[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
MESSING WITH SUCCESS: HOW CMS' ATTACK ON THE PART D PROGRAM WILL
INCREASE COSTS AND REDUCE CHOICES FOR SENIORS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON HEALTH
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
FEBRUARY 26, 2014
__________
Serial No. 113-119
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
_____
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COMMITTEE ON ENERGY AND COMMERCE
FRED UPTON, Michigan
Chairman
RALPH M. HALL, Texas HENRY A. WAXMAN, California
JOE BARTON, Texas Ranking Member
Chairman Emeritus JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky FRANK PALLONE, Jr., New Jersey
JOHN SHIMKUS, Illinois BOBBY L. RUSH, Illinois
JOSEPH R. PITTS, Pennsylvania ANNA G. ESHOO, California
GREG WALDEN, Oregon ELIOT L. ENGEL, New York
LEE TERRY, Nebraska GENE GREEN, Texas
MIKE ROGERS, Michigan DIANA DeGETTE, Colorado
TIM MURPHY, Pennsylvania LOIS CAPPS, California
MICHAEL C. BURGESS, Texas MICHAEL F. DOYLE, Pennsylvania
MARSHA BLACKBURN, Tennessee JANICE D. SCHAKOWSKY, Illinois
Vice Chairman JIM MATHESON, Utah
PHIL GINGREY, Georgia G.K. BUTTERFIELD, North Carolina
STEVE SCALISE, Louisiana JOHN BARROW, Georgia
ROBERT E. LATTA, Ohio DORIS O. MATSUI, California
CATHY McMORRIS RODGERS, Washington DONNA M. CHRISTENSEN, Virgin
GREGG HARPER, Mississippi Islands
LEONARD LANCE, New Jersey KATHY CASTOR, Florida
BILL CASSIDY, Louisiana JOHN P. SARBANES, Maryland
BRETT GUTHRIE, Kentucky JERRY McNERNEY, California
PETE OLSON, Texas BRUCE L. BRALEY, Iowa
DAVID B. McKINLEY, West Virginia PETER WELCH, Vermont
CORY GARDNER, Colorado BEN RAY LUJAN, New Mexico
MIKE POMPEO, Kansas PAUL TONKO, New York
ADAM KINZINGER, Illinois JOHN A. YARMUTH, Kentucky
H. MORGAN GRIFFITH, Virginia
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Ohio
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina
_____
Subcommittee on Health
JOSEPH R. PITTS, Pennsylvania
Chairman
MICHAEL C. BURGESS, Texas FRANK PALLONE, Jr., New Jersey
Vice Chairman Ranking Member
ED WHITFIELD, Kentucky JOHN D. DINGELL, Michigan
JOHN SHIMKUS, Illinois ELIOT L. ENGEL, New York
MIKE ROGERS, Michigan LOIS CAPPS, California
TIM MURPHY, Pennsylvania JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee JIM MATHESON, Utah
PHIL GINGREY, Georgia GENE GREEN, Texas
CATHY McMORRIS RODGERS, Washington G.K. BUTTERFIELD, North Carolina
LEONARD LANCE, New Jersey JOHN BARROW, Georgia
BILL CASSIDY, Louisiana DONNA M. CHRISTENSEN, Virgin
BRETT GUTHRIE, Kentucky Islands
H. MORGAN GRIFFITH, Virginia KATHY CASTOR, Florida
GUS M. BILIRAKIS, Florida JOHN P. SARBANES, Maryland
RENEE L. ELLMERS, North Carolina HENRY A. WAXMAN, California (ex
JOE BARTON, Texas officio)
FRED UPTON, Michigan (ex officio)
(ii)
C O N T E N T S
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Page
Hon. Joseph R. Pitts, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 1
Prepared statement........................................... 2
Hon. Marsha Blackburn, a Representative in Congress from the
State of Tennessee, opening statement.......................... 3
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, opening statement......................... 9
Hon. Gene Green, a Representative in Congress from the State of
Texas, opening statement....................................... 10
Hon. Michael C. Burgess, a Representative in Congress from the
State of Texas, opening statement.............................. 10
Hon. John Shimkus, a Representative in Congress from the State of
Illinois, opening statement.................................... 21
Hon. Bill Cassidy, a Representative in Congress from the State of
Louisiana, opening statement................................... 21
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 24
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, prepared statement................................... 173
Witnesses
Jonathan Blum, Principal Deputy Administrator, Center for
Medicare, Centers for Medicare & Medicaid Services, Department
of Health & Human Services..................................... 35
Prepared statement........................................... 37
Answers to submitted questions............................... 175
Douglas Holtz-Eakin, President, American Action Forum............ 123
Prepared statement........................................... 126
Answers to submitted questions............................... 190
Carl Schmid, Deputy Executive Director, The AIDS Institute....... 135
Prepared statement........................................... 137
Joe Baker, President, Medicare Rights Center..................... 140
Prepared statement........................................... 142
Submitted Material
Letter of February 18, 2014, from Jerry Neff, Chief Medical
Officer, Centerstone of Indiana, et al., to Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services,
submitted by Mrs. Blackburn.................................... 4
Statement of February 26, 2014, by the National Kidney
Foundation, submitted by Mr. Burgess........................... 12
Statement of February 26, 2014, by the American Society of
Transplant Surgeons, submitted by Mr. Burgess.................. 14
Letter of February 26, 2014, from James L. Martin, Chairman, 60-
Plus Association, to Mr. Pitts, submitted by Mr. Pitts......... 22
Letter of March 7, 2014, from Abcam, Inc., et al., to Marilyn B.
Tavenner, Administrator, Centers for Medicare & Medicaid
Services, Department of Health & Human Services, submitted by
Mr. Pitts...................................................... 26
Memorandum of July 29, 2008, from Daniel R. Levinson, Inspector
General, Department of Health & Human Services, to Kerry Weems,
Acting Administrator, Centers for Medicare & Medicaid Services,
Department of Health & Human Services, submitted by Mr. Pitts
\1\
Report, dated July 2008, ``Review of Medicare Part D Contracting
for Contract Year 2006,'' submitted by Mr. Pitts \1\
Letter of February 25, 2014, from Alliance for Retired Americans,
et al., to Mr. Pitts and Mr. Pallone, submitted by Mr. Pitts... 52
Letter of February 26, 2014, from Ronald F. Pollack, Executive
Director, Families USA, to Mr. Pitts and Mr. Pallone, submitted
by Mr. Pallone................................................. 55
Letter of February 25, 2014, from David A. Balto, Attorney at
Law, Independent Specialty Pharmacy Coalition, to Mr. Pitts and
Mr. Pallone, submitted by Mr. Pallone.......................... 57
Letter of February 25, 2014, from Alaska Pharmacists Association,
et al., to Marilyn B. Tavenner, Administrator, Centers for
Medicare & Medicaid Services, Department of Health & Human
Services, submitted by Mr. Pallone............................. 60
Letter of February 25, 2014, from Saul M. Levin, CEO and Medical
Director, American Psychiatric Association, to committee and
subcommittee leadership, submitted by Mr. Murphy............... 80
Letter of January 14, 2014, from Mr. Murphy to Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services,
Department of Health & Human Services, submitted by Mr. Murphy. 83
Statement of February 26, 2014, by the National Association of
Chain Drug Stores, submitted by Mr. Pitts...................... 94
Letter of February 18, 2014, from Daniel R. Salomon, President,
American Society of Transplantation, to Marilyn B. Tavenner,
Administrator, Centers for Medicare & Medicaid Services,
Department of Health & Human Services, submitted by Mr. Pitts.. 101
Letter of February 25, 2014, from Dan Weber, President and
Founder, Association of Mature American Citizens, to Mr. Pitts
and Mr. Pallone, submitted by Mr. Pitts........................ 103
Memorandum of February 25, 2014, ``Proposed Interpretation of the
Noninterference Provision Under Medicare Part D,''
Congressional Research Service, submitted by Mr. Gingrey....... 113
Article, dated June 6, 2012, by Mr. Burgess, ``Medicare-less:
Patients will have fewer options under Obamacare,'' Washington
Times, submitted by Mr. Burgess................................ 170
----------
\1\ The memorandum and the report are available at http://
docs.house.gov/meetings/IF/IF14/20140226/101788/HHRG-113-IF14-
20140226-SD006.pdf.
MESSING WITH SUCCESS: HOW CMS' ATTACK ON THE PART D PROGRAM WILL
INCREASE COSTS AND REDUCE CHOICES FOR SENIORS
----------
WEDNESDAY, FEBRUARY 26, 2014
House of Representatives,
Subcommittee on Health,
Committee on Energy and Commerce
Washington, DC.
The subcommittee met, pursuant to call, at 10:01 a.m., in
room 2123 of the Rayburn House Office Building, Hon. Joseph R.
Pitts (chairman of the subcommittee) presiding.
Members present: Representatives Pitts, Burgess, Shimkus,
Murphy, Blackburn, Gingrey, Lance, Cassidy, Guthrie, Griffith,
Bilirakis, Ellmers, Barton, Pallone, Capps, Schakowsky, Green,
Barrow, Christensen, Castor, Sarbanes, and Waxman (ex officio).
Staff present: Clay Alspach, Chief Counsel, Health; Sean
Bonyun, Communications Director; Matt Bravo, Professional Staff
Member; Karen Christian, Chief Counsel, Oversight and
Investigations; Noelle Clemente, Press Secretary; Paul Edattel,
Professional Staff Member, Health; Brad Grantz, Policy
Coordinator, Oversight and Investigations; Sydne Harwick,
Legislative Clerk; Sean Hayes, Counsel, Oversight and
Investigations; Robert Horne, Professional Staff Member,
Health; Peter Kielty, Deputy General Counsel; Chris Pope,
Fellow, Health; Chris Sarley, Policy Coordinator, Environment
and the Economy; Heidi Stirrup, Policy Coordinator, Health;
Josh Trent, Professional Staff Member, Health; Ziky Ababiya,
Democratic Staff Assistant; Phil Barnett, Democratic Staff
Director; Eddie Garcia, Democratic Professional Staff Member;
Kaycee Glavich, Democratic GAO Detailee; Amy Hall, Democratic
Senior Professional Staff Member; Karen Lightfoot, Democratic
Communications Director and Senior Policy Advisor; and Karen
Nelson, Democratic Deputy Staff Director, Health.
Mr. Pitts. The subcommittee will come to order. The Chair
recognizes himself for an opening statement.
OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA
The Medicare Part D Prescription Drug Benefit is a
government success story. Last year, nearly 39 million
beneficiaries were enrolled in a Part D prescription drug plan.
Competition and choice have kept premiums stable. In fact, in
2006, the first year the program was in effect, the base
beneficiary premium was $32.20 a month. In 2014, the base
beneficiary premium is $32.42; a 22-cent increase over 9 years,
and still roughly half of what was originally predicted. More
than 90 percent of seniors are satisfied with their Part D drug
coverage because of this. African-American and Hispanic seniors
report even higher levels of satisfaction, at 95 percent and 94
percent, respectively.
The program has worked so well because it forces
prescription drug plans and providers to compete for Medicare
beneficiaries, putting seniors, not Washington, in the driver's
seat. Part D should be the model for future reforms to the
Medicare Program. Instead, in its January 6, 2014, proposed
rule, the Centers for Medicare & Medicaid Services, CMS,
proposes to dismantle the very features of the program that
have made it so popular and successful. CMS has taken it upon
itself to interpret the noninterference clause in the statute
to mean that it can interfere with negotiations between plans
and pharmacies. Congress expressly created the clause to
prevent CMS from doing what it intends to do in this rule, yet
CMS is choosing to ignore the law.
The proposed rule seeks to essentially eliminate preferred
pharmacy networks. A 2013 Milliman Study shows that preferred
pharmacy networks will save taxpayers $870 million this year,
and anywhere from $7.9 billion to $9.3 billion over the next 10
years. CMS itself says that 96 percent of the Part D claims it
reviewed showed seniors saved money at preferred pharmacies,
and nearly 25,500 seniors in my congressional district have
chosen Part D plans with a preferred pharmacy network, yet CMS
would take that away from them.
Today, the average senior has 35 different plans to choose
from this year. This rule would reduce that choice to 2 plans.
Fifty percent of the plans offered today will be gone, and the
healthcare that seniors like may go with it. Limiting seniors'
choices like this will inevitably lead to higher cost. By some
estimates, the restrictions on the number of plans that could
be offered could cause premiums to rise by 10 to 20 percent.
Cost to the Federal Government may increase by $1.2 to $1.6
billion, according to a study by Milliman.
How is this beneficial? I am at a loss to understand why
CMS has proposed these changes, and what problems with the Part
D Drug Benefit it is attempting to solve. I don't see how any
of these proposals provide tangible benefits to seniors, but I
do see more bureaucracy, less choice and competition, and
higher cost to both beneficiaries and the Federal Government in
the future if the proposed rule is enacted.
I urge Secretary Sebelius and Administrator Tavenner to
rescind this rule. And I welcome our witnesses here today. I
look forward to their testimony.
[The prepared statement of Mr. Pitts follows:]
Prepared statement of Hon. Joseph R. Pitts
The Medicare Part D prescription drug benefit is a
government success story.
Last year, nearly 39 million beneficiaries were enrolled in
a Part D prescription drug plan (PDP).
Competition and choice have kept premiums stable. In fact,
in 2006, the first year the program was in effect, the base
beneficiary premium was $32.20 a month. In 2014, the base
beneficiary premium is $32.42--a 22-cent increase over 9
years--and still roughly half of what was originally predicted.
More than 90 percent of seniors are satisfied with their
Part D drug coverage because of this. African-American and
Hispanic seniors report even higher levels of satisfaction, at
95 percent and 94 percent, respectively.
The program has worked so well because it forces
prescription drug plans and providers to compete for Medicare
beneficiaries--putting seniors, not Washington, in the driver's
seat.
Part D should be the model for future reforms to the
Medicare program.
Instead, in its January 6, 2014, proposed rule, the Centers
for Medicare & Medicaid Services (CMS) proposes to dismantle
the very features of the program that have made it so popular
and successful.
CMS has taken it upon itself to interpret the
``noninterference'' clause in the statute to mean that it can
interfere with negotiations between plans and pharmacies.
Congress expressly created the clause to prevent CMS from doing
what it intends to do in this rule. Yet CMS is choosing to
ignore the law.
The proposed rule seeks to essentially eliminate preferred
pharmacy networks.
A 2013 Milliman study shows that preferred pharmacy
networks will save taxpayers $870 million this year and
anywhere from $7.9 billion-$9.3 billion over the next 10 years.
CMS itself says that 96 percent of the Part D claims it
reviewed showed seniors saved money at preferred pharmacies,
and nearly 25,500 seniors in my district have chosen Part D
plans with a preferred pharmacy network. Yet CMS would take
that away from them.
Today, the average senior has 35 different plans to choose
from this year. This rule would reduce that choice to two
plans. Fifty percent of the plans offered today will be gone,
and the health care that seniors like may go with it.
Limiting seniors' choices like this will inevitably lead to
higher costs. By some estimates, the restriction on the number
of plans that can be offered could cause premiums to rise by
10-20 percent. Costs to the Federal Government may increase by
$1.2 to 1.6 billion, according to a study by Milliman.
How is this beneficial?
I am at a loss to understand why CMS has proposed these
changes and what problems with the Part D drug benefit it is
attempting to solve.
I don't see how any of these proposals provide tangible
benefits to seniors, but I do see more bureaucracy, less choice
and competition, and higher costs to both beneficiaries and the
Federal Government in the future if the proposed rule is
enacted.
I urge Secretary Sebelius and Administrator Tavenner to
rescind this rule.
I welcome our witnesses here today, and I look forward to
their testimony.
Mr. Pitts. Thank you, and I yield the remainder of my time
to the gentlelady from Tennessee, Mrs. Blackburn.
OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TENNESSEE
Mrs. Blackburn. Thank you, Mr. Chairman. I thank you for
the hearing today, and I have to agree with you, Medicare Part
D is very popular with seniors, and the majority of
beneficiaries not only participate in Part D, they express
satisfaction with the program, and it is definitely working the
way it was intended.
I join you in being very concerned about the rule and the
proposed rule. This is something that would not serve groups
well, certainly not my seniors in Tennessee. There are over 250
groups which include patients and physicians that oppose the
rule, and I would like to submit a letter from an organization,
Centerstone. I submit that for the record. They provide mental
health care in Tennessee.
Mr. Pitts. Without objection, so ordered.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mrs. Blackburn. And I thank the gentleman for yielding the
time, and I yield back the balance of my time.
Mr. Pitts. The Chair thanks the gentlelady. Now yields to
the ranking member of the subcommittee, Mr. Pallone, 5 minutes
for an opening statement.
OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. Thank you, Chairman Pitts.
The Centers for Medicare & Medicaid Services, CMS, recently
proposed program changes to the Part D Prescription Drug
Benefit for 2015, and I believe it is important that we
thoughtfully examine these changes, and the effects they will
have on the program and on beneficiaries.
Unlike my Republican colleagues' tactics towards the
Affordable Care Act, my initial opposition to the Part D law
has not stopped me from working to improve and strengthen the
program for seniors. In fact, the ACA took important steps to
address the inadequacies that first caused me concern.
Specifically, we closed the doughnut hole. So I welcome today's
hearing so we can learn from the agency and other stakeholders
about what is working and not working in the Part D Program,
and, of course, how we can strengthen the program to work
better for seniors and taxpayers alike.
Truthfully, it frustrates me that the Republicans are
politicizing this issue using alarmists and exaggerated
rhetoric to make a politically motivated point. Given the
significance of the Medicare Program, I hope we can have a
constructive and sincere discussion today on CMS' recent
proposals regarding the Medicare Drug Benefit. The committee
has a valuable function of monitoring and looking for ways to
improve programs under its jurisdiction, however, let's not
forget that CMS also plays a role in ensuring that its programs
are working as effectively and efficiently as possible. One way
it does this is by promulgating regulations to make
adjustments, and respond to changes in the healthcare landscape
and evolving needs. Importantly, part of the federal rule-
making process involves making the proposed program changes
available for public comment, and taking comments into
consideration before finalizing the regulation.
Mr. Chairman, there are many positive provisions in this
rule that, even if it is not perfect, I do not agree with the
naysayers who have called for its dismissal outright. Rather,
we should move forward on how best to achieve our objectives
for a Part D program that serves its beneficiaries as best as
possible. For example, the proposed rule seeks to make
improvements to transparency, and to reducing fraud and abuse.
These are issues I think we can all agree are important to
continue to work on. I can also see the value in offering
meaningful choices for beneficiaries, rather than just more
choices, which create unnecessary complexity in making plan
choices.
Now, there are some policies in this proposed rule that
give me pause. In particular, the proposed Protected Classes
policy. I think everyone here should share in the
administration's goal of lowering prices, but I do worry that
the benefits to Medicare may not outweigh the risks when it
comes to vulnerable patient populations.
So, Mr. Chairman, I just hope that today we can have
meaningful discussion about these policies. I look forward to
hearing from our witnesses about the rule, and how we can
continue to improve and strengthen Part D.
I'd like to yield now the remainder of my time to Mr.
Green, if he'd like.
OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Green. Thank you. Thank you for yielding to me, and I
want to thank the chairman and also the ranking member for
having the hearing today.
Some of us were on the committee when we drafted the
prescription drug plan, Medicare Part D, in 2003, and it was
also a very partisan issue, just like the Affordable Care Act.
In fact, in some of my emails over the years that said that the
Affordable Care Act was passed at night, I really remember the
vote being left open for about 6 hours, and I think our vote
was about 5:00 a.m. in the morning, and my colleague from
Illinois knows that. So even Congress can work at night
sometimes on both issues. And I also recall that the Affordable
Care Act had trouble rolling out. We actually worked with our
constituents to help people use community college, community
computers to help people access it, even though I considered
the plan flawed. Although over the years there have been
changes and a reform, mainly administrationwise, and I think
that is what we are going to see today.
While it is clear that Part D programs provide prescription
drugs for Medicare beneficiaries who previously didn't have it,
there is still room to improve the program. And I have concerns
about individual provisions in the proposed rule, but I support
increased transparency and expanded access to affordable
pharmacies, and cost sharing for Medicare beneficiaries.
And again, I thank my colleague for yielding the time, and
I yield back.
Mr. Pallone. And I yield back, Mr. Chairman.
Mr. Pitts. The Chair thanks the gentleman. Now recognize
the vice chair of the subcommittee, Dr. Burgess, for 5 minutes
for an opening statement.
OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF TEXAS
Mr. Burgess. I thank the chairman for the recognition. Mr.
Blum, welcome to our committee today, and to our other
witnesses, we are happy to hear from you.
So December of last year, the end of 2013, marked the 10-
year anniversary of the creation of the Medicare Part D
Prescription Drug Benefit. Not only has Part D come in at 45
percent under budget, the Congressional Budget Office has
reduced its 10-year projections for Part D by over $100 billion
for each of the last 3 years. The success of Part D is largely
attributed to its competitive, free-market structure.
I would remind my friend from Texas that, different from
the Affordable Care Act, the Part D changes were noncoercive
and based on free-market principles, entirely different from
the ACA.
So despite a proven track record of success, the Center for
Medicare & Medicaid Services has proposed to fundamentally
restructure the Part D Program; restructure it with a 700-page
rule allowing the government to interfere in private plan
negotiations, restrict beneficiary choice of plans, and limit
incentives that lower costs for consumers. Only in Washington
would there be a big government solution in search of a problem
that simply does not exist.
The interference by the Centers for Medicare & Medicaid
Services is projected to eliminate almost half of current Part
D plans in 2015. So what effect will that have? Well, it is
going to drive premiums higher for nearly 14 million seniors,
and increase costs across the entire Medicare Program. Even
more concerning is the proposal by the Centers for Medicare &
Medicaid Services to eliminate several of the protected classes
of drugs under Part D. We all remember when Dr. McClellan came
to this committee, and the Democrats asked some pretty incisive
questions, and Dr. McClellan was able to defend the Part D
Program based on the fact that there would be these protected
classes under Part D. They were designed to ensure that
vulnerable populations of patients have continued access to
lifesaving drugs. Not all drugs are interchangeable, especially
in the case of immunosuppressants.
