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MEDICARE PART D: IMPLEMENTATION OF THE NEW DRUG BENEFIT HEARING BEFORETHE SUBCOMMITTEE ON HEALTH OF THE COMMITTEE ON ENERGY AND COMMERCE HOUSE OF REPRESENTATIVES ONEHUNDREDNINTH CONGRESS SECONDSESSION MARCH 1,2006 Serial No. 109-129 Printedfortheuse ofthe Committee onEnergyandCommerce AvailableviatheWorldWideWeb: http://www.access.gpo.gov/congress/house U.S.GOVERNMENTPRINTINGOFFICE 31-429PDF WASHINGTON 2006 : ForsalebytheSuperintendentofDocuments,U.S.GovernmentPrintingOffice Internet:bookstore.gpo.gov Phone:tollfree(866)512-1800;DCarea(202)512-1800 Fax:(202)512-2250 Mail:Stop SSOP,Washington,DC20402-0001 COMMITTEEONENERGYANDCOMMERCE JoeBarton,Texas,Chairman RalphM.Hall,Texas JohnD.Dingell,Michigan MichaelBilirakis,Florida RankingMember ViceChairman HenryA.Waxman,California FredUpton,Michigan EdwardJ.Markey,Massachusetts CliffStearns,Florida RickBoucher,Virginia PaulE.Gillmor,Ohio EdolphusTowns,NewYork NathanDeal,Georgia FrankPallone,Jr.,NewJersey EdWhitfield,Kentucky SherrodBrown,Ohio CharlieNorwood,Georgia BartGordon,Tennessee BarbaraCubin,Wyoming BobbyL.Rush,Illinois JohnShimkus,Illinois AnnaG.Eshoo,California HeatherWilson,NewMexico BartStupak,Michigan JohnB.Shadegg,Arizona EliotL.Engel,NewYork CharlesW."Chip"Pickering, Mississippi AlbertR.Wynn,Maryland ViceChairman GeneGreen,Texas VlTOFOSSELLA,NewYork TedStrickland,Ohio RoyBlunt,Missouri DianaDeGette,Colorado SteveBuyer,Indiana LoisCapps,California GeorgeRadanovich,California MikeDoyle,Pennsylvania CharlesF.Bass,NewHampshire TomAllen,Maine JosephR.Pitts,Pennsylvania JmDavis,Florida MaryBono,Cahfomia JanSchakowsky,Illinois GregWalden,Oregon HildaL.Solis,California LeeTerry,Nebraska CharlesA.Gonzalez,Texas MikeFerguson,NewJersey JayInslee,Washington MikeRogers,Michigan TammyBaldv/in,Wisconsin C.L."Butch"Otter,Idaho MikeRoss,Arkansas SueMyrick,NorthCarolina JohnSullivan,Oklahoma TimMurphy,Pennsylvania MichaelC.Burgess,Texas MarshaBlackburn,Tennessee BudAlbright,StaffDirector DavidCavicke,GeneralCounsel Reidp.F.Stuntz,MinorityStaffDirectorandChiefCounsel SUBCOMMITTEEONHEALTH NathanDeal,Georgia,Chairman RalphM.Hall,Texas SherrodBrown,Ohio MichaelBilirakis,Florida RankingMember FredUpton,Michigan HenryA.Waxman,California PaulE.Gillmor,Ohio EdolphusTowns,NewYork CharlieNorwood,Georgia FrankPallone,Jr.,NewJersey BarbaraCubin,Wyoming BartGordon,Tennessee JohnShimkus,Illinois BobbyL.Rush,Illinois JohnB.Shadegg,Arizona AnnaG.Eshoo,California CharlesW."Chip"Pickering Mississippi GENEGREEN,Texas , SteveBuyer,Indiana TedStrickland,Ohio JosephR.Pitts,Pennsylvania DianaDeGette,Colorado MaryBono,California LoisCapps,California MikeFerguson,NewJersey TomAllen,Maine MikeRogers,Michigan JimDavis,Florida SueMyrick,NorthCarolina TammyBaldwin,Wisconsin MichaelC.Burgess,Texas JohnD.Dingell,Michigan JoeBarton,Texas (ExOfficio) (ExOiiuJO) ai) 3 CONTENTS Page Testimonyof: McClellan,Hon.Mark,Administrator,CentersforMedicare&MedicaidServices 32 Dennison,Anne 11 Hickerson,Marcus 116 Song, Dennis, Flower Moimd Herbal Pharmacy, on behalfofNational Community PharmacistAssociation 122 Paul,Tom,ChiefPharmacyOfficerforOvations,UnitedHealthGroup 128 Walsh, Jude E., Special Assistant, Governor's Office ofHealth Policy and Finance, StateofMaine 137 Ettienne,Earl,SeniorRXSupervisor,CVS/Pharmacy 142 Lipshutz,DavidA.,StaffAttorney,CaliforniaHealthAdvocates 148 Rawlings,Susan,President,SeniorServices,WellPoint,Inc 159 Additionalmaterialsubmittedfortherecord: McClellan, Hon. Mark, Administrator, Centers for Medicare & Medicaid Services, responsefortherecord 174 Q^SUbrarv C2-07-13 7500 Security Bfvd, Sattlmore, Marytend 21244 (III) MEDICARE PART IMPLEMENTATION D: OF THE NEW DRUG BENEFIT WEDNESDAY,MARCH 1, 2006 HouseofRepresentatives, CommitteeonEnergyand Commerce, Subcommittee onHealth, Washington, DC. The subcommittee met, pursuant to notice, at 2:00 p.m., in Room 2123 of the Raybum House Office Building, Hon. Nathan Deal (chairman) presiding. Members present: Representatives Deal, Hall, Bilirakis, Gillmor, Norwood, Shimkus, Pickering, Buyer, Pitts, Ferguson, Burgess, Barton (ex officio). Brown, Waxman, Towns, Pallone, Gordon, Rush, Eshoo, Strickland, DeGette, Capps, Allen, Davis, Baldwin, and Dingell (ex officio). Staff present: Chuck Clapton, Chief Health Counsel; Melissa Bartlett, Counsel; Ryan Long, Counsel; Nandan Kenkeremath, Counsel; Bill O'Brien, Research Assistant; David Rosenfeld, Counsel; Brandon Clark, Policy Coordinator; John Ford, Minority Counsel; Chris Knauer, Minority Investigator; Purvee Kempf, Minority Counsel; Amy Hall, Minority Health Professional Staff Member; Bridgett Taylor, Minority Health Professional StaffMember; Jessica McNiece, Minority Research Assistant; Jonathan Brater, Minority Staff Assistant; and Chad Grant, Legislative Clerk. Mr. Deal. The meeting will come to order. Ifsomeone would get the door in the back, please. The Chair recognizes himself for an opening statement. We are pleased to have Dr. McClellan here as our member ofour first panel and another rather distinguished second panel thatwill follow shortly thereafter. The purpose ofthe hearing today is to examine the implementation of the new Medicare prescription drug benefit. Today, I believe, marks the sixtieth day ofthe implementation of the biggest change to Medicare in its 40-year history. Like most significantprograms, the newbenefit has not gone without a few isolated glitches and unexpected problems, but I believe that ifthere is anything wrong with the plan, most ofithas been fixed andthat that hasn't can be fixed over time. In fact, I understand that most ofthe early glitches in the program have already been resolved thanks to the hard work and cooperation of CMS, pharmacists who are dealing with it on a daily basis, andtheprescription drugplans, themselves. (1) 2 Because ofthis new benefit, America's senior citizens are better off, and today more than 25 milUon Medicare beneficiaries are receiving benefits under this new Medicare prescription drug benefit. This includes more than 5.3 milHon beneficiaries who have signed up individually for prescription drug coverage in the last three months, including 1.5 million who have signedup inthe last 30 days. The new prescription drug benefit is working for American citizens because of the hard work and commitment by pharmacists, physicians, plan employees, public administrators in the States, Dr. McClellan and his staff at CMS. Also, by all the cooperation of family and friends of Medicare beneficiaries who take the time to help their loved ones signup for the plan and to make the right choices that they think meet their individual needs. I talked with constituents in my district and many of them tell me that before the implementation of this benefit, they were spending several hundred dollars out of their own pocket on prescription drugs. Many times it was equal to, and in some cases even exceeding, their Social Security benefits. Today, many of these constituents are now spending less than $100 a month thanks to this new prescription drug benefit. Many of them tell me that sometimes the money they didn't have for drugs, they had to put on credit cards or ask family members to assist in paying for those benefits, and by having this benefit available it has restoredtheirpersonal dignity. Anything that you try to do is going to have objectors, and we have certainly had our share of objectors, and we will hear some of those objections, I am sure, here today. Many of us have held town hall meetings across our districts and have provided assistance in enrolling seniors into programs. Others have not been quite so cooperative in that effort, but many ofmy colleagues on this committee have done exactly that ~ both Democrats and Republicans. I thankthem for that, because I think it is our obligation to assist seniors in making this benefit package work forthem. I want to thank our expert panel ofwitnesses for taking their time to come and we are going to hear a variety ofpoints ofview, obviously, in a panel as large as the second panel will be. I look forward to hearing your testimony. Thank you again and at this time I would recognize the Ranking Member, Mr. Brown. [Theprepared statement ofHon. NathanDeal follows:] PreparedStatementoftheHon.NathanDeal,Chairman,Subcommitteeon Health • The Committee will come to order and the Chairrecognizes himselffor an opening statement. 