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NATIONAL INSTITUTES OF HEALTH

Senator REID. A week ago Monday, I went to the National Institutes of Health for the first tour of the Institutes in 9 years. It is too bad that all Members of Congress are not forced to go through the National Institutes of Health for a tour because it really is something our country should be proud of. I am glad to see that your coalition has recommended a significant increase in funding of almost $1 billion for the National Institutes. There could not be money that would be better spent. We have a lot of problems there. We are having trouble attracting scientists because of the way they are paid. But we are working on that, and we hope we can maintain our place in the world as a foremost researcher of health problems of human beings.

Ms. MCCARTER. I would agree with what you said and would also add that I would hope that all Members of Congress could also visit the other agencies of the Public Health Service like the CDC and the FDA and be aware of the significant contributions that they all make to the health of this country.

Senator REID. But, of course, as you are aware, medical research in this country starts with the National Institutes of Health. Some 75 percent of all medical research that is done in the country anyplace is started at the National Institutes of Health. And so, while these other agencies are extremely important, the umbrella is the National Institutes of Health for everything that goes on in this country regarding medical research.

Ms. MCCARTER. Right. The other agencies may have different focuses such as services or health training. Undoubtedly, the National Institutes of Health is a premier research agency.

Senator REID. The Indian Health Service. I am on the Indian Affairs Committee, and the problems we have there are so significant that I really am at a loss for words to try to describe what needs to be done. I am not sure anyone knows, but it is going to take a different approach than what we have used because we are simply failing the need of Americans with the way we are administering health care.

Thank you very much for your testimony.

Ms. MCCARTER. Thank you very much.

PREPARED STATEMENT OF JOHN M. RECTOR, NATIONAL ASSOCIATION

OF RETAIL DRUGGISTS

Senator REID. John M. Rector with the National Association of Retail Druggists was unavoidably detained. As a result of that, I would order that his statement be made a part of the record.

[The statement follows:]

STATEMENT OF JOHN M. RECTOR, VICE PRESIDENT OF GOVERNMENT AFFAIRS AND GENERAL COUNSEL, NATIONAL ASSOCIATION OF RETAIL DRUGGISTS

Mr. Chairman, Members of the Subcommittee:

I am John M. Rector. I serve as Vice President of Government Affairs and General Counsel for the National Association of Retail Druggists.

The National Association of Retail Druggists (NARD) represents the owners of 40,000 independent pharmacies, where over 75,000 pharmacists dispense more than 70 percent of the nation's prescription drugs. Together, they serve 18 million persons daily and provide nearly 85 percent of the Medicaid pharmaceutical services. NARD has long been acknowledged as the sole advocate for this vital component of the free enterprise system.

We appreciate the opportunity to comment on HHS priorities for Fiscal Year 1992. Our principal concerns relate to the Medicare and Medicaid programs administered by the Health Care Financing Administration (HCFA) and the Food and Drug Administration (FDA).

HCFA/MEDICAID

We strongly supported the enactment of the "Medicaid

Anti-Discriminatory Price and Patient Benefit Restoration Act of 1990" (MADPA) in OBRA 90. Since 1985, all HCFA efforts to ostensibly control escalating drug costs have either unfairly reduced provider reimbursement or limited Medicaid patient access to full coverage.

These initiatives have had virtually no effect on the record breaking increases in drug prices which now account for 80% of program costs. It was a program with first-class prices and second-class care.

The Medicaid outpatient drug program, as the largest nonprofit, now has equal access to nonprofit prices. With several important exceptions it appears that HCFA is implementing MADPA in a reasonable manner. In short order, the rebate or "best price" contracts were developed, and virtually all pharmaceutical corporations are participating.

Some states failed to provide our members, reasonable notice of the 04-01-91 list of covered products. It is our view these pharmacists

should be held harmless and that a portion of the special 75% match for the first year of MADPA or a portion of the rebates be made available for this purpose. It is doubtful that in the future quarters the problem will be as extensive as in the first one, but a minimum of two weeks actual notice in our view would be reasonable.

The MADPA requires a number of studies on the subject of pharmaceutical pricing, including a Controller General study due each year on May 1st to inform the Congress about price changes. Repeatedly, investigative inquiries including those by Chairmen Pryor, Dingell and Brooks have been denied this information. Now it will be available for

the Subcommittee and others. Thus any allegations about pricing based on anecdotal information, half-truths, pseudo-facts, wishful thinking or outright distortions by opponents of equal access to fair pricing, should be readily disregarded.

Some have claimed that special prices for charities have been eliminated. We hope not. Claims have also been made that "commercial nonprofits" or those serving virtually no indigents may have experienced price increases comparable to the double digit increases our members receive each January. We welcome a more level playing field for such competitors.

Lastly, hospital pharmacists and consultant pharmacists seem to point to a conspiracy by the pharmaceutical industry to fix prices as a consequence of MADPA. To the extent this can be documented, the Justice Department should appropriately address these charges.

By and large, the new moratorium on reductions in pharmacy reimbursement, through December 1994, by either Federal or state Medicaid agencies, as of the date of OBRA 90 enactment, November 5, 1990, is being implemented. Unfortunately, several states have attempted to reduce reimbursement after November 5, 1990 and such acts are now the subject of law suits filed in various Federal courts. These states are, New York (03-31-91), Missouri (03-13-91), Pennsylvania (03-19-91), and California (03-22-91). A TRO has been granted in the Missouri case.

Several states

including Tennessee and Kentucky initially claimed that HCFA was forcing them to expost facto reduce pharmacy reimbursement. This is clearly not Tennessee has withdrawn its initiative and Kentucky may be the

the case.

subject of litigation. Importantly, HCFA is abusing West Virginia pharmacists by claiming in a December 31, 1990 letter to the Department of Human Services, that the state was out of compliance. Actually there was no notice or finding of noncompliance in West Virginia or the other cited states prior to November 5, 1990 or for that matter by January 1, 1991. We are especially concerned about such lawlessness in these few states. Fortunately, it appears that most states have complied with the Federal

law.

Much progress has been made towards the enactment of marketplace pricing (MAPP) reimbursement for retail pharmacists participating in the Medicaid outpatient prescription drug program. This concept developed by our organization was formally submitted to HHS in 1983 and has been endorsed since 1986 even by the Pharmaceutical Manufacturers Association. Had the Medicare Catastrophic program not been repealed it would have been the reimbursement standard by 1991. And of course, MAPP was included in the bipartisan "Pharmaceutical Access and Prudent Purchasing Act of 1990." S.2605, PAPPA, last year.

Now that MADPA has focused HCFA on the source of prescription drug pricing increases the moratorium period should be more than adequate to enact a this fair reimbursement formula. The MAPP approach reimburses the pharmacists as any other small business person would be reimbursed but also provides payment for professional services. In effect, it is payment for a "pharmacy visit" somewhat like an office visit for a physician. of course, there are appropriate screens including the "lower of" provisions which will continue to provide Medicaid the benefits of our very competitive retail marketplace.

HCFA/MEDICARE

1. The President's Medicare HME cuts are not only unnecessary but may precipitate a crisis in the delivery of such products and related services to Medicare beneficiaries.

As a member of the Coalition to Support Quality Home Medical Equipment, Supplies and Services (the Home Care Coalition,) made up of consumer, health care professionals and supplier organizations, we concur with the coalition's position that the "further reductions such as recently proposed by the Administration should be rejected."

2. Regarding the OBRA 89 provisions for mandatory submission of Part B Medicare claims we concur with HCFA recommendations that exemptions be provided for claims for items below a certain dollar threshold, for example $100.00 dollars. And that a blanket exemption be provided for entities not primarily involved with such health care services.

3. We recommend that HHS/HCFA carefully monitor the practices of Medicare funded entities including hospitals, to assure that such Federal funds are not facilitating a denial of Medicare beneficiaries freedom of choice as recently addressed in the Key Enterprises of Delaware, Inc. v. Venice Hospital.

PHS/FDA

We are very concerned about failure of the FDA to implement the Prescription Drug Marketing Act, PDMA, (P.L. 100-293.) This landmark statute, authored by our dear friend the late Senator Spark Matsunaga and Chairman John Dingell of the House Energy and Commerce Committee, was the result of an extensive four year investigation and its provisions are aimed at the safety of American consumers and fair competition in the pharmaceutical marketplace. To date, the FDA has done little to increase the risk to violators. Additionally, it appears that HHS has undermined the efforts of its Inspector General to assist in the development of appropriate PDMA cases. Rather than a separate additional appropriation for a modest level of enforcement, we suggest that some small portion of

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