Without this committee getting into the pharmacology of how
these drugs work, if we don't understand how they work, how can
we change the policy so that--and not affect the patient at the
same time? The removal of these drugs from protected class
status risks the lives of current and future beneficiaries,
further jeopardizing transplanted organs and patients' lives.
Yet again, the Centers for Medicare & Medicaid Services has
proposed a policy that is penny wise and pound foolish. Not
only has the program increased patient access to drugs, and
made positive effects on the health of beneficiaries, the
program has extended the solvency of the entire Medicare
Program, saving billions of dollars over the past 10 years. So
rather than continue a successful program and encourage
innovation, now we are faced with a rule to ruin one of the
only working parts of our current healthcare system, leaving
patients with the short end of the stick.
I would like to submit for the record a statement by the
National Kidney Foundation and the American Society of
Transplant Surgeons. And yield to Mr. Shimkus.
Mr. Pitts. Without objection, so ordered.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Mr. Shimkus. Thank you. And I thank my colleague and
friend.
More than 250 organizations united for a common goal,
protecting seniors and individuals with disabilities from
harmful changes to Medicare Part D. And that is what your
proposed rule actually does, is harm seniors. It gives them
less choices, it will project higher costs, and from an
administration that cut $716 billion out of Medicare, to
propose a 700-page rule trying to fix something that is not
broken, is disastrous at a time when people are paying more,
even in the national healthcare rollout.
It is safe to say when I go to my district, people pay more
now for their insurance and get less, and this is just going to
fall down to our seniors.
I also want to focus on the fact that Medicare Part D has
been successful. I want to focus on medical therapy management
issues, that moving that level down that small is just going to
hurt medical therapy management for those bigger populations
that actually need the care.
And I yield the rest of my time to Dr. Cassidy.
OPENING STATEMENT OF HON. BILL CASSIDY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF LOUISIANA
Mr. Cassidy. Thank you.
I am a doc, and so when I talk to constituents back home
about how changes by Obamacare and this administration are
going to decrease their choices and increase their costs, I
understand the issue.
Medicare was cut $716 billion to fund Obamacare, and
frankly, when you cut that much, it has got to give. It is
going to force beneficiaries to find new healthcare plans,
despite the President's promise that you could keep your health
insurance if you like it, period. Instead, they get
cancellation notices.
Now, the Medicare cut $300 billion, or to the Medicare
Advantage Program, and now I understand that--for--there is a
further 3.55 percent cut on top of the cumulative 6.5 percent
cut that the industry has already suffered. It is a very
popular program. If you cut funding, seniors have less choice
and increased cost.
Moving forward, we must preserve that and decrease those
costs. We need policies that help seniors, not threaten access
and choice.
I look forward to the questioning. Thank you. I yield back.
Mr. Pitts. The Chair thanks the gentleman and seeks
unanimous consent to enter into the record the letter from
Sixty-Plus Association.
Without objection, so ordered.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Pitts. The Chair now recognizes the ranking member of
the full committee, Mr. Waxman, 5 minutes for an opening
statement.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. Thank you, Mr. Chairman.
Today's hearing will focus on the Medicare Part D drug
program.
When President Bush signed the Part D benefit into law,
Democrats had many concerns. We thought the structure of the
law was too confusing for beneficiaries, we thought the
doughnut hole was bad for seniors, and we felt the law did not
do enough to reduce drug costs, and most of us voted against
it. But, Mr. Chairman, we didn't find dozens of ways to
sabotage the program. We didn't send out massive document
requests in order to delay and intimidate contractors. We
didn't shut down the government to try to force its repeal, or
vote over 40 times to repeal the law. Instead, we worked with
the Bush administration to make sure our constituents could get
the benefits they deserved, and ultimately, as part of the
Affordable Care Act, we improved benefits, closing the Part D
doughnut hole.
Mr. Chairman, your constituents and the Nation would be
much better off if your party took a similar approach to the
Affordable Care Act.
We improved the Part D law, but there are still adjustments
we can make to strengthen the program for both beneficiaries
and taxpayers, improving transparency and addressing fraud and
abuse.
CMS recently proposed a rule that would make some of these
changes. I appreciate the agency's efforts. They show that the
administration continues to work to improve Medicare for
seniors.
The proposed Part D rule provisions would increase
transparency, and increase access to community pharmacy
services. Many community pharmacies have been unable to
participate in Part D plan's preferred networks, even if they
are willing to meet the plan's preferred prices. CMS proposes
to allow any pharmacy who can meet the plan's prices to
participate. This change would increase pharmacy access for
patients, particularly in underserved communities where
patients may not have access to preferred pharmacies.
CMS has also proposed simplifying beneficiary choices under
Part D. CMS and patient advocates have long noted that seniors
find the array of plan choices dizzying, and that plans are
using the multitude of choices to segment risks and maximize
profit. It makes sense for both the patient and the taxpayer
that CMS address these matters.
There are other places where I would like to see the agency
rethink its approach. In particular, the Six Protected Classes
policy. I share the administration's goal of lowering prices,
and ensuring that Medicare is able to get the best deal
possible. CMS has correctly observed that eliminating some
drugs from the Protected Classes category would allow Part D
plans to negotiate for lower prices, but it is hard to ignore
the concerns of patient groups and Medicare advocates that
these changes will make it more difficult for seniors to get
the drugs they need.
There is a better way. Adopting my Part D Drug Rebate Bill,
the Medicare Drug Savings Act would be a much sounder and
beneficiary-friendly approach. This bill would allow Part D to
get some discounts on drugs for low-income seniors that
Medicaid and private sector purchasers receive. It would,
according to the CBO, save over $140 billion over the next
decade.
The administration was correct to include this provision in
its new budget. It is a commonsense idea that would save
taxpayers billions of dollars without affecting access to Part
D drugs for seniors.
Mr. Chairman, I am pleased that Deputy Administrator John
Blum is here today to explain CMS' approach in the Part D rule.
I look forward to discussing how we can improve Part D for
seniors, and reduce taxpayers' costs, and yield back the
balance of my time.
Mr. Pitts. The Chair thanks the gentleman, and again seeks
unanimous consent to enter a letter to Administrator Tavenner
from a coalition of 250 organizations on Medicare Part D.
Without objection, so ordered.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Pitts. We have on our first panel today Mr. Jonathan
Blum, Principal Deputy Administrator, Centers for Medicare &
Medicaid Services, U.S. Department of Health & Human Services.
Thank you for coming today. You will have 5 minutes to
summarize your testimony. Your written testimony will be placed
in the record. You are recognized for 5 minutes for your
opening statement.
STATEMENT OF JONATHAN BLUM, PRINCIPAL DEPUTY ADMINISTRATOR,
CENTER FOR MEDICARE, CENTERS FOR MEDICARE & MEDICAID SERVICES,
DEPARTMENT OF HEALTH & HUMAN SERVICES
STATEMENT OF JONATHAN BLUM
Mr. Blum. Thank you. Chairman Pitts, Ranking Member
Pallone, members of the committee, thank you for the
opportunity to discuss our thoughts on ways to improve the Part
D Drug Program.
Mr. Pitts. Just pull that a little closer to you, if you
can. Yes, thanks.
Mr. Blum. We believe the Medicare Part D Program has never
been stronger. All Medicare beneficiaries have many plan
choices to select from, premium growth has been flat, and the
Affordable Care Act took strong steps to close the Part D
coverage gap or doughnut hole. By 2020, the gap will be
completely closed.
In general, Medicare beneficiaries are satisfied with their
drug coverage, and there is growing evidence that the Part D
Drug Benefit has led to some decreases in other program costs.
While Medicare Part D is strong, we also see many
vulnerabilities that can and should be addressed. This year,
Medicare Part D will cost more than $70 billion, or about 12
percent of total program costs. According to CBO, total Part D
spending is projected to grow dramatically faster than other
parts of the program. These projected spending trends, as well
as other vulnerabilities, led us to take a comprehensive review
of the program, and to propose in an open and transparent way
some changes to our current regulations. According to our
actuaries, the proposed rule will reduce overall program costs
and Part D premiums.
In addition to rapid spending growth, we see other
vulnerabilities in Part D. First, while we see broad measures
of beneficiary satisfaction, CMS receives far too many
complaints from beneficiaries. In 2013, the program received
over 30,000 complaints from beneficiaries regarding their Part
D coverage. Far too high. Second, we see very high rates of
inappropriate prescribing. While we are very, very sensitive to
the concerns we have heard over changing the Protected Classes
designation for three drug classes, we have to acknowledge the
requirement for Part D plans to cover all drugs in these
classes, with very little restriction, has led to harmful
overprescribing--particularly antipsychotic drugs to sedate
nursing home patients. Third, the program has too much
prescriber fraud. This agency made a commitment to the Homeland
Security Committee to reduce this fraud. This proposed rule
honors that commitment. Fourth, we have seen too many Part D
sponsors have significant compliance issues that have resulted
in harm to Medicare beneficiaries. Fifth, we see weak data
evidence that preferred pharmacy networks always leads to cost
savings for beneficiaries and the taxpayers. Sixth, while most
beneficiaries have many plan choices, the evidence suggests
that beneficiaries rarely change plans, even though they could
reduce their out-of-pocket costs by changing plans. We support
private plan competition in Medicare Part D, so long as
beneficiaries can understand their choices and make changes
easily. And seventh, CMS, under current regulations, cannot
share detailed Part D claims data with outside researchers. We
believe this data, if shared appropriately, can make the
program even stronger.
Our proposed Part D rule is designed to address all these
vulnerabilities, and to make the benefit work better for
Medicare beneficiaries. In short, we believe that we must
celebrate Part D's success, but also take a critical look at
its vulnerabilities and take action where we can. The status
quo is hardly perfect. However, we deeply respect the views of
those who have stated their concerns and opposition to the
rule, particularly patient groups and their concerns over the
changes to the protected class definition. CMS will listen very
carefully to the views of all Part D stakeholders and partners.
We will make our final decisions after carefully reviewing all
stakeholders' comments.
Thank you. Happy to address your questions.
[The prepared statement of Mr. Blum follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Pitts. The Chair thanks the gentleman. And we will now
go to questions and answers. I will begin the questioning.
Recognize myself for 5 minutes for that purpose.
Mr. Blum, nonpartisan experts are warning us that millions
of seniors will see higher costs and fewer choices if this
regulation is finalized. Seniors in my district tell me how
much they enjoy the Part D Program, many times when I talk to
them.
As you acknowledge in your testimony, the Medicare Drug
Benefit is under-budget, and 94 percent of seniors are happy
with it. Why would CMS propose this regulation if everyone is
telling us that it is going to force seniors to lose their
plans, decrease access and increase cost?
Mr. Blum. Well, a couple of points, Mr. Chairman. We see
the overall Part D Program being a tremendous success, but the
nonpartisan CBO projects that Part D spending in the next 10
years will grow faster than the other parts of the program. It
is the fastest-growinig line item for the Medicare Program. The
entire Medicare Program, since the Affordable Care Act, has
dramatically been reduced, but for Part D. Part D is projected
to be the fastest-growing program.
Now, CMS' proposed rule is a consistent path for us to
simplify plan choices, to reduce, you know, kind of extra plans
being offered by the same plan sponsors. CMS started this work
back in 2010. We heard the same concerns from the plan
industry, the PBM industry, that those changes would raise
premiums, decrease choices, create greater dissatisfaction.
That hasn't happened.
As you pointed out during your opening statement, the Part
D premium has stayed flat, while at the same time we have
reduced kind of extra plan choices dramatically, cut them in
half. And looking at the past track record, the arguments that
we are hearing today were similar arguments that we heard back
in 2010, but those arguments back in 2010 did not prove true.
Mr. Pitts. Given the fact that the President's healthcare
law cut $716 billion from seniors' Medicare Program, and we are
already seeing how those cuts are negatively impacting seniors
throughout the country, why should they believe that this
proposed rule won't hurt them even more?
Mr. Blum. Well, I think going back to the payment
reductions that were passed in the Affordable Care Act, while
we appreciate that there is now reduced spending within the
Medicare Program, we see that every--signs on quality have
increased. We see more private plans wanting to come into the
program, we see premiums remain flat. The Part D premium this
year was negative. Part D premiums, premiums for plans, have
fallen, not risen. So we appreciate the fact that we are paying
less today than we paid for some services before the Affordable
Care Act, but every quality sign that we track, every quality
sign that we measure, has gone up, premiums have gone down, and
so we believe very strongly that beneficiary care, beneficiary
costs have not been impacted by these changes.
Mr. Pitts. The law includes a noninterference clause,
which prohibits the government from interfering with
competition, and this has helped to prevent CMS from
interfering with negotiations between drug plans and
pharmacies. Such a prohibition has helped reduce costs for our
seniors.
I and my colleagues read your regulation to violate the
noninterference clause. In fact, department officials have
weighed in against the very interpretation included in the
proposed rule. I would ask that you open the document, document
1, in the document binder before you. This memo is from the HHS
Inspector General, and I would ask you to read the highlighted
portion of the document. You can go ahead and read that out
loud.
[The information is available at http://docs.house.gov/
meetings/IF/IF14/20140226/101788/HHRG-113-IF14-20140226-
SD006.pdf.]
Mr. Blum. So this is a statement to Kerry Weems back in
2008: ``We agree that the Act prohibits the Government from
interfering with negotiations between PDP sponsors and
pharmacists and from instituting a price structure for the
reimbursement of covered Part D drugs.''
Mr. Pitts. Now, did you or agency staff specifically
review the Inspector General's memorandum before issuing your
proposed rule?
Mr. Blum. I don't know. I can check. I personally did not,
but I think it is important for us to explain why we chose to
propose this change.
CMS, in the course of day-to-day interactions with plans
and pharmacies and other entities, gets drawn into individual
contract disputes. Plans ask us to arbitrate contract disputes
with pharmacies and other entities. Pharmacies ask us to
arbitrate disputes from Part D plans. And we agree, the statute
is clear: CMS shall not interfere with the price structures.
What we try to do is to articulate when and will not CMS
interfere with these contract disputes.
Now, our challenge is on a day-to-day basis that plans and
pharmacies ask us to arbitrate, and we wanted to propose a
clear definition, not to degrade the noninterference clause but
to strengthen it to make sure that we are absolutely clear with
partners, stakeholders, when CMS won't arbitrate contract
disputes, but we have no intention to negotiate price
structures. The law is very clear. During my time on the Senate
Finance Committee, that I had a hand in helping to draft that
provision, I understand the intent, I understand why that was
included.
Mr. Pitts. Well, you know, I am not sure it is responsible
for agency staff to issue a rule that completely contradicts
the written legal opinion of the HHS Inspector General.
So with that, I'll recognize the ranking member, Mr.
Pallone, for 5 minutes for questions.
Mr. Pallone. Thank you, Mr. Chairman.
You know, I know you mentioned, Mr. Chairman, the Medicare
Advantage changes in the ACA, and as you know, nearly every
Republican in the House of Representatives voted for or
supported the very same changes or savings. In fact, the
savings were part of the Republican budgets written by the
House Budget Chair, Paul Ryan, in 2011, 2012, and 2013, and
these same policies put in place by the ACA were continued in
these budgets, and the majority of House Republicans voted for
them in each of those years.
But let me ask Mr. Blum. If you listen to the critics of
the proposed rule that you are discussing today, it sounds like
the end of western civilization as we know it, and the refrain
we keep hearing is that most beneficiaries are satisfied, and
costs are lower than anticipated when the program was enacted 8
years ago, therefore, we should make no changes. And today's
hearing is titled ``Messing With Success.'' But, frankly, I
believe that we should continually seek to improve Medicare for
beneficiaries and taxpayers. It seems strange to me that people
would want to block changes that could improve the program. In
fact, organizations representing these so-called satisfied
beneficiaries that we keep hearing about, such as the National
Council on Aging, National Committee to Preserve Social
Security, and Families USA, strongly support many of your
proposed changes.
So could you comment on why CMS chose to move forward a
proposal to further strengthen Part D at this time?
Mr. Blum. Well, we see the program being tremendously
successful. We also see that the program has many
vulnerabilities. We receive recommendations from the IG
frequently for us to take stronger steps to reduce prescriber
fraud in the program. We see that, while the Part D premium has
remained stable over the past several years, that is only one
part of Part D's costs, and the Part D premium doesn't measure
the complete cost of the program. Part D is projected to spend
faster than other parts of the program, dramatically faster
than the Part A Program, the Part B Program.
We feel it is our responsibility to propose changes to
improve the operations. We also feel that it is our
responsibility to do it through the propose and notice comment
period. We want to create a conversation about the best ways to
improve the Part D Program. We respect and we will carefully
review the comments, concerns and the criticisms, but for us to
argue that the Part D Program is perfect, the status quo is
perfect, is contrary to what we see as our obligations to this
committee, to the Congress, and to the beneficiaries that we
serve.
Mr. Pallone. Well, I certainly agree. We have also heard
that the unfettered competition in the Part D Program is
responsible for bringing costs down below initial projections,
and that the CMS rule is messing, I think the word is, with
competition, but could you comment on what had led to the lower
costs in Part D? I know you have already, but maybe a little
more.
Mr. Blum. Well, two points I think that are important for
us to state on the record. If you speak to our CMS actuaries
and ask them what has accounted for the lower costs than
projected back in 2003, I believe the number 1 answer would be
the fact that we have much more generic prescribing happening
in the Part D Program, and the fact that we have fewer brand-
new breakthrough medications right now on the market than the
CMS actuary, and CBO, staff projected back in 2003. So it is
not necessarily private competition that has caused the lower
Part D cost trends previously, but the fact that we have kind
of fewer brand-name drugs coming onto the program.
I think it is also important for this committee to
understand that the Part D Program is not a truly competitive
model, that it is not simply that CMS pays a fixed capitated
payment to Part D plans; they can negotiate said benefits as
best they see fit. Medicare in many respects is a cost-based
program. For the low-income beneficiaries, Medicare pays just
about the full cost of the benefit, not based upon a fee
schedule, but based upon the prices Part D plans negotiate. For
beneficiaries that exceed certain thresholds, the catastrophic
limit, Medicare pays just about the full cost of those drugs
past that limit. So to say that Part D is competitive in a pure
sense doesn't meet the statutory definition of the program, and
I think what our actuaries tell us is that the primary reason
that Part D spending has been lower than projected is the fact
that we have more generic prescribing, due to the fact that we
have fewer new brand-name drugs brought to market.
Mr. Pallone. Thank you. Mr. Chairman, I have 4 letters--I
would ask unanimous consent. I have 4 letters in support of the
rule and the provisions that foster greater transparency and
competition, as well as enhance beneficiary protections, from
beneficiary advocacy groups, including the Medicare Rights
Center, Families USA, Independent Specialty Pharmacy Coalition,
and the National Community Pharmacists Association.
Mr. Pitts. Without objection, so ordered.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Pallone. Thank you.
Mr. Pitts. The Chair thanks the gentleman. Now recognizes
the vice chair of the full committee, Mrs. Blackburn, 5 minutes
for questions.
Mrs. Blackburn. Thank you, Mr. Chairman. Thanks, Mr. Blum,
for being here.
Avalere has said that the changes you are going to make
would eliminate 39 percent of all of the enhanced plans by
2016, and that would be 214 of the current 552 enhanced PDP's
to be terminated or consolidated.
So what would you say to the seniors in my district who
like the plan that they have but cannot keep it if you get your
way?
Mr. Blum. Well, there are a couple of things,
Congresswoman. First is that CMS, since 2009, has put in place
a strategy to reduce the number of kind of extra plans that
sponsors provide. We started that process back in 2009/2010. We
heard the same----
Mrs. Blackburn. You are doing this through the rules?
Mr. Blum. Correct.
Mrs. Blackburn. OK. Let me ask you this. Avalere also said
that the regulation would impact 7.4 million of the 7.9 million
Medicare beneficiaries who are enrolled. That is 94 percent. So
why would you and the President support a regulation which is
going to disrupt 94 percent of seniors in Medicare Part D who
have a plan that they like, and would really like to keep it
but you are not going to let them do that?
Mr. Blum. So I think it is important to think about the
history of the marketplace. Before the doughnut hole was
closed, Part D plans oftentimes offered kind of supplemental
benefits to fill in that doughnut hole. The doughnut hole is
now being closed due to the Affordable Care Act.
By 2020, the doughnut hole will be completely closed. There
have been very strong steps so far to close that doughnut hole.
We see----
Mrs. Blackburn. OK----
Mr. Blum [continuing]. Little opportunity for Part D plans
really to distinguish themselves from other plans----
Mrs. Blackburn. So you see this----
Mr. Blum [continuing]. Those same sponsors offered----
Mrs. Blackburn [continuing]. As an opportunity?
Mr. Blum. We see this as a way to simplify the Part D
Program, to make it much easier to navigate. The concerns
that----
Mrs. Blackburn. So by limiting choice and options, you see
that as a simplification and a way to improve this program?
Mr. Blum. I think some of the concerns that I hear,
oftentimes from the beneficiary community, are that there are
many Part D choices, too many to choose from, and we know from
academic literature that the more choice, more confusion----
Mrs. Blackburn. So you think people are confused?
Mr. Blum. I think----
Mrs. Blackburn. That seniors are confused----
Mr. Blum. I personally hear----
Mrs. Blackburn [continuing]. And they need CMS to----
Mr. Blum. I personally hear----
Mrs. Blackburn [continuing]. Simplify that?
Mr. Blum [continuing]. Tremendous confusion----
Mrs. Blackburn. OK, let me----
Mr. Blum [continuing]. From the beneficiary community.
Mrs. Blackburn. Let me ask you another question. You have
talked about actuaries a lot. Are you listening to actuaries or
enrollees?
