Part D Slide Presentation
. MEDICARE PART D
THE PRESCRIPTION DRUG
BLACK HOLE
The Subscriber share of drug cost between $2,250
and $5,100 when Medicare pays nothing ($0)
toward the cost of drugs has been called the
"Donut Hole". In fact it is a Black Hole that
siphons the limited resources of Medicare
beneficiaries
Presentation Goals:
To make Medicare Part D Beneficiaries explain
and make aware some of the items that drive the
Medicare Part D discussion
To suggest actions that an informed Beneficiary
community should consider in pursuing their best
interest
What is Medicare Part D (short form)
The structure is unnecessarily complex
The Federal Government subsidizes drug purchasing plans offered by
private insurers
Insurers negotiate prices with drug makers and create menus
(Formularies) for different plans
Plans range from low/cost/minimum coverage to expensive/extensive.
All plans must offer at least two drugs in every category. They can be
generic.
For the parts where medicare incurs cost, they pay 75% of the cost. The
plan pays all or part of the cost remaining.
Medicare pays $0 after subscriber cash outlay reaches $2,250 until out of
pocket expenses reach an additional $3,850 (or $5,100 from the start).
Above $5,100 Part D Pays 95% of the cost of drugs
Source: NY TIMES
May 10, 2005 the LTAC Committee Subcommittee
on Medicare Prescription Drug and Modernization Act
of 2003 set four goals.
The first was:
Reduce Financial hardships caused by Part D Premiums,
deductibles and co-payments.
Let us understand the pieces that cause Senior
Beneficiaries problems:
Drug Prices are based on a Manufacturer's Cost Estimate
called the AVERAGE WHOLESALE PRICEWhy AWP Drug Costs are Excessive
Salaries
Big rewards for little work
Advertising
marketing direct to consumers via TV
Increased Usage
advertised top 50 drugs grew 6 times faster
than all others
Brand Name Versus Generic
Only 8% of prescriptions are generic
Inflation
Top 50 drugs rose a twice the rate of inflation
R&D Costs
A new drug costs $800,000,000 on average to develop
Patent Pressure
Three in four new drugs fail so costs must be recovered by the
winner
AS A RULE OF THUMB
Nine of the ten top drug companies spend twice their R&D cost for
marketing, advertising and administration ------ Yet, Pharmaceuticals
Companies were the most profitable in the United States in 2005.
Source: Wall Street Journal
Samples of the Top Drug Company Executive Salaries and
Bonuses
Net Income Company Salary Bonus
31,424,000 Bristol Myer Squibb - Pres 31,424,000 159,691,000
29,574,000 Pfizer - CEO 40,191,845 130,944,439
40,363,000 Merck - EVP 26,454,600 80,559,000
9,815,000 Schering Plough - CEO 21,444,020 -------
40,363,000 Merck - Pres 19,600,975 181,252,976
18,216,000 Bristol Myers - CEO 39,753,000 227,869,513
13,178,000 Abbott Labs - CEO 16,272,000 830,000
12,929,000 Warner Lambert -CEO 22,061,000 250,681,000
10,003,000 Eli Lilly - CEO 12,940,000 33,667,000
Source: Families, Inc. 2005/actupny 2005
The Salaries and Bonuses of the top twenty-five (25) executives in the drug
industry would pay the Part D costs of 6,800,000 low income seniorsThe AWP varies by Purchaser and Purchasing Group
We require a starting point to gain understanding of how the
costs you incur happen
PRICE (on average) % added to the AWP
Retail (Drug store) +79%
Private Drug Plan -26%
Federal Supply Service -65%
Canadian Drug Seller -50%
Wholesaler (Walmart) +$2 or $3
Source: House Special Investigations Committee 2005
The profit lost in bulk transactions is compensated for by
boosting retail prices
On average Generic Drugs cost 65.9% less than Brand name
drugs
Source: House Government Reform Committee 2005
Sample Drug Prices for the Five Biggest Sellers
RM Drug FSS Drug Plan Wholesaler Retail
8.63 Zocor/60 tab 34.80 85.47 106.84 113.97
.14 Norvasc/90 tab 59.71 95.33 119.16 127.17
.20 Procardia/100 tab 68.35 110.69 110.69 144.89
.52 Prisolec/ 30 cap 59.10 96.74 120.93 122.62
1.75 Zoloft/100 tab 115.70 181.71 227.14 238.44
Source: Families USA 2005
Samples of Cost Variances for the
Identical Drug
Drug AWP FSS Change
Lanoxin 20.51 10.05 -51%
Norvasc 122.86 61.27 -50%
K-Dur 20 49.98 23.73 -53%
Lipitor 169.08 102.28 -40%
Prilosec 119.57 58.73 -51%
Pepcid 53.13 18.39 -65%
Glucophage 64.62 30.60 -53%
Fosamax 60.89 33.74 -45%
Synthroid 30.84 20.91 -32%
The Federal Supply Schedule is negotiated by the Veterans
Administration for the DOD, PHS, VA and USCG
Source: Journal of Clinical Pharmacology Theory, Sept 2006
Sample Drug Markups for Drug Store Customers
ITEM Ingredient cost Markup
Celebrex .60 21,712%
Claritin .71 30,306%
Lefkex 1.88 8,372%
Lipitor 5.80 4,696%
Norvasc .14 134,493%
Paxil 7.60 2,898%
Previcid 1.01 34,136%
Prilosec .52 69,417%
Prozac .11 224,973%
Tenormin .13 80,392%
Vasotec .20 51,185%
Xanax .024 699,588%
Zestril 3.20 2,809%
Zithromax 18.78 7,892%
Zocor/B 8.63 4,051%
Zoloft 1.75 11,821%
Source: Steve Wilson, Investigative Reporter, WXYZ-TV Detroit
TO BE FAIR
The cost for manufacturing, Inventory, Administration, Marketing and
Research and Development reduce the mark-up percentage.