3 • The purpose ofthis hearing is to examine the implementation ofthe new Medicare prescriptiondrugbenefit. • Todaymarksthe60*dayoftheimplementationofthebiggestchangetoMedicarein the40yearhistoryoftheprogram. • Andlikemostsignificantnewprograms,thisnewbenefithasnotgonewithoutafew isolatedglitchesandunexpectedproblems. • However, I believe that there isn't anything wrong with the Medicare prescription drugbenefitthatcannotbefixedwithtime. o In fact, I understand that most of the early glitches in the program have already been resolved thanks to the hard work and cooperation of CMS, pharmacists,andtheprescriptiondrugplans. • Becauseofthisnewbenefit,America's seniorcitizensarebetteroff • Today,morethan25 millionMedicarebeneficiariesarenowreceivingbenefitsunder thenewMedicareprescriptiondrugbenefit o This includes more than 5.3 million beneficiaries who have signed up individually forprescription drug coverage inthe lastthreemonths, including 1.5millionwhosignedupinthelast30days. • The new prescription drug benefit is working for America's seniors because ofthe hardworkandcommitmentby o Pharmacists o Physicians o Planemployees o PublicAdministratorsinthe states o Dr. McClellanandhisstaffatCMS o And all the friends and family ofMedicare beneficiarieswho tookthe timeto make sure their loved ones took advantage ofall ofthe choices in plans and enrolledintheplanthatbestsuitstheirindividualneeds • I talk with constituents all the time in my district that tell me that before the implementation ofthis benefit, they were spending several hundred dollars out their own pocket on prescription drugs. Many times they were turning over their entire Social Security check to the pharmacist and still not able to buy all the drugs they neededto stayhealthy. o These same constituents are now spending less than $100 permonth on their drugseachmonththankstothenewMedicarePrescriptionDrugBenefit. o They tell me how they now have several hundred dollars a month that they didn't have before to spend on things otherthan drugs and that they are now able to take all the drugs they need without having to borrow money from creditcardcompaniesandfamilymembers. o Formanyofthem,thisnewbenefithasgiventhemtheirdignityback. • Unfortunately, as is so often the case, the people who voted against this bill find themselves on the wrong side of history and are now taking advantage of every opportunity to attackthis newbenefitby seizing on every little temporary glitch and exaggeratingoftenisolatedproblemsandmakingthemseemlikethenorm. • Ofcourse,thesepartisanattacksandpoliticalposturingdonothingtohelpAmerica's seniors. • Infact, ratherthanholdingtownhallmeetingsto educatebeneficiaries aboutthe law andhelp thempick aplan thatbest meets theirneeds, the Democratic Leadership is instructingtheirMemberstoholdtownhallmeetingsblastingthebenefit. • How many seniors have they scared away from saving thousands ofdollars in drug costsbecauseoftheirrhetoric? • How many seniors are having to do without some of the medications they need becauseofthisrhetoric? 