Mr. Blum. We listen to both beneficiaries----
Mrs. Blackburn. You are listening to both?
Mr. Blum [continuing]. And----
Mrs. Blackburn. OK.
Mr. Blum. And to our career actuaries.
Mrs. Blackburn. OK. Well, you know, the surveys show that
95 percent of the seniors are satisfied with their plan, and
Part D is estimated to cost 48 percent less than initially
estimated by the CBO, and Milliman has projected that if your
new rule goes into effect, the Federal Government will be on
the hook for $1.6 billion more than expected in 2015. So where
are you going to get the money?
Mr. Blum. So I think a couple of things. I think we see a
future for the Part D Program that is growing very quickly; 10
percent per year. That is dramatically faster than other parts
of the program.
Mrs. Blackburn. OK.
Mr. Blum. So to say that we shouldn't take a critical look
at the future, we don't agree.
We heard the same concerns back in 2010 that premiums would
skyrocket, beneficiaries would be left by their plan when CMS
started to----
Mrs. Blackburn. Yes, we heard that----
Mr. Blum [continuing]. Consolidate--.
Mrs. Blackburn [continuing]. About the Affordable Care
Act, and that indeed is happening. I will tell you, I have
plenty of stories I can share with you there.
Well, if Part D is not broken, then why do you think you
need to go put something in here that is going to cost more,
limit options, take seniors out of their plans, you know, it
doesn't make a whole lot of commonsense, Mr. Blum. And I think
that what we would like to do is see seniors who have a product
they like, they are satisfied, bear in mind Medicare is
something seniors have had money coming out of their paycheck
every day of their working life and going into a Medicare trust
fund, and they have prepaid their participation in this
program, and I think that CMS needs to be listening to those
enrollees and maybe paying less attention to these actuaries
that obviously are going to give you--let me ask you this. What
is your goal? What are you trying to achieve by this? What is
your outcome?
Mr. Blum. I think we have several goals. We want to reduce
the prescriber fraud in the program, we want to make the
benefit less confusing, more clear to our beneficiaries, we
want to make sure that when the program pays the majority of
costs for low-income beneficiaries, that we are paying the best
possible rates. When we see preferred pharmacy networks being
created, we want to encourage innovation----
Mrs. Blackburn. OK.
Mr. Blum [continuing]. So long as those cost savings get
passed on to our beneficiaries, passed on to the taxpayers.
Mrs. Blackburn. OK.
Mr. Blum. So Part D, yes, has been tremendously
successful, but we do not think it is perfect, nor do we get
that----
Mrs. Blackburn. My time has expired. One last question.
Can you cite for me the statute that gives you the opportunity
to go in and settle these disputes between the manufacturers
and the pharmacies?
Yield back.
Mr. Blum. Sorry, is that a question or----
Mr. Pitts. Did you want to respond?
Mr. Blum. We are happy to provide our legal clarification.
We see that the changes to the noninterference don't weaken,
but they strengthen. On a day-to-day basis we are pulled into
many disputes that we feel that we need to provide clear rules.
Mr. Pitts. OK. The Chair thanks the gentlelady and now
recognizes the ranking member of the full committee, Mr.
Waxman, 5 minutes for questions.
Mr. Waxman. Thank you, Mr. Chairman.
Mr. Blum, there is a lot of concern about the proposed rule
removing two classes of drugs, antidepressant and
immunosuppressants, from the list of protected classes. I would
like to hear your rationale. I know there are cost concerns,
and cost concerns are always legitimate.
When I did my oversight work on Part D in 2007 and 2008, my
investigations also revealed the prices for the drugs on the
Protected Classes list were much higher than they should have
been, but I think seriously the concerns that have been
expressed by patients, that removing drugs from the Protected
Classes list will mean their Part D plans may not cover them,
and seniors will not be able to get the drugs they need.
Give us your rationale here.
Mr. Blum. Well, I think we came to this proposal with
difficulty, with much analysis, and kind of weighing the pros
and cons for a proposed change, and one of the reasons why we
felt comfortable to take a careful step towards lifting the
class definition is that the Part D Program has many
protections built into place; the appeal system, transition
policy, the very rigorous formulary review that we do for Part
D plans.
We cover drugs in about 140 drug classes, and we have 6
classes that are now protected, and other drug classes that
treat very important conditions, diabetes, hypertension,
congestive heart failure, don't receive this designation, yet
we don't hear the concerns regarding beneficiaries having
access to the drugs they need.
Mr. Waxman. Well, there are a lot of concerns being
expressed----
Mr. Blum. Sure.
Mr. Waxman [continuing]. About this, and I appreciate your
efforts to reduce the taxpayer cost, and I know you are serious
about making sure that seniors can get the drugs they need, but
I believe there is a better way, and I have introduced to the
last two Congresses the Medicare Drug Savings Act that would
end one of the worst giveaways that was included in the
original Part D bill.
For people who were covered by Medicaid, before Part D,
there was a rebate for these dual eligibles, and when Part D
was adopted, suddenly that rebate ended and the prices of those
drugs went up so that the Medicare Program paid a much higher
price. It was a sweetheart deal. It resulted in a substantial
drug manufacturer windfall at taxpayers' expense.
My bill would reverse that windfall, adding drug a
manufacturer rebate so that Medicare Part D prices are no
higher than prices in programs like Medicaid.
Do you have any thoughts on this rebate bill?
Mr. Blum. Well, I think the President supports the
legislation. In his last budget, the President proposed a very
similar change to your legislation, to enable the Part D
Program to receive better prices for drugs that were previously
paid much less when the beneficiaries received their benefits
through State Medicaid Program.
Mr. Waxman. I would not interfere in any way with any of
the drugs that people would get, it would just mean a huge
savings for those drugs, restoring the price we pay for those
drugs that the manufacturers received prior to Part D.
We have heard a lot of concern about Medicare
beneficiaries, and I know that, Mr. Chairman, your side of the
aisle talks a good game when it comes to being concerned about
Federal spending. I would like to suggest that our committee
look at this opportunity, take action, and pass this bill,
Medicare Drug Savings Act, which would cut beneficiary costs,
protecting seniors, make sure they have access to drugs.
Mr. Blum, I have heard a great deal about CMS' discussion
of the noninterference provisions in the proposed Part D rule.
Part D statute states, ``Secretary may not interfere with the
negotiations between drug manufacturers and pharmacies and PDP
sponsors; and may not require a particular formulary or
institute a price structure for the reimbursement of covered
Part D drugs.''
So we have a witness that has gone on to suggest that your
rule rests on a questionable legal foundation, it violates the
intent of the Congress. I would like to understand this
proposal a little better. Does your proposal rule interfere
with negotiations between drug manufacturers and pharmacies?
Mr. Blum. No.
Mr. Waxman. Does your rule interfere with negotiations
between drug manufacturers and PDP sponsors?
Mr. Blum. No.
Mr. Waxman. Does your rule require a particular formulary?
Mr. Blum. No.
Mr. Waxman. Does your rule institute a particular price
structure?
Mr. Blum. No.
Mr. Waxman. So it would seem to me that your rule does not
do anything that the Part D statute prohibits you from doing,
yet the mere specter of the word ``noninterference'' has set
some industry groups ablaze.
Could you briefly explain what your rule does in this area?
My understanding is that the proposed rule merely states that
whatever prices are, they all have to be reported consistently,
is that correct?
Mr. Blum. Correct. I think we want to make sure that we
are clear when and won't the agency will become involved in how
Part D plans operate. As I expressed earlier, we often get
pulled into disagreements, contract disagreements, contract
disputes. Our principle is to make sure that Part D plans honor
the requirements, that they have to have complete pharmacy
networks, complete pharmacy access standards, but to me and to
the agency, this proposed change clarifies what we believe the
clause should mean in operations, to us that work to strengthen
the requirement, not weaken it, but we have no intention to
interfere in the price negotiations between Part D
stakeholders.
Mr. Waxman. Thank you. Thank you, Mr. Chairman.
Mr. Pitts. Chair thanks the gentleman. Now recognize the
gentleman, Dr. Burgess, 5 minutes for questions.
Mr. Burgess. Thank you, Mr. Chairman. And, Mr. Blum, thank
you, and thank you for being here.
If I understood correctly in your comments to Chairman
Pitts, you said that costs are going down. You extolled some of
the virtues of the Part D Program, and then in the next breath
you said some of the fastest growth is projected to be in the
Medicare Part D Program.
It reminds me of the old line from the Marx Brothers movie:
``Who are you going to believe, me or your own eyes?'' So it
almost can't be both ways. One or the----
Mr. Blum. Well----
Mr. Burgess. One or the other has got to be true.
Mr. Blum. Let me clarify, please. So looking back, Part D
has cost the taxpayers, cost beneficiaries less than what CBO
and the CMS actuaries projected back in 2003. That is true, and
that is a great statement for us to make together, and a reason
to celebrate Part D's success.
When you look at CBO's current projections for the future,
not the past but the future, Part D total spending, not just
the Part D premium but all the pieces that the program pays,
the low-income subsidy, the reinsurance, that is the fastest-
growing part of the program.
Mr. Burgess. Correct. But you just have to ask, what is
that based on? So let me ask you----
Mr. Blum. Why do you--you know the answer to that
question.
Mr. Burgess. Let me--well, let me ask you. When you have
this proposed rule that is some 700 pages, that I assume that
you have read and approved----
Mr. Blum. Yes.
Mr. Burgess [continuing]. Is that correct?
Mr. Blum. Correct.
Mr. Burgess. Can you provide the committee with the cost
analysis that you did for this rule?
Mr. Blum. Sure. By requirement, we have to do an economic
estimate. This rule was significant, so per OMB process, we put
our estimate----
Mr. Burgess. Have you provided that to the committee?
Mr. Blum. That is part of the rule.
Mr. Burgess. OK. Have you provided it already, or is it
coming?
Mr. Blum. We are happy to send a copy of the rule to you.
Mr. Burgess. Let me ask you this. In that, is there also
going to be the delineation of the legal justifications for
proposing the rule?
Mr. Blum. The proposed rule went through our general
counsel. They cleared it. We are happy to answer any questions
regarding their legal views regarding the regulation.
Mr. Burgess. Well, let us--and we need that. I mean it is
critical to our discussion.
On the noninterference that has come up several times this
morning, the noninterference policy, the cornerstone of the
Part D Program, under the proposed rule, CMS reinterprets this
part of the statute, asserting the language of the law does not
apply to negotiations between pharmacies and prescription drug
sponsors. So in my mind, there is some confusion as to why,
after 10 years, your agency felt that it must now reinterpret
the noninterference clause.
What has changed that propelled you to make this
distinction?
Mr. Blum. Well, I think we interact with our Part D plan
sponsors on a day-to-day basis. We approve, we review, we have
a very rigorous process----
Mr. Burgess. Do you have evidence to which you can point
and provide to this committee why----
Mr. Blum. We are happy to do that.
Mr. Burgess [continuing]. You have changed?
Mr. Blum. Yes, we are happy to do that.
Mr. Burgess. I would ask you to submit that for the
record, and how do you anticipate how the Center for Medicare
and Medicaid Services intervention in these negotiations to
improve the program. What is your expectation of improvement,
can you provide that to the committee?
Mr. Blum. Absolutely.
Mr. Burgess. Are you aware of the requirements within the
oft-mentioned Affordable Care Act, are you aware of the
requirements to keep the proprietary contract terms
confidential? That is Section 3301 of the PPACA. And it seems
to me it would be contrary to the policy you are proposing in
the Part D proposed rule.
Mr. Blum. We are happy to review that section of the
statute to make sure that we are consistent.
Mr. Burgess. And again, I would--you need to do that and
it needs to be detailed.
Let me just ask you again about, were you or Administrator
Tavenner or Secretary Sebelius, did you receive any legal
memoranda, was any legal memorandum prepared for you that
provided you the ability to proceed forward with this rule?
Mr. Blum. I am not sure about legal memorandum.
Mr. Burgess. Well, let me restate that to the proposed
noninterference interpretation.
Mr. Blum. So let me be clear. All major regulations go
through rigorous review through the department. That includes
our general counsel staff. The general counsel cleared the
regulation, which means they believed that CMS had the
authority----
Mr. Burgess. And had you received a memorandum to that
effect?
Mr. Blum. I don't know, but I can check for you, sir.
Mr. Burgess. We need, the committee needs that.
Let me just ask you, were there any doctors on the panel
that evaluated the immunosuppressant drugs relative to the
proposed protected class?
Mr. Blum. The CMS chief medical officer for Medicare was
part of the panel. And----
Mr. Burgess. So is that----
Mr. Blum [continuing]. By the way, he was the same chief
medical officer that helped design the Protected Classes back
in 2005.
Mr. Burgess. Well, was there--has there been any
breakthrough or change in the science on immunosuppressant drug
treatments since 2005 that many of us on the committee might
have missed?
Mr. Blum. Well, I think we recognize the very strong views
of patient groups, physician groups. We understand this is a
significant change.
Mr. Burgess. Mr. Blum, I am going to run out of time. With
all due respect, it is not just strong views, you give the
wrong immunosuppressive, you lose the graft. This may be a
graft that has been given a living donor, or someone who
donated that upon their demise, but you reject a graft. That is
a big deal, and it costs you at CMS a ton of money to then put
that kidney patient, graft recipient back on dialysis after
they reject their graft, or worse, then pay for another
transplant some point down the road. I mean that is an
incredible inefficient use of funds. So it is hard for me to
believe that you really have the cost benefit analysis in hand
when this type of behavior is allowed to go on at CMS.
Thank you, Mr. Chairman, for your indulgence. If the
gentleman wishes to respond, but I will yield back.
Mr. Blum. I pledge that the agency will carefully review
both the clinical arguments and the concern from patient
classes regarding the changes to the Protected Classes. We
understand this is a change. We understand that there are
clinical implications, and we will take a very careful look at
the comments and the thoughtful arguments coming to us during
the comment process.
Mr. Pitts. Chair thanks the gentleman. Now recognize the
gentleman from Texas, Mr. Green, 5 minutes for questions.
Mr. Green. Thank you, Mr. Chairman, and thank you, Mr.
Blum, for being here.
I understand that some plans have used significant
incentives, for example, zero cost sharing, to steer patients
to the mail-order pharmacies, and I believe patients, of
course, should be able to choose the pharmacy setting that best
meets their needs, whether it be mail-order or bricks and
mortar; however, CMS found that these incentives caused
increased demand for mail-order prescriptions, sufficient to
disrupt timely delivery of prescriptions to patients. In a
retail setting, the beneficiary often was notified of a problem
with a prescription in real time, or within hours, but when it
happens with a mail-order, the time it takes to find,
communicate, and resolve the problem may delay the delivery
date and resulting in gaps into the therapy.
I believe that timely access to medicines are critical for
patients, and I understand CMS is proposing to establish
requirements for timely fulfillment of prescriptions from mail-
order pharmacies, as well as for home delivery services and
retail pharmacies. This would provide consistent expectations
for beneficiary access to drugs.
Mr. Blum, when you proposed these standards for the timely
delivery, did you come up with these standards, or were these
guidelines already in existence that you used to develop your
proposed standards?
Mr. Blum. Well, I think we looked at common standards for
any kind of mail-order program. We believe strongly that we
should have both pharmacy networks and mail-order options for
our beneficiaries, that both should provide value to our
beneficiaries and provide clear standards. We want to make the
options stronger for our beneficiaries, to work better for our
beneficiaries, we want to make sure that beneficiaries
understand the benefits of preferred pharmacy networks,
community pharmacies and mail-order pharmacies, to ensure that
both the beneficiaries see clear benefits from different
delivery options, but also the taxpayers. And I think more
importantly, we want to make sure that plans operate with
consistent standards.
We receive complaints from beneficiaries regarding the
timeliness, the accuracy of drugs being shipped to them by
mail. We think it is appropriate for all plans to compete on a
level playing field to ensure that they're providing consistent
care and consistent delivery to our beneficiaries.
Mr. Green. OK. Beneficiary groups are strongly supportive
in ensuring timely access to their needed medicines, whether
provided by a pharmacy counter or the mail-order. Could you
further elaborate on the proposal and the ruling why CMS
believes this is an important beneficiary protection to pursue?
Mr. Blum. Well, I think we, right now, have standards for
pharmacies to fulfill drugs in a timely manner. We believe that
similar kinds of timely standards are appropriate for mail-
order pharmacies as well, and we want to make sure that
beneficiaries receive timely delivery. We want to make sure
that we have clear standards, but our goals simply are to
provide uniformity throughout how the benefit is delivered, and
to ensure that plans compete in a transparent way.
Mr. Green. OK. Mr. Chairman, those are my only questions,
and I will be glad to yield back.
Mr. Pitts. Chair thanks the gentleman. Now recognizes the
gentleman from Illinois, Mr. Shimkus, 5 minutes for questions.
Mr. Shimkus. Thank you, Mr. Chairman. Mr. Blum, it is good
to see you again. We have worked together before, and welcome.
I go to schools a lot and they talk about the Constitution,
and so these questions are meant just as a position of a
constitutional basis of what's Article One, which is Article
Two. And the basic premise, even I taught government history,
was that the administration enforces law. That is the job of
the administration. So these questions are posed based upon a
real concern out there in America that this administration does
not enforce the law, or picks and chooses which pieces of the
law they want to enforce.
So let me begin with stating that, as you know, the statute
clearly states that CMS may not interfere with negotiations,
and I quote, ``between drug manufacturers and pharmacies and
PDP sponsors.''
I was here, as a few of us were, when Part D was passed.
That was an intentional to put that in the law, to ensure that
CMS would not interfere with any of these three parties.
Can you tell me why CMS has chosen, based upon this
proposed rule, to go against the law as Congress intended?
Mr. Blum. Well, I think on a practical basis, and
overseeing the Part D Program on a day-to-day basis, we
constantly or frequently get asked to intervene in contract
disputes by plans, by hospitals, by pharmacists. And so we
don't necessarily always feel that we can simply say no, we are
not going to interfere when beneficiary access is a concern. We
have no interest to negotiate prices between Part D plans and
pharmacies and drug manufacturers, but on a day-to-day basis,
particularly when a----
Mr. Shimkus. Well, let me--and I appreciate that, but
wouldn't it be a better response if you feel the need to do
that, than to have someone sponsor a piece of legislation and
correct the law?
Mr. Blum. Well, I think we----
Mr. Shimkus. I mean constitutionally. I mean just----
Mr. Blum. Yes----
Mr. Shimkus [continuing]. In the real world of how we
teach our kids, that would be the correct answer.
Mr. Blum. Well, I am not a constitutional lawyer, so I
can't speak to that process with authority, but what I can
articulate is the day-to-day challenge of how we operate the
program, how we get drawn into individual disputes. We are open
to the best ways to----
Mr. Shimkus. Well, let me follow on because I have two
more questions that just kind of follow on with this.
In the original final Part D regulations published in 2005,
CMS separately responded to comments on its original proposed
regulation as follows: ``As provided in Section 1860D-11(i) of
the Act, we cannot intervene in negotiations between pharmacies
and Part D plans.'' And again, in the same document, as
provided in Section 1860D-11(i) of the Act, ``we have no
authority to interfere with the negotiations between Part D
plans and pharmacies, and, therefore, cannot mandate that Part
D plans negotiate the same or similar reimbursement rates will
all pharmacies.''
So if that was the ruling from CMS based upon the law, how
can the agency today say it is not unlawfully interpreting the
noninterference clause, when CMS clearly stated in 2005 that it
does not have the authority to negotiate between plans and
pharmacies?
Mr. Blum. Well, I think two points, Congressman. One, we
are happy to provide our legal justification to this committee
as to how we got to our proposal. But second, the 2005
regulations were drafted at a time before CMS had experience
with reviewing, negotiating and approving competing Part D
plans.
When I was on the Senate Finance Committee, I think the
working assumption would be only a handful of the standalone
Part D drug plans would choose to provide coverage. The good
news is we have many, many entities wanting to provide drug
coverage to our beneficiaries. We have more plans wanting to
come into the program every year. And I think the operational
realities, the complexities of day-to-day negotiations and
interactions with the agency and partners created us--or caused
us to take this proposal.
Mr. Shimkus. Let me finish with this. In the preamble
discussion and the final regulation issued in April 2010, CMS
stated the noninterference provisions in Section 1860D-11(i) of
the Act explicitly provides that the Secretary may not
interfere with the negotiations between pharmacies and PDP
sponsors, which would include payment negotiations between the
party sponsors and pharmacies for MTM services.
Mr. Blum, you were director of the Center for Medicare, and
had operational authority over the Part D Program in 2010. Why
did you--why did your interpretation of noninterference
change----
Mr. Blum. Well, I think----
Mr. Shimkus [continuing]. Four years later?
Mr. Blum. I mean, I think with more experience, with more,
you know----
Mr. Shimkus. But again, that is a debate on the law.
Mr. Blum. Well----
Mr. Shimkus. The law is pretty clear.
Mr. Blum. Well, we understand the concerns regarding the
legality of the provision. We are happy to provide our
justification. What I can say is that the complexity to oversee
this benefit has, you know, caused us to reinterpret certain--
--
Mr. Shimkus. You are not tasked to reinterpret the law.
You are tasked to follow the law.
Thank you, Mr. Chairman. I yield back.
Mr. Pitts. Chair thanks the gentleman. Now recognizes the
gentleman, Mr. Barrow, 5 minutes for questions.
Mr. Barrow. Thank you, Mr. Chairman. And thank you, Mr.
Blum, for being here.
Mr. Blum, for seniors, Medicare is kind of like home; when
you have to go there, they have to take you in. When it comes
to prescription drug benefits, Medicare Part D is like home;
when you have to go there, they have to take you in. So I want
to take stock of what positive has happened before we assess
the cost of the benefits to seniors, to our customers, as
opposed to the institutional interests that you all have.
First of all, why do you think the program is costing less
than it was originally projected to? What is your number one--
what is the number one takeaway we get from you as to why the
program is costing less than projected?
