MINUTES OF THE meeting

of the

ASSEMBLY Committee on Health and Human Services

 

Seventy-First Session

February 26, 2001

 

 

The Committee on Health and Human Serviceswas called to order at 1:30 p.m., on Monday, February 26, 2001.  Chairman Ellen Koivisto presided in Room 3138 of the Legislative Building, Carson City, Nevada.  Exhibit A is the Agenda.  Exhibit B is the Guest List.  All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

 

 

COMMITTEE MEMBERS PRESENT:

 

Mrs.                     Ellen Koivisto, Chairman

Ms.                     Kathy McClain, Vice Chairman

Ms.                     Sharron Angle

Ms.                     Merle Berman

Mrs.                     Vivian Freeman

Ms.                     Dawn Gibbons

Ms.                     Sheila Leslie

Mr.                     Mark Manendo

Ms.                     Bonnie Parnell

Ms.                     Debbie Smith

Ms.                     Sandra Tiffany

Mr.                     Wendell Williams

 

COMMITTEE MEMBERS ABSENT:

 

None

 

GUEST LEGISLATORS PRESENT:

 

None

 

STAFF MEMBERS PRESENT:

 

Marla McDade Williams, Committee Policy Analyst

Darlene Rubin, Committee Secretary

 

OTHERS PRESENT:

 

Richard Cauchi, Senior Policy Specialist, Health Care Programs, Denver National Conference of State Legislatures

Keith Munro, Legal Counsel, Governor’s Office

Keith Macdonald, Executive Secretary, Nevada Board of Pharmacy

Louis Ling, General Counsel, Nevada Board of Pharmacy

Mary Lau, Executive Director, Retail Association of Nevada

Ron Bingaman, Director of Pharmacy Administration and Compliance, Safeway, Inc.

Vic Verling, Director of Pharmacy, Scolari's Food and Drug Co.

Angie Sharp, Pharmacy Insurance Administrator, Scolari’s Food and Drug Co.

Tom Wood, State Government Affairs Manager, Wyeth-Ayerst Pharmaceuticals

Ed Fend, Capital City Task Force, America Association of Retired Persons

Paul Gowins, Lobbyist, Disability Forum

Dee Dee Foremaster, Resource Specialist, Carson City Center for Independent Living

 

Chairman Koivisto opened the meeting with a committee discussion on the need to require the Legislative Counsel Bureau to provide actuarial assistance to the Assembly Committee on Health and Human Services to assist its members in the analysis of issues relating to prescription drug coverage.  The committee voted to request the Director of the Legislative Counsel Bureau to take any steps necessary to provide that assistance.

 

Next, the committee considered a request for the drafting of a bill that required a trauma center in a county with a population less than 400,000 that contracted for services for the treatment of trauma to bill charges to all payers for the services; prohibits the hospital from indemnifying or otherwise providing for a reduced payment or other relief for payment of trauma services; and, prohibits a hospital from entering into negotiations for new contracts or negotiations for contract renewal that do not comply with the aforementioned provisions.  The committee voted unanimously to request the bill draft.

 

Chairman Koivisto then asked for approval of bill draft request introductions:

 

• BDR 38-356 – Requires adoption of regulations governing provision of certain information to foster or adoptive parents and revises certain provisions governing procedures for protection of children from abuse and neglect (A.B. 248).

 

                        VICE CHAIRMAN MC CLAIN MOVED FOR THE COMMITTEE                                     INTRODUCTION OF BDR 38-356.

 

                        ASSEMBLYMAN MANENDO SECONDED THE MOTION.

 

                        THE MOTION CARRIED UNANIMOUSLY.

 

 

• BDR R-226 – Directs the Legislative Committee on Health Care to conduct an interim study concerning development of a system for reporting medical errors (A.C.R. 7).                 

 

                        VICE CHAIRMAN MC CLAIN MOVED FOR THE COMMITTEE

                        INTRODUCTION OF BDR R-226.

 

                        ASSEMBLYWOMAN GIBBONS SECONDED THE MOTION.

 

                        THE MOTION CARRIED UNANIMOUSLY.

 

Chairman Koivisto introduced Richard Cauchi, from the National Conference of State Legislatures (NCSL), to help educate the committee on the status of other states’ senior pharmacy programs.

 

Richard Cauchi, Senior Policy Specialist, with the Health Care Program based in Denver, informed the audience that NCSL was a nonpartisan organization that acted directly as support and research staff for the 50 states and took no position on any state legislation.

 

Mr. Cauchi noted that prescription drug costs and access had been a controversial topic for the past two years and that was especially true for the states.  Policymakers had clear but conflicting goals and driving the debate was the desire for increased access and coverage for those who lacked it. Meanwhile most states were looking to save state funds and often to avoid entitlements.  Much of the discussion on the state level was separate from the federal debate.

 

Mr. Cauchi provided written copies (Exhibit C) of his slide presentation. 

 

• State Cost Increases – Medicaid:  Prescription drug costs within the Medicaid program from 1994 to 1998 had shown an 11 percent to 12 percent increase.  However in 1999 that number had taken a major leap of 22 percent, and in some states the increase had been much more; in Georgia 34 percent, North Carolina 31 percent, and so on.