FOR COMPARISON
George Washington University states that raw materials amount to 12% of
the average wholesale price in New York State
Glossary
AMP - Average Manufacturers Price, i.e., price paid to the drug company by
the wholesaler (after discounts are applied)
ASP - Average Sales Price, i.e., average of all prices charged across all
purchasing groups
AWP - Average Wholesale Price, i.e., a fictitious cost created as a basis for
negotiation with potential buyers.
Best Price - Lowest price available from Drug Manufacturer to any customer
FCP - Federal Ceiling Price, i.e., the maximum the drug manufacturer can
charge the four government agencies under the FSS.
FSS - Federal Supply Schedule, i.e., the price negotiated by the Veterans
Administration for the "Big Four" (DOD, VA, PHS, Coast Guard).
MAC - Maximum Allowable Cost, i.e., a ceiling set by state governments for
the drug program within their state (30 states have a MAC).
Raw Material - The cost of the basic ingredients used to make the drug being
sold.
WAC - Wholesale Acquisition Cost, i.e., list price charged by the drug
manufacturer to the wholesaler before discounts
Retail Price - The price the manufacturer charges a retail pharmacy making a
direct purchase.
WHAT YOU CAN DO TO CONTROL DRUG PRICES
Lobby congress (write, call or e-mail your representative and
senators) to act for you to help Medicare's 14 million
beneficiaries save over $60,000,000 in premiums, co-pays and
out of pocket drug costs
Ask Medicare to switch to generic drugs. This would prevent
6.2 million beneficiaries from reaching the donut hole. If this
change would occur, the average out-of-pocket expenses would
not reach $1,700 in 2007.
Source: Committee on Government Reform Minority Office Oct 2006
The Second Goal of the LTAC Subcommittee is
Reduce Prescription Drug prices while insuring the
continuity of needed drugs
Let us look at the impediments to attaining this goal
THE POLITICS OF DOING BUSINESS IN A
CAPITALIST ECONOMIC SYSTEM ADDS TO
DRUG COST
Drug Industry Political Clout in 2005
$184 Millions for Lobbying
$ 74 Millions for Campaign Contributions
824 Lobbyists in DC
7 are Former Congresspersons
The President and CEO of the Pharmaceutical
Research & Manufacturers of America is:
` BILLY TAUZIN
Mr. Tauzin was Chairman of the House Energy
and Commerce Committee, the Committee
responsible for regulating the
DRUG INDUSTRY.
Source: NYPIRG 2006
Your Responsibility is to be Aware
Medicare Part D is confusing - It was created as the foregoing
suggests by bureaucrats.
Your Elected Representatives have a better plan than that
available to you Make them earn their plan
It is your obligation to speak out to obtain the information
you need to make an informed decision.
DRUG PLANS ARE GOVERNED BY A
FORMULARY
(A List of Drugs for which the Plan will pay)
Not all Drugs are covered by every plan so a
potential subscriber must be careful when making
their choice of the plan best suited to their needs
PREPARING TO CHOOSE THE PLAN BEST
MAKE A LIST of your prescription drugs
ASK YOUR DOCTOR if a generic drug can be
substituted for his prescribed drug
CORRECT YOUR LIST (Plans tend to
substitute Generic drugs when they have them
available)
CALL THE PLAN you choose and assure
yourself that your prescription drugs are in the
formulary. (A plan that does not feature your
drugs is worthless to you)
IF A DRUG IS NOT COVERED ask the plan
administrator if the plan will make an exception
and provide your drug
WHAT YOU CAN DO
Become a voice for Seniors Citizens as an individual
or as part of an outspoken group. Petition (lobby)
your elected representatives and your local political
leaders to make them act in your interest. They need
your vote to remain in office.
Keep aware of pending actions that affect you and
your peers. If you do not act for yourself, who will.
Work as a team player to spread the word about
actions and decisions which impact on your way of
life.
Be active in your club or center.
BUYING OFF SHORE IS AN IDEA
The Foreign Drug Market
Are Foreign Drugs Much Cheaper?
It matters which drugs are included, i.e., extremes cloud the result
Different US Buyers pay different prices, i.e., large purchasers pay less,
retail purchasers pay more.
