The federal government could curb the growth of Part D drug prices by requiring manufacturers to sell drugs to prescription drug plans for dual-eligible beneficiaries at prices similar to those paid by the Medicaid program, researchers said in a study that appeared in the January/February 2008 edition of the journal Health Affairs.

The study authors proposed a “light touch” in making policy changes to Part D pricing. Program data so far suggest that price increases could be tempered by mandating pricing for dual-eligible beneficiaries without threatening research and development at the manufacturing level.

The researchers, Richard G. Frank and Joseph P. Newhouse, cautioned that Part D drug price controls were not necessary or advisable across the board. Frank is a health economics professor at Harvard Medical School, and Newhouse is a health policy and management professor at Harvard University.

Instead, they suggested that Congress and the Centers for Medicare & Medicaid Services closely monitor the number and pricing of unique drugs in the Part D market and intervene if necessary.

“This monitoring means that the CMS should obtain price data from the industry that include information on rebates granted to PDPs [health plans that offer only Part D prescription drug coverage] for specific drugs,” Frank and Newhouse wrote. “Furthermore, the government should be prepared to intervene if a problem arises.”

Pricing Intervention Recommendation.

The study further suggested that, if such pricing intervention were necessary, CMS and manufacturers could have a fixed period of time in which to negotiate prices, and that if no agreement were reached during that time period, the parties could enter into binding arbitration to reach pricing deals.

“This process would be highly structured,” the study stated. “It would be modeled on public-sector labor-management negotiations and dispute resolution when strikes are illegal.”

Regarding the recommendation that drugmakers be required to sell drugs used by dual-eligibles at prices in line with those paid by Medicaid, Frank and Newhouse said such a move would create a better balance between controlling Medicare spending and protecting research and development incentives for manufacturers.

“The impact on Medicare spending is likely to be significant, given that dually eligible people represent 29 percent of Part D participants and an even higher share of drug purchases under Part D,” according to the study. “Further, this action involves little additional administrative cost. PDPs would report purchases on behalf of dually eligible enrollees, and a corresponding rebate would be provided by the manufacturer to the federal government in much the same way that rebates are now provided to Medicaid.”

Consumers Union Study.

In a separate study released Jan. 8, Consumers Union said rising Part D drug prices continue to support a case for Congress to allow for drug price negotiations in the Rx program.

Using data available on the consumer-oriented Medicare.gov Web site, Consumers Union found that about three-quarters of drug plans had raised the cost of prescriptions for enrollees.

Consumers Union has tracked drug price increases among plans in five states since the start of the Part D program.

“Most of these Medicare drug plans are increasing costs double or triple the rate of inflation, which really torpedoes the insurance industry's claims that they are getting the best deal for seniors,” Consumers Union Senior Policy Analyst Bill Vaughn said in a news release about the findings.

Consumers Union said that seniors should be getting better savings than is being reported--about $6 to $9 on average per prescription--given the high cost of the Part D benefit to taxpayers.

Copyright 2008, The Bureau of National Affairs, Inc., Washington, D.C.