 

• Drug Spending by the States 1985 – 2008:  That slide illustrated the Medicaid program both real and projected.   Medicaid was a fairly good indicator because the program covered people of a variety of ages and conditions and reflected many of the concerns.  The numbers showed what most people believed: prices of prescription drugs would continue to increase.  A recently released report from the Congressional Budget Office showed that in 2001 the Medicare population’s spending would be higher than anticipated at $1,525 per person average.

 

• Relative Contribution to Increase in Drug Spending:  Manufacturers’ price increases accounted for 18 percent of the overall increase.  Higher by far was the increased utilization of various prescription drugs that caused 43 percent of the difference in cost to a state or program.  The switch to higher cost drugs, usually new products, accounted for 39 percent of the impact.

 

Mr. Cauchi reflected that the dilemma for state policymakers in many locations was that a more informed understanding of those causes did not lead to a single effective or acceptable legislative solution. 

 

In the next slides, Mr. Cauchi focused on state senior pharmaceutical assistance programs, namely the state-funded and state agency-run programs that subsidized prescription drugs. 

 

• Current Subsidy Programs:  Twenty states had enacted such subsidy programs, including Nevada.  Some of those programs were modest; for example Wyoming averaged 550 people served per month, while Pennsylvania had 234,000 people.

 

• Senior Pharmacy Assistance:  In 11 states the enrollees must be 65 or over, while nine states required the person be over 65 or disabled.

 

• Pharmacy Assistance Programs:  State Laws:  There seemed to be no single model for the programs; they evolved at different times and from different motivations and budget situations.  New Jersey and Maine were the first states to have such programs, which began in 1975, and at least a dozen had been in place for a decade or more.

 

• Pennsylvania Pharmaceutical Assistance:  There were strict income caps; $14,000 for an individual or $17,200 for a couple.  They also had a catastrophic program that had a slightly higher bracket of $16,000 and $19,000.  The administrator of that program emphasized their program was neither an insurance product nor a discount program, rather a straight subsidy.  They also required the person have no other insurance.  There was a $6 co-payment but they had no formulary and no upward dollar cap on the benefit.  The program budget was $288 million and it was funded by the state lottery.  Further, it was not an entitlement program in the sense that it was dependent upon appropriation of funds.  In 1997, the program averaged about $791 per participant, and at the beginning of 2000 it was $1,100.  While the expenditure had increased the enrollment had actually decreased.

 

• Fees and Co-Payments:  A chart of the various states’ programs.  Generally, most had either an annual fee or co-payment, or co-insurance, where the person paid a percentage of the prescription drug.  Because those programs were aimed at a population usually under 200 percent to poverty, most states had attempted to keep the total figures relatively low.

 

            One state that bore a demographic resemblance to Nevada was Maine,             which had a $2 co-payment or a 20 percent co-payment whichever was             greater.

 

            The programs varied extensively but the common denominator was             average cost per recipient, although it varied from program to program.              Generally the cost was $1,000 down to $700 per recipient; some states             were lower due to people who went on and off the program, as not             everyone used a prescription drug regularly for a 12-month period, so that             decreased the average-per-enrollee cost.

 

Mr. Cauchi stated there were some variations within the programs in the states:  Missouri and Michigan both had chosen a tax credit approach; the state did not actually purchase the drugs or subsidize the purchase, rather the individual at the end of each year was able to take a credit on their state income tax, from $200 in Missouri up to $600 in Michigan.  Nevada had chosen the approach of private insurance subsidy.

 

The tobacco settlement which provided a windfall of funds to at least 45 states and in some way all 50 states in the last year, had had an impact on enactments in that area.  In 2000, Indiana, Kansas, Florida, and South Carolina joined in the list of states with such programs. 

 

Mr. Cauchi added that although less visible, but more important numerically, were some of the fast changing expansions within existing programs.  In 2000, Illinois, which had an existing program that served about 50,000 people and had served people with incomes up to $16,000, increased the limit for eligibility to $28,480 for a couple and doubled the program budget.   Massachusetts’ program, which began in 1996 with a traditional program that served a low-income population with an annual benefit cap of $500, was increased to $750 in the second year, and by last year had increased to $1,250 per individual (the average cost for someone over 65).  The program had a rapid expansion; a year and one-half ago it had 32,000 people, currently it had 81,000 people and it was estimated that number would rise to 150,000 people by the end of 2001.

 

In July 2000, the state approved a new catastrophic plan that featured a sliding scale premium and was designed to include everyone over the age 65. That new component was an insurance product and probably had some similarities to the effort underway in Nevada.  A track record was not available for that new Massachusetts program as it would not begin until April 2001.  Mr. Cauchi said subsidy programs were not necessarily a consensus nationwide, in fact had been rejected in Colorado, Arkansas, Iowa, Missouri, West Virginia, and Wisconsin.