Price disparities vary by Country, i.e., foreign governments become
involved to prevent local drugs moving out of their control to the
highest bidder.
Other factors affect price
Government regulation
Foreign Drug Makers prohibit exports and/or limit volume
American Regulator actions affect the volume entering the US
BOTTOM LINE
Big Government and Drug Manufacturers (Buying into foreign
manufacturing and R&D) act to stabilize prices to keep them near US levels.
Source: Congressional Budget Office 2004
Dangerous Foreign Products are Common
Unapproved Drugs are sold at reduced prices
Controlled substances in US are not controlled in Foreign Countries
Foreign Drugs withdrawn for safety reasons are shipped to US
Drugs are improperly packaged
Animal drugs are sold for human consumption
Drugs recalled in their country of origin are dumped in the US
Drugs requiring risk management and or restricted distribution are not
identified when shipped to the US
Drugs are inadequately labeled with volume/dosage information
Counterfeit drugs and placebos are shipped to the US
SOURCE: Consumer Reports Best Buys
ABOUT FOREIGN DRUGS
Canadian
Good News
On average drugs can be from 75% to 90% cheaper
Problems
Many are old (Expired)
Dosage (conversions are not accurate)
Wrong medication with an accepted US Brand or generic name
Placebo (some pharmacies dispensing drugs cheat)
Compare prices:
www.canadameds.com
www.crossborderpharmacy.com
www.canpd.com
www.CANADARx.com
SOURCE: Congressional Research Service 2005
NYS/NYC RETAIL PRESCRIPTIONS COST
MORE THAN CANADA
ITEM NYS NYC
Allegra 133.1% 133.1%
Lipitor 66.1% 66.5%
Norvasc 36.8% 41.4%
Premarin 549.3% 593.9%
Singular 63.8% 63.2%
Synthroid 284.1% 266.2%
Zithremak 48.5% 45.5%
Zyrtec 291.2% 302.7%
Source: NYPRIG 2005
The third Goal of the LTAC Subcommittee states:
Prevent Retiree employer/organization drug
coverage benefits from being reduced
EXAMPLES OF DRUG PROGRAMS
SOME INFORMATION ABOUT CURRENT PLANS
ALL PLANS
In 2007 there will be 61 standalone plans (up from 46 in 2006).
These plans enhance Medicare Parts A and B and most times
include Part D. Some plans combining A and B are called C.
A few of the 61 plans will offer reduced premiums to low
income senior citizens.
BENCHMARK PLANS
In 2007 there will be 13 Benchmark Plans (down from 15 in
2006). Only two waive premiums for low income seniors
To enjoy drug coverage you must be a participant in either
Medicare Part A, B or A&B.
Source: Brehenson, NY Times
Foreign Government MEDICARE PART D
Similar Programs
FRANCE
Government maintains lists of approved drugs
Reimbursement varies, i.e., outpatient vs hospital
Government Commission determines price and reimbursement (the
French have the lowest drug prices in the world)
Consumers pay 100% of commission approved cost and then apply for
reimbursement
Patient generally pays very little out of pocket after government refund
GERMANY
Government maintains a negative drug list, i.e., drugs not eligible for
reimbursement (mostly over the counter drugs)
No price established controls but Government sets a maximum amount
it will reimburse patient
Reference reimbursement price for a drug is set slightly higher than the
lowest price in the drug category (arthritis, cardiac, etc.)
Patient pays difference between the reference price and the real cost
charged by the supplier
Doctors are monitored to assure performance, i.e., if brand name drugs
exceed a certain percent of total prescriptions, the doctor pays a
penalty (assures prescribing generic)
Source: Congressional Budget Office
What You must Do:
Realize that Corporations face competition and therefore be
willing to adjust without sacrificing the benefits you have
earned and deserve.
Be willing to accept generic drugs as replacements to brand
name drugs when your Doctor approves the switch.
Question any change that happens without explanation or is
limited to only those in your situation.
Prod your Human Resource, Union and Elected
Representatives to support your interests.
Source: AARP 2006
LTAC Subcommittee Goal Four states:
Obtain Counseling for all people to select an appropriate plan.
TIPS FOR PART D USERS
Shop Around
www.NYAGRx.org
www.drugstore.com
www.nabp.net
www.crbestbuydrugs.com
Buy Generic
Be up front with your doctor about your ability to pay
Consider Information from certified Pharmacy sources:
www.MinnesotaRxConnect.com lists State of Minnesota approved
Canadian Pharmacies
COMPANIES OFFERING DISCOUNT OR NO COST DRUG PROGRAMS
Eli Lilly Glaxo-SmithKline
Novartis Pfizer
Abbot Labs Astra Zeneca
Adventis Bristol Meyer Squibb
Johnson & Johnson plus 64 more
(In 2005 the Drug Manufacturers give Doctors sample drugs valued at
$8,500,000. Ask for samples when you visit your Doctor).
NYS LOW COST PLAN AND DRUG INFORMATION
New York Attorney General (NYAG.GOV)
EPIC