AZBio shares information on Medicare Part D

 as sent to members of the Arizona Congressional Delegation

August 9, 2011

Changes to Medicare Part D – Please Don’t “Fix” a System That Is Working

We have a lot of things that need fixing at the moment as the financial burden our country bears comes under further review and adjustments.  Many of our systems are broken, but some are working.  Medicare Part D is one system that works.

In keeping with the Arizona BioIndustry Association’s commitment to monitor key issues and to share key information on areas that affect our community, our state and our nation, the following points are offered to assist you on how best to control healthcare costs and protect jobs while serving the best interests of millions of Americans and tens of thousands of Arizonans who are touched directly or indirectly by the Medicare Part D Program.

HISTORY/BACKGROUND:  Medicare Part D was designed as a competitive system and it’s working to everyone’s benefit.  Private plans in Medicare Part D operate under strong incentives to achieve savings. The plans negotiate discounts and rebates with prescription drug manufacturers, contributing to the  program’s success in holding costs far below projections, while achieving very high marks from seniors.

Why Medicare Part D Works:

Private plans with strong incentives to achieve savings negotiate for rebates and other savings with prescription drug manufacturers.

CBO’s current spending projections for Part D are 41 percent lower than the initial estimates, driven by competition among plans and strong cost containment; including negotiated rebates that the Medicare Trustees have reported are often as much as 20-30 percent.    This year, CBO reduced its projection of Medicare expenditures by $186 billion over ten years, with fully 2/3 of this amount attributable to slower
spending on prescription drugs, even though drugs make up a small fraction of total Medicare spending.

How  we can break it by “fixing” it:

Government-imposed, centralized rebates risk the success of the Medicare Part D program.  Imposing an additional layer of government price controls taken directly from Medicaid onto the Medicare Part D program threatens to destabilize this successful program.

Why Medicare Part D Works:

The products provided under Medicare Part D are directly tied to hundreds of thousands of American jobs.  With many of these American workers are well above the national average wage – making them valuable as tax payers.

How we can break it by “fixing” it:

Imposing such centralized rebates, despite the program’s outstanding record of success,
could begin the transformation of Medicare into Medicaid, curtail investment in research and development needed to discover new treatments, and lead to hundreds of thousands of lost jobs. 
Estimates of the kind of Part D rebate policy now being considered show an impact of
100,000 or more lost jobs.[i]Published research shows that each job in the pharmaceutical sector supports about 3.7 additional jobs in the economy[ii], so each job lost would have a large impact.  The
loss of these jobs will directly impact our country’s ability to earn its ways out of our current financial  situation by adding to unemployment and decreasing our tax base.  Here in Arizona, we were exceedingly hard hit by the financial downturn.

Our bioscience community was the ONLY sector to grow jobs in 2010 with a 7% INCREASE in  employment and an average wage of $57,000+ compared to a state average of $37,500.  We cannot afford a hit on our state’s only growing jobs sector.

Why Medicare Part D Works:

Many of the products covered under Medicare Part D are American Innovation Products.  If we adversely affect the marketability and financial viability of these products, we stifle the innovation that is our path to recovery.

How we can break it by “fixing” it

We have a lot at risk on the innovation front.  CBO has reported that imposing price controls in Part D could “reduce the amount of funds that manufacturers invest in research and development of new products.”[iii]  Furthermore, the Department of Commerce has found that foreign government price control strategies “tend to have the most significant impact on the newest and most innovative medicines…”[iv]    Reducing investment in research would slow medical progress in cancer, Alzheimer’s disease, osteoporosis, and other conditions that disproportionately affect the elderly, where patients have
urgent, unmet needs.

Why Medicare Part D Works:

The American People understand and depend on Part D.  Eighty-four percent of Part D enrollees are satisfied with their coverage, and 95 percent say their coverage works well.

How we can break it by “fixing” it

Turning Medicare into Medicaid is a dangerous experiment. This would be the first time ever that Medicaid payment is used as the benchmark for Medicare. Dual eligibles also receive physician and hospital care, all paid for at Medicare, not Medicaid, rates. Beginning to impose Medicaid’s payment rates in Medicare will set back efforts to reform Medicare and create enormous problems for seniors.

When Part D was created, many groups advocated for the dual eligible population to be included in Medicare rather than in Medicaid.   Treating dual eligible or LIS beneficiaries differently for the purpose of pricing could fundamentally alter the program and open the door to different treatment for these most vulnerable beneficiaries.  Beneficiaries in the Medicaid program often face significant access restrictions. For example, many states impose limits on the number of allowed prescriptions per month,  which has been associated with declining use of medicines and poor outcomes.

As I shared in the beginning, Medicare Part D is Working. It has allowed us to reduce healthcare costs and through the products it covers stimulate innovation and create joba.  Fixing a syatem that is not broken could negatively impact thousands of Arizonans and millions of Americans.  Either directly
or indirectly.  I know you have a lot on your plate in solving the financial challenges our country is facing.   Perhaps it is time to take Medicare Part D off the “fix it list” and  use our scarce resources to address other challenges that can truly use the help.

On behalf of the Arizona BioIndustry and our community, I thank you for taking the time to read this letter and for doing what is best for all of us.

[i] PhRMA analysis based on PricewaterhouseCoopers, “Exploring the Relationship Between Revenues and Employment in the Biopharmaceutical Industry,” PWC Research Report, June 2009, Table 1; PricewaterhouseCoopers, “Health Reform: Prospering in a Post-Reform World,” May 4, 2010, page 30.

[ii] Archstone Consulting and R.L. Burns, “The Biopharmaceutical Sector’s Impact on the Economy of the United States,” Fact Sheet, Washington, DC, 2010.

[iii] CBO , “Reducing the Deficit: Spending and Revenue Options” March 10, 2011, p. 54.

[iv]  “Pharmaceutical Price Controls in OECD Countries, Implications for U.S. Consumers, Pricing, Research, and Development, and Innovation”  U.S. Department of Commerce, International Trade Administration (December 2004).

Posted in Advocacy and Regulations, Government Affairs Blog, Press Room.