 

Mr. Cauchi moved on to a second approach that states had used recently beginning in 1999, when states seriously considered bills that would address the cost of the drugs but not through state subsidies.  He introduced a slide that showed: 

 

• Discount Prices for Medicare Enrollees:  Such proposals would, by statute, allow anyone who was enrolled in the Medicare program to purchase prescription drugs at the Medicaid discounted price.  California was the first state to enact that law and that went into effect in February 2000; enrollment was automatic with a Medicare card.  Florida was next with a comparable program that began in the fall of 2000; however, there the discount was via a manufacturer’s rebate.  That meant that manufacturers were requested to be a participant and provided a reduced rate and the retail pharmacies added a component to that.  Maine also had a law that proposed to require a discount and had included a provision for future price controls and a provision that required prescription drug manufacturers to participate and provide a discount or else their products would be placed on “prior authorization” within the Medicaid program.  A federal court found that provision was not legal under federal law and had enjoined it.

 

Chairman Koivisto opened the discussion briefly for questions on points raised.

 

Assemblywoman Berman noted she had been interested in Senate Bill 393 in  California and asked for a run-down on how the bills in Florida and California  were working.

 

Mr. Cauchi said he had spoken with key people in California and some said the program was working.  There had been three million transactions or transaction increases.  A question raised there was that prices were not as low as had been talked of in the political debates. The reality of using the Medicaid program as a basis, explained Mr. Cauchi, was that it held all the complexities of Medicaid pricing.  The prices varied frequently and with different brand products; as was the case with many drugs even though the content was supposed to be identical.  As far as Florida’s experience, Mr. Cauchi said he had heard little in response to his queries.  There were some media stories criticizing the law, mostly based on the actual price of drugs that, the media claimed, were no better than some of the best discount prices.  The lack of price control was a problem within programs around the country.

 

Mr. Cauchi returned to the slide presentation:

 

• State Bulk Purchasing:  Massachusetts was the first state to enact a law that proposed that the state combine all of the constituencies that were of interest to the legislature in that year in order to get the best possible price for a mega-volume purchase.  Included were such groups as the existing senior pharmacy constituency, subsidy program, all state employees, and group insurance consisting of public employees plus retirees, the Medicaid population, the uninsured and under-insured individuals, and others whom the state might subsidize.  The governor signed the law but it had not yet been put into effect.  Discussions were ongoing as to how that plan might be implemented.  Seven months after passing that law the Massachusetts legislature passed their major expansion of the subsidy program and the agencies involved felt they wanted to try the program most recently passed instead of the bulk purchasing.  Mr. Cauchi said 10 other states had proposals for bulk purchasing and in 2001 several states also had legislation in that area. 

 

Assemblywoman Gibbons asked if the states could combine their efforts to purchase the most common, or 10 most common, drugs used by seniors.

 

Mr. Cauchi responded that the three northern New England states: New Hampshire, Vermont, and Maine, had formed a formal organization called the Tri-State Coalition and were actively pursuing a three-state purchasing initiative.  Instead of legislation, each of the three states had authorized the exploration via a request for proposals (RFP) to the pharmacy benefit management world.  As of the January 9, 2001 deadline the coalition had received eight bids from some of the major pharmacy benefit management companies in the country to explore how to run a program.  The coalition had not yet selected a single vendor.  Part of their RFP was to ask those companies  not only what they would charge, but  also how would they run or structure a program.  The coalition’s approach had provided for the important aspect of flexibility, specifically who would or would not be included in the bulk purchase.  They did specify that the Medicaid programs in the three states would be involved and two of those states had senior pharmacy subsidy programs.  Both Vermont and Maine had a separate approach they were using with a Medicaid waiver, therefore the structure in those states had become complex but they were moving ahead with the Tri-State Coalition RFP.  They anticipate having a program in place by July 1, 2001.  Mr. Cauchi considered that to have been a serious professional effort in the sense they hired pharmacy professionals who designed the RFP, and who had been doing the program design so it attempted to fit the private market model of what pharmacy benefit management did for multi-state companies.

 

• State Purchasing Cooperatives:  Those had emerged in the fall of 2000 where the governors of four states went forward and announced the states would form a discount club for the over-65 population and without an upper income limit.  The programs followed closely the private market model of companies that offered a discount card.  In some case the states proposed the individual pay an enrollment fee of $15 or $25 a year, which would entitle them to whatever discount the hired pharmacy benefit management company could negotiate.  In that situation the prices would not be set by law but by a future negotiation estimated at 22 percent, based on existing private sector models.  No state funds would be used for that program. Washington’s program was supposed  to go into effect on January 1, 2001, but a lawsuit had slowed that down. The West Virginia program had been up and running for a couple of weeks; New Hampshire had 75,000 people who filled out a form saying they wanted to be part of it, but no record yet on how it was working.

 

Chairman Koivisto asked about funding for the above-described programs.  Mr. Cauchi responded that the state in each case hired a pharmacy benefit management company and asked for a proposal based on the number of elders in the program and the management company would propose the best price it could obtain for the state as a discount program.

 

Mrs. Koivisto asked if funding had come from tobacco settlement funds.  Mr. Cauchi said it had not.  In the case of the discount programs no state funds had been appropriated.  The 20 states that were putting money directly toward the drugs had used tobacco settlement funds.  He stated too that because the programs had not been done by legislation but had been designed by contract he was not familiar with all the financial details.