Mr. Blum. Well, I think there are many reasons why the
Part D Program has cost less than the 2003 projection. I think
the first reason is that the Part D Program pays for many more
generic drugs today than I think CBO or the CMS actuaries
projected back in 2003. I think Part D private plan competition
also has caused the Part D premium growth to stay moderate, but
I think the number one reason is the fact that we have many
more generic drugs provided through the Part D Program than
projected back in 2003 by CBO and the CMS actuaries. But----
Mr. Barrow. Referring to your secondary consideration,
more competition than anticipated, does that also have a role
in this; the fact that some folks are providing generics and
others aren't? Isn't that----
Mr. Blum. Well, I think there are----
Mr. Barrow [continuing]. A little cause and effect there?
Mr. Blum. Well, I think there are three, you know, kind of
primary reasons. The first is, you know, due to the fact that
we have fewer new blockbuster brand-name drugs today on market
than I think what the actuaries, CBO, projected back in 2003. I
think the second reason is Part D private plan competition.
Plans compete very hard for their members, which is why we do
not agree that Part D premiums will skyrocket due to some
changes in how we oversee Part D plans. And third is, the
agency is a much more rigorous reviewer of Part D bids and
benefit plans coming into CMS. CMS negotiates vigorously with
Part C plans, Part D plans, but I think the number one reason
that both CBO and CMS actuaries would cite why the costs are
lower than projected back in 2003 is the fact that we have
fewer new blockbuster brand-name drugs than was previously the
case back in 2003.
Mr. Barrow. All right, we have taken stock of how we got
here, now I want to take stock of where this--how the--where
you want to take us.
Let us talk about the costs and the benefits of the
proposed rule. I heard in response to previous questioning that
your understanding--your cost benefit analysis is in the rule.
I want to focus for a second on the costs and benefits to our
customers, as opposed to the cost and benefits to CMS as the--
the institutional interests you all have in managing the
program the way that you all think it ought to be managed.
Can you tick off for me just what you think of the
principle costs to seniors of the direction you all want to
take us in? What is going to be the impact as far as they are
concerned?
Mr. Blum. Well, I think we look at costs in kind of
multiple ways. One, we want to make sure that the premiums,
Part B premiums, Part D premiums, remain--growth remains
tempered. The Part B premium has been flat and for the first
year has, I think, come down, which is due to the changes
passed by the Affordable Care Act. The Part D premium in the
last several years has stayed flat. We also want to make sure
the cost sharing that beneficiaries pay----
Mr. Barrow. Well, but my point is it stayed flat without
taking the direction that you all want to take us in. Do you
see foresee any kind of cost impact to the customers as a
result of the proposed rule?
Mr. Blum. Well, I think we should look back at CMS changes
over the past 4 or 5 years.
In 2010, we required plans to offer no more than 3 plans,
you know, coming down from 5, 6, 7 of benefit offerings down to
3. We heard arguments from the same entities that we hear from
today that premiums will skyrocket, when, in fact, they didn't,
they stayed flat. So we don't see, based upon prior experience,
that, when going from 3 plans down to 2, particularly with the
Part D doughnut hole being filled in, that we will see----
Mr. Barrow. Well, I am asking you whether or not there
have been any--there are any adverse impacts to seniors, to our
customers, as a result of the proposal you all are making, and
I am hearing you say none. What are the proposed benefits that
you think the seniors are going to get out of the proposed
changes you all want to make?
Mr. Blum. Well, I think they will see greater clarity,
they will have greater confidence that the program is doing
everything we can to reduce provider fraud. They will----
Mr. Barrow. That is more of an institutional interest than
a customer interest.
Mr. Blum. Well, I think our customers have an interest to
make sure that the program doesn't pay inappropriately.
Mr. Barrow. Sure, but they want to make sure that they are
going to have the full range of options they have got too, and
they want to make sure they are not going to lose out on this
as----
Mr. Blum. Well, here----
Mr. Barrow [continuing]. In some other way.
Mr. Blum. Well, here is the past 5 years. We have more
sponsors than ever before wanting to come into the program. For
2015, we continue to see more plan sponsors wanting to come
into the program to expand benefits, consistent with the past
trends. We have heard arguments since the Affordable Care Act
that the changes due to the Affordable Care Act would reduce
plan premiums, when, in fact--I am sorry, would raise premiums.
They have come down by 14 percent.
So I think we have to look at the past 5 years in order to
make judgments regarding the future.
Mr. Barrow. Mr. Chairman, thank you very much. I would
like to follow up on this but my time has expired.
Mr. Pitts. The Chair thanks the gentleman. Now recognizes
the gentleman from Pennsylvania, Dr. Murphy, 5 minutes for
questions.
Mr. Murphy. Thank you, Mr. Chairman.
Despite the success of Medicare Part D, CMS proposed a rule
last month that would threaten the health and wellbeing of our
most vulnerable seniors: those with mental illness.
Now, having authored the Helping Families in Mental Health
Crisis Act, which is H.R.3717, cosponsored by many members of
this committee, it codifies protected class status for
antidepressant and antipsychotic medications. And having
written to Administrator Tavenner on this issue last month, I
am deeply concerned that the agency's proposal will have huge,
unintended consequences.
Now, this is not one of cost-saving or convenience, it is
not about swapping generic and brand drugs. Apparently, a panel
is what advised you on making these changes, and some
consultant. Do you have a list of the panel members who made
this decision?
Mr. Blum. We can provide it. They were CMS career
physicians and pharmacists.
Mr. Murphy. Psychiatrists?
Mr. Blum. I don't know, but I can check for you, sir.
Mr. Murphy. I see. I would think that psychiatric
medication, some decision would be made by a psychiatrist.
So these are career people, so they work where?
Mr. Blum. Within CMS, but I want to also clarify----
Mr. Murphy. Are they practicing physicians?
Mr. Blum. I am not sure, but one thing I want to also
clarify is that our analysis is on the Web. We proposed the
change in an open way, and we understand----
Mr. Murphy. No, I read the analysis, and it does not say
who did it, and it has very limited things.
So let me offer you something. So is it true that, in terms
of the proposed rule, there were things from the APA Practice
Guidelines that said the effectiveness of antidepressant
medications is generally comparable between classes and within
the class of medications? You know that is what the register
wrote, are you aware of that?
Mr. Blum. Yes.
Mr. Murphy. OK. Is it your view that drugs covered in
Medicare Part D 6 protected classes are interchangeable?
Mr. Blum. I think--our clinical review is that some of the
drugs are today and----
Mr. Murphy. I--no, I didn't ask--well, let me go on. Did
you validate your findings with the American Psychiatric
Association?
Mr. Blum. We proposed these changes in an open way. We are
going to listen very carefully to comments from all medical
societies.
Mr. Murphy. Including the National Association on Mental
Illness----
Mr. Blum. We will--I plan----
Mr. Murphy [continuing]. And the National Council for
Behavioral Health?
Mr. Blum [continuing]. Tomorrow--we will work very
carefully with both the clinical patient communities to ensure
that our----
Mr. Murphy. How about the National Institute on Mental
Health?
Mr. Blum. We are happy to meet with all stakeholders.
Mr. Murphy. Now, I have in my hand a letter here from the
American Psychiatric Association, and I want to read you a
couple of quotes from this. It says, ``We find it particularly
disturbing that CMS used selective and improper references to
APA Treatment Guidelines as justification for limiting coverage
of these medications.'' The letter goes on to state that
``selective quoting from our guidelines and flawed clinical
logic apparently led CMS to conflate the supposed
`interchangeability' of drugs within the classes of both
antidepressants and antipsychotics with overall evidence for
efficacy when this is just one element of a drug's
appropriateness for an individual patient.''
Were you aware that CMS selectively quoted from the APA?
Mr. Blum. Well, I think one of our principles, sir, was to
make sure that we----
Mr. Murphy. Yes or no----
Mr. Blum. We----
Mr. Murphy [continuing]. Were you aware?
Mr. Blum. We wanted to make sure that our analysis was
public, detailed----
Mr. Murphy. I see. There is a letter in front of you. You
have that letter?
Mr. Blum. Yes.
Mr. Murphy. There is a highlighted section.
Mr. Blum. Sure.
Mr. Murphy. Could you read that out loud?
Mr. Blum. ``CMS also cited the APA Treatment Guidelines in
support of its claim that there is a `lack of unique effects
for distinguishing individual drug products when initiating
drug therapy' and that treatment guidelines ... generally do
not advocate preference of one SSRI drug over another for
initiation of therapy. CMS' conclusion is not supported by the
evidence it cites. It misinterprets and misrepresents APA's
clinical practice guidelines multiple times as justification
for limiting patient access to'' the necessary products.
Mr. Murphy. Exactly. So it is important. I mean, you are
going back then for a comment, but you didn't list them in the
first place.
Do you know what an SSRI is?
Mr. Blum. I have been advised.
Mr. Murphy. Do you know how long it takes for one to take
effect?
Mr. Blum. Not personally, but I have been advised.
Mr. Murphy. About 2 to 4 weeks, and yet there is a
standard here if it doesn't have an impact on someone's
hospitalization within 7 days, it can be disregarded.
Do you know that according to the National Alliance on
Mental Illness, that seniors who died by suicide, 20 percent of
them do it the day of their doctor's appointment, 40 percent
the week of their doctor's appointment, and 70 percent the
month of their doctor's appointment? So psychiatrists and their
patients know that not all medications are created equal. Each
one is in a different therapeutic, or within a therapeutic
class have different molecular makeups, different side effects,
different drug-drug interactions, they impact a person's brain
in unique ways, which is why physicians and patients with
serious mental illness often try different therapies until they
find the right one that works.
If you restrict access to these drugs, you restrict the
treatment of mental illness, you impact increasing hospital
stays, you raise suicide rates among a population that has an
increased suicide rate once people reach 65, and you restrict
and you forbid the use of life-saving drugs.
On behalf of the mental health community, I urge CMS to
reconsider, because senior citizens with schizophrenia, bipolar
illness or depression, this is a matter of life and death. So I
want to ask you, will you commit to removing this unscientific,
callous, and anti-medical decision that will lead to harm for
seniors with mental illness?
Mr. Blum. Sir, I will commit to making sure that our
policy is right for patients.
Mr. Murphy. Sir, you are not a physician. You are the
people's worst fears. You have no background, no education, no
training, and it sounds like the people in this panel are not
practicing physicians either and not psychiatrists. You are
practicing medicine without a license. This cannot stand. For
people who are at high risk for depression and suicide and
mental illness, I urge you to go back and remove this rule.
Thank you. I yield back.
Mr. Pitts. Chair thanks the gentleman. Now recognize----
Voice. [Inaudible.]
Mr. Pitts. Without objection, so ordered.
[The information follows:]
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Mr. Pitts. The Chair now recognizes the gentlelady from
Virgin Islands, Dr. Christensen, for 5 minutes for questions.
Ms. Christensen. Thank you, Mr. Chairman, and thank you,
Mr. Blum.
I have a similar question to begin with. We have had many
issues with CMS over N-stage renal disease patients and the
regs that have been changed over the years. Were there any
transplant physicians who served on the panel?
Mr. Blum. I don't believe so, but again, CMS proposed
these changes in an open, transparent way. We walked through
every detail of our analysis, and we welcome feedback, we
welcome disagreement to ensure that we get the policy right.
Ms. Christensen. Well, given the risks to this vulnerable
population, which make up a large part of the CMS-covered--
especially Medicare, covered population, it--doesn't--if they
do not receive the appropriate immunosuppressant medication,
doesn't CMS think it is important for a transplant physician
who has experience treating patients with varying organ
transplants to weigh in on how clinical practice guidelines
should be interpreted?
Mr. Blum. We agree that CMS should do everything possible
to make sure that patients receive the drugs prescribed to
them, that meet their clinical needs. I think it is important
to recognize that we pay for about 140 drug classes, and while
we have 6 protected, we don't hear the concerns regarding lack
of that kind of patient access--however, we deeply recognize
and deeply appreciate the concerns from patient groups,
physicians, and we pledge to make sure that we listen, we
understand, and to have our final policies best serve patients.
Ms. Christensen. And we appreciate that. My experience is
that clinical guidelines are an important reference for
physicians to use to identify the treatments with the strongest
evidence base, but that they are indeed a guide and the
decisions and immunosuppressant drug regimens and psychiatric
medications must be tailored to the individual patients' needs,
and this decision is best made by the transplant physician who
really knows the medical history of the patient.
I have a question that I also need to ask. CMS is proposing
to make changes to the number of enhanced plans that can be
offered by any one sponsor, and to the number of contracts a
sponsor can have in a bid region. I want to ask about this
proposed requirement.
I have seen one industry-sponsored study that says 7
million beneficiaries will be affected, a letter by the
chairman notes that more than 8 million will be affected,
another industry-sponsored study cites 14 million people who
will be affected. The number seems to be growing like
Pinocchio's nose. On the other hand, organizations representing
Medicare beneficiaries are strongly supportive of the proposed
two-plan requirement. They believe it strengthens the program
for beneficiaries, making choices more meaningful and making
sure plans aren't gaming the system.
So I would like to provide you with the opportunity to
discuss these proposals. My first question is why did CMS
believe it was important to address these issues, and
rationalize the number of plans that can be offered in an area?
Was the agency seeing gaming?
Mr. Blum. Well, I think one game that we have seen right
now, or that the program is now experiencing, is that some plan
sponsors offer what they call enhanced coverage, that is
actually coverage far cheaper than their basic benefits. And
that is a strategy to select healthier beneficiaries to lower-
cost plans.
Now, that may be good for the program, but on the other
hand, what happens is that the low-income beneficiaries who are
auto-assigned to that higher-premium plan, if the program pays
the full premium cost, that costs the government, not saves the
government. So we need to take a balanced look at how plan
structures are being offered to ensure they best serve
beneficiaries, they are not confusing, but they also lower
total program costs----
Ms. Christensen. Let me try to get a----
Mr. Blum [continuing]. In our program.
Ms. Christensen [continuing]. A couple--thank you for that
clarification. Could you comment on how the Federal Government
taxpayers and plans--well, I guess you did, with dual eligible
beneficiaries are paying more than they should because of the
way the plan sponsors are offering multiple plans in that area.
Did that pretty much address that question?
Mr. Blum. Well, I think dual-eligible beneficiaries pay
the same copayment. They are fixed in statute, but the Medicare
Program pays just about the complete cost of those drugs, not
based upon a set fee schedule, but based upon the prices
negotiated by the Part D plans. We want to make sure that we
are paying the right, correct, fair rates on an apples-to-
apples basis with the Part D plans.
Ms. Christensen. And some of us cited this proposal will
hurt dual eligible beneficiaries in the basic plans, but I
interpret it exactly oppositely. Some enhanced plans with dual
eligibles are not enrolled and may be consolidated with other
plans, but dual eligible will benefit from lower costs in the
basic plans that they enroll in. If I could just get an answer
to that. Is that correct?
Mr. Blum. Well, I think we want to make sure that when
plans provide what is called enhanced coverage, that it is more
generous than their basic plan offerings; one, so beneficiaries
clearly understand what it means to sign up for coverage that
is enhanced, but also to make sure that when the program is
paying the complete cost, the full premium, that we are not
paying more than what we should if the plan structures were
more consistent.
Ms. Christensen. Thank you, Mr. Chairman, for allowing the
answer.
Mr. Pitts. Chair thanks the gentlelady, and now recognizes
the gentleman from Virginia, Mr. Griffith, 5 minutes for
questions.
Mr. Griffith. Thank you, Mr. Chairman. I appreciate that.
Let me start off by saying that I am concerned when you
keep saying, you know, you can provide us with the legal status
memorandum. This appears to be a major controversy as to
whether or not this--these changes are legal, and most of the
folks up here believe that it is not legal, particularly when
it is so large a change. And I will have to tell you, this is
what happens when one agency goes rogue. It wasn't yours, but,
you know, I dealt with the Solyndra situation, as many people
up here did, and general counsel there did not give legal--good
legal advice, in my opinion. They gave bad legal advice, the
agency acted on it, and I think they violated the law not once,
but about 3 times. And that was my opinion after reviewing all
of the documents involved, and all the opinions involved, is
they got bad counsel. So I am going to ask you to get a second
opinion after you provide us with what you already have from
your legal counsel, I am going to ask that perhaps you look at
getting a second opinion because this is a very serious matter,
and it appears that the legality is in serious question.
Now, that being said, I have a little bit different tack,
because last year, based on conditions in my district, I asked
you all to do something, and that was to take care of our
pharmacies. And I have recently had a conversation with one of
my pharmacists who is willing to accept the price negotiated in
the region, you know, just let me be able to provide my
customers with the drug that they need, or the drugs that they
need, and he has been told no. And so when you say to us today
that you are getting a lot of complaints, I understand that.
Now, my question is last year I wrote a letter, and I am
going to write you another letter, thanking you all for taking
care of the community pharmacies, and saying, hey, if you meet
the price, you can do it, because I represent a mountainous
district, it may not be the big mountains they have in the
west, but in the east we have some pretty good mountains in
southwest Virginia. And so if you don't have a preferred
pharmacy, you might be in the same county, but you might not be
in an area where my people can get there easily, particularly
if we happen to have 20 inches of snow on the ground, it is
going to be even more difficult to travel those 10, 20, 30
miles that may pile up to get to the next pharmacy that is on
the list. And so I do appreciate what you all did in that
regard.
Question becomes whether or not you have a legal basis to
do it.
Now, under your theory, with what you are changing in this
rule, and, of course, it is not the whole 800 or 700-and-some
pages, and I do have serious questions about the rest of it,
you are trying to take care of that situation, you are trying
to make it so that my constituents can go to the pharmacy down
the street instead of having to drive around the mountain to
the next pharmacy over, isn't that correct?
Mr. Blum. So I think a couple of things. We want to make
sure that we are proposing these changes in an open and
transparent way. And so one of the benefits is that, going
through the notice and comment process, we get the best legal
advice, not just from our lawyers but from the Congress, from
outside stakeholders.
And so to your first point about getting a second opinion,
that is precisely why we chose to go through the notice and
comment process.
To your second question regarding the pharmacists
protections, we believe that Part D plans should be able to
offer tiered pharmacy networks. We see evidence that they do
reduce costs for the program, for beneficiaries, but we have
two principles. Principle one is that beneficiaries need to
benefit from those tiered pharmacy networks. It can't just be
the plan sponsor that benefits, but it has to benefit both the
beneficiaries and the taxpayers. And we agree that tiered
pharmacy networks need to be fair, not just to the plan, not to
the beneficiary, but to the community pharmacists. And so we
have a hard time seeing the data evidence that we are seeing
today, that the evidence for cost savings is mixed, and telling
community pharmacies, well, they can't participate with major
Part D plans. We want those tier pharmacy networks to be fair,
we want to make sure that beneficiaries see clear savings, but
we agree that preferred pharmacy tools can be a good tool for
the Part D program if structured correctly.
Mr. Griffith. And here is the concern you are hearing
today. Look, I think if you are fair to the beneficiaries, and
I want fairness as well, if you are fair to the beneficiaries
then you are being fair to the community pharmacists because,
in most cases, particularly in the rural areas, the folks know
their pharmacists, they want to go to that pharmacist, and they
go to somebody who is close by, and they want to make sure they
don't have to drive around the mountain to get to the other
side of the mountain in order to get their drugs, because it
may not look like much on a map, but it is a big deal when you
are having to drive that. But I have to say, you know, Mr.
Shimkus was right earlier when he said the whole idea is if you
don't have the authority, it doesn't matter how much fairness
you want, you need to bring that to us, and you need to say we
need a bill to make this fair. And if what I need to do to take
care of my people is to introduce a bill, then I will do that,
but let us make sure that we don't have the Constitution being
set aside because it is inconvenient.
I yield back.
Mr. Pitts. Chair thanks the gentleman. Now recognizes the
gentlelady from California, Mrs. Capps, 5 minutes for
questions.
Mrs. Capps. Thank you, Mr. Chairman. And Deputy
Administrator Blum, thank you for your testimony today.
I believe this proposed rule has some serious problems, but
it also includes some important steps forward to ensure that
future CMS decisions are based on the best data available. But
today's hearing shows that it is important for us to be
cautious as we evaluate ways to make this program more
sustainable and efficient.
One area that I would like to add my voice of concern is in
the proposal to eliminate some of the protected classes of
prescription drug coverage. You know, I have been a public
health nurse for too many years in my community, and I
understand that access to the right treatment at the right time
is very critical for some of our most vulnerable groups, and I
have grave concern that if this rule is proposed, it could put
that in jeopardy. This is especially important as many of the
ailments that would lose this status are said common--
morbidities affecting perhaps many more individuals than we
might think. And while I have concerns about access for
vulnerable populations due to that part of the rule, I do want
to applaud the agency for another change that will also have an
important impact for improving care for patients, and that is
the enhanced eligibility criteria for Part D medication therapy
management, the MTM Program.
I welcome CMS' recognition of the importance of MTM that it
plays in increasing medication adherence, improving healthcare
outcomes, and reducing overall program costs. Specifically, the
proposed rule would lower the threshold for beneficiary
eligibility, meaning that an additional 16\1/2\ million
beneficiaries could be able to benefit from this important
service.
My question is, would you outline the specific benefits
that you envision this expansion will deliver to beneficiaries
as well as to the Part D Program, just so we get that on the
record?
Mr. Blum. Well, one of the things that we know is that
there are greater opportunities to assist beneficiaries, to
ensure they stay compliant, to help manage complicated
polypharmacy regimes. Our team sees growing evidence that the
MTM Programs can help to improve drug compliance, can lower
overall costs of the program. We agree that a well-designed
Part D benefit works not only to improve patient care, but to
lower total program costs. And so our goal is to expand the
availability of these programs to more beneficiaries, to ensure
more beneficiaries get the benefits of these programs.
