Measure to offer seniors full Medicare drug coverage blocked

September 24, 2009

WASHINGTON, D.C. – A measure viewed by many as the first clear attempt since 2003 to give 26 million senior citizens covered by Medicare a full prescription drug benefit suffered a narrow defeat in the Senate Finance Committee today during debate on a broader bill to revamp the nation’s health care system.

By a 13-10 vote, the committee defeated an amendment by U.S. Sen. Bill Nelson ( D-FL ) that would have forced the pharmaceutical industry to surrender a financial windfall it gets on drugs sold to a group of Medicare patients who also qualify for Medicaid, the poorest seniors labeled as “dual eligibles.”   Nelson’s measure would have saved taxpayers an estimated $106 billion over ten years, based on estimates provided by the Congressional Budget Office.

When Congress enacted a partial Medicare drug benefit in 2003, about six million elderly Americans who had been receiving drug benefits under Medicaid, the government insurance program for the poor, were instead shifted into the new Medicare drug program, resulting in the government paying far higher prices for drugs.

That money, Nelson argued today, is enough to completely close the estimated $56-billion gap in existing Medicare drug coverage for millions of seniors and would have given them a full prescription drug benefit for the first time ever.  It also would have provided taxpayers with an additional $50 billion in savings, which Nelson and other lawmakers said could apply to deficit reduction and many other urgent needs.

“I simply don’t think it’s right,” Nelson said of the windfall from dual eligibles.  “I simply think it’s an opportunity to bring this money back to the taxpayer.”

After the vote, Nelson pledged to continue to fight for his amendment and for a full prescription drug benefit when the broader health care bill goes before the entire Senate this fall.  He was joined in that pledge by a number of his Senate Finance Committee colleagues, including New York Sen. Charles Schumer.

“I think we all would like to fill the donut hole,” Schumer said.  “This amendment is aimed … at helping middle-class seniors.”

The donut hole is a gap in annual Medicare prescription coverage between $2,600 and $5,500 in which seniors must pay the full price of drugs out of their own pockets.

Thursday’s committee debate and vote played out against the backdrop of an agreement the White House struck months ago with drug-makers to help pay for expanded health insurance coverage.  And, the amendment reportedly was the top target for defeat by the pharmaceutical lobby.

Nelson-Rockefeller Amendment #D-1 to the America’s Healthy Future Act of 2009

Short Title: Eliminate the Part D Coverage Gap and Require Drug Maker Rebates for Full-Benefit Dual Eligible Individuals

Description of Amendment:  Amends Section 1860D-2 of the Social Security Act by phasing-out the Medicare Part D coverage gap and requiring drug manufacturers to provide rebates for full benefit dual eligible beneficiaries that match Medicaid rebates.  Every year, beginning in 2011, the initial coverage limit will be increased and the out-of-pocket threshold will be decreased until the coverage gap is closed.  The initial coverage limit, otherwise computed without regard to the phaseout, will be increased by half the cumulative phase-in percentage times the out-of pocket gap amount for the year.  The annual out-of-pocket threshold, otherwise computed without regard to the phaseout, will be decreased each year by half the cumulative phase-in percentage of the out-of-pocket gap amount for the year multiplied by 1.75.  The cumulative phase-in percentage will be calculated by adding the annual phase-in percentage for the year and all previous years beginning in 2011, but cannot exceed 100 percent.  The annual phase-in percentages are: for 2011, 13 percent; for 2012 through 2015, 5 percent; for 2016 through 2018, 7.5 percent, and for 2019 and each subsequent year, 10 percent.  The out-of-pocket gap amount is defined as the amount by which the annual out of pocket threshold (as determined without regard to the phaseout) exceeds the sum of the annual deductible plus ¼ of the amount by which the initial coverage limit (as determined without regard to the phaseout) for the year exceeds the annual deductible.

Offset:  Require Part D Drug Rebates for Dual Eligible Individuals. Drug manufacturers, as a condition of having any of their drugs covered under Part D, are required to provide the Secretary of Health and Human Services with a rebate for any drug covered under Medicare Part D dispensed to any full-benefit dual eligible after December 31, 2010.  This provision applies to drugs used by dual eligible individuals enrolled in Prescription Drug Plans run by Part D sponsors and MA-PD plans administered by MA organizations.  The size of the rebates is defined as the amount (if any), by which the average Medicaid drug rebate (as modified by this statute, and including both the basic and inflation rebates) for each unit of the drug exceeds the average per-unit rebate, discount, or price concession provided to Part D sponsors and MA-PD plans administered by MA organizations drugs used by dual eligibles, multiplied by the number of units of the drug provided to dual-eligibles by Part D or MA-PD plans.  Part D prescription drug plans (PDPs) and Medicare Advantage plans must make confidential reports to the Secretary on the drugs dispensed, the price rebates given, the extent to which rebates are available to dual eligible and non-dual eligible Medicare beneficiaries, and any other information needed by the Secretary to calculate the rebate amount needed.  Confidentiality provisions similar to those that already apply to the Medicaid drug rebate will apply to the data provided under the Part D rebate program.  The Inspector General of the Department of Health and Human Services may use this information to conduct audits, investigations and evaluations.  The plans are subject to a $10,000 per day civil money penalty for failing to provide these information reports and a $100,000 civil money penalty for providing false information in their reports.  The rebates are to be deposited into the Medicare Prescription Drug Account and used to pay for all or part of the gradual elimination of the Part D coverage gap.

The Chairman’s Mark provision on improving coverage in the Part D coverage gap is modified so that pharmaceutical manufacturers are required to give discounts on drugs used in the donut hole as if it existed without regard to the phaseout.  Discounts provided in the portion of the donut hole that has been closed by the phaseout will be used to reduce the cost of the phaseout.

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