 

Mr. Cauchi continued, noting that the state of Maine had one of almost every program in place:  a subsidy program for 25 years, a small discount program that was expanded to a large and somewhat mandatory discount program, and a price control program would go into effect if prices were not lowered by July 2003.  There was a federal injunction on some portions of that law but it had received a lot of attention and other states had filed bills based on parts of that model.  More current attention was the notion of a Medicaid waiver that would allow for anyone who was on Medicare to be eligible for a special Medicaid benefit that would only include prescription drugs.  When the Vermont legislature passed that idea in April 2000, those familiar with Medicaid had not taken it seriously because one could not have a prescription-only Medicaid benefit.  In November 2000, the Health Care Financing and Administration (HCFA) approved that waiver and said Vermont could have a prescription-only benefit.  In January a similar program had been approved for the state of Maine.  Thus there was now a federally approved benefit that allowed for an individual over 65 and over eligibility for normal Medicaid to be declared eligible for a prescription drug-only Medicaid benefit.  However, the benefit consisted of a co-payment or a co-insurance amount where the individual was actually paying much of the retail price and the program benefit consisted of the Medicaid discount and rebate rate.  Essentially, that amounted to a federal waiver that allowed a discount program with an outcome quite similar to that in Florida and California.  The key was that it was done under federal law and the individuals declared to be Medicaid beneficiaries for that purpose. 

 

A number of other states had applied for such waivers and they would be watching to see what was possible and what else might be approved as a model for other states.  Another set of states known as the Northeast Legislative Association included eight states: all six New England states plus New York and Pennsylvania.  The group, made up of legislators, had held regular meetings to discuss options for prescription drug cost measures but no legislation had yet been brought forward, but the ideas that had come out of the meetings were being shared and discussed with other states. 

 

Mr. Cauchi informed the committee about the “340-B” drug pricing program, a program that had existed for 10 years and was coordinated by what was termed the Office of Pharmacy Affairs.  Since the law authorizing it passed in 1990 and 1992 it had provided significant discounts to federally qualified health clinics, disproportionate share hospitals (DISH), Indian health aides, and a number of specified categories.  There were 57 locations in Nevada that were currently qualified.  Moreover, retail pharmacies now were allowed to join the network that had previously been seen as in-house clinics in facilities, but now they were providing for retail pharmacies to be part of that.  Some states were looking at expanding use of such clinics or services as a way of providing a prescription drug benefit. 

 

In summary, Mr. Cauchi, said that quite a number of states had looked at that issue and were debating it just as was being done in the Nevada Legislature, either for the first time or to add on or alter existing programs.  If a federal benefit was approved it would lead to an adjustment in many state programs and some states would be relieved to scale back and look at other spending priorities.  Mr. Cauchi also provided a folder of information, Pharmaceutical Assistance:  Latest Activities in the States (Exhibit D).

 

Chairman Koivisto suggested to committee members that if they had additional questions for Mr. Cauchi to write them out and give them to Marla McDade Williams and she would work with Mr. Cauchi to get answers for the committee.

 

Next to speak was Keith Macdonald, Executive Secretary, for the Nevada State Board of Pharmacy.  He complimented Mr. Cauchi’s comprehensive review of the status with the various states.  Mr. Macdonald advised the Board of Pharmacy was not authorized to conduct any review or regulatory matters regarding prescription pricing, although his staff came in contact with that issue periodically.  There were, however, some limited provisions regarding the requirement to assure that consumers were given prices and other data about their prescriptions.  He noted prescriptions were the most frequent service and transaction that occurred in the health care industry.  The Board of Pharmacy received complaints about various aspects of the industry, among which were:

 

• The price of prescriptions about which the Board of Pharmacy could do nothing was the most common consumer complaint;

 

• Drug switches, the second most common complaint which, although of concern to the individual, was often done for the improvement of their health care or drug therapy, and while it may have been a switch to a more expensive product it was not done for monetary reasons but for health benefit reasons;

 

• Medication errors was the third most common and the level at which the board began to respond;

 

• Pharmacist’s negative conduct was the fourth most common complaint.

 

Mr. Macdonald continued regarding the interest in the possibility of 340-B, the federally qualified health clinic concept.  Individual pharmacies had operated under that concept and give discount prices, but the temptation for at least one pharmacy was too great to handle those government-discounted prices and the pharmacist began to sell them to his regular customers.  The Board of Pharmacy disciplined him with fines and penalties that benefited the state treasury.  The percentage of prescriptions paid by third parties had increased from 37 percent in 1990 to nearly 80 percent by 1999.  The majority of people were receiving benefits, but the individuals being spoken of in the meeting had no benefits at all.  Nevertheless, the percentage of insured Americans had grown tremendously: in 1987 it was 23 percent; in 1992 it was 55 percent; and in 1999 it was 80 percent.  However, the uninsured and under-served were the main focus of concern.

 

He noted that the increased utilization and cost, as depicted in Mr. Cauchi’s slide presentation, were often the result of new products on the market, which appeared at the rate of nearly one new product per week.  Due to the research and development involved, those products were expensive.  The people in the senior age group were those who needed more drugs and often the more expensive drugs, at a time when income and assets were reduced.