Mrs. Capps. Thank you. And, you know, clearly, there have
been some concerns about the policies in this and other
proposed rules. Maybe it is a lack of understanding, maybe it
is just the complexities of the issues, but one of the main
concerns we hear from supporters and opponents of changes
proposed by CMS is that the data is not accurate. The proposed
rule we are discussing today seems to get at some of those data
discrepancies by requiring uniform standards for reporting
negotiated drug prices across Part D sponsors, but I know that
some groups are concerned that this could interfere with
negotiations regarding drug prices with pharmaceutical
manufacturers. It is a very complicated arena, but would you
now expand on CMS' intent for this particular aspect of the
proposed rule? What is the goal of this portion of the rule,
and how do you think this is going to affect price
negotiations, which, after all, is the bottom line?
Mr. Blum. Well, I think a couple of things, Congresswoman.
The Part D benefit is not a purely capitated program where CMS
simply pays a premium to plans and lets the plans negotiate
prices. There are other payment mechanisms built within the
Part D Program. There are risk corridors, reinsurance,
catastrophic coverage, the fact that for many low-income
beneficiaries, dual eligibles, the program pays just about the
entire cost of the drug bill.
Now, we have no interest or no policy desire to interfere
with the negotiations between Part D drug plans and
pharmaceutical manufacturers, but we believe that those prices
should be reported, kind of in a consistent way, to make sure
the program is paying fairly, and if the Part D plan is
benefitting from the lower negotiated price, and given the
large size of the premium costs, the cost sharing, the
catastrophic coverage, the reinsurance, the risk corridor, that
those prices should be paid--should be reported in a consistent
way to ensure those discounts not just get retained by plans,
but get passed on to beneficiaries and to the taxpayers that
are funding the vast majority of the program costs.
Mr. Pitts. Chair thanks the gentlelady. Now recognizes the
gentlelady from North Carolina, Mrs. Ellmers, 5 minutes for
questions.
Mrs. Ellmers. Thank you, Mr. Chairman. And thank you, Mr.
Blum, for being with us today.
Mr. Blum, I think it is important that you know that over a
half a million seniors in North Carolina will be affected by
these proposed rules, and I just want to start off by stating
that fact.
I am a little concerned with the interpretation that you--
CMS has on not interfering or arbitrating or mediating between
pharmaceutical companies and manufacturers. You are basically
coming in and saying, ``We are not going to be in the middle,
what we are going to do is take over and dictate.'' Is that not
essentially what you are doing?
Mr. Blum. I don't see any desire or attempt for us to
dictate the negotiation of prices between Part D plans and
providers, manufacturers. We believe in private plan
competition, we believe in choice, but choice that is fair to
beneficiaries and fair to the taxpayer.
Mrs. Ellmers. OK, and you have stated that, and you are
basically reiterating what I said, but essentially what you are
saying is you are going to come in and control the situation as
a whole, kind of as a whole umbrella effect----
Mr. Blum. That is not what I said----
Mrs. Ellmers [continuing]. Of control.
Mr. Blum [continuing]. Congresswoman. What I said is that
we get pulled into disagreements between plans, pharmacies,
other entities. And so our view is this clarification helps to
strengthen the noninterference, to describe precisely how we
interpret it on a day-to-day basis, but from a day-to-day
basis, CMS continuously gets pulled into disputes----
Mrs. Ellmers. OK. Well, let us move on. Let us move on.
The CMS rule proposed that prescription drug plans are limited
to offering only one standard benefit and one enhanced benefit.
Is this correct?
Mr. Blum. That is correct.
Mrs. Ellmers. So essentially, 50 percent of the plans that
are available now will be decreased and eliminated?
Mr. Blum. I think, a couple of clarifications. The first
is, this is a continuation and a continuous pathway for us to
reduce the number of enhanced plans. There are only 2 percent
of Medicare beneficiaries that are in that category of plans
that could be eliminated----
Mrs. Ellmers. But----
Mr. Blum [continuing]. If CMS chose to finalize the
proposal. When CMS moved from 5 plans down to 3 plans, we heard
the same concerns, the same arguments, that premiums would
skyrocket, that beneficiaries would go without coverage, they
would have to change plans. And as we have heard, you know,
throughout this hearing, the Part D premium has stayed
constant, has stayed flat. So we need to be concerned regarding
the comments and the criticisms coming to us regarding this
change, but we also have to look on the past 4 or 5 years to
really make a complete judgment regarding this proposed change.
Mrs. Ellmers. OK, well, there again, to your point that
you are making, you are basically justifying the reasoning
behind eliminating, as you pointed, only 2 percent of these
patients receive the benefit from what is being eliminated,
correct?
Mr. Blum. I am trying to give the justification for CMS'
proposal. This is still on comment, and we have----
Mrs. Ellmers. And this is----
Mr. Blum [continuing]. Made no policy----
Mrs. Ellmers [continuing]. From a perspective of trying to
save dollars in healthcare, is that correct?
Mr. Blum. I think our total estimate, if the proposed
change is completed, is that it is overall savings, small but
overall savings, and we are also trying to make the benefit
work better for our beneficiaries.
Mrs. Ellmers. Do you realize, though, that the changes
that are being made to Medicare Part D will then actually
increase the spending in Medicare Part A and Part B, because
many times these patients will then be rehospitalized, sent to
the hospital for care?
You cited in part of your justification at the beginning
the vulnerabilities, one of which has to do with the protected
classes of drugs. Nursing home patients being a large patient
body that receives those medications, that is an ongoing issue.
Have you ever been to a nursing home before?
Mr. Blum. Yes, I have. And, also, we understand that the
nursing home industry is also very concerned regarding the high
rate of use, and the high degree of variability in
antipsychotic use----
Mrs. Ellmers. OK, so would it not be more efficient, then,
to go to the source? You cited overprescribing of medication.
Wouldn't it make more sense to narrow down who it is that is
overprescribing drugs than it would be to eliminate the entire
program?
Mr. Blum. Well, I think we have--Congresswoman, we have
worked very closely with the nursing home industry----
Mrs. Ellmers. OK, I only have one more moment, because it
is not the nursing home that prescribes the drug, it is the
physicians that prescribe the drugs. So I want to make that
clarification. In relation to the potential impact on seniors,
because of any willingness provider provision, staff of the
Energy and Commerce Committee spoke with the Office of the
Actuary, who told them, ``Any time you make a network wider,
costs go up.'' Can you respond to that? Because you have just
told me that this is an effort at decreasing cost.
Mr. Blum. I agree that pharmacy networks have the
potential to lower costs for the program for beneficiaries. In
our current program today, we see strong evidence that pharmacy
networks do reduce costs. We also see evidence that some
pharmacy networks in their current forms don't lead to cost
savings for our beneficiaries and for the program.
Mrs. Ellmers. So, basically, what you are saying is a
direct complete----
Mr. Blum. What I am saying is----
Mrs. Ellmers [continuing]. Opposite opinion of the----
Mr. Blum. No, that is not what I am saying.
Mrs. Ellmers [continuing]. Office of the Actuary.
Mr. Blum. What I am saying is that we believe that
pharmacy networks, if structured correctly, make clear to
beneficiaries the pros and cons of preferred pharmacy networks
versus not, they do reduce cost, but the data right now shows
that some pharmacy networks in their current forms don't reduce
costs for beneficiaries. Our goal is to make sure that
preferred pharmacy networks work, and work well for
beneficiaries, but also work well for----
Mrs. Ellmers. Thank you. I----
Mr. Blum [continuing]. And----
Mrs. Ellmers [continuing]. Have gone way over my time----
Mr. Blum [continuing]. And for the----
Mrs. Ellmers [continuing]. So I appreciate----
Mr. Pitts. The Chair thanks the gentlelady. Now recognizes
the gentlelady from Florida, Ms. Castor, 5 minutes for
questions.
Ms. Castor. Well, I want to thank you, Chairman Pitts, for
calling this Oversight hearing for Medicare Part D, and thank
Mr. Blum who is here from the Center for Medicare and Medicaid
Services, and thank everyone at CMS for working to improve
Medicare Part D, helping to simplify it for beneficiaries, make
benefits more meaningful and cost-effective for everyone. But
it has to be balanced by science, and I think that many of the
many advocates for beneficiaries and those who have chronic
illnesses and other sicknesses have very valid points about the
Protected Class Policy.
So I want to make sure everyone is aware; this is a
proposed rule, this is what CMS has proposed in January,
correct?
Mr. Blum. Correct.
Ms. Castor. And there is an open comment period where you
can receive comments from people all across the country,
whether they are medical, professionals, beneficiaries, family
members, pharmacists, is that correct?
Mr. Blum. That is correct, Congresswoman, and we pledge to
meet with all stakeholders on this issue to understand comments
and concerns, and this is proposed and we pledge to talk to
clinicians, beneficiary groups to ensure that----
Ms. Castor. And the comment period is----
Mr. Blum [continuing]. We get the policy right.
Ms. Castor [continuing]. Open until when?
Mr. Blum. I believe March 10, March 14.
Ms. Castor. OK. Mr. Blum, many private insurance plans
steer patients toward preferred pharmacy networks and mail-
order pharmacies in an attempt to lower costs, but CMS has
found that total drug costs were not consistently lower in
preferred pharmacy networks, and, in fact, the retail
pharmacies in the nonpreferred network were actually offering
savings to the Medicare Trust Fund through discounted generics
at prices below those offered by pharmacies with preferred cost
sharing.
And I hope you have reviewed the research done by the
National Community Pharmacist Association. The community
pharmacists chose one commonly purchased prescription drug
plan, and entered in the Medicare plan finder for the most
frequently prescribed drugs; the generic version of Lipitor,
the generic version of Plavix, Diovan and Nexium. The costs
were then compared between preferred, mail-order and
nonpreferred pharmacies in 9 cities across the country, and
according to the analysis, I think it is quite surprising, 89
percent of the time preferred pharmacy costs to Medicare were
higher than those of nonpreferred pharmacies, and 100 percent
of the time, mail-order costs to Medicare exceeded those of
nonpreferred pharmacies.
Now, this is really counterintuitive to how you think it
would work. How can Medicare be paying more for mail-order and
more for drugs at preferred pharmacies? Medicare is supposed to
be benefitting from competition here that will bring prices
down, and it is troubling that plans are offering little to no
savings in the aggregate in their preferred pharmacy pricing,
particularly in mail-order for generic drugs. So instead of
passing on lower costs available through economy scale of
deeper discounts, a few sponsors are actually charging the
program higher prices. So preferred networks and mail-order
pharmacies should save the patient and the Medicare Program
money, I would think.
So I would like to ask you first, is the situation I have
described where mail-order and preferred pharmacies are costing
Medicare more than community pharmacies, similar to what CMS
found in your analysis of Part D?
Mr. Blum. Thank you for the question.
First, to clarify. The comment period for the proposed rule
closes March 7. I apologize for not giving the accurate answer.
To your question regarding preferred pharmacy networks. I
think the reason why CMS proposed this change was that we saw
similar data results. When you look at the actual cost of the
drug being paid by the program, being paid by the beneficiary
through cost sharing, there is not a consistent pattern that
preferred pharmacy networks, mail-order, lead to consistent
lower prices for beneficiaries, for the program. And we want to
make sure that our Part D plans have all the cost containment
tools that they can use to lower costs, benefit beneficiaries,
benefit taxpayers, but when the program is permitting plans to
restrict some pharmacies to not participate within their
networks, we believe the principle should be that we need to
demonstrate there is savings to our beneficiaries, to our
taxpayers.
So we embrace preferred pharmacy networks so long as they
are fair to beneficiaries, they are fair to pharmacists, and
they are fair to the taxpayers that fund the vast majority of
the cost of the program.
Ms. Castor. So you would agree that it is inconsistent
with the Part D law that preferred networks would cost Medicare
more money?
Mr. Blum. I think the intent of the program is to ensure
that Part D plans have tools to lower costs, not just the
premium, but cost sharing, reinsurance payments, risk corridor
payments, and that should be the principle that the Medicare
Program follows.
Ms. Castor. Thank you very much. I have nothing else.
Mr. Pitts. Chair thanks the gentlelady. Now ask consent to
submit for the record three letters: one from the National
Association of Chain Drug Stores, one from the American Society
of Transplantation, and one from the Association of Mature
American Citizens.
Without objection, so ordered.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Pitts. Now the Chair recognizes the gentleman from New
Jersey, Mr. Lance, 5 minutes for questions.
Mr. Lance. Thank you, Mr. Chairman.
Good morning to you, Mr. Blum. I will be concentrating on
what I believe is an overreach by the department, and I
understand when the law was written, there was a debate whether
there should be negotiations involving the Federal Government,
but as I read the law, that was clearly decided in the
statutory law and I am deeply concerned at what I believe is
the illegal reading of the law by the agency.
My concerns go not only to this situation but to several
other situations where the administration has unilaterally
delayed the ACA. I think the administration should have come to
us in Congress with statutory change, recess appointments
argued before the Supreme Court several weeks ago. I believe
the Supreme Court will rule those recess appointments were
unconstitutional. EPA regulation under the Clean Air Act,
argued before the Supreme Court earlier this week. Now, that is
not your purview, any of those matters, I understand that, but
you are here this morning regarding the topic under discussion.
There is a legitimate debate in this country; whether or
not there should be negotiations by HHS, I understand that, but
the noninterference provision is, in my judgment, unambiguous
that that is not the right or the responsibility of HHS, it
does not permit negotiations between Part D sponsors and
pharmacies. And as I understand what was statutorily created,
Senator Grassley stated, for example, that the noninterference
provision is at the heart of the bill's structure for
delivering prescription drug coverage through market
competition. I think that is a good deal for consumers, rather
than through price fixing by the CMS bureaucracy.
In the conference report at the time the legislation became
law, this is a direct quote, ``In order to promote competition,
the Secretary is prohibited from interfering with the
negotiations between drug manufacturers and pharmacies and PDP
sponsors.'' Between drug manufacturers and pharmacies and PDP
sponsors. And yet as I read what has occurred in this proposed
rule, prohibits only HHS' involvement in negotiations between
drug manufacturers and pharmacies, and between drug
manufacturers and PDP sponsors, but under the rule, not
prohibiting HHS involvement in negotiations between pharmacies
and PDP sponsors. Am I accurate in that?
Mr. Blum. I think we have clarified how we interpret the
noninterference provision of the statute. I agree that they
were vitally important to the framework of the 2003
legislation. During my time on the Senate Finance Committee----
Mr. Lance. Yes.
Mr. Blum [continuing]. I worked very closely with Senator
Grassley's office----
Mr. Lance. Yes.
Mr. Blum [continuing]. And so I agree with----
Mr. Lance. That is why I raised it.
Mr. Blum [continuing]. The premise. Now, we do not believe
that the Part D Program should interfere with price
negotiations----
Mr. Lance. Um-hum.
Mr. Blum [continuing]. As I said previously, oftentimes
Part D plans, pharmacists try to bring the agency into contract
disputes. We felt it was important to clarify how we interpret
the noninterference clause, but I am very familiar with how it
was drafted, very familiar----
Mr. Lance. Probably more familiar----
Mr. Blum [continuing]. With----
Mr. Lance [continuing]. Than I.
Mr. Blum. Yes.
Mr. Lance. Well, thank you. Let me say, I think that the
current interpretation is novel, and I think it strains
statutory credulity. I think it strains the statutory text
beyond reasonable limits.
Now, I am an attorney, and I am familiar with the deference
doctrine under Chevron, but as I read applicable law,
particularly from the DC Circuit and from the Second Circuit, I
think this goes well beyond any deference that would be
permitted under the Chevron doctrine. And, undoubtedly, this
will be litigated if the rules are finalized, and I would urge
the administration, based upon sound principles of law, to
reconsider this matter, and if a change is required, as is true
in so many areas, the ACA, recess appointments, EPA
regulations, I urge the President of the administration to come
before Congress to seek statutory change.
Thank you, Mr. Chairman.
Mr. Pitts. The Chair thanks the gentleman. Now recognizes
the gentleman from Maryland, Mr. Sarbanes, 5 minutes for
questions.
Mr. Sarbanes. Thank you, Mr. Chairman. Thank you, Mr.
Blum, for being here.
I think it is an important undertaking what CMS is doing. I
think it is a fair expectation on the part of the taxpayers and
the beneficiaries that periodically you kick the tires on the
program, even if it is working very well and we are all happy
with the track record. I mean when this was first rolled out,
there were problems. Democrats who were initially concerned
about the program, I think stepped up to try to improve it, and
we now have a program that works well and is respected by its
beneficiaries. So that doesn't mean that you don't come along
every so often and try to make it better, which is what you
said.
So we ought to be going through this exercise, and I
endorse the process that you have undertaken. The rule--the
proposed rule covers a lot of different areas, as you have
indicated. I share some of the concerns you have heard with
respect to removing the Protected Class for certain categories
of drugs, and as you know, there is a broad coalition that has
expressed those concerns, and I encourage the agency to pay
careful attention to that.
In terms of the requirement to reduce the number of plan
offerings, I agree with you, I think that is an important step
to consider. I think you are right to point to the alarm that
existed the last time you did something like this, and the
track record now shows that it has been an improvement overall.
And there is still potential for a lot of confusion on the part
of seniors and beneficiaries when they look at the plan
offerings. So as long as you are not diminishing the quality of
the options that are available across the board, I think that
that is a reasonable change to pursue.
I share, and you have seen this on both sides of the aisle,
concerns on the part of independent and community pharmacists
that they are not getting the full benefit and access to some
of these preferred networks and so forth, and that is clearly
something that the rule is trying to address.
The Medicare Program, the Part D Program, is not permitted
to negotiate with drug manufacturers, correct?
Mr. Blum. Correct.
Mr. Sarbanes. But you reimburse plans that are themselves
negotiating with those drug manufacturers.
Mr. Blum. Correct. Part D plans negotiate the formularies
and negotiate the prices with manufacturers. It is not true
that CMS simply pays a fixed premium to Part D plans. We pay
many other separate payments that are based upon the actual
prices being negotiated. We don't plan or don't want to
interfere in those negotiations. But the 2003 law that was
legislated created many separate payment mechanisms that the
program pays Part D plans. And, for many beneficiaries, we're
essentially a cost-based reimbursement, particularly for the
dual-eligible beneficiaries that receive continuity of
coverage.
Mr. Sarbanes. It is certainly fair for the program to
expect that if the plans are securing discounts, that some of
that benefit would come back to the program and to the
taxpayers. If the program was not doing a reimbursement, if the
patient was paying directly to a plan that originally cost $100
for a drug, and the plan was paying the manufacturer $75 and
getting a $25 mark-up, but then was able to go negotiate and
get that for $50, there would certainly be an outcry on the
part of the consumer if none of that savings was being passed
through. I think the transparency that the program is demanding
in terms of what the drug pricing is and how it works is to get
to the notion that taxpayers also have a rightful expectation
that, if there are significant discounts being earned by the
plans relative to the manufacturers, that some of the benefit
of that ought to come back to the program. And that doesn't--
that interest on your part in transparency does not translate
into interference or trying to negotiate directly with
manufacturers, or anything else, that is just basic fair
transparency. Is that not right?
Mr. Blum. Correct, and we believe that competition has
served the Part D Program well in the past 10 years. At the
same time, we believe that prices reported to the program for
purposes of paying cost-sharing assistance or other, you know,
kinds of payment mechanisms need to be reported in a consistent
way to ensure that competition is fair, to ensure that both
beneficiaries and taxpayers benefit from that competition.
Mr. Sarbanes. Thank you.
Mr. Pitts. Chair thanks the gentleman. Now recognize the
gentleman from Louisiana, Dr. Cassidy, 5 minutes for questions.
Mr. Cassidy. Hi, Mr. Blum.
Mr. Blum. How are you?
Mr. Cassidy. You always know your stuff, man. I don't
always agree with you, but you know your stuff, so thank you.
Let us just put it on the table. In your testimony, you
mentioned the concerns, recent changes to the MA Program will
result in lower enrollment, higher cost appear unfounded, but
let us be honest, only a small fraction of the scheduled cuts
have come into being, and, indeed, the cuts that were already
scheduled were papered over by large grants by CMS. I would
note, GAO questioned the legality of those demonstration
projects. A cynic would say they were being papered over prior
to the last presidential campaign, but far be it for me to
accuse the administration of politics.
So given that, I mean you see no basis that these cuts
going forward could have an impact on the care that patients
are receiving?
Mr. Blum. So before the Affordable Care Act was signed
into law, Medicare paid on average about 13 to 14 percent more
than the same cost for the traditional Fee-For-Service Program.
Today, we are paying roughly about 103 percent of costs on
average, compared to the Fee-For-Service Program. So a dramatic
decrease in the total cost that the program paid private plans.
That includes the costs to our quality bonus demonstration.
During that time period of dramatically lower premiums----
Mr. Cassidy. But going--I--not to interrupt, we have
limited time, I don't mean to be rude. Going forward, there are
further cuts, I think, what, I see J.P. Morgan says that
payments will be cut at least 4 percent in 2015, which is more
than you suggest, but nonetheless, so the cuts begin to
accelerate.
Mr. Blum. So we estimate that the proposed change that CMS
put forward last week for the Medicare Advantage Plans, on
average, will be roughly the same change that was finalized for
2014, the current year. For----
Mr. Cassidy. But without the demonstration projects.
Mr. Blum. Net, net. So, you know, apples-to-apples
comparison.
In 2014, we are on track to exceed our 5 percent growth
projection----
Mr. Cassidy. But let me ask you. Those cuts are in
addition to the previous cuts.
Mr. Blum. So----
Mr. Cassidy. So you add cuts--you have more cuts, you have
more cuts in '16 and more cuts in '17, at some point the
cumulative effect, that--saying 3 percent this year is not
going to result in any worsening that 3 percent last year,
ignores the fact that you had 3 percent last year.
