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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 conment 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).


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.


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.


short order, the rebate or "best price" contracts were developed, and

virtually all pharmaceutical corporations are participating.

Same 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 Ist to inform the Congress about price changes. Repeatedly,

investigative inquiries including those by Chaimmen Pryor, Dingell and

Brooks have been denied this information. Now it will be available for

the Subconmittee and others. Thus any allegations about pricing based on

aneodotal 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


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


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

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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

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including Tennessee and Kentucky initially claimed that HCFA was forcing them to expost facto reduce pharmacy reimbursement. This is clearly not

the case.

Tennessee has withdrawn its initiative and Kentucky may be the

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


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.


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 reconmendations 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.


We are very concerned abou

failure of the FDA to implement the

Prescription Drug Marketing Act, POMA, (P.L. 100-293.) This land.nark

statute, authored by our dear friend the late Senator Spark Matsinaga and

Chairman Jahn 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

the Bush requested FDA user fees be set aside for appropriate

investigation and prosecution activities.

2. NARD has long maintained that all FDA approved drugs should be

available to all pharmacists. The FDA should be carefully monitored to

assure that in the future it rejects drug distribution plans that exclude

virtually all of the nation's pharmacists. This dangerous precedent was

incorporated in the marketing of clozaril. Fortunately in the new

marketing of clozaril patients are generally not denied the important

professional services provided by their family pharmacists.


We request that the Subcommittee support our efforts to dissuade

the FDA from steering American consumers to our commercial nonprofit

competitors. FDA has no business recommending one competitor versus

another in the prescription drug marketplace. We are especially

concerned by the FDA's endorsement of mail order pharmacy which forces

American consumers to forgo traditionally pharmacy services. In any case, no competitor should be "FDA Approved" to the disadvantage of


The FDA's image should be beyond approach. Certainly, the

general drug scandal has tarnished the view of the Agency in marry

sectors. The Agency's obligations to American consumers are enormous. The distribution system for prescription drugs in this country in


Given the extensive struggle throughout the eighties regarding

matters of pharmacy reimbursement both in the Medicaid outpatient

prescription drug program and the Medicare home medical equipment, supplies and services program, the establishment of a practicing

Pharmacists Advisory Council, similar to the Council for practicing Physicians, established by Section 1868 of Title XVIII of the Social Security Act, would be both timely and sensible. The practicing Pharmacists Advisory Council could help assure that the Department has the views of pharmacists participating in the Medicaid and Medicare programs long before political and legislative controversies polarize the

respective interests.

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