Oppose H.R. 244 and H.R. 793 | Council For Citizens Against Government Waste

Oppose H.R. 244 and H.R. 793

Letters to Officials

May 11, 2015

The U.S. House of Representatives

Washington, D.C. 20515

Dear Representative,

On behalf of the more than 1.2 million members and supporters of the Council for Citizens Against Government Waste (CCAGW), I am writing to express our opposition to H.R. 244 and H.R. 793, both of which will interfere with the market dynamics that have done so much to keep costs low and beneficiary satisfaction high in Medicare Part D.

Medicare Part D is one of the few government-created programs that has consistently cost less than the Congressional Budget Office’s (CBO) original estimates. Former CBO Budget Director

Douglas Holtz-Eakin pointed out that in 2004, CBO projected Part D’s cost by 2012 would be approximately $123 billion; it was $55 billion. In addition, 59 percent of beneficiaries are “extremely satisfied” to “very satisfied” with their prescription drug plan.

The bills offer similar controversial proposals that were part of a January 10, 2014 proposed rule by the Centers for Medicare and Medicaid Services (CMS). Many of the rule’s provisions were opposed on a bipartisan basis by members of Congress, as well as insurers, taxpayer and patient groups. The outcry against CMS’s plans to harm the highly successful Part D program, including interfering with price negotiations and preferred pharmacy networks, was so intense the agency withdrew the proposals on March 10, 2014.

H.R. 244, the “MAC Transparency Act” and H.R. 793 the “Ensuring Seniors Access to Local Pharmacies Act of 2015,” may sound like prudent concepts, but in reality they would stifle competition and drive up costs for Medicare beneficiaries and taxpayers.

The MAC (maximum allowable cost) process was created by public and private payers, such as health insurance companies, to stop them from having to pay significantly higher prices for drugs than the average acquisition cost paid by pharmacists. The system has increased both competition and the dispensing of generic drugs, as well as encouraging pharmacists to shop around for the best deal. The cost savings are passed onto consumers and taxpayers.

H.R. 244 would force participants in these negotiations to increase the disclosure of sensitive financial information, which in turn would increase both direct costs and litigation costs. As Emory University Associate Professor Joanna Shepherd pointed out in the May 2013 Cornell Law Review article entitled, “Is More Information Aways Better?,” such “regulations foster tacit collusion” and reduce the ability of pharmaceutical benefit managers to “negotiate discounts with pharmacies and rebates with drug manufacturers. As a result, drug prices will rise and total prescription drug spending will increase.”

H.R. 793 would force prescription drug plans to accept any independent pharmacy (known as the “any willing pharmacy” policy) to participate in their preferred network if one or more of their stores is located in a “medically underserved area.”

The Health Resources and Services Administration (HRSA) defines “medically underserved” as a lack of primary medical care, dental, or mental health providers, not pharmacies. A July 2014 report by the Moran Company found that legislation similar to H.R. 793 that was introduced in 2014 “might appear on its face to be limited in geographic scope,” but an analysis of HRSA data “indicates that 94.77 percent of all Medicare Part D enrollees reside in counties meeting at least one of the ‘underserved area’ criteria established in this legislation.” Moran estimated “that enactment of this legislation would increase Federal mandatory spending by $21.32 billion over the 2015-2024 scoring window.”

The Federal Trade Commission noted in its March 7, 2014 comments on 2015 policy and technical changes to Medicare Part D “any willing pharmacy provisions threaten the effectiveness of selective contracting with pharmacies as a tool for lowering costs. Requiring prescription drug plans to contract with any willing pharmacy would reduce the ability of plans to obtain price discounts based on the prospect of increased patient volume and thus impair the ability of prescription drug plans to negotiate the best prices with pharmacies.”

Americans purchase a multitude of products every day. Confidential and intense negotiations among manufacturers, wholesalers, intermediaries, and retail establishments occur vigorously behind the scenes. Purchasers of healthcare services and prescription drugs, as well as taxpayers, are primarily concerned about final prices and good customer service. This is certainly true with pharmaceutical purchases under Medicare Part D. H.R. 224 and H.R. 793 are attempting to fix something that is not broken. We urge you not to support these bills.

Sincerely, 

Thomas Schatz