Mr. Blum. So every year, CMS phases in parts of the
Affordable Care Act changes. Every year, we hear that plans
will pull out, benefits will be cut----
Mr. Cassidy. No, no. Now you are dodging the question. The
fact is is that you have an accumulation of cuts. So, sure, we
can speak about rhetoric and about how, you know, you give
grants and somehow it doesn't happen, but there is 3 percent,
there is 3 percent, and it accelerates, and to say that it
doesn't--that is not going to--I mean are you really
maintaining that these cuts are going to eventually have no
effect?
Mr. Blum. I think----
Mr. Cassidy. Yes or no.
Mr. Blum. What we are saying is our--what I believe is
that the past 5 years we have seen----
Mr. Cassidy. Never mind. That is fine. I don't mean to be
rude but this is clearly a talking point. I don't mean to be
rude but I am not getting a yes or no, I am sorry.
Next, one of your things is that you are going to require
physicians to be enrolled in Part D in order to participate.
Now, I am a doc. I get so sick of bureaucrats telling me how to
run my show. There are so many things that already are looking
at me. I mean physicians must be one of the most scrutinized
people in terms of bureaucracy staring at them. Why are we
going to kick our box from the ability to prescribe if they are
not a Medicare provider?
Mr. Blum. Well, I testified to the Senate Homeland
Security Committee, based upon reports from the IG that found
that the program was paying for prescriptions written by
prescribers that were not licensed physicians. We think it is
appropriate for us to have the same standard----
Mr. Cassidy. Now stop. If I may, there are other ways to
weed out unlicensed physicians. Do we have to say, OK, you
can--if you are licensed, you cannot work for a nursing home in
an underserved area, you are not going to be able to work for
them, because somebody without a license should be kicked out
anyway.
Mr. Blum. Well, that is the situation that we have today.
That is the rule that we have today, that we rely on State
pharmacy licensure, and that hasn't worked.
Mr. Cassidy. Now, I will say that that doesn't mean that
now we are going to use, as a surrogate for that not working,
another set of regulations. As--speaking for my fellow
physicians who are groaning under the burden of paperwork laid
upon them by CMS, and thinking about getting out of the system
because they are so sick of it, this threatens a senior's
access to physician care because CMS doesn't understand that
one more piece of paperwork is just enough to make me retire to
Florida.
Mr. Blum. Well, we understand the burdens, but we also----
Mr. Cassidy. If you do, you are not operationally
understanding it.
Mr. Blum. Well, our principle is to make sure that
prescribers who are writing scripts pay for the Part D Program,
are licensed----
Mr. Cassidy. I don't see the rationale for that beyond you
don't think other laws are being implemented, being enforced.
It seems better to enforce those other laws than add on more
regulation.
Mr. Blum. Well, those are State laws, and I think we feel
that we have a responsibility to ensure that the taxpayers that
front the vast majority of costs to the Part D Program are
paying for prescriptions that are written by legitimate
physicians.
Mr. Cassidy. With that defense of further centralization
of healthcare and to the Federal Government, I yield back.
Mr. Pitts. Chair thanks the gentleman. Now recognize the
gentleman from Kentucky, Mr. Guthrie, 5 minutes for questions.
Mr. Guthrie. Thank you, Mr. Blum. Thank you for coming. I
appreciate that.
I just want to first go back to what--I think are questions
that Mr. Shimkus and you had. If I heard correctly, which I
think I did because I wrote it down, he quoted a 2010 position
that CMS had that would not have allowed this rule to go
forward, and then you said, and I quote, ``reinterpreted the
law'' to allow this rule to go forward. You also said that you
understand the legal concerns that we have, not in that
exchange, but you understand the legal concerns that we have,
which I would say you understand that, the basis is quite
questionable or else you wouldn't understand our concerns if
you didn't understand how we could question that. And you say
that you have been pulled in by other groups to get involved in
negotiations, and you had to come up with this rule because
other groups want you to be involved. And I hear from people
all the time in my district; veterans, other things that they
are in bad situations, and I just have to say to them I wish I
could help you, but the law is the law, and it is my job to
change the law and fix the law to help you in that situation,
but I can't just go reinterpret the law. And that is what you
said. And I think all of my colleagues, whether Republican or
Democrat, House or Senate, should be really concerned with what
you said today; that there could be a position of CMS, you want
to do something different so you go back and reinterpret the
law on a questionable basis. Or I think that--I just want to
put out this--what was said, and I will give you a chance to
respond to that if you want to do so, or I can go into my
questions.
Mr. Blum. Well, I think a couple of things. As I said
during my opening statement, the Part D Program has many
vulnerabilities, and we did a comprehensive review based upon
the policy concerns that come to us from members of Congress,
stakeholders, partners, and based upon our own operational
experience. We chose to propose changes, to talk about our
principles, to testify here today to discuss our concerns, to
discuss the vulnerabilities that we see.
Mr. Guthrie. Well, did you have to reinterpret the law to
go forward with this?
Mr. Blum. We want to invite comment, we want to invite
conversation, that we don't believe the status quo for the Part
D Program is perfect. There are vulnerabilities. We have to
accept that. We have to accept the program is spending $70
billion, the fastest projected----
Mr. Guthrie. Well, let me----
Mr. Blum [continuing]. Program----
Mr. Guthrie [continuing]. Just--I only have a--I want to
get to the question, but if you have a--if all that is true,
and if we accept all that, but that doesn't mean you can just
do it without the legislative----
Mr. Blum. And that is precisely what----
Mr. Guthrie [continuing]. Authority.
Mr. Blum. That is precisely why we go through the notice
and comment period. We want to invite a perspective, we wanted
to testify before this committee to explain our rationale, to
hear disagreement.
Mr. Guthrie. But to the legal side. I am not just saying
whether the----
Mr. Blum. Well----
Mr. Guthrie [continuing]. Rules are correct or not or----
Mr. Blum [continuing]. During the comment process, many
stakeholders submit legal opinions, law firms submit comments
to us to tell us whether we are right or we are wrong.
Mr. Guthrie. Well, I don't--but you had to reinterpret the
law to get to where you were, that was your quote.
Mr. Blum. I would call it a clarification, sir.
Mr. Guthrie. OK. Well, you--OK, you said--one complaint I
don't hear from my constituents is Medicare Part D. I just
don't hear from them on Medicare Part D as a problem moving
forward. And you did say in your opening statement----
Mr. Blum. I would invite you to look at the complaint----
Mr. Guthrie. I am going to look to your complaints and
see, but I don't--when I go to town hall meetings, nobody
stands up and says I don't like my drug plan. But--so one of
the things you said, you support competition as long as seniors
understand. And, you know, that--I imagine going into a
superstore and saying here is the aisle limited choices for
people that are 65 and older, and here is the rest of the
superstore for everybody else. And, you know, it just says, you
know, they do understand and it is--the Milliman report says up
to 15 percent of Part D plan choices may be eliminated or
materially changed during 2015 or 2016, based on provisions in
the rules. So some of my constituents will have plans that they
chose, plans that they like, and if they like what they have,
they can keep it, as we have heard, and I know that when
constituents under the ACA were--plans were changed, and people
were just saying, well, they were paying for something they
shouldn't have paid for because it wasn't worthy insurance. I
have heard that even in this committee. And, obviously--so that
is just assuming people don't understand what they are buying.
And I don't think that is the case. I think people are far more
sophisticated and smarter than maybe what those kinds of
comments give them credit for.
And so what do I tell my constituents if they can't get
plans because they are limited? You said it is only 2 percent,
but that is 2 percent.
Mr. Blum. Well, I think a couple of things. One is we want
to make sure that we are incorporating into our final policies
the views from the beneficiary communities, beneficiary
stakeholders. What we hear from the beneficiary community is
that the benefit is confusing. We see from the academic
literature that beneficiaries would have the opportunity to
reduce their out-of-pocket costs dramatically by changing
plans. We want beneficiaries each year to take a critical look
at their benefit offerings, because we know that many
beneficiaries will be able to save, reduce their out-of-pocket
costs. That is why we have private plan choices. We want
competition, we want beneficiaries to evaluate and be able to
understand the benefits for different plan options, but we know
that most beneficiaries year-to-year don't change plans, even
though they could benefit dramatically by changing plans.
Part of the reason that we hear from the beneficiary
community, and again, we invite this public conversation, is
the benefit is confusing. We see plans cherry-picking the
healthiest beneficiaries, raising costs for the rest of the
program. But we will respectfully review and carefully review
comments sent to us to make sure that we are fostering
competition, but in a way that helps beneficiaries choose the
best possible plan, but also make sure the taxpayers don't
overspend. I would hope the Congress would want us to manage
the Part D budget in the most prudent way.
Mr. Guthrie. Well, thanks. I do appreciate you coming
today. Appreciate it, and I yield back.
Mr. Pitts. Chair thanks the gentleman. Now recognizes the
gentleman from Georgia, Dr. Gingrey, 5 minutes for questions.
Mr. Gingrey. Mr. Blum, you have been with CMS since 2009,
is that correct?
Mr. Blum. Correct.
Mr. Gingrey. You have been in this current position,
number 2 guy, for, what, about a year?
Mr. Blum. Roughly speaking, yes.
Mr. Gingrey. Yes. And I certainly can understand a new
coach coming in, wanting to do something kind of drastic, but
quite honestly--and I commend you on the transparency aspect of
this proposed rule, but I think the rule is boneheaded. In
fact, Bill O'Reilly would probably call it pinheaded.
I would expect, since you have been around since 2009, that
you know on, let us say, a 5-year average, the last 5 years,
how many participants in Medicare Part D, the prescription drug
plan, have reached the doughnut hole, what percentage on
average over the past 5 years?
Mr. Blum. I don't have the numbers in my head, but what is
true is many fewer beneficiaries are hitting the doughnut hole
because it is being closed.
Mr. Gingrey. Yes, but I suspect that number is pretty low.
I am surprised you don't have that. Maybe somebody behind you
could whisper in your ear----
Mr. Blum. We would be happy----
Mr. Gingrey [continuing]. And tell you----
Mr. Blum. But I believe the numbers are roughly year-to-
year----
Mr. Gingrey. Well----
Mr. Blum [continuing]. And it changes year-to-year,
roughly 3 to 4 million Medicare beneficiaries hit the doughnut
hole----
Mr. Gingrey. Yes. Yes
Mr. Blum [continuing]. Each year. However, but----
Mr. Gingrey. I would suggest that, you know, you are
trying to kill a gnat by torching a village. You are trying to
fix things that are not broken, and to do it, maybe the optics
of closing the doughnut hole look great. And so you have to go
back and say, well, we are going to look at these Protected
Classes, and we are going to do something about that and we are
going to save money so we can close the doughnut hole. And
look, listen to these 6 drug classes. Antineoplastics, that is
cancer, ladies and gentlemen. Anticonvulsants. Maybe we ought
to add marijuana to that. Antiretrovirals, that is AIDS drugs.
Antipsychotics. Antidepressants. Anti-immunosuppressants. These
are people who have had transplants--renal transplants, and if
they don't get the drugs necessary within 3 to 5 years--they
can't pay for them, and all of a sudden they reject these
transplants.
I just, you know, I wish I could tell you that I was
shocked at the egregiousness of this proposed rule, and that
this was all just a mistake, but that would be too kind.
At this point, we must recognize the pattern of this
administration attacking any healthcare program that empowers a
free market, no matter the pain it causes beneficiaries. I
personally, as a physician, find it reprehensible that the
administration is so against any market-based system, that they
are willing to once again harm seniors to serve the purpose. My
colleague from Maryland said, you know, every now and then you
have to kick the tires to see if a program is working. Well, on
the Affordable Care Act, you--every time you kick the tires,
your foot goes through the sidewall. So maybe you are a little
reluctant, so you kick the tires of a good program and your
foot comes bouncing right back in your face. And that is what
is going on here. And let us be clear, this proposed rule will
destroy the Part D Program as we know it. It will limit our
seniors' coverage options, and it will force higher premiums,
unwarranted changes to a program where beneficiaries are
overwhelmingly satisfied. It just doesn't make sense.
Now, Mr. Blum, even as I disagree with the contents of the
rule, I also question whether CMS, you guys, even have the
legal authority to reinterpret the clear Congressional intent
in the Medicare Modernization Act of 2003. I was here. I was
here when that was passed. The Energy and Commerce majority
staff requested that CRS review the legality of your actions,
and we requested a memo in response. The memo cites, and I will
just give you a little bit of it because I am running out of
time, a Supreme Court decision that interpreted a statute, a
court should always turn first to one cardinal cannon before
all others; that a legislature says in a statute what it means,
and it means in the statute what it says.
Mr. Blum, Congress has opined on this. Why does CMS feel
the need to act at all when the law is crystal clear on this
issue?
Mr. Blum. Well, I haven't seen the CRS reports. I would
welcome having a chance to look at it.
Mr. Gingrey. Well, Mr. Chairman, I request unanimous
consent that we make this report from the Congressional
Research Service on the proposed interpretation of the
noninterference provision under Medicare Part D as part of a
permanent record. And I will come back to the----
Mr. Pitts. Without objection, so ordered.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Gingrey. Let me just conclude. I am urging you, Mr.
Blum, to withdraw this rule, and I personally, as a member of
this committee, am prepared, and I will also urge our
leadership, fight with every tool available to repeal this rule
legislatively if you guys do not heed the wishes of our seniors
and the American people.
I have gone over my time, and, of course, I yield back, Mr.
Chairman.
Mr. Pitts. Chair thanks the gentleman. And I would like to
ask the staff to provide a copy to the minority, please.
Chair now recognizes the gentleman from Florida, Mr.
Bilirakis, 5 minutes for questions.
Mr. Bilirakis. Thank you, Mr. Chairman. I appreciate it
very much.
And again, I represent over 100,000 seniors in the Tampa
Bay area, and they seem to be very pleased with Medicare Part
D, and I am along with Dr. Gingrey: If it ain't broke, don't
fix it.
Mr. Blum, specifically, I am concerned about CMS'
reinterpretation of the noninterference clause of the Medicare
Part D statute. It was clearly written so that CMS would not
interfere with the negotiations between drug manufacturers,
pharmacies, and Part D sponsors.
You may or may not know that I am in a unique position
here, since my father, Congressman Mike Bilirakis, was the
chairman of the subcommittee, and again, he remembers the
intent of the law as written by him and his colleagues, and it
was not to allow CMS to interfere in any of these negotiations.
And I was in the legislature at the time in 2003, and I
followed this as well, and that was my interpretation of the
law, that the intent was for CMS not to interfere, and not to
allow CMS to interfere again in the negotiations.
You should know that, of course, you were the--I believe
you were on Senator Baucus' staff at that time, so I am sure
you remember. So I would like to ask you, Mr. Blum, are you
telling me that the authors of the legislation, of course,
including my father, are wrong when they say that they intended
for CMS not to interfere in these negotiations?
Mr. Blum. So going back to my days on the Senate Finance
Committee, I worked with your father and his staff during the
conference committee that produced the final Part D
legislation, and so I understand well the intent of the
Congress at the time. Senator Baucus, my former boss, and the
team that he had, myself included, were directly involved in
the drafting of the Part D legislation. So I understand well
why Congress chose to put in place the noninterference clause.
While we understand the disagreement, and it is clear from
this hearing today there is a disagreement, we proposed the
change with the interest to make the provision work better, to
have it be stronger, to make it really clear when CMS will and
won't get involved with contract disputes--with Part D sponsors
and pharmacies. We get asked frequently to get involved with
those disputes, and we want to kind of articulate to the public
when and won't CMS try and broker, you know, beneficiary access
issues or pharmacy network issues.
Mr. Bilirakis. OK.
Mr. Blum. We will thoroughly review--I look forward to
looking to the CRS documents to understand our authority to
make sure that our legal team understands it, but as I said
several times during this hearing, our intention is not to
interfere with the price----
Mr. Bilirakis. Thank you.
Mr. Blum [continuing]. Negotiations.
Mr. Bilirakis. And you understood the intent of the law
then, and now you understand it as well.
Mr. Blum. Having served on the Finance Committee staff
during the 2003 drafting, I understand the 2003 legislation----
Mr. Bilirakis. Thank you.
Mr. Blum [continuing]. Well.
Mr. Bilirakis. Thank you, sir, because I don't have a lot
of time, I want to get onto the next question. Appreciate it.
You justify some of the changes in the rule as a means to
address prescription drug abuse. It seems to me that we could
manage some of the prescription drug problem through the use of
a pharmacy lock, the lock-in program, where a single point of
sale could provide more protection against the problem of
doctor shopping, pharmacy shopping, and inappropriate drug
therapies for high-risk beneficiaries. Pharmacy lock-in has
been used successfully in State Medicaid, of course, as you
know, and also with TRICARE and commercial insurance. Are you
in support of pharmacy lock-in, sir?
Mr. Blum. I testified on the record last summer to the
Senate Homeland Security Committee that we believe lock-in
provisions can help to reduce inappropriate prescribing,
prescriber fraud. We have concluded that Congress would have to
act to authorize us to allow pharmacy lock-in, but we believe
that is a change that Congress should make.
Mr. Bilirakis. So in other words, you agree with the
pharmacy lock-in. Why isn't it in this particular rule?
Mr. Blum. We don't have the authority for that change. I
testified that Congress would have to give us that authority.
Mr. Bilirakis. OK. I have introduced a bipartisan bill on
this particular issue, but staff at CMS have not replied to
requests from this committee for technical assistance on this
bill. Today, would you commit to me, you personally, to review
this legislation that I have offered? I have actually filed it.
It has been about a couple----
Mr. Blum. Absolutely.
Mr. Bilirakis [continuing]. A few months. So I would like
to get your feedback----
Mr. Blum. Yes.
Mr. Bilirakis [continuing]. With regard to this
legislation. Would you personally commit to me that you will
review that and respond to me?
Mr. Blum. Absolutely.
Mr. Bilirakis. OK, thank you very much. Appreciate that.
Mr. Pitts. Chair thanks the gentleman. Chair thanks Mr.
Blum for spending 2\1/2\ hours with the subcommittee this
morning. We really appreciate your time and patience. We will
send you additional questions. We ask that you please respond
to those promptly.
There are two things I want to highlight. Dr. Burgess'
question was for the full and complete cost analysis that led
to the rule. If you will provide that. And Mr. Guthrie's
question, the call sheets, the full complaint data that you
referenced that you say shows seniors don't like their Part D
plans, would you provide those to the committee?
Mr. Blum. To clarify the complaint data, in 2013 CMS
received over 30,000 complaints on various Part D issues. We
have to protect beneficiary confidentiality, but we will do our
best to make sure that we can summarize that data in a way that
would be helpful to this committee.
Mr. Burgess. Redact the names and let us have it.
Mr. Pitts. Go ahead.
Mr. Burgess. Mr. Chairman, I think you can redact the
names and let us have the information.
Mr. Blum. We will look into it.
Mr. Burgess. The complaints themselves will be
significant.
Mr. Blum. Yes, we will look into it, sir.
Mr. Burgess. Thank you, Mr. Chairman.
Mr. Pitts. All right. Chair thanks the gentleman. We will
now take a 5-minute recess as the second panel sets up.
[Recess.]
Mr. Pitts. Our time of recess having expired, we will go
to our second panel. We have three witnesses on our second
panel today. We have Mr. Douglas Holtz-Eakin, President, the
American Action Forum; Mr. Carl Schmid, Deputy Executive
Director, The AIDS Institute; Mr. Joe Baker, President of the
Medicare Rights Center. Thank you all for coming. You will each
have 5 minutes to summarize your testimony. Your written
testimony will be placed in the record.
Dr. Eakin, you are recognized for 5 minutes for your
opening statement.
STATEMENTS OF DOUGLAS HOLTZ-EAKIN, PRESIDENT, AMERICAN ACTION
FORUM; CARL SCHMID, DEPUTY EXECUTIVE DIRECTOR, THE AIDS
INSTITUTE; AND JOE BAKER, PRESIDENT, MEDICARE RIGHTS CENTER
STATEMENT OF DOUGLAS HOLTZ--EAKIN
Mr. Holtz-Eakin. Well, thank you, Chairman Pitts, and
Ranking Member Pallone, members of the committee, for the
privilege of being here today to discuss what I consider to be
a crucial proposed rule from CMS.
You have my written statement. Let me make just a few brief
points at the outset. First, as has been discussed, the Part D
Program has a tremendous record of success. It has come in well
below the projected budget costs, and I note with irony that
Mr. Blum said one reason to do this rule is CBO was saying it
is going to cost so much in the future, when it came in at $55
billion, after my CBO projected it would cost $122 in 2012.
It also has had stable beneficiary premiums, it has a very
high level of beneficiary satisfaction, 85 percent of seniors
are very happy with Part D. For those who are interested in the
statistics on this, I will point out 30,000 complaints is less
than 1/10 of a percent of Medicare beneficiaries. So we have
approval at 85, complaints at under 1/10 of 1 percent. And
seniors have, in 2013, at least 23 choices in every plan area.
And so that record of success is not an accident. If you think
about how Part D works, the plans sit in the middle and the
plan sponsors, and they negotiate with the drug manufacturers
discounts on their drugs on the basis of a volume of business
they can deliver. And to do that, over here they go out and
offer different plans with different formularies, not to
confuse seniors but to attract more volume and get better deals
over here, and they develop these preferred pharmacy networks
with special provisions, again, by offering lower prices, they
get more volume, they get more ability to negotiate over here
with the drug manufacturers. That capacity to undertake these
negotiations is at the heart of the success of Part D. And for
Mr. Blum to suggest that by setting a saving standard--a
minimum saving standard, that you have to get in a preferred
pharmacy network, that is a direct intervention in the price
negotiation for those pharmacies, and to suggest that you offer
to someone you have never negotiated with exactly the same deal
you have given to somebody you have negotiated with, that is a
direct intervention of the negotiations. I believe that the
idea that this is not violating Congressional intent with the
noninterference clause is just transparently false. I mean I
was there at the birth of the Part D benefit, as were many in
this committee. This is just flatly inconsistent with what
Congress intended.