 

Mr. Macdonald stated the Board of Pharmacy had tried to keep a very open, competitive marketplace in the industry and at the retail level it was the most competitive component of health care.  He reflected that in the Las Vegas area there were two pharmacies on opposite corners at nearly every stoplight.  Moreover, the Board of Pharmacy worked diligently to assure the quality of pharmaceutical services, both with the industry and from the board’s own regulatory standpoint. 

 

In summation, Mr. Macdonald stated the Board of Pharmacy stood ready to serve any of the provisions of public policy enacted by the legislature, however admitted candidly the board was not anxious to involve itself in pricing as the staff was very limited and it would be a project much larger than the board’s abilities and administrative skills could handle.  Mr. Macdonald then introduced his associate, Louis Ling.

 

Louis Ling, General Counsel for the Nevada State Board of Pharmacy, reiterated the board had no authority to involve itself in the price of drugs.  However, they had been working on things that had an indirect affect.  While those things could not be quantified, they impacted prices in a positive way.  One was a regulatory structure that was very welcoming to business in the state, particularly in Las Vegas.  He reported being astounded recently when he learned that approximately three pharmacies a month opened in Las Vegas.  Further, he had been in contact with a large national chain, CVS Drugs, that would be building stores in Las Vegas.  Theoretically, that should drive prices down although there was nothing to support that.  Finally, he noted the world’s largest pharmacy, Merck-Medco, was located in Las Vegas and reportedly was filling 700,000 prescriptions per week. 

 

Mr. Ling added the board was very progressive and had regulated for the latest technology that in the long run reduced the price to the consumer.  For example, a “central fill” concept meant that prescriptions would be filled offsite in more efficient facilities, thus the cost would go down.  Further, a remote dispensing regulation would allow pharmacies to serve patients in remote areas where there were no pharmacies.  In such a situation, a video link with a pharmacist in Las Vegas, Reno, or Carson City would allow communication with communities where there was no pharmacy, dispensing pharmacy assistant, or anyone to help in that area.  Also, a bill for “e-prescribing” which, if passed in the 2001 Legislative Session, would authorize prescriptions by physicians using hand-held devices rather than handwritten prescriptions currently used.

 

Mr. Ling also mentioned two initiatives being worked on that he felt in the long run would have an affect on the price of drugs.

 

 

Returning to the subject of Las Vegas, Mr. Ling reported the city had become a haven for the “gray market,” a system whereby pharmacies bought drugs at tremendous discounts based on the promise they were serving under-served people, such as long-term care homes.  In fact, however, at least in one case, the pharmacy had ordered several million dollars worth of deeply discounted drugs and the drugs went out the back door and into the “gray market.”   Nationally, the “gray market” drained about $1 billion a year on the price of drugs and served to make a handful of people very rich.  The board had begun an earnest effort to stop that practice and driven out four or five pharmacies in the last several months.  The wholesalers who had also been involved were also on their way out.  Mr. Ling believed one of the benefits of his move from the Attorney General’s Office to the general counsel position at the Board of Pharmacy, was that he had time to pursue individuals involved in that type of illegal activity. He also intended to start cracking down on Internet pharmacies from the standpoint of safety rather than pricing. 

 

Assemblywoman Leslie wondered if the state’s method had been wrong in attempting to take care of the problem under Senior RX, a kind of “one size fits all” approach.  In view of the huge pharmacy operation in Las Vegas, it seemed that bulk purchasing or discounts were other means to achieve the desired end, or perhaps even other approaches should be considered.  Mrs. Leslie then referred to Mr. Macdonald’s statement that the Board of Pharmacy did not have the resources to look at other aspects of prescription drug prices, and asked if the resources could be found to help with bulk or discount purchasing, or the Medicaid discounts, would the board then work with the legislature to augment a plan.

 

Mr. Macdonald responded that most boards of pharmacy across the United States had not been tasked with efforts at price controls, bulk purchasing, insurance programs, or other concepts of retail pricing.  However, the Nevada Board of Pharmacy would be happy to help with those projects.  He offered the unique computer systems at their disposal, and believed they were quite advanced in their efforts and stood ready to support any public policy adopted.

 

Mrs. Leslie asked if there was room, in view of Merck being in Las Vegas, to take advantage of a unique situation in terms of bulk purchasing power, and if that was a direction the state should travel.  Also, she asked what role the Board of Pharmacy would have in that type operation.

 

Mr. Macdonald said there would be no role for the board, the only oversight the board had with Merck-Medco was the regulatory oversight authorized by statute.  Regarding bulk purchasing, a variety of programs were described by Mr. Cauchi and it would be a matter of public policy.  He added he was unsure if Merck would have that shared availability; they were a vertical company, from the manufacturing level down to the distribution level of dispensed prescriptions.  However, Merck might be a source of good advice on modeling a purchasing program, as they were one of the best in the country.

 

Mrs. Leslie felt that was something that should be pursued.

 

Mary Lau, Executive Director, Retail Association of Nevada, said she and her associates would compile data and send it to Chairman Koivisto for distribution to members at a later date.

