact that there are drug
options other than brand names for our seniors. But seniors
need to know about these options. The major challenge to this
is the lack of information available to individuals about their
drug options. The providers of this information are not doing
enough. They include physicians, pharmacists, and government
agencies. However, there are groups and states that have
started to take action on this.
The state of Pennsylvania, with the assistance of Harvard
researchers, has created an innovative program to reach out to
physicians to help them in becoming a conduit of this
information for their patients. The Pennsylvania ``Unsales
Team'' program hires staff to reach out to physicians--
educating them about generic and alternate drug options to
brand-name drugs. This program is unique because these ``drug''
representatives are working on behalf of patients, rather than
the bottom-line of a pharmaceutical company. They want to help
doctors in providing better advice on how seniors can get the
best prices for their drugs. This program deserves our
attention.
I also look forward to hearing more about the relationship
between physicians and pharmacists. According to a survey of
physicians done by the American Journal of Managed Care,
physicians said they receive phone calls from pharmacists
concerning formulary issues after 18.6 percent of the
prescriptions they write. More communication between these
health care professionals could make a difference for patients.
Physicians should be utilizing pharmacists' information on the
costs of drugs as part of the care-management of a patient. In
turn, pharmacists should be providing this information to
physicians. I hope to hear more from these groups on how we can
provide better drug management assistance to seniors in dealing
with their drug costs.
I appreciate the work of the Chairman and Ranking Member,
who are responsible for this discussion of the increased costs
of prescription drugs for seniors and the options seniors have
in controlling these costs through increased use of generic or
low-cost drugs. I will use the comments and ideas presented
here today in my discussions with the health care community, as
well as with my fellow legislators. I believe we can come up
with solutions to help our seniors in accessing information on
their health care needs and lowering their health care costs.