I am not a lawyer, so I don't know about the statutory
authority, but the lawyers I have consulted with say they don't
have the authority to do this. And for Mr. Blum to suggest that
it somehow strengthens the noninterference clause is just
Orwellian doublespeak, and I am deeply troubled by the fact
that they would do this.
The implications, I think, are very important. First, and
this is your self-interest, if they do this in Part D, they
don't need you anymore. Not this committee, not the full
committee, not the House, not the Senate, not the Congress.
They can do whatever they want with the Part D benefit, and I
believe that is an inappropriate power for an administration to
have. And it would also hurt the program as a whole because if
you are a plan sponsor, and you have an administration that has
the power to do whatever it wants without real consideration of
the consequences, you are either not going to participate or
you are going to charge a lot to participate, and that is going
to hurt the seniors, which, in the end, are the focal point of
the program.
So I believe those provisions are ones that certainly
cannot be rushed through in the next couple of weeks. It
shouldn't happen at all, and I would urge the committee to do
everything in their power to stop them.
The other features of the rule, there are many details in
here, but limiting the number of plans qualms the negotiations
that they can do with the drug manufacturers. As a result,
there is no real way that CMS can claim to be monitoring
savings in the program by looking at one half of this equation.
That is incomplete and incorrect, and any support for this rule
on that basis has to be questioned. They need to provide a lot
better support, as in the cost analysis that you mentioned. I
think that overall there have been some private estimates to
suggest the limiting in choice, the limiting competition is
going to raise plan bids by about 10 percent. That may not
directly translate into 10 percent higher premiums for
beneficiaries, but those 10 percent costs will go somewhere in
the system. That is bad news for taxpayers, bad news for
beneficiaries, or both, and we need to be concerned about that.
There is no question that I think this leads to higher
budget costs for a program that has consistently surprised on
the downside, and, you know, we have had a lot of discussion,
this is going to restrict some seniors' access to their doctors
and/or their particular pharmaceuticals, and those are steps in
the wrong direction from the point of view of the program.
I guess the last thing I would close with is there has been
a lot of discussion about seniors getting in the right plan. It
is not as if there is no other way to do that. This is a
terrible way to solve that problem. Mr. Blum runs a Web site
called Medicare.gov, with a plan finder. He might want to
devote his efforts to improving that.
Thank you.
[The prepared statement of Mr. Holtz-Eakin follows:]
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Mr. Pitts. Chair thanks the gentleman. Now recognizes Mr.
Schmid for 5 minutes for an opening statement.
STATEMENT OF CARL SCHMID
Mr. Schmid. Thank you. Good afternoon.
The AIDS Institute is pleased to offer our views on CMS'
proposed Medicare Part D rule. Since we believe aspects of the
proposed rule would erode a patient's ability to obtain the
medications that their providers prescribed, we are urging CMS
to scrap the proposal to change the 6 protected classes.
Frankly, just like many of you, we were rather surprised
the Obama administration would propose such a rule, given its
strong commitment to quality healthcare, including mental
health, and to others living with illnesses and diseases.
For people with HIV, and so many other patients, new drug
therapies have saved millions of lives, and prolonged millions
more. The advent of antiretroviral medications in the late
'90's turned HIV from a near certain death to a more manageable
disease if patients have access to quality care and
medications.
We know all medications are not the same, and each person
reacts differently to a particular drug. Doctors and patients
together make careful decisions about which therapies are most
appropriate on a case-by-case basis. Some individuals may
develop side effects to a particular drug, while another may
need a therapy to avoid a harmful interaction for a drug being
taken for another health condition. For people with HIV, drug
resistance can occur, requiring them the ability to switch to
another drug without interruption.
It is for these reasons, when Medicare Part D was first
implemented, CMS determined that a minimum of only 2 drugs in
the class, which is what the law requires, was simply not
enough for certain patients, including those with HIV, mental
illness, cancer, epilepsy, and those undergoing organ
transplantation. The 6 Protected Classes was created so that
patients could have access to all the drugs in these classes.
For the past 10 years, Medicare Part D has been working for
millions of seniors and people with disabilities, including
over 100,000 people a year with HIV. As part of the Affordable
Care Act, Congress even codified the 6 protected classes. We
see no reason why the protected classes should be changed, and
if they were, we would like to see more classes of drugs gain
protected status rather than reducing them, so that more
patients can gain access to the medications prescribed.
As I commented earlier, we were shocked when we read the
proposed rule. The Secretary used the authority granted to her
under the ACA to develop criteria to alter the 6 protected
classes, and, at the same time, proposed to eliminate 3 of
them. One would think if the administration was contemplating
any changes, their criteria for class review would be developed
first with adequate public comment before it was applied.
Instead, a very arbitrary criterion was developed in secret,
and then arbitrarily applied at the same time.
Thankfully, the proposed rule continues the protections for
antiretrovirals. That would not be the case for antidepressants
and immunosuppressants in 2015, and antipsychotics in 2016, if
the proposed law--proposed rule was finalized.
Frankly, we are worried. Who will be next? How much longer
will people with HIV, cancer and epilepsy have access to all
the medications they need through Medicare Part D?
Because it is estimated that about half the people living
with HIV experience mental illness or substance abuse, we are
concerned that people with HIV who rely on antidepressants and
antipsychotics will not be able to access their medications. We
are also concerned that people with Hepatitis, who we also
advocate for, who undergo liver transplants, will not be able
to access their immunosuppressants.
Medicare Part D, including the 6 protected classes, is
working. It is enabling the elderly and the disabled to access
the medications their providers prescribe, and at the same
time, saving and prolonging countless lives. We see no reason
to change the protected classes, and urge the administration to
withdraw this proposal.
We are encouraged by CMS statements this morning they are--
that they are sensitive to and are carefully listening to our
concerns. Hopefully, in the end, they will do the right thing
for patients.
Thank you.
[The prepared statement of Mr. Schmid follows:]
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Mr. Pitts. Chair thanks the gentleman. Now recognize Mr.
Baker for 5 minutes for an opening statement.
STATEMENT OF JOE BAKER
Mr. Baker. Thank you, Chairman Pitts, and Ranking Member
Pallone, for the opportunity to testify today on the proposed
rule for Medicare Advantage and Part D prescription drug plans.
Excuse me. As you know, the Medicare Rights Center is the
national nonprofit that works to ensure access to people with
Medicare, both older adults and people with disabilities. We
answer over 15,000 questions each year from beneficiaries,
family, caregivers and professionals, and our Online resources
receive more than 1 million visits annually.
I want to stress 3 key points today. First, we believe that
each one of the proposed policies reflected in this rule should
be evaluated on its own merits, as opposed to supporting or
redirecting the entire rule as a whole. We note that the
comment period, as has been said, for the rule is still open,
and all interested parties should submit comments and give CMS
a chance to modify the rule based upon those comments.
In this spirit, I would like to talk about a couple of
provisions that we strongly support, and others that we do
oppose.
Second, I think the rule reflects CMS' belief that
increased oversight and monitoring is required to ensure that
Medicare Advantage and Part D plans are adequately serving
people with Medicare. We wholeheartedly agree with this
determination. In particular, we strongly support CMS' proposal
to ensure meaningful differences among Part D plans by further
consolidating plan options. On our helpline, we observed that
older adults and people with disabilities find choosing among a
large number of Part D plans to be a dizzying experience. Most
people with Medicare fail to re-evaluate their coverage options
on an annual basis. According to one analysis from 2006 to
2010, only 13 percent of beneficiaries switch prescription drug
plans during each annual enrollment period, despite changes in
premiums, cost sharing and coverage.
So ensuring that there are real meaningful differences
between offerings from the same plan sponsor reduces confusion
and helps people better comparison shop.
Further related to Part D, CMS acknowledges that Medicare
Advantage plans with prescription drug coverage are not
adequately coordinating beneficiary care with respect to drug
denials. When a Part D drug is denied because it should be
covered by Part A or B of the plan, CMS finds that some plans
are not adequately informing beneficiaries that their drugs
should be covered. This indicates that some plans are not
living up to their promise to coordinate care efficiently for
their members. To fix this, CMS appropriately suggests new
requirements for plans to facilitate access to these medicines.
Throughout the proposed rule, CMS demonstrates a commitment
to enhancing transparency. For instance, increased transparency
is at the heart of proposals concerning drug pricing fairness,
and accuracy with respect to preferred pharmacy. CMS also aims
to make information about annual changes to Medicare Advantage
and Part D plans more transparent throughout proposals to
strengthen beneficiary notices ahead of and during the annual
enrollment period. We support these proposals.
Finally, CMS aims to increase oversight and monitoring of
prescribing providers to address problems with Medicaid--
medication diversion and abusive practices. We appreciate the
rule's aim and that it avoids placing burdensome restriction on
beneficiary access to needed medicines, but we would like to
see additional beneficiary protections in any new system.
Third, we are deeply concerned about CMS' proposed policy
to scale-back the protected classes. Specifically, CMS argues
that existing beneficiary protections, including the Part D
appeals process, will preserve access for beneficiaries if open
formulary access is relaxed for antidepressants, antipsychotics
and immunosuppressants. Based on our experience counseling
Medicare beneficiary, we believe these protections are
insufficient, especially the Part D appeals process. Echoing
our experience, the 2011 data released by CMS finds that over
half of plan-level denials are overturned by the independent
review entity; the first time an entity other than the plan
reviews the appeal. This alarming rate of reversal raises
serious questions about how well the appeals process is
working, and demands greater transparencies. We urge members of
Congress to request that CMS make plan-level appeals data
accessible so that targets for improvement can be identified.
In addition, Congress should encourage CMS to improve the Part
D appeals process, first and foremost by allowing a beneficiary
to receive a formal denial from the Part D plan at the pharmacy
counter, as opposed to expecting beneficiaries and their
doctors to submit a formal request to the plan for the denial
before the appeals process can begin.
Finally, we do believe that pricing is an issue, and CMS is
trying to get at that through this proposal. We believe that
Congress should restore Medicare drug rebates for beneficiaries
that are dually eligible for both Medicare and Medicaid, which
would save taxpayers over $140 billion over 10 years.
Thank you for this opportunity to testify.
[The prepared statement of Mr. Baker follows:]
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Mr. Pitts. Chair thanks the gentleman. And we will now go
to questioning. I will recognize myself 5 minutes for that
purpose.
Dr. Holtz-Eakin, in a recent final regulation issued in
April 2011, CMS reiterated the noninterference clause's
application to Part D, sponsor pharmacy negotiations, in its
response to a comment, ``As provided in Section 1860D-11(i) of
the Act, we are prohibited from interfering with negotiation
between Part D plans and pharmacies.''
Dr. Holtz-Eakin, you were at CBO during the time that the
Part D Program was operating. How did CBO interpret the
noninterference clause that Congress passed in 2003?
Mr. Holtz-Eakin. Well, we were asked on numerous occasions
what would happen if the noninterference clause were to be
deleted from the law, and indeed shortly after its passage,
this is a letter from January 23, 2004, we wrote a letter to
then-Majority Leader Frist, which said that striking the
provision would affect negotiations between drug manufacturers
and pharmacies and sponsors of prescription drug plans. So
there is no question that it covered the pharmacies, and there
is no question that the kind of action that CMS is proposing in
this rule is at odds with the intent of Congress.
Mr. Pitts. In the proposed regulation, CMS has
reinterpreted the noninterference clause, clearly outlined in
Federal law, such that, in my opinion, the proposed regulation
actually contradicts the meaning of the statute.
If CMS can effectively change the meaning of settled
Federal law via regulation, then we must ask ourselves what are
the outrebounds of the abuse of that authority.
Dr. Holtz-Eakin, could CMS require pharmacies or
manufacturers to give them records access?
Mr. Holtz-Eakin. Certainly, they could, and I don't know
what the outrebounds are, Mr. Chairman. I am not certainly a
lawyer by training, but, you know, the clear intent was to not
do what is proposed in this rule, and if they are to go forward
with this and not see it struck down by the courts, which I
think it very well would be, then there is nothing they can't
do to the Part----
Mr. Pitts. Could----
Mr. Holtz-Eakin [continuing]. Part D----
Mr. Pitts. Could CMS set volume caps on prescriptions
under Part D?
Mr. Holtz-Eakin. They certainly could.
Mr. Pitts. Could CMS require participating pharmacies
maintain stockpiles of certain drugs?
Mr. Holtz-Eakin. Yes, they could.
Mr. Pitts. The Office of the Actuary at CMS produced an
analysis of the estimated budgetary impact of the proposed
rule, yet they acknowledged in conversations with committee
staff that not all elements of the proposed rule had been
scorned.
Well, Milliman actually did a complete cost analysis by
surveying drug plan sponsors and PBM's to evaluate the
anticipated effect of the rule on the Part D Program, and found
it would cost billions of dollars. Do you believe that the
American public deserves a full cost accounting from CMS on
this issue?
Mr. Holtz-Eakin. I do. I believe this rule is so sweeping
as to essentially constitute new law, that Congress ask for a
budgetary analysis from the CBO before it enacts new law, I
think the same thing should be done in this case.
Mr. Pitts. CMS rule proposes that prescription drug plans
are limited to offering only 1 standard benefit, and 1 enhanced
benefit plan per region, is that correct?
Mr. Holtz-Eakin. That is correct.
Mr. Pitts. So let me ask this, if 2 of my constituents are
enrolled in 2 different enhanced benefit plans offered by the
same PDP, 1 of those 2 seniors will lose their current
prescription drug plan under the proposed rule, isn't that
correct?
Mr. Holtz-Eakin. That is correct, and in my written
testimony, we have an estimate of the number of seniors who
would be affected in each State.
Mr. Pitts. Well, I don't think CMS should be outlawing
seniors' current prescription drug plans by placing arbitrary
caps on the number of plans that can be offered. CMS should not
be taking away the prescription drug plans that seniors rely on
today, do you agree?
Mr. Holtz-Eakin. I agree with the principle that seniors
should be able to choose, that choice is an important part of
our society.
I want to emphasize one of the things I said in my opening.
You can't look at that in isolation. The ability to have more
plans, gets you more volume and lowers the cost of the program
as a whole. And I think the CMS analysis is fundamentally
flawed by ignoring that.
Mr. Pitts. All right, thank you. Chair recognizes the
ranking member, Mr. Pallone, 5 minutes for questions.
Mr. Pallone. Thank you, Mr. Chairman.
I wanted to ask Mr. Baker, when Part D was enacted into
law, many of us were skeptical the program would work. In fact,
we were opposed to turning Medicare over solely to private
insurance companies because of concerns with gaming and the
ability to fully protect beneficiaries in these plans that may
be more interested in corporate profits than patient wellbeing.
Nevertheless, once Part D became the law, Democrats put
aside their reservations and have worked hard to ensure that
patients get the best deal possible under the law. And I would
contrast this with the way the Republicans have behaved since
the enactment of the Affordable Care Act, actively trying to
undermine implementation of the law and keep consumers from
getting access to important program benefits. However, the
Affordable Care Act made a number of improvements to Part D,
most importantly, it filled in the doughnut hole, and the ACA
also made a number of changes to the Medicare Advantage
Program, ensuring that consumers and taxpayers get good value
for their dollars.
So, Mr. Baker, could you talk briefly about the way the
Affordable Care Act has improved Part D and Medicare Advantage
for beneficiaries?
Mr. Baker. Well, once again, you are absolutely right. The
closure of the doughnut hole has been a great boom to people
with Medicare Part D coverage, and we hear about that on our
helpline. As well, with regard to the changes in the Medicare
Advantage Program that have been implemented through the
Affordable Care Act, I note the wellness visit that is now
covered, preventive care that is now covered, the prohibition
about charging higher coinsurance or copayment amounts for
care, like skilled nursing facility care or chemotherapy care.
This makes sure that there is no gaming amongst the plans, in
trying to provide disincentives for folks with, for example,
cancer--a history of cancer from joining certain plans, from
consolidating offerings, once again, as Mr. Blum referred to,
in Part D, but also in the Medicare Advantage Program, there
has been a constant effort by CMS under the Affordable Care Act
to make sure the plans have meaningful differences. And so that
has helped consumers understand the program better and use the
program better, I think. And finally, the out-of-pocket cap
that CMS has implemented in the Medicare Advantage Program has
provided seniors with, I think, great security in knowing that,
yes, they have copayments amount but their--copayments amount
in Medicare Advantage plans, but they will be capped at a
certain amount out-of-pocket, and I think that has done a lot
to make the program more attractive to seniors. They flock to
Medigap Programs in the context of original Medicare because
they see a lot of financial security there for that first
dollar of coverage. I think many now see the out-of-pocket
maximum to Medicare Advantage as a similar financial security
measuring, and so that has made the program more attractive.
Mr. Pallone. I know that you expressed significant concern
with the section of the rule related to categories or classes
of drugs of clinical concern and which identify classes of
drugs require Part D plans to include all or substantially all
covered drugs on their formularies. And you are aware, CMS has
indicated that these protected classes of drugs were not
necessarily meant to be permanently protected, recognizing now
on the one hand in many instances as generics become available,
broadly mandating that every drug be available may not make
sense, but on the other hand, new classes of drugs may need to
be deemed protected to ensure patient access. And as such, the
Secretary was directed to establish criteria by which
identified classes, including new classes of drugs for
inclusion under the protected status.
If you could--I know you are concerned about the Part D
appeals process. Can you just basically describe some of the
problems that you see with the current appeals process, and
why, if the appeals process is not fixed, the protected classes
proposal would be especially problematic for patients?
Mr. Baker. Yes, I would be happy to. You know, first off,
this issue that I mentioned earlier about when folks go to the
pharmacy counter, they get a denial, and in effect, they are
told their drug is not going to be covered and be dispensed to
them, but that is not an ``actual denial'' by the plan. It is
not a coverage determination. They then need to either go home
or otherwise call or email or somehow contact the plan to
actually get a coverage determination and denial, and this can
take a lot of time, it can take a lot of calls. So we are
really calling for that denial at the plan counter to be the
denial or coverage determination that does help them initiate
and allow them to initiate an appeal. So that is one issue
there.
There are also then 2--at least 2 levels of redetermination
that the plan has in addition to that denial at the pharmacy
counter. We believe that could be slimmed to get to the
independent review entity sooner. I think also we are also
concerned generally that there is not a lot of data about how
plans internally are dealing with appeals, and we think that
information, some of it could be publicly available, and could
help consumer gage whether or not plans are doing a good job by
those who have problems with the plans' determinations.
Mr. Pallone. All right, thanks a lot.
Mr. Pitts. Chair now recognizes the vice chairman of the
committee, Dr. Burgess, 5 minutes for questions.
Mr. Burgess. And I thank the chairman.
I would offer for those limited comparisons between ACA and
the Medicare Modernization Act from 10 years ago. There are
some significant differences, of course. The Medicare
Modernization Act was not the coercive, broad, overreaching
legislation that the ACA was. There was difference in scope and
size, and thus, the implementation, while there may be
similarities, there are also vast differences.
Mr. Schmid, just like you, to say I was blindsided by this
rule would be an understatement. I thought things were working
reasonably well. I don't understand the discussion, why we are
even having the discussion about dispensing with any of the 6
protected classes. And Dr. McClellan came here and very
patiently, in 2005 and 2006, very patiently went through what
the reasons were for developing those classes. I think you
heard Dr. Murphy talk about the--on the psychiatric side. I
have discussed on the immunosuppressant side. You have very
eloquently discussed on the--with the antiretroviral drugs, why
these are important to have these as protected classes. And I
really cannot--and I don't--I did not hear from Mr. Blum why
there was a reason for doing this, so I agree with you. I am
completely blindsided by the rule.
Dr. Holtz-Eakin, I mean, Chairman Pitts asked you this to
some degree already, but let me just ask you again: What--in
your opinion, what was the original intent of the
noninterference clause?
Mr. Holtz-Eakin. Its intent was to make sure that, on both
sides of the negotiations, that plans had the unfettered
ability to negotiate aggressively with drug manufacturers, and
to structure their plans and their pharmacy networks to attract
the volume necessary to get good deals with the manufacturers.
And the idea was to keep the Congress and the administration
out of those negotiations.
Mr. Burgess. So if we are doing away with the
noninterference clause, perhaps we are instituting an
interference clause. Would that be a logical assumption?
Mr. Holtz-Eakin. I view this as direct interference in
negotiations. I don't see any other way to read it. If I
negotiate with you, and then turn around and CMS orders me to
give him the same deal, that is a pretty clear interference. I
don't understand that.
Mr. Burgess. Well, of course, Congress loves to interfere,
so that will give us an opening.
Mr. Holtz-Eakin. I would encourage you to restrict those
impulses please.
Mr. Burgess. Well, that is, of course, why we are having
this discussion, but it would--I mean that interference--then
if we label that the interference clause, the interference
clause is going to have an effect on the direct cost to
beneficiaries, is it not?
Mr. Holtz-Eakin. It is. I mean the core costs are the
pharmaceuticals, and the deal that can be cut with the
manufacturers is at the heart of the cost of the program.
Things that impair the ability of plans to cut good deals are
going to raise the cost to everybody; beneficiaries, taxpayers,
it is going to show up somewhere.
Mr. Burgess. And I was going to make that point. It is not
just the beneficiaries, obviously, the person who is ultimately
paying the bill, which is the United States taxpayer, or our
generations to follow, since some of it is not paid for
immediately, they will all be affected by the institution of an
interference clause where none existed before. Is that a
correct statement?
Mr. Holtz-Eakin. That is correct.
Mr. Burgess. So the proposed CMS rule suggests that, for a
competitive market to function, that they, Centers for Medicare
& Medicaid Services, have a duty to ensure that there is a
competitive market, and encourage elements to promote
competition. So maybe as a professor in economics, you can tell
us how this interference would promote competition.
Mr. Holtz-Eakin. I don't think it is pro-competitive. If
you take, for example...
Mr. Burgess. Well, but between members of Congress,
wouldn't it?
Mr. Holtz-Eakin. Well, just for a second. Just a narrow
provision, you know, the idea that any pharmacy should be able
to provide at the terms negotiated between and plan and its
preferred pharmacy network, there is already competition.