 

Ron Bingaman, Director of Pharmacy Administration Compliance, Safeway, Inc., said Safeway-operated pharmacies in northern Nevada and, under the name of Von’s Pharmacies, in southern Nevada.  He commended Governor Guinn for his initiative in starting the process to provide for seniors who did not have direct coverage.

 

Mr. Bingaman offered suggestions and recommendations, on behalf of all the retail pharmacy providers in the state of Nevada, on the program currently underway.  Specifically, how the program could be modified or enhanced to provide better coverage to the senior population that needed it and minimized the impact on any retail pharmacy providers within the state so that it resulted in a “win-win” situation in the short term and long term:

 

• Eliminate or reduce the multiple layers of administration:  plan sponsor, administrative agency, and the processor, the pharmacy benefit manager (PBM), comprised the basic structure.  The PBM was an organization responsible for the enrollment and processing of prescription claims.  The PBM also undertook some review processes in terms of drug-drug interaction to make sure there was no overlapping of drugs a patient received from multiple pharmacies.  The program could be modified by condensing some of those layers of administration and focused mainly on a PBM.  The PBM company could provide all the services that all three of the current administrative layers provided.  It could provide a plan that was flexible and targeted to various seniors at various income levels, with flexibility in terms of deductibles or co-pays to be able to bring more assistance to the needy seniors of the group. 

 

Mr. Bingaman noted that retail pharmacies only had control of about 19 percent of the total drug cost.  The bulk of the drug cost was the cost of the medication from the manufacturers.  There was also a component of distribution; the manufacturers sold to wholesalers who routed it out to the retail pharmacies. Any price reductions basically focused on the retail component.  Under the current plan there were no provisions to accept any rebate funds from manufacturers.  Those rebates now went to the PBM but were not returned to the program; which would help minimize the financial impact of the Nevada retail businesses that provided pharmaceuticals, or help support the financial platform of the program itself.  As future plan designs went forward, that was a critical component for consideration to help the financial viability of the program.

 

• Keep Nevada business in Nevada.  One of the key components under the current plan was a mail order component.  The provider of that mail order component maintained their mail order business out of the state of Nevada.  The pricing on the mail order prescriptions created a competitive disadvantage to the Nevada retailers, and that succeeded in driving business out of state, and in the long term could have an adverse affect over the amount of jobs provided to Nevada residents.

 

• Create a total pharmacy benefit not necessarily just a drug benefit.  A drug benefit would basically monitor and provide pharmaceuticals.  Among the added advantages of creating a total pharmacy benefit was in knowing the special needs and problems of the patients; they came into the pharmacy, they were known.  In certain cases people could be grouped into the major disease states; asthma, cholesterol, hypertension, diabetes, conditions which required special monitoring and instructions on how to properly use the medication.  When those types of programs were in place a dramatic reduction was found in the number of drugs used.  For example, an asthmatic using an inhaler might refill too soon or too often and it was discovered he did not know how to prepare the aerosol unit or perhaps needed to use a peak flow meter to measure the effect of the drug.  The pharmacist got directly involved with the care of the patient.  Many states had enacted a pharmaceutical care reimbursement where the pharmacist actually derived a financial benefit through a 15 or 20-minute consultation with the patient to explain the use of their medications.  Thus, there were fewer emergency room visits or hospital stays, and it actually improved the overall quality of health of the patient.

 

            Mr. Bingaman encouraged consideration of a total pharmacy benefit not             necessarily just a drug benefit.

 

• Local pharmacy versus a pharmacy benefit manager comparison.  While the PBM was computerized to be able to check drug-drug interactions, there were other components many local pharmacies checked that the PBMs did not, such as drug-food interactions, or drug and over-the- counter interactions.  Although a PBM did have some advantages in terms of computerization they may not be able to provide for a total solution.

 

Vice Chairman McClain asked for an explanation on pricing strategies on some of the discount programs.  Mr. Bingaman said Nevada currently used the Senior Silver and Senior Blue programs.  Because it was an insurance-based program there were varying monthly premiums.  Some options available were a mandatory generic program:  If an AB–rated-generic was available there was a mandatory substitution policy.  There was also a preferred brand program where if three or four brands of the drug were available, the patient could use the preferred brand.  That was driven by a rebate program back to the PBM, but under the Nevada plan those rebates were not shared back to the plan sponsor or to the pharmacies.  The third option was an open formulary in which the patient could select any brand of the drugs available.  There was a sliding co-pay based on the selection. 

 

Mr. Bingaman suggested a program could be designed that was basically one plan, and for those seniors who needed more help financially they could be focused on the mandatory generic program and still provide for quality care at a much lower cost to the plan.  Another program would utilize established formularies; offer a select group of drugs from which to choose and drugs outside of that either were not covered or required prior authorization.

 

Mrs. McClain commented that it almost required a PBM to run a program such as those Mr. Bingaman had described; it was not something a state agency could do.  However, there was no reason not to contract with a PBM who could offer good service at a lower price and use some of those discounts they managed to negotiate.  Mr. Bingaman agreed.  He added that one of the shortcomings of the Governor’s program was that he wanted to make it an insurance-based plan and as such the request for proposal (RFP) went only to insurance companies.  However, since actually PBMs did that on a daily basis, had they been included in the RFPs the bids would have been more competitive, assuming they could have provided the total administrative oversight of the current three agencies.

