Democratic Lawmakers Seek To Restore Drugmaker Rebates For ‘Dual Eligibles’

Updated at 5:25 p.m.

Senate and House lawmakers unveiled legislation Tuesday that would require brand-name drugmakers to pay rebates to Medicare for drugs used by some of the program’s low-income and disabled beneficiaries.

Photo by Karl Eisenhower/KHN

The legislation would require drug companies to provide rebates to the federal government for drugs used by a group of beneficiaries often called “dual eligibles.” These beneficiaries are predominantly low-income seniors and people with disabilities who qualify for both Medicare and Medicaid.

Until recent years, these people got their drug coverage from Medicaid, the federal-state health insurance program for the poor and disabled. And drugmakers rebated part of the cost of drugs for those beneficiaries, just as they do for current Medicaid beneficiaries.

As part of the creation of the Medicare Part D prescription drug program in 2006, “duals” shifted to Medicare for their drug coverage. But the rebates negotiated by Medicare Part D plans are not as generous as those that drugmakers previously paid to Medicaid, according to the Department of Health and Human Services inspector general.

In the Senate, Sen. Jay Rockefeller, D-W.Va., is the bill’s chief co-sponsor, and 18 other senators, including Tammy Baldwin, D-Wis., and  Angus King, I-Maine, support the bill. Rep. Henry Waxman, D-Calif., and four other House members introduced companion legislation in the House.

The measure would reduce Medicare spending by more than $141.2 billion over the next decade, according to Rockefeller’s office.

“With the