Anyone can right now go to any pharmacy and get their
prescription filled. They may not get the terms from the
preferred network but they can go. That forces those who are
not in the network to compete on nonpriced grounds; service,
variety of things in the store, whatever it may be. That is how
economics works. For them to step in and interfere undercuts
that competition.
Mr. Burgess. And I, again, don't mean to interrupt you,
but the time will draw short.
And that competition is what gave us the $4 prescription at
Wal-Mart, and then other chains followed suit with that. Those
are indirect effects of the Medicare Part D law that oftentimes
no one discusses. So----
Mr. Holtz-Eakin. Yes, I think that is one of the reasons
it came in under budget cost. I mean, we thought the
competitive incentives were quite strong with CVL, we did, but
a couple of things happened that we didn't anticipate. One is
we never had any trouble getting sponsors to enter. There was a
fear of having to have government fallback plans, those were
priced in there. None of that ever happened, however
competitive incentives. And the second was the network size,
the pharmacy and the savings in the pharmacies were bigger than
we expected.
Mr. Burgess. And just as a consequence to that, I mean and
Mr. Blum testified to the fact that costs came in lower, he
thought because of generic prescribing. I will tell you that I
think that generic prescribed existed because of the so-called
coverage gap, or doughnut hole. Now that we have done away with
that, or we will do away with that in future years, what is
going to happen to that driver that kept costs low?
Mr. Holtz-Eakin. Well, and I know you are over, but
briefly, I don't think his reading of the record is correct.
The biggest difference between the projections and reality was
lower enrollment. Fewer bodies are cheaper, and that is the top
thing, not generics. Generics are in there, but there was a lot
of generic substitution anticipated because a lot of the
patented pharmaceuticals were going to go off patent over the
first 10 years. We knew that so that was priced in at the
outset, so it is not really a surprise in the data.
Mr. Burgess. Very good.
Thank you, Mr. Chairman. I will yield back.
Mr. Pitts. The Chair thanks the gentleman. Now recognize
the gentleman from Texas, Mr. Green, 5 minutes for questions.
Mr. Green. Thank you, Mr. Chairman.
Mr. Baker, you have heard from Mr. Holtz-Eakin's testimony
certain estimates suggest that a large number of beneficiaries
would lose their current plan due to CMS' proposal to level the
playing field for pharmacies wishing to offer preferred cost
sharing under a plan's preferred network. To me, this doesn't
sound right. Expanding the availability of pharmacies can often
reduce cost sharing as long as they can meet negotiated price,
only seems to expand access to other places. And it is
reasonable to expect that allowing any pharmacy to match the
competitive prices offered by preferred pharmacies would result
in more competition and better access to lower-priced drugs for
seniors. It also would seem to help beneficiaries who prefer to
retain trusted relationships with community providers at their
local pharmacy, as well as beneficiaries who do not have nearby
access to a big box retailer.
And my question, Mr. Baker, can you confirm this line of
reasoning? Has it been your experience that all beneficiaries
can currently access preferred networks and preferred pricing,
or are some of them left out in the cold?
Mr. Baker. It is our experience that some--in our written
testimony, our longer, written testimony, we do talk about a
woman in Maryland who did not, you know, lost access to her
local pharmacy because they were not able to provide the
preferred pricing that she could get at another pharmacy where
she had not had a 40-year relationship with that pharmacy. So
we do believe that opening up, just as we have any willing
provider in the general networks in the Part D plans opening
up, that any willing provider in preferred networks will expand
options and access for consumers, and we certainly are
supportive of that proposal.
Mr. Green. So you agree with helping beneficiaries get
access to more pharmacies that provide reduced cost is good for
those patients?
Mr. Baker. Yes, I do.
Mr. Green. OK. It seems that pharmacies who have contracts
today really don't want to compete with community pharmacies
who are prohibited now. Would you comment on this? Wouldn't
allowing participating of any pharmacy who can meet the plan's
terms and prices actually help competition and improve access
for patients?
Mr. Baker. I think that, you know, certainly, as Mr.
Holtz-Eakin was saying, there are other components on which
pharmacies can compete at such a service, et cetera, what is in
the front of the house, as it were, and not at the pharmacy
counter, but we do believe expanding access by allowing
community pharmacies and others to be able to match preferred
prices will spur further competition, and certainly increase
access and decrease cost for consumers, and hopefully for the
program itself.
Mr. Green. Well, I would have--I think I remember, because
I was on the committee when we did this in '03, it was a very
long markup, same with the Affordable Care Act, and I think
there was an amendment to this effect that was part of that,
and I am trying to--I will go back and look at the records, but
I understand that, you know, when we deliver healthcare for
doctors, you know, the office visit is basically the same, you
know, if you go have a certain procedure, it is basically the
same. And, now, granted, we do have preferred providers on
certain things, but that is not--that is through an insurance
policy, not necessarily through Medicare, but--so anyway.
I want to yield back to--yield my time to the ranking
member.
Mr. Pallone. Thank you. Mr. Baker, I wanted to ask, I
didn't get a chance, that while you have concerns with the
Protected Classes Policy, you still do believe that many of the
other provisions in the rule that protect patients should go
forward, is that correct?
Mr. Baker. Yes, we do.
Mr. Pallone. All right, thank you. I yield back.
Mr. Pitts. The Chair thanks the gentleman. Now recognizes
the gentlelady from North Carolina, Mrs. Ellmers, 5 minutes for
questions.
Mrs. Ellmers. Thank you, Mr. Chairman, and thank you to
our panel.
Dr. Holtz-Eakin, I have a question for you that is North
Carolina-specific. I am very concerned with the number. I think
with--this proposed rule has a potential of affecting over half
a million of my seniors. Do you know how many of those
healthcare plans, I mean in your numbers and in your research,
do you know how many plans will be eliminated as a result of
this in North Carolina?
Mr. Holtz-Eakin. We have an estimate that we would be
happy to get to you. When we----
Mrs. Ellmers. OK.
Mr. Holtz-Eakin [continuing]. Did our analysis, we found
out the number of beneficiaries in North Carolina----
Mrs. Ellmers. Um-hum.
Mr. Holtz-Eakin [continuing]. We then looked at the plans
in North Carolina, especially the large plans, we could
identify those that had preferred pharmacy networks that would
be eliminated----
Mrs. Ellmers. Um-hum.
Mr. Holtz-Eakin [continuing]. Or other plans that would be
eliminated, and we can get that to you.
Mrs. Ellmers. Great, thank you. I would appreciate that.
You know, there was a Milliman study done, a survey analysis in
January 2014, CMS Medicare Part D proposed rule, found that
approximately 12.9 million Medicare Part D beneficiaries
currently enrolled in preferred pharmacy PDPs may experience
material premiums and cost-sharing increases in 2015 as a
result, on average, because of the proposed rule.
Do you think this is right, is it 12.9 million seniors will
be affected this way? What are your thoughts on that?
Mr. Holtz-Eakin. It doesn't surprise me. I don't know if
the precise estimates----
Mrs. Ellmers. Um-hum.
Mr. Holtz-Eakin [continuing]. The right one, but if you
change the terms the way the rule proposes, there is not really
anything known as a preferred pharmacy anymore.
Mrs. Ellmers. Yes.
Mr. Holtz-Eakin. So a plan can't go to pharmacy----
Mrs. Ellmers. Pretty much just goes to--yes.
Mr. Holtz-Eakin. Right, and so they can't cut as good a
deal, the----
Mrs. Ellmers. Um-hum-
Mr. Holtz-Eakin [continuing]. Cost sharing will go away
and the prices--the net price to consumers will go up.
Mrs. Ellmers. Which is exactly what I am hearing today as
we are doing this subcommittee hearing, is there are 2 trains
of thought that somehow we are going to be saving money----
Mr. Holtz-Eakin. Right.
Mrs. Ellmers [continuing]. And yet it is contradicting
each other, that by doing this we are actually going to be
saving money, and yet we keep seeing that it is actually not
going to be the case.
Mr. Holtz-Eakin. Right. I would just say that the
committee, I mean this issue has these 2 sides, which is you
want to be able to take terms of a contract to another pharmacy
if you can----
Mrs. Ellmers. Um-hum.
Mr. Holtz-Eakin [continuing]. Wouldn't that be great, but
can you cut a deal with as good of terms and----
Mrs. Ellmers. Um-hum.
Mr. Holtz-Eakin [continuing]. How does that balance out.
There has been a lot of work done by the Federal Trade
Commission whose sole mandate is to identify pro-consumer
aspects of the competition, and they have found these preferred
networks are very effective in helping beneficiaries and
consumers. And I think the committee should look at that, and I
think CMS should look at that one.
Mrs. Ellmers. Um-hum. Um-hum. Thank you. Mr. Schmid, you
know, in my years as a nurse, certainly, one of those groups of
patients that I have had the honor of taking care of and come
to know, and their families I have come to know, are our HIV
and AIDS patients. So first of all, I just want to thank you
for all of the work that the institution is doing, because you
are a vital, vital voice in how much treatment has advanced for
our AIDS patients.
And I just want to ask your opinion. With the provisions
that are being put forward in this proposed rule, is this not
going to have a negative effect on our Medicare Part D patients
who especially are receiving AIDS treatment?
Mr. Schmid. Yes, well, right now they are not proposing to
eliminate access to antiretrovirals, but as I mentioned in our
testimony, we are just concerned we could be next. And the
criteria that they came up with, it was very arbitrary, the 7
days initiate----
Mrs. Ellmers. Um-hum.
Mr. Schmid [continuing]. Medication that will result in
hospitalization or disability for----
Mrs. Ellmers. Um-hum.
Mr. Schmid [continuing]. A typical patient. They are not
looking at a Medicare patient. Yes, we are very concerned and--
for the future and the harm that it could have to patients.
Mrs. Ellmers. Um-hum.
Mr. Schmid. But most immediately, it would have harm to
those who need immunosuppressants and antidepressants, and in
the future, antipsychotics. And as I said in my testimony, a
lot of people with HIV also have mental health issues.
Mrs. Ellmers. Yes.
Mr. Schmid. And so, you know, around 50 percent. So we are
very concerned about access for medications for them. And then
our organizations also advocates for people with Hepatitis----
Mrs. Ellmers. Um-hum.
Mr. Schmid [continuing]. Who undergo----
Mrs. Ellmers. Um-hum.
Mr. Schmid [continuing]. Liver transplants, and they need
immunosuppressants as well.
Mrs. Ellmers. Immunosuppressants, absolutely. Thank you.
And, Mr. Baker, I just have a quick question for you. The
proposed rule change, CMS actually pointed out that, in this
discussion that has already gone forward, and hopefully we are
going to be able to have enough time for a future discussion,
although I think that that time is falling short. The
safeguards that are in place, do you feel that these patients
are being safeguarded enough? And, as we have discussed, the
idea that we are actually saving money--some of CMS' own
findings are showing that this is not the case. What do you say
to that? And I will just make one point that CMS put forward
April 2013. It basically pointed out, it said negotiated
prices--pricing for the top 25 brands and 25 generics in Part D
Program at a preferred retail pharmacy is lower than a
nonpreferred network pharmacy.
How do you justify the position that we are actually going
to be saving money when we are already doing that, but by
making this proposed rule change, that we will end up saving
more money?
Mr. Baker. I think there are projections and--on both
sides of the ledger, as it were, from various actuaries. I
mean, we certainly think that, given the track record that Part
D has had thus far, and the stewardship that CMS has been
engaged in, that the proposal will lead to lower costs not only
for consumers but also for the program itself. And so I think--
and that is because of the--any willing provider that has been
in the pharmacy network overall, we are thinking that same will
happen in the preferred network.
Mrs. Ellmers. Um-hum. So we are projecting that, but we
aren't seeing those results though.
Mr. Baker. Well, there is a lot of----
Mrs. Ellmers. Thank you. And I apologize, Mr. Chairman. I
have gone over my time.
Mr. Pitts. Chair thanks the gentlelady. And now recognizes
the gentleman from Maryland, Mr. Sarbanes, 5 minutes for
questions.
Mr. Sarbanes. Thank you, Mr. Chairman. Thank the panel.
I wanted to talk first about the consolidation idea which I
think is a good one. I know the premise of Dr. Holtz-Eakin's
perspective is that if you reduce the number of options that
are available, that undermines competition, that ends up being
a problem in terms of better prices for the program, and a
better set of offerings for the beneficiary and so forth, but
in order for there to be a competitive environment, the people
making the choices have to feel that they can choose 1 over the
other. And my understanding, Mr. Baker, is that the evidence
suggests that when seniors have that opportunity to make a
change, they are so typically overwhelmed by the number of
options that are available, that they just choose to stick with
the plan they have. And the competition that you want to
encourage among the providers, among the plans, is both with
respect to any new beneficiaries that are coming in, but also
more so with the existing pool because that is the bigger part
of the opportunity.
So if, as a practical matter, seniors are coming and
saying, well, I am in this plan, and yes, I can go choose a
different one, but I am not going to sit here and go through
all of these different offerings, then the market is not really
working. I mean the assumptions that your perspective are based
on don't hold. And so if you reduce and consolidate this
dizzying array of options that are available, you may actually
get more people choosing something different, which will send a
signal to the plans that are offering these opportunities that
they have to compete more robustly.
Now, moving to the issue of the preferred pharmacy
providers and so forth. I think it is outrageous that there--
you have independent community pharmacists that are essentially
being locked out of the opportunity to participate in a
preferred pharmacy network, even when they are willing to
accept the same terms. In a way that is happening, and I had
the benefit of pharmacists in my district in Halethorpe, which
I represent, a fellow named George Garmer who actually came and
sat with me and kind of took me through his experience, and it
may even be that the Maryland woman you are talking about was
one of his customers, because it sounds very much the same, but
she really couldn't stick with his pharmacy because the way the
copayments were being differentiated between those who were
able to be in the preferred pharmacy network and his situation
meant that she was going to pay another $300 a year if she
wanted to continue to go to the pharmacy that she had been
going to for 40 years, and where she had a relationship.
So getting to this issue of the market and how it works,
there is the theory and there is the practice. And I notice
that in your testimony, you made the statement, Mr. Baker, that
with this kind of pharmacy provider network manipulation, plans
distort market behavior by lowering beneficiary cost sharing
where the full cost of the drug is the same or higher than it
would be at nonpreferred pharmacy. And this is important.
Instead of harnessing the power of consumer choice to lower
costs overall by aligning lower cost sharing with lower total
costs, the plans divide the interests of individual
beneficiaries on the one hand, and the Medicare Program on the
other, in order to increase the profits of related entity mail-
order pharmacies. That is not the way it should work, and I
just want to give you another opportunity because I feel pretty
passionately about this, just based on this particular
constituent who came and brought it to my attention, if you
could speak again as to why this is a distortion of the market
that we are supposedly trying to encourage here.
Mr. Baker. Right. I think the distortion is exactly as you
said, and that is that these lower cost sharing for
beneficiaries into these preferred networks is not matched by,
in many instances, in some instances by actual lower prices for
the program. And so you are, you know, steering, if you will,
beneficiaries to higher cost pharmacies that are either chain
pharmacies or pharmacies that are wholly or partially owned by
the plans themselves. And plans are reaping and pharmacies are
reaping profits from that.
We really think that the interests of the program and
beneficiaries should be aligned, not only for lower prices, but
also because beneficiaries care about the sustainability of the
Medicare Program and of this benefit, and to the extent that
there can be that win-win, and also at the same time allowing
community pharmacists into the equation to provide the services
that they have been providing, you have more access at lower
prices.
Mr. Sarbanes. My time is up, but I will just note that if
you have more transparency, it will promote better alignment, I
think----
Mr. Baker. Yes.
Mr. Sarbanes [continuing]. By definition. Thank you.
Mr. Pitts. Chair thanks the gentleman. Now recognizes the
gentleman from Virginia, Mr. Griffith, 5 minutes for questions.
Mr. Griffith. Thank you, Mr. Chairman. And, Mr. Chairman,
I appreciate you having this hearing, and this is one of those
hearings where it has put me into a dilemma of sorts because I
have great concerns that CMS doesn't have the authority to do a
lot of things that they are doing in this rule-making process,
and I noted with interest Dr. Gingrey earlier brought up the
report from the CRS, and one of the things that he didn't
mention is that what they are attempting to do is to take the
legislative language and shift an ``and'' to an ``or,'' and
that causes me as an attorney who believes that the agencies
ought to do what the law says, and if there is a problem come
back to us, that they ought not be changing the law
unilaterally, and that they ought to be exercising the
constitutional prerogative of bringing their suggestions and
their recommendations to the United States Congress.
So on that side, I agree with many of the comments of my
colleagues on this side of the aisle. On the other side, I
represent a fairly rural district, and while it may be lowering
the price somewhat to have the preferred network, if the
preferred network, the chain pharmacy, is located 20 miles away
and around the other side of the mountain, I have people who
aren't being adequately served by this program.
And so, gentlemen, I ask you, how do we solve that problem?
How do we solve the problem where we may be getting the price
down, but we are making it very, very difficult for my
constituents to get to see the pharmacist who is prescribing
their drug, and who--and, you know, in these rural areas,
particularly a rural, mountainous area where they may not have
but one pharmacy, and if that pharmacy is not in that
particular town, part of this preferred network, and they have
to go to the next town over, it may be a good distance. And
particularly when most of these folks may not really like
getting out driving, particularly, as we have had this winter,
a fair amount of snow. How do you solve that problem? And I
don't mind putting a bill in if that is what you think we need
to do, but I do think that, Dr. Holtz-Eakin, it may impact the
pricing somewhat, but there is a big difference between walking
down the block in New York City and getting from Haysi to
Clintwood.
Mr. Holtz-Eakin. I agree with that completely, and I am
not familiar with your district so I won't pretend too much
knowledge, but we won't have to solve all problems with the
same provisions. And the overall goal of this should be to get
prescription drug coverage at as low cost possible for
beneficiaries. I mean that is a key feature of the design.
Now, which vender delivers that, I don't think we should
have a stake in. Perhaps mail-order is better for some of your
folks as opposed to traveling at all. Have it delivered to
their home. We need to make sure that we have a system that
allows the negotiations to be as intense as possible with the
manufacturers to get prices down, and then use a variety of
delivery mechanisms to get them to seniors. And I think that
should be the overall objective. No question.
We should trust the seniors to figure it out.
Mr. Griffith. Well, of course the problem, in all
fairness, with mail-order is if you have questions or if you
have had a little rash that might have been caused by that,
your pharmacist is in a far better position than your UPS or
mail deliverer to----
Mr. Holtz-Eakin. OK.
Mr. Griffith [continuing]. Explain to you that, well, that
is actually one of the side effects buried way down in the
notes I have here.
Mr. Holtz-Eakin. I would concur, and I----
Mr. Griffith. And so that is another problem that I have.
Mr. Holtz-Eakin [continuing]. Almost never have a--
discussion. But I guess the second thing I would say is not all
competition is on prices. We do want low prices, but there are
many services associated, you know, advice about prescriptions,
people are worried about seniors being in the right plan, well,
we trust people to make choices right up to the age of 64 on
the exchanges, and 65 suddenly they are incapable? I think they
can probably figure it out, but if they can't, they can talk to
their pharmacist, am I in the right plan, this what I typically
have. You know, there are some other aspects----
Mr. Griffith. I am running out of time.
Mr. Holtz-Eakin [continuing]. That could be----
Mr. Griffith. I do want to give Mr. Baker an opportunity
to resolve the dilemma, and you may want to touch on how the
CMS has the legal authority to go forward with what they are
doing, even though I agree with you on the any willing provider
portions.
Mr. Baker. I think that 2 things. One is that, certainly,
there is a balancing here, and the example that we have in our
testimony was a $300 difference. So I mean I don't think the
service component allows that person to afford the $300 at the
local community pharmacy. So I think, once again, the any
willing provider is, I think, a moderate solution. I mean, I
think for 2 reasons I am the wrong person to ask about the
interference piece, one, because I am not--I am a lawyer but I
am not, I don't think, qualified to do this constitutional
interpretation, and----
Mr. Griffith. But you do agree there is a difference
between and and or.
Mr. Baker. I would agree----
Mr. Griffith. As a lawyer, you know there is.
Mr. Baker [continuing]. With that.
Mr. Griffith. Yes.
Mr. Baker. I will agree with that.
Mr. Griffith. Yes. Absolutely. And so that is my concern.
And I hate to cut you off because I am running out of time.
Mr. Baker. Sure.
Mr. Griffith. I have other concerns about both the rule
and the fact that maybe it is time for us to take a look at
some of the things that may be working to a disadvantage. I
have another letter here from one of my pharmacists who is in a
specialized area, and they can't even figure out what they are
going to get paid until after they have already provided the
drug because of the way the system is set up, but that--I will
have to deal with that another time because my time is out.
I do appreciate it. I have been--this hearing--totally, Mr.
Chairman, I have been educated even more on this subject
matter, and do appreciate it, and that is why we have these
discussions and it is good to have.
Thank you, sir, and I yield back.
Mr. Pitts. Chair thanks the gentleman, and we will provide
questions to you, if you will please respond in writing
promptly.
I remind members that they have 10 business days to submit
questions for the record. And I ask witnesses to respond
promptly. And members should submit their questions by the
close of business on Wednesday, March 12.
Dr. Burgess, you have a unanimous consent request?
Mr. Burgess. Yes, Mr. Chairman. I have an opinion piece
from June of 2012 that almost prophetically foretold the
problems that would be visited upon the Part D Program by the
Affordable Care Act, and I would like to submit that for the
record. It was a very insightful piece that was written.
Mr. Pitts. Without objection, so ordered.
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Mr. Pitts. This has been a very informative hearing, very
important issue. Thank you very much for your----
Voice. Thank you.
Mr. Pitts [continuing]. Patience.
Without objection, the subcommittee is adjourned.
[Whereupon, at 1:24 p.m., the subcommittee was adjourned.]
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