 

Assemblywoman Gibbons asked to verify the five components to be considered:  rebate of funds, pharmaceutical benefit, mandatory generic program, established formulas, and PBM, as being those which could make up the most affordable drug program.  Mr. Bingaman said those would have the greatest financial impact.  They were not new, but were currently being used by other states.  If the state did not elect an insurance-based program and put the RFP out for the next bid process, and included PBMs that had the administrative structure in place to be able to provide those oversights and plan reviews, there would be some tremendous savings.  Also as experience was gained and included an understanding of what financial tools were available, that would also help aid the financial stability of the plan.

 

Next to speak was Vic Verling, Director of Pharmacy, Scolari’s Food and Drug Company, who stated he had not prepared a presentation however he believed that Mr. Bingaman had presented a very viable plan.

 

Mary Lau, who spoke previously, introduced Angie Sharp, Director of Insurance Benefits, Scolari’s Food and Drug Company.  Ms. Lau said Ms. Sharp, who did not have a presentation, would answer questions; however, there were none.

 

J. Thomas Wood, State Government Affairs Manager, Wyeth-Ayerst Pharmaceuticals and taskforce chair for the state of Nevada for Pharmaceutical Research and Manufacturers of America (PhRMA), stated he was delighted to hear all the information presented which represented perspectives from every angle and he felt the committee was a great forum for that purpose.  He commented that it might not be known that Keith Macdonald had one of the finest scheduled prescription drug control programs in the nation.

 

Mr. Wood presented Exhibit E and reported that PhRMA represented the country’s leading research-based pharmaceutical and biotech companies.  It was devoted to inventing medicines that allowed patients to lead longer, healthier, and more productive lives.  PhRMA had invested over $26 billion in discovering and developing new medicines and was leading the way in its search for cures.

Highlights of Mr. Wood’s presentation were as follows:

 

• PhRMA was a strong proponent that access to pharmaceuticals was central to modern medical care.  The answer was found in good insurance coverage for prescription drugs.  It actively supported enactment of a federal Medicare drug benefit, structured to allow access to all FDA-approved drugs without government price controls.

 

• PhRMA believed that good public policy on prescription drugs would have the following elements: 

 

                        The ability to enroll in any qualified pharmaceutical plan of one’s               choosing;

 

                        Federal government subsidies to low-income beneficiaries;

                       

                        Choices of multiple competing, private insurance plans that

                        relied on marketplace competition to control costs;

 

                        Plans that provided coverage for those with high pharmaceutical                     expenditures;

 

                        Oversight by a new, independent government entity; and

 

                        A new program consistent with the needed comprehensive                                modernization of the Medicare program.

 

• Increasing expenditures for prescription drugs resulted from increased use of new drugs.  However, there had been a misunderstanding with regard to pharmaceutical prices versus pharmaceutical expenditures.  While prices rose modestly in 1999, only 4.2 percent, expenditures rose by 18.8 percent.  The major increase was due to an increase in use of medicines, including new, innovative medicines that may have cost more but also prevented costs in other areas like surgeries and long-term care.  Increased utilization of prescription medications was driven by many factors such as:

 

                        Demographics;

                        Better medicine;

                        New medicines and science; and

                        Changing role and use of insurance.

 

• Pharmaceutical companies had many new medicines in development:  354 medicines for cancer; 348 for diseases that disproportionately afflicted women; 104 that treated or prevented heart disease and stroke.

 

• Development efforts were paying off.  In the past five years, the Food and Drug Administration (FDA) had approved 209 new medicines including: 

 

                        The first in a new class of antibiotics which proved effective                                  against some life-threatening infections resistant to all other                           available antibiotics;

 

                        The first in a new class of medicines for Parkinson’s disease;

           

                        The first new tuberculosis drug in 25 years; and

 

                        The first in a new class of medicines to prevent organ rejection                                 after transplant.

 

Mr. Wood provided a Directory of Prescription Drug Patient Assistance Programs (Exhibit F), and a booklet entitled Why Do Prescription Drugs Cost So Much? (Exhibit G).

 

Assemblywoman Gibbons asked if evidence supported whether those who took their prescription drugs were healthier or had less hospitalization than those who did not.  Mr. Wood replied that studies had shown cost effectiveness in several categories: AIDS, diabetes, asthma, and mental health conditions.  PhRMA believed that drugs not only dropped health costs but also improved the quality of life.

 

Mrs. Gibbons commented she too had known people with cancer who had been treated at home with drugs at a much lower cost than had they been hospitalized.  She added that perhaps prescription drugs needed to be regarded differently than in the past.

 

Assemblywoman Smith asked about the advertising aspect of drug usage; were patients requesting advertised drugs.  Mr. Wood responded that the direct-to-consumer advertising was a “two-edged sword” in terms of how the provider community had accepted it.  Direct-to-consumer advertising represented less than one percent of the total amount of money generated.  Further, advertising had created a more informed consumer, which was a good thing.

