MEND the Prescription Drug Act

Sunday, February 29, 2004

Editor, HME News

If you’re not outraged by the Medicare Prescription Drug and Modernization Act of 2003 (MMA), you should be.

While the law sets up a competitive bidding situation for durable medical equipment, much of which requires a significant service component, the law prohibits the government from setting up a similar bidding matrix for the drugs that Medicare will begin doling out to seniors.

That the 675 lobbyists who work for the drug companies inside the Beltway could have won this victory for their employers, to the detriment of America’s tax base, is astonishing. And yet it’s happened. According to an analysis of the bill by Sherrod Brown, D-Ohio, drug companies stand to make $139 billion in profit from this Act.

Take a look at the portion of Brown’s analysis we reprinted in our Databank on page 70. While the average Fortune 500 company enjoys a 3.1% profit margin, the average profit margin of the top-ten drug makers is 17%.

How much service attends the plopping of pills in a bottle? Yes, your pharmacist might print out some additional information about your medicine, but how does the cost of that service compare to the service provided when Mrs. Jones calls at three o’clock in the morning because her power’s off, and she’s worried that her backup won’t carry her through.

If ever there was a commodity, it’s a pill in a bottle, and yet we can’t bid for this one.

Two senators - Olympia Snow, R-Maine and Ron Wyden, D-Ore. - announced plans to change that on Feb. 10. Their bipartisan plan, the Medicare Enhancement for Needed Drugs Act (MEND), would provide financial incentives for participating Medicare plans to negotiate the best possible drug prices.

No one’s banking on the success of this bill, not in an election year in which President Bush is touting the MMA as one of his hallmark achievements. Indeed, the day after Snowe and Wyden unrolled their plan, none of the major newspapers in America thought it warranted coverage.

The HME industry’s sights are set on a roll-back of FEHBP price reductions to the industry’s bread and butter products. For talking points on why this FEHBP and Medicare, like Medicare and the VA, is apples and oranges, see David T. Williams report on page 4.

Whether the MEND Act hunts is anyone’s guess today. If it doesn’t, look for the industry’s playmakers to slip some FEHBP corrective action through the sidedoor as lawmakers move other legislation.