Medicare Compliance & Reimbursement

Coalition lacks major players--kickback issues could arise.

In an attempt to forestall potential problems with the Medicare Part D benefit, several pharmaceutical companies have joined together to develop a plan to provide discounted prescription drugs to Medicare beneficiaries who reach the doughnut hole in their coverage. The coalition could potentially save substantial out-of-pocket costs for those seniors who don't qualify for subsidies. But health plans need to watch out for abuse within the system, experts warn.

The so-called "Bridge Rx" program would supply qualifying Medicare benes with discounted drugs, often up to 50 percent reduced cost. This proposal is significant because as many as 6.9 million Part D enrollees will reach the doughnut hole in 2006, according to the Kaiser Family Foundation.

Seven drug companies have announced their intention to join the Bridge Rx coalition, including AstraZeneca, Johnson & Johnson, Novartis and Bristol- Myers Squibb.

Medicare benes with annual incomes between $14,000 and $18,620 would qualify for the program, as would those benes who make less than $14,000 but can't obtain subsidies because of disqualifying assets. The program anticipates a $30 million budget, serving as many as half a million qualifying Medicare benes.

"Millions of low-income individuals are not eligible for subsidies," says Dan Mendelson, president of Avalere Health in Washington, D.C. "There is definitely a need."

But there is also a downside. Although the Bridge Rx coalition might help save plans' Medicare benes from severe out-of-pocket costs, the program could end up costing plans more. For one thing, widespread participation will be necessary for the program to work, or else plans will need to worry about the potential for kickbacks.

The HHS Office of Inspector General insists that such a plan will work only if it offers "a broad range of drugs, including generics" so that drug companies can't use the discounts to steer patients solely to their own brands.

This is a standard legislative and regulatory hurdle, says Mendelson. "It prohibits pharmaceutical industry contributions [such as rebates] from counting against true out-of-pocket costs. On the other hand, there's no historical precedent for this situation, so it's possible to write the plan to avoid this problem."

The OIG also cites the need to implement safeguards to ensure that benes don't switch from generics to brand-names, and to offer uniform discounts for all drugs. If the program doesn't follow these policies, Bridge Rx could become little more than a moneymaking scheme, depending on "how patients feel about what they were sold," Mendelson remarks.