4 • Howmanyseniorsarehavingtogototheirfamilymembers, swallowtheirpride, and askformoneyfortheirdrugsbecauseofthisrhetoric? • But I want to thank my Democratic colleagues who chose not to go this route and hurtourseniorcitizensinexchangeforsome short-termpoliticalgain. • Indeed, many Democrats on this Committee have made the right decision by not goingthePelosiroutebutinsteadchoseto help theirconstituents getthemostoutof this wonderful new benefit by holding educational town hall meetings and helping theirseniorsenrollinthemostappropriateplanfortheirneeds. o Itismyhopethatmoreofyourcolleagueswillfollowyourlead. • Iwantto thank our expertpanel ofwitnesses fortakingthe time to testifybefore us today. Ilookforwardtohearingfromeachofyou. Mr. Brown. Thank you, Mr. Chairman, and welcome, Dr. McClellan. Nice to see you again. Thankyou forjoining us. You and I have spoken about and I appreciate your taking my call a couple of weeks ago about the frustration, anxieties they try to navigate, as seniors try to navigate the new drug program. I know you have taken steps to improve customer service at the request of many on both sides of the aisle, this panel and others, and I am grateful for that. Insurers like Anthem in Ohio have been trying to make the best out ofabad situation. I am equally grateful forthat. But no one inthe Bush Administration, no one in the insurance industryhas beenwilling to acknowledge, much less D tackle, the big issues that Medicare Part has brought. I find that appalling. When Democrats talk about the problems dragging this program down, we are accused ofpoliticizing the issue. That accusation would carry a lot more weight ifwe were making a mountain out ofa molehill. Instead, the Bush Administration and the Republicans in Congress are trying to make a molehill out of a mountain. The problems with this drugprogram are real, they are significant, they are ongoing. Ifsomeone doesn't take those problems seriously and it doesn't sound like people in this institution are, we have no hope ofsolvingthem. First, there is a looming enrollment deadline. How could it possibly be fair for Medicare beneficiaries to pay a penalty ifthey don't enroll by May 15^? How can anyone blame seniors ifthey have been either too perplexed or too wary to enter the fi'ay? I spoke to a Medicaid eldercare lawyer in Butler County, north ofCincinnati, abouttwo months ago who, about a month and a half ago, who told me, as a Medicaid lawyer, that she couldn't figure out this benefit for her mother. And why isn't the Administration working with Congress to extend the enrollment deadline? It is pretty clear that that is just the tip ofthe iceberg. The biggest problem with the new drug program is the program, itself Privatizing prescription drug benefits for seniors never made sense and now it is wreaking havoc. You know and I know that the problems dogging this 5 program aren't over, they are just beginning. Wait until seniors face prior authorization requirements, driven not by medical necessity, but by the bottom line. Wait until formularies change, premiums change, deductibles change, co-pays change. Wait until drug plans drop out of the program. Wait until seniors learn their neighbors one county over have lowerpremiums. Waituntil seniors who pickthe bestplan forthem on that day need another prescription, one that turns a right plan into the wrong one. Andthese arejustthe coverage problems. The financial issues are equally daunting. Genentech recently announced that it plans to charge $100,000 for a year's worth of the cancer drug, Avastin. The company didn'tbother to weave a story to the R&D media about recouping cost, Genentech simply said Avastin will carve the best andwill cost $100,000 because that is what the marketwill bear. The Medicare drug law prohibits the Federal government, amazingly so, we all know this now, prohibits the Federal government from negotiating drug prices. If Genentech wants to arbitrarily charge $100,000 so it can generate billions in profits, why should taxpayers have anything to say about it? Taxpayers contributed $45 million to the development ofthis drug. Americans are being charged the highestprice in the world for that drug and Medicare is not allowed to negotiate a discounted price for that drug. We might as well eliminate the middle man and give the drug industry a vote in Congress and a Cabinet position. Democrats have introduced legislation to eliminate the prohibition on price negotiations. We have introduced legislation to extend the We penalty-free enrollment deadline. have introduced legislation to rationalize prior authorization rules to dispense with mid-year formulary changes and let seniors switch plans ifthe initial one turns out to be a lemon. We have introduced legislation that goes back to the basics to enable Medicare beneficiaries to bypass private insurance so they don't spend all their time trying to figure out and compare 40 or 50 insurance companybrochures, insteadto simply addMedicare prescription drugs to their Medicare benefits package and no confusion, no drama,just a good drugbenefit, the way we shouldhave done atthe beginning. Numerous choices have been foisted upon seniors. It is time to give themthe one choice they want. I spent the last six weeks traveling Ohio, talking to pharmacists and seniors in Vandalia and Cincinnati and Lima and Bowling Green and Toledo and Akron and Cleveland and Mansfield and Columbus and Youngstown and one drug store, one pharmacist in Norton, Ohio, a suburb of Akron, told me that Congress and the president simply must have handed ablank legal pad to the drug industry and said hey, write this bill for us, would you? It's never pleasant to admit you were wrong, but it is worse to ride a dead horse. I hope my 6 Republican colleagues will decide it is time to focus on the well being of Medicare beneficiaries andhelp us make this drugprogramwork. Thank you, Mr. Chairman. Mr. Deal. The Chair recognizes the Chairman of the full committee, Mr. Barton ofTexas. Chairman Barton. Thank you, Mr. Chairman, for holding this hearing. I want to thankDr. McClellan for once again comingbefore the subcommittee. It is always good to see a fellow Texan. I am looking forward to hearing your perspectives. We also look forward to hearing theperspectives ofthe panel that is goingto come afteryou. Medicare is finally providing patients with prescription drugs after years offalse starts, failed attempts, and endless debate. Congress finally delivered on its promise and created a Medicare prescription drug benefit. The result is not perfect. In fact, it is no secret that during those negotiations and markups several years ago, I unsuccessfully sought to make several changes when we debated the Medicare Modernization Act of2003 in this very room. At the end ofthe day, however, I voted for the bill, voted for it in committee, voted for it on the floor, and voted for itin conference. We negotiated a compromise that has created what we now call the program. Medicare Part D. Where our critics before us had failed for 40 years, that Congress and now this Congress has delivered a Medicare prescription drug benefit for millions ofsenior citizens. We are now in the sixtieth day of this new benefit. Although you wouldn't believe it from some accounts, more than five million seniors have enrolled in the new Medicare prescription drug benefit plan. Another 20 million are getting assistance in existing plans that Medicare is helping to subsidize in some way. That adds up to 25 million seniors, andthey are signing up atthe rate ofabout a halfa million a week. That sounds like a success to me, not a failure. The people that are signing up are saving money. Their monthly premiums have dropped from an initial estimate of $37 down to about $25 a month. CMS reports that the plans they are joining are doing better than anybody expected to increase the use ofgeneric drugs and to negotiate deeper discounts with drug manufacturers. The market works. People are making choices and supplies are responding to market competition. This is translated into real savings for Medicare beneficiaries, meaning that they have been able to reduce their drug spending by thousands of dollars on an individual basis on an annual basis. We are going to hear from some real beneficiaries today, including one from my Congressional district, Mr. Marcus Hickerson, who I can see out in the audience over on, unfortunately for me, on the Democratic