 

Assemblywoman Leslie commented on the great presentations at NCSL conferences that directly linked the change in federal law allowing prescription advertising to the huge spikes in prescription usage.  She felt that the tremendous numbers of advertisements in magazines like the New York Times, Sunday edition, for example, had gotten out of control.  Further, she felt it was a factor in the huge increases in prescription prices and perhaps that type of advertising needed to be curtailed.  Mr. Wood said others had also voiced concern over that issue.

 

Vice Chairman McClain expressed a grave concern regarding a referenced attachment to Exhibit E, “State-Level Seniors’ Drug Programs Issues,” which had not been included in her packet.  Mr. Wood stated he had taken it off the required reading list.

 

Mr. Wood suggested reading the booklet included in his exhibit (Exhibit G) entitled, “Why Do Prescription Drugs Cost So Much?” as it would answer many of the questions the committee had raised.

 

Vice Chairman McClain said she knew PhRMA preferred the insurance-based programs.  However, were they adamantly against PBMs and states getting into the business and negotiating with drug manufacturers.  Mr. Wood said the PhRMA “mantra” was that they believed in the private-based markets; they would like the private-based insurance market but were not adamantly opposed to a private-based market.  They did not want government price controls and government-run markets.

 

Ed Fend, Capital City Task Force Member, American Association of Retired Persons (AARP), said he was also a member of the Committee for a Healthy Nevada, which allocated the tobacco settlement fund.  He said the program the state currently had was not great, but it was better than nothing.  If the seniors waited for the federal government they would be in serious difficulty; he doubted the federal government would get a new program through in 2001.

 

Mr. Fend presented Exhibit H, the testimony of Carla Sloan, given at the Task Force for a Healthy Nevada, October 26, 2000.  He added that AARP did support the program under discussion, or any type of program that provided drugs to seniors.  Further, he would like to see it expanded to support low-income working families.

 

He said there were two programs:  The Senior Blue and the Senior Silver. Currently there were 140 on the list who actually utilized the program, and about 1,500 to 1,600 more who had sent in applications, most of whom should qualify.  The Senior Blue Program cost $74.76 per month and the state would pay the entire cost.  The Governor’s emergency bill would provide funding for that.  Previously, the Governor wanted to take the money from the Independent Living Grant of $4 million; AARP had not agreed with that, as that fund was just as heavy a requirement as the prescription drug program.  Mr. Fend saw no problem in getting another $1 million since it was a one-shot allocation and the “rainy day” fund had grown by $15 million, therefore, the $1 million could come from that.  Further, if enough people joined the program that would reduce the cost.  The program called for a co-payment of $10 for generic drugs with a $50 deductible, and it also had a maximum annual amount of $5,000; extremely high for any prescription program funded by another company.  He reiterated that the program was not perfect but felt changes should not be made until it was operational.  Meanwhile, he recommended supporting the emergency funding bill currently in the Senate.

 

Assemblywoman Gibbons asked if one of the problems with obtaining sign-ups for the state prescription program was because it was insurance-based.  Mr. Fend did not believe seniors cared about how it was based as long as they could get prescription drugs for a reduced cost.  He added that if it was possible to get enough outside people to go into either one of the programs and pay the full amount, perhaps the cost could be driven down.  Mrs. Gibbons said her concern was whether the insurance was acting as a middle-man and could costs be cut by eliminating that.   Mr. Fend said that was indeed the case and perhaps costs could be cut, however felt the program needed to be tested before that could be done.

 

Next to speak was Paul Gowins, a member of the Disability Forum, who stated he was pleased by the number of options available, however, one of the issues often forgotten in the debate had been the people with disabilities.  It was relative to look at who would be covered.  He had worked with AARP in the past and they were in agreement that seniors and the disabled were in a similar situation with long-term chronic illnesses and high drug usage.  If there was any doubt about the need for drugs it might be resolved by noting what was spent in the Medicaid program for people with disabilities.  The cutoff was $540 and there was no help from Medicaid beyond that, which placed the disabled in the same situation with seniors under the Medicare coverage, and for two years they did not even get that.  He asked to have the people with disabilities included in that category along with seniors in any policy adopted by the state.

 

Chairman Koivisto reiterated what she often said, that the state ended up paying for it anyway and the best way was to take care of the problem with a definitive program.

 

Dee Dee Foremaster, representing Carson City Center for Independent Living, said as a resource person she was “out there on the streets with the disabled.”  Two of the questions she asked the disabled and homeless people when trying to help them get off the streets were:  How much Social Security they received, and how much drug costs they had.  Often drug costs could be the difference between being able to get them into housing and not get them into housing.  She said many people were on the streets because they could not pay for their medications.  Further, she received about five phone calls a week from people of all ages and disabilities and there was simply not enough coverage for the disabled or seniors who desperately needed assistance.  She was very pleased about the presentations made by the speakers before her.

 

Chairman Koivisto thanked the participants for sharing their thoughts and information. 

 

With no further business, the chairman adjourned the meeting at 3:35 p.m.

 

 

 

 

 

RESPECTFULLY SUBMITTED:

 

 

 

Darlene Rubin

Committee Secretary

 

 

APPROVED BY:

 

 

                       

Assemblywoman Ellen Koivisto, Chairman

 

 

DATE: