Pennsylvania currently has a prescription drug program that is the envy of the nation. The Commonwealth’s plan is the largest and most generous in the country, providing over 250,000 seniors on fixed incomes with prescription drug coverage through the Pharmaceutical Assistance Contract for the Elderly (PACE) and the PACE Needs Enhancement Tier (PACENET) programs.
The Pennsylvania Lottery Fund pays for both the PACE and PACENET programs that provide prescription drug coverage to PA seniors. At the same time that the costs of providing prescription drugs have increased, Lottery revenues have remained flat and unable to keep up with the cost to administer the programs. According to the Pennsylvania Department of Aging, more than 3.5 prescriptions are being filled per person today compared with 2.5 in 1997 and 2 in 1987. The state pays an average of $42 for each prescription, which is up substantially from $27 in 1997 and $14 in 1987.
As Attorney General, Mike Fisher has helped to increase funding for PA prescription drug programs by bringing back over $11 billion from the national tobacco settlement, $28 million of which went into increased prescription drug coverage for this year. Fisher has also taken on the drug manufacturers for fraud and consumer abuse. In one case alone he was able to go after a manufacturer for suppressing information about one of its drugs to drive up the costs of the drug and was able to return $6.2 million to Pennsylvania, of which $1.4 million was given to the PACE program.
According to the Fisher/Earll Plan for prescription drug coverage, Fisher will make PA’s current programs even better by focusing on expanding benefits to middle class seniors, accessing new revenues, controlling costs and providing more options to seniors.
Currently, 222,000 seniors out of 510,000 eligible for PACE are enrolled. The eligibility for PACE coverage is 65 years or older, with an income of less than $14,000 annually for a single person and less than $17,200 for a couple. There is a co-pay for each prescription. The PACENET program offers benefits to 31,000 seniors out of the 190,000 eligible for coverage. This program covers seniors 65 and over who earn less than $17,000 per year for an individual and couples earning less than $20,200 per year. The program requires a $500 annual deductible and co-payments are $8 for generic drugs or $15 for brand name drugs.
The Fisher Plan calls for the expansion of PACE and PACENET through the creation of a new PACENET Plus program that will increase income eligibility limits by $4000 ($20,999) for an individual and $5000 ($25,199) for a couple, establish a $50 annual enrollment fee, index deductibles to income ranging from $450 to $650, and create a tiered co-pay system of $8 for generic drugs, $15 for preferred brand name drugs and $25 for non-preferred brands.
This program will cost the Commonwealth approximately $36 million in fiscal year 2003-04.
The Fisher Plan also calls for an increase in funding from two sources: Slots at the racetracks and a federal waiver. As Governor, Fisher states he will sign legislation to allow slot machines at PA’s four existing racetracks and a proposed site in Erie. According to a Penn State University Study, this would provide an estimated $200 million annually in state tax revenue.
Fisher would require that the first $200 million generated from slot revenues go into the Lottery Fund to make up for the pending financial deficit, as well as to expand PACE and PACENET programs and create the PACENET Plus program.
Through the newly created federal Pharmacy Plus initiative, which is Medicaid research and demonstration program, the Fisher Administration will pursue a conditional deferral waiver for certain Medicaid eligibility requirements. This would allow federal Medicaid money to be used by the states to extend prescription drug benefits to seniors not currently covered by a state program.
Fisher’s program will enable PA to expand prescription drug coverage by creating a single eligibility tier for persons earning up to 200 percent of the Federal Poverty Level. This would cover an individual making up to $17,720 annually and a couple earning up to $23,880. All Pennsylvanians currently enrolled in the PACE/PACENET programs would be eligible for this federal program with the federal government funding 54 percent of this new program.
According to Fisher’s Plan, this would free up money to expand coverage to non-eligible seniors in the newly created PACENET Plus program. By drawing down federal money, Fisher’s plan will not only free up state money to expand coverage to middle class seniors, but it will split any future increases in the cost of the program with the federal government.
The Fisher Plan will also implement cost controls to help hold down the inflation rate of PA’s PACE and PACENET programs. Since 1997, the costs of the programs have increased by 13 percent annually while revenues from the state lottery have remained constant. Fisher’s Administration plans to continue to encourage seniors participating in the PACE program to use generic drugs instead of brand names.
The Administration will establish a preferred drug list for PACENET reimbursements. The list, which will be compiled by physicians, pharmacists and academics, when established, PACENET enrollees who choose a non-preferred drug would make a higher co-payment than that allowed for a drug on the list ($25 versus $15). This will encourage enrollees to make efficient choices, while still providing a significant benefit if they choose the more expensive drug, and would save the Commonwealth about $6 million per year.
Fisher states he will increase rebate levels for PACE and PACENET drugs. Seventy percent of the expenditures made under these programs are passed on to the pharmaceutical companies. Under Fisher, manufacturers will be required to give the Commonwealth a rebate equal to the difference between the average price for a drug and the best price it has given for the drug to any purchaser. This would result in about $32 million a year in savings.
Fisher says he is committed to making access to prescription drugs easier for Pennsylvania seniors. His plan includes the establishments of a Prescription Drug Clearinghouse that will create a single source of information for seniors, either by toll free telephone or the Internet.
These centers Fisher plans to establish if elected will advise of the existence and eligibility of prescription drug benefit programs, identify alternatives for purchasing drugs through both private and public programs and provide additional information that will enable senior citizens to make informed and reasonable choices with regard to health care.
Fisher plans to establish a mail order program that will allow pharmacists to provide seniors maintenance drugs, those drugs dispensed in no more than 60-day amounts and used to maintain a chronic condition. This would provide convenience and efficiency to seniors who have decreased mobility due to their medical conditions.
The Fisher/Earll Plan is sensible and beneficial to the seniors of Pennsylvania, but what makes it different compared to Democratic candidate Ed Rendell? Rendell has his own plans dealing with the issue of prescription drug coverage in Pennsylvania.
As Governor, Rendell will be committed to ensuring the long-term solvency of the PACE and its ancillary PACENET programs, while working to dramatically expand the number of individuals covered.
Recent Congressional actions leave little hope that a meaningful Federal prescription drug plan will be enacted in the near future, therefore it is even more important that the Commonwealth do all it can to expand and improve access to prescription drugs for its seniors.
The Rendell/Knoll Plan will aggressively support Federal Legislation to provide a prescription drug benefit under Medicare. Rendell will pursue enactment of comprehensive prescription drug coverage as part of the benefit package provided by Medicare to every senior.
Although many of the current proposals being debated in Congress would fund a program that is not as generous as PA’s effort, if legislation is passed, Rendell will work to assure that PA’s share of any new federal funds goes to expand access to the Commonwealth’s program and would not use these monies to allow a shift of Lottery proceeds to other programs.
Rendell plans to secure PACE’s future by expanding and improving the current Lottery system in order to generate new revenues by for one, minimizing loss and fraud at the retail level. Rendell’s plan says the state can potentially save over $100 million in yearly losses by better management practices in dealing with its retailers.
After improving management and oversight, the number of Lottery retailers can be increased under Rendell’s plan. Pennsylvania’s retailer to population ratio ranks 36th out of 39 U.S. lotteries. If PA would add 2500 new retailers the rank would improve to 24th.
In addition, Rendell will explore ways to expand and improve the Lottery system including adding mid-day drawings, installing instant ticket vending machines, and introducing new games, including potentially Keno, which has proven to be highly profitable for states that have implemented it.
Together, in Rendell’s plan, increased sales revenue and savings could generate over $1 billion and cover the projected losses in the PACE program and allow expanded coverage as well.
Rendell’s plan wants to reduce costs by expanding current Private Sector Discount Purchasing programs. As evidenced by the recent announcements of discount programs by several major pharmaceutical manufacturers and pharmacies, the private sector can provide valuable solutions to public policy matters. Rendell understands and appreciates the value in developing strong public-private partnerships like this to address concerns facing the public sector. Rendell successfully formed public-private partnerships in the areas of education, health care and economic development, to name a few.
Rendell said he will encourage the PA pharmaceutical industry to expand existing private sector discount and charitable programs to lower the cost of prescription drugs, but if this effort does not result in significant discounts to PA’s seniors, he will quickly initiate other measures.
As Governor, Rendell will seek to replicate the successes states such as Maine, Michigan and Florida have had lowering the cost of prescription drugs, including seeking higher rebates where applicable. As an example, under Maine’s ‘Healthy Maine’ low income prescription drug program, manufacturers are now required as a condition of having their products included in the Medicaid formally to offer rebates for prescription drugs purchased by Medicare-eligible residents.
If elected, Rendell will support a legislative proposal to provide cumulative rebates from drug price increases, instead of annual rebates. Currently, drug prices of, for example, 3 percent one year and 4 percent the second year, would trigger rebates to the state of 3 percent and 4 percent. With cumulative rebates, the amount would be 3 percent the first year and 7 percent the second year, bringing more revenue to the state while discouraging drug price hikes.
Rendell will seek discounts through bulk purchases by the state. He would consider one legislative proposal to have the state pool an estimated 2.4 million people, who are in separate prescription benefits programs, under one Pharmacy Benefits Manager (PBM). The PBM would negotiate new rebates from pharmaceutical manufacturers based on these larger volume purchases.
The new rebate money, an estimated $120 million, would be funneled directly into PACE to support expanding income eligibility, adding 80,000 people to the program. The added revenue could also go toward eliminating the PACENET deductible and covering future expansions of income eligibility for PACE. Additionally, all seniors covered by Medicare, no just low-income seniors in the PACE program, would be able to purchase prescription drugs under a discounted price.
Rendell also supports an initiative to allow PA to join a multi-state drug purchasing coalition that could save the state as much as 40 percent in costs. The compact would pool the purchasing power of 43 million people in eight states and would achieve as much as $251 million a year in savings from what Pennsylvania now pays for prescription benefits under Medicaid.
As Governor, Rendell will carefully consider, after consulting with important advocacy groups like AARP and others, submitting a Medicaid waiver request similar to that approved by the U.S. Department of Health and Human Services for the State of Illinois in January 2002. Such a waiver request would permit the elimination of onerous co-pay and high deductibles required under PACENET, and also add approximately 150,000 seniors to the program.
If elected, Rendell will work towards implementing these recommendations necessary to bring additional savings, similar to those achieved under the Medicaid program. They include: Impose on manufacturers ‘best price’ rebates for branded products; use the ‘Federal upper limit’ maximum allowable cost in reimbursing pharmacies; and develop a 90-day supply policy and mail order access for consumers.
Rendell’s plan shows the importance for the need to expand and improve access to prescription drugs for seniors in the Commonwealth. Lack of coverage, which translates into a lack of access, is a major threat to the health and quality of life of PA’s citizens.
Fisher and Rendell both have plans to help the prescription drug issue, but it will be up to the voter next Tuesday to decide what plans might become a reality in the near future.
