The Washington Post weighs in this morning with a front page article headlined “Success of Drug Plan Challenges Democrats.” The article suggests that the success of the Medicare Part D program in controlling drug costs through insurer negotiations and its popularity with seniors creates an impediment to incoming House Speaker Nancy Pelosi’s plan to change the Medicare Part D law to permit the Government to directly negotiate prices with drug manufacturers for Part D covered drugs.

In my opinion, Government negotiations is a misnomer in the health care context. The Government does not negotiate prices; it sets prices by law. That is what happens with Medicare Part A (Prospective Payment System/DRGs), Medicare Part B (RBRVS), and Veterans Administration and Defense Department drug programs (Federal Supply Schedule) . Lower prices for the Government may benefit taxpayers, but they also shift costs onto private sector health plans and the same taxpayers who participate in those plans or sponsor those plans as employers.

The Post article mentions a couple of other alternatives to Representative Pelosi’s plan:

Rep. Fortney “Pete” Stark (D-Calif.), who is in line to become chairman of a key health subcommittee, said he prefers a middle path, with Medicare setting ceilings from which private insurers could negotiate downward.But Sen. Max Baucus (D-Mont.), the incoming Senate Finance chairman, is cool to the idea of government negotiation, and has committed only to holding hearings to “determine what the result would be of eliminating” the no-negotiation clause.

The New York Times reports today that prescription drug manufacturers are circling the wagons in response to this month’s Congressional elections. The Wall Street Journal offers a freely accessible story on the obstacles that incoming House Speaker Nancy Pelosi faces to achieve her announced goal of restructuring Part D so that the goverment rather than the Part D plans negotiate drug prices. The article explains that the principal obstacles are the closely divided Senate and the President’s veto pen. For that reason the Democrats are evaluating several alternative:

Alternatively, Democrats could create a government-run plan that negotiates
with drug makers, and competes with private insurers’ drug plans, an approach
favored by Sen. Richard Durbin of Illinois and Rep. Pete Stark, a California
Democrat who will head the Ways and Means health subcommittee.Another approach Democrats could try would be requiring drug makers to give Medicare beneficiaries their lowest price, as companies must for Medicaid, the
state-federal health-insurance program for the poor and disabled. Or, Democrats
could push Medicare to copy the Department of Veterans Affairs, which maintains
a formulary, or list of approved drugs that are part of its veterans health
program; lower prices, among other factors, can help drug makers get on the VA’s
list.

The U.S. Justice Department announced yesterday that it recovered a record $3.1 billion through settlements and judgments in cases alleging fraud against the federal government during the government fiscal year that ended September 30, 2006.

By industry, 72 percent of the recoveries were in health care, 20 percent in defense, and 8 percent other. Health care fraud accounted for $2.2 billion in settlements and judgments, including a $920 million settlement with Tenet Healthcare Corporation, the nation’s second largest hospital chain. Although Medicare and Medicaid, both administered by the Department of Health and Human Services, bear the brunt of health care fraud, other programs that are affected include the Federal Employees Health Benefits Program run by the Office of Personnel Management, the TRICARE military health insurance program run by the Department of Defense, and health care programs run by the Department of Veterans Affairs, the Department of Labor and the Railroad Retirement Board. Defense procurement fraud accounted for $609 million in settlement and judgment awards, including a $565 million settlement with The Boeing Company, the nation’s second largest defense contractor.

On May 30, I blogged about the D.C. Circuit’s opinion in Abigail Alliance, et al v. Von Eschenbach, et al, in which the Court held unconstitutional the Food and Drug Administration’s practice of restricting the marketing of new drugs until all three stages of testing had been completed. The Wall Street Journal is reporting that the Court has vacated the three judge panel opinion in order to rehear the case before the full court (en banc). This is an unusual action and at least a temporary victory for the Food and Drug Administration.

When Walmart announced last September its $4 price for roughly 300 generic drugs at Tampa St. Petersburg Florida pharmacy, Target offered to match Walmart’s price. (B.J’s Warehouse Stores adopted the same policy.) Since then Walmart has expanded its $4 pricing program to 75% of its 3900 U.S. pharmacies.

Today, Target announced that it has expanded its $4 pricing program to all 1,287 of its U.S. pharmacies. Business Insurance noted that “It was not immediately clear which generic drugs were on Target’s list. Previously, the discount retailer had matched the list of drugs being sold for $4 at Wal-Mart. * * * Wal-Mart has also added more drugs to its list, such as pravastatin, a generic form of Bristol-Myers Squibb’s cholesterol drug Pravachol.”

I wondered why I was paying CVS $11 for a 20 day supply of the over the counter antihistamine Loratadine (brand name Claritin). I hopped on the internet and an Amazon supplier selling 150 tablets (same 10 mg dosage) for $9.95 plus $5.95 shipping. Maybe there is something to this pricing transparency concept.

May 23, 2007, is the general health plan compliance date for implementing the new HIPAA mandated, ten digit national provider identifier (NPI). Medicare plans to only accept the NPI on claims submitted on or after that date. Government Health IT magazine recently featured an article predicting that various logistical problems may lead to a messy implementation. “As of October [2006], CMS had issued slightly fewer than 1.3 million NPIs, or about 50 percent of the total 2.3 million CMS expects to issue.” It also is surprising that HHS has not yet issued the official dissemination policy for the NPI.

On August 22, the President signed an Executive Order requiring various government agencies, including the U.S. Office of Personnel Management, and their contractors to support health care pricing and quality transparency and interoperable health information technology. Last Friday, HHS Secretary Mike Leavitt encouraged all employers and health plans to adopt the tenets of the Executive Order. “If we are going to get a handle on health care costs — and we must — we first need to know what our costs are and what we are getting for our money,” Secretary Leavitt said. “Our nation’s private employers are the major source of health insurance for Americans, and they can help us provide the information consumers need to achieve better value for their health care dollars.”

Forbes Magazine features an interesting article discussing “What’s on Tap for Small Business in the New Senate”. The article describes ideas offered by the next Senate’s leaders for improving small business access to health care. Among those ideas is the possible resurrection of a Democrat initiative (S. 637) offered by Senators Dick Durbin (D – Ill.) and Blanche Lincoln (D – Ark.) as an alternative to Senator Enzi’s (R – Wyo.) association health plan idea that “would create a small firm buy-in system similar to federal employees’ health benefits program.”

As the current minority blocked consideration of Senator Enzi’s association health plan bill (S. 1955) and a similar House enacted bill (H.R. 525) even though the Republicans had a 55 seat majority, enacting such large scale changes strike me as unlikely as the Democrats will have a smaller 51 seat majority in the next Senate. But we shall see.

On Friday, November 17, 2006, OPM promulgated in the Federal Register an interim final regulation updating its employee payroll allotment rules to expressly provide for pre-tax payments for the new federal supplemental dental and vision programs known as FEDVIP and the federal employees health care and dependent care flexible spending account programs known as known as FSAFEDS. The comment period on this regulation is open until January 18.

Last week, OPM issued an updated Benefit Administration Letter (No. 06-405) announcing significant plan changes for 2007 Federal Employees Health Benefits (FEHB) Program Open Season. These changes principally pertain to the health maintenance organizations participating in the FEHB Program, which may have joined, expanded or reduced their service areas, added an option, or dropped out for 2007. This letter is always interesting reading.