The Associated Press recently ran an interesting story on the prospects for laws expanding the ability of U.S. consumers to import drugs from Canada and other countries in the new Congress. The article notes that

Senator David Vitter [R Louisiana] continues to block confirmation of Dr. Andrew von Eschenbach, President Bush’s nominee to lead the Food and Drug Administration [FDA], until federal drug import laws are further relaxed. As for the FDA, the agency says it can’t vouch for the safety or efficacy of imported drugs. This summer, the FDA said testing revealed fake versions of Lipitor and other widely used prescription drugs ordered through Web sites linked to a Canadian pharmacy but shipped from other countries.

TRICARE is a Defense Department health care program for military dependents and retirees. In 2004, TRICARE remodelled its pharmacy benefits program by subcontracting with Express Scripts for a retail pharmacy network and a mail order pharmacy. The Veteran Affairs National Acquisition Center, which administers the the Federal [Government] Supply Schedule for pharmaceuticals, sent a letter to brand name drug manufacturers ordering them to rebate to the Defense Department the difference between the retail price paid at the retail pharmacy and the “federal ceiling price” because the Express Script’s pharmacy network represented a depot contracting system.

The U.S. Court of Appeals explains in The Coalition for Government Procurement v. Secretary of Veterans’ Affairs, __ F.3d ___ (Sept. 11, 2006) that

The Veterans Health Care Act (VHCA) was enacted in 1992 to reduce the cost of prescription drugs used in the VA health care benefits programs. As seen, the VHCA is codified at scattered sections of Title 38. The VHCA includes 38 U.S.C. § 8126, which provides in relevant part:

(a) Each manufacturer of covered drugs shall enter into a master agreement with the Secretary [of the VA] under which— (1) beginning January 1, 1993, the manufacturer shall make available for procurement on the Federal Supply Schedule of the General Services Administration each covered drug of the manufacturer;
(2) with respect to each covered drug of the manufacturer procured by a Federal agency described in subsection (b) on or after January 1, 1993, that is purchased under depot contracting systems or listed on the Federal Supply Schedule, the manufacturer has entered into and has in effect a pharmaceutical pricing agreement with the Secretary . . . under which the price charged during the one-year period beginning on the date on which the agreement takes effect may not exceed 76 percent of the non-Federal average manufacturer price (less the amount of any additional discount required under subsection (c)) during the one-year period ending one month before such date (or, in the case of a covered drug for which sufficient data for determining the non-Federal average manufacturer price during such period are not available, during such period as the Secretary considers appropriate), except that such price may nominally exceed such amount if found by the Secretary to be in the best interests of the Department or such Federal agencies[.]
Thus, section 8126(a) limits the price that manufacturers of “covered drugs” may charge for drugs “procured by a Federal agency.” Section 8126(b)(2) lists DOD as a “Federal agency” to which section 8126(a) applies. Accordingly, section 8126(a) requires that manufacturers charge DOD a percentage of the non-federal average manufacturer price (“non-FAMP”) for “covered drugs.” [Fn. The non-FAMP is defined as “the weighted average price of a single form and dosage unit of the drug that is paid by wholesalers in the United States to the manufacturer, taking into account any cash discounts or similar price reductions during that period.” 38 U.S.C. § 8126(h)(5) (2000).]

This price limit is also called the federal ceiling price (“FCP”).

As seen, section 8126 limits “covered drugs” to those obtained through one of two sources: the drugs must be (1) “listed on the Federal Supply Schedule” or (2) “purchased under depot contracting systems.” The Federal Supply Schedule (“FSS”) of the General Services Administration authorizes the VA to award and manage contracts with pharmaceutical companies in order to obtain low prices. See 41 U.S.C. § 259(b)(3) (2000).

This is how the Government “negotiates” pharmaceutical prices.

Needless to say, the drug manufacturers hit the roof when they received the VA order, and they challenged its legality. The VA agreed to suspend enforcement of the order until a court ruling. In its September 11 opinion, the Federal Circuit ruled that the VA had failed to follow proper Administrative Procedure Act rules when it issued the order without first engaging in notice and comment rule making. The Court did not consider the legality of the substance of the order. The ball is back in the VA’s court.

The Federal Times reports this week on FEHB plan carrier efforts to provide their members with computerized personal health records.

The Washington Post yesterday included the obituary of H. Donald Wilson, 82, who was the president of Mead Data Central when the online legal research service Lexis was introduced. The obituary notes that

At first, many lawyers refused to use the software, regarding computer work as a secretarial job. In order to spur adoption of the product, Mr. Wilson gave law students almost free access to electronic files of court decisions, so that when they graduated, the young associates at law firms immediately asked their employers: “Where’s your Lexis?” Zurkowski said. Mr. Wilson also realized that tax lawyers and those in other specialized fields were more likely to do their own research, and he focused the company’s early efforts in those areas, said his longtime associate, Gary A. Marple, president and chief executive of Lessac Technologies Inc.

I was attending law school when Lexis was introduced at the George Washington University where I studied. I don’t remember badgering my first employer for Lexis but the online legal research services are a valuable tool along with the old fashioned books and now the free internet services.

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.