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Statement by U.S. Sen. Chuck Grassley, of Iowa
Chairman, Senate Committee on Finance
Pharmacy Benefit Managers
and the Medicare Prescription Drug, Improvement and Modernization Act of 2003


After six years of hard work, the bipartisan Medicare Prescription Drug, Improvement, and Modernization Act of 2003 was passed by both the House and Senate in late November and was signed into law by the President on December 8, 2003. This historic legislation helps about 490,000 Iowa seniors and individuals with disabilities by adding a voluntary prescription drug benefit to Medicare. This new law also makes important reforms to strengthen and improve the program for generations to come.

This legislation provides several provisions to ensure that Medicare beneficiaries are provided with choice and easy accessibility to local pharmacies, and to provide proper oversight of pharmacy benefit managers. The new law provides choice to beneficiaries by containing an any willing provider provision. This provision requires prescription drug plans to accept any and all pharmacies willing to agree to the terms and conditions of the plan. By adding this provision we have given all pharmacies, big and small, the opportunity to participate in the modernization of Medicare.

The new law also requires that prescription drug plans and Medicare Advantage plans provide beneficiaries with convenient access to pharmacies by adopting the TRICARE access standard for prescription drug plans, which requires access to pharmacies in rural and urban areas. This is the same pharmacy access standard used for health care coverage provided through TRICARE, which is the health care plan for the Department of Defense. In addition, to simplify the administration of the drug benefit for pharmacists, all Medicare prescription drug plans will be required to use a standardized benefit card for its enrollees.

The Medicare prescription drug legislation also requires plans to cover prescriptions filled at community pharmacies rather than solely through mail-order. In addition, prescription drug plans may not unfairly steer prescriptions to mail-order as any differential in payment between a retail pharmacy and mail-order is limited to only that amount that reflect any difference in costs. By adopting these requirements, pharmacies are protected against unfair practices by pharmacy benefit managers and beneficiaries are ensured adequate, convenient access to pharmacies of their choice.

In addition to providing convenient, local access to pharmacies, the Medicare legislation also provides safeguards to ensure fair drug pricing and protects pharmacies from have to accept insurance risk. Under the legislation, the prescription drug plans will be required to disclose all discounts, rebates, and charge backs given to them by drug manufacturers. In addition, the Medicare prescription drug plans are prohibiting from requiring pharmacies to accept insurance risk as a condition of participating in its pharmacy network. These provisions are designed to protect local pharmacies and provide a fair playing field for competition.

This new law also establishes a Medication Therapy Management Services program in the new prescription drug benefit, which recognizes pharmacists as a health care provider in the Medicare program for the first time since its inception in 1965. The creation of this program recognizes the role that pharmacists play in the management of the patients' medication therapy assures access to pharmacists' services. Medication therapy management programs will be designed to assure, for beneficiaries at risk for potential medication problems such as beneficiaries with complex or chronic diseases (such as diabetes, asthma, hypertension, and congestive heart failure) or multiple prescriptions, that drugs under the plan are appropriately used to optimize therapeutic outcomes through improved medication use and to reduce the risk of adverse events, including adverse drug interactions. The Medication Therapy Management Program will be developed in cooperation with licensed pharmacists, and pharmacists are eligible under the legislation to provide these services as part of the prescription drug benefit. The Pharmacists Provider Coalition called the Medication Management Program "a big step forward for patient safety."

In addition, this legislation will result in national standards for electronic prescribing, which will be have a dramatic impact on pharmaceutical care in this country. The electronic prescribing provisions in the legislation require the Secretary of Health and Human Services to develop or adopt standards for electronic prescribing that will ensure that pharmacists and physicians have access to the patient's complete medication history, information on eligibility and benefits, formulary requirements. These standards will be designed to improve patient safety and the quality and efficiency of patient care, and I believe that electronic prescribing will be particularly beneficial for the profession of pharmacy and for the advancement of quality pharmacy care in this country.

Finally, I have heard from a large number of pharmacists who are concerned about pharmacy benefit managers. Many pharmacists have contacted me with their concerns that PBMs are treating local pharmacies unfairly and that they inappropriately steer business to their own mail-order pharmacies. To respond to this serious concern, this Medicare legislation orders an investigation of PBMs and their mail-order operations by the Federal Trade Commission (FTC). The purpose of this investigation is to determine if the use of mail-order pharmacies owned by PBMs results in lower or higher prescription drug costs. In particular, the FTC will examine whether PBMs routinely switch patients from lower priced drugs to higher priced drugs in the absence of a clinical reason for doing so and whether these mail-order pharmacies dispense fewer generic drugs. The FTC investigation will include an assessment of the differences in drug spending for patients who obtain their prescriptions through mail order pharmacies owned by PBMs compared to those not owned by PBMs, and community pharmacies. The FTC is required to submit a report to Congress within 18 months of enactment.

As Chairman of the Senate Finance Committee, and lead architect of the Senate bill, I believe that the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 has finally delivered on a long-time promise to strengthen and improve the Medicare program for all beneficiaries. Forty million seniors and Americans with disabilities shouldn't have to wait any longer for prescription drug coverage. Medicare is part of our country's social fabric, and we're not only saving it, but we're also improving it.