Medicare Fight Causes Headaches

Proposed Drug Guidelines Intensify Industry Struggle;
Manufacturers vs. Insurers

The proposed blueprint for the types of medicines that will be covered by the new Medicare drug benefit is expected to be unveiled soon, a step that is certain to intensify a fierce lobbying battle between pharmaceuticals companies and insurers.

The proposed guidelines -- from U.S. Pharmacopeial Convention Inc., which was assigned the task by last year's Medicare law -- seek a middle ground between the two industries. But in a number of important areas, the drug makers appear likely to lose out.

In categories including anticholesterol drugs and arthritis treatments, USP was leaning toward an approach that would grant insurers and pharmacy-benefit managers considerable flexibility on the drugs they offer -- potentially giving them more leverage to bargain down the prices or to avoid high-price options.

At the same time, the agency that oversees Medicare is expected to announce that it considers the USP draft only a first step, and it may take a different tack. The Centers for Medicare and Medicaid Services is expected to signal that it may end up effectively requiring more medicines than might be necessary under the proposal by USP, a Rockville, Md., nonprofit group that develops standards for drug quality.

CMS probably will say its goal is to ensure that all its enrollees can get the drugs they need, but its intervention is likely to console the drug industry, as well as patient advocates. That is because the USP's draft guidelines are likely to take a broad-brush approach that probably would draw howls from some of the biggest drug companies. If such a plan were implemented unchanged, it is likely that some of the drug makers' biggest blockbusters would have a harder time being covered by the Medicare drug benefit.

A USP spokeswoman declined to comment on the organization's plans, but said details still were under discussion late yesterday and could change.

The USP proposal, set to be unveiled as soon as today and expected to result in a final plan around the end of the year, after the organization takes comments, is supposed to define a list of classes of drugs -- more formally divided into therapeutic areas and pharmacologic subcategories. This is important because under the Medicare law, companies that provide the new drug plans generally were supposed to offer at least two drugs in each class.

At the heart of the lobbying battle over the USP plan is the question of how many classes would make the cut. Drug companies wanted a large number of narrowly tailored classes -- more than 200 -- because that would ensure more of their products would be included on the list of drugs that each plan covers, called a formulary.

On the other side, pharmacy-benefits managers were advocating numbers roughly in the range of 50 to 90 classes. Having fewer and broader categories would give them more freedom to pick cheaper drugs or bargain down the prices of blockbusters.

According to a version of the USP's plan dated Aug. 16, which was reviewed by The Wall Street Journal, the organization is close to proposing a list of 146 classes, coming down in the middle between the two sides, though the exact number could change. In some areas, the organization was leaning toward parsing those classes fairly narrowly, as the drug industry wanted. For instance, the document listed at least five classes of anti-HIV drugs.

In several of the most high-profile categories, USP appears to be leaning toward broader-gauge classes that lump together newer, expensive drugs with older categories that often are available generically. Pharmacy-benefit managers would be unlikely to exclude modern medicines wholesale, because doctors and patients almost certainly would object, and Medicare, too, appears ready to exert its own pressure.

Yet the draft proposal would give benefit managers leverage, because the classification plan doesn't automatically grant preferred status to some very popular categories of brand-name medicines, such as the cholesterol-lowering drugs called statins. Many brand-name drugs would have to fight their way onto the list. The most likely route: deep discounts that would bring the prices of these medicines closer to those of generics.

A spokesman for the Pharmaceutical Care Management Association, which represents PBMs, said that while the list of about 140 classes is "broader than what is typically found in the commercial marketplace, this could be a step in the right direction."

If the USP proposal doesn't change, for instance, antidepressants would be divided into a few broad categories. The rub for the brand-name drug industry would be that some newer antidepressants, such as Eli Lilly & Co.'s Cymbalta and Pfizer Inc.'s Zoloft, would be lumped together with decades-old medicines called tricyclics. As a result, a formulary could theoretically satisfy government requirements by offering only inexpensive generic antidepressants such as amitriptyline, or Elavil, and fluoxetine, the generic version of Prozac.

"These guidelines reflect a lack of adequate representation by recognized medical organizations," said a spokesman for Eli Lilly, of Indianapolis. He called the draft proposal "regressive," and said that if it were finalized, and no further requirements were imposed on insurers, "practically speaking, patients would be denied access to the most effective therapies."

In another blow to the drug industry, USP was leaning toward sticking a broad spectrum of cholesterol-fighting drugs in the same bin, under the description "antilipemic agents." This puts statins, such as Pfizer's Lipitor and Merck & Co.'s Zocor, on a par with older generic drugs. Statins are the best-selling prescription drugs in the U.S., with sales of $14.7 billion for the year ended in June, according to IMS-Health, a health-information company. A Pfizer spokesman said the company couldn't comment in detail on a document it hadn't reviewed.

Another battleground could be arthritis drugs. Medicare recipients are a ripe market for these painkillers. The draft of the proposed classification scheme lumps them into a broad nonsteroidal anti-inflammatory category, putting Cox-2 inhibitors, such as Merck's Vioxx and Pfizer's Celebrex, in the same bin as older generics such as naproxen. U.S. sales of Cox-2 drugs topped $5.6 billion for the year ended in June, according to IMSHealth data. A spokesman for Merck declined to comment until he had seen the proposed guidelines.

Brand-name drug makers could sustain another blow in a hot segment of the market for blood-pressure medicines. Merck's Cozaar/Hyzaar and Novartis AG's Diovan were lumped with older medicines called ACE inhibitors, most of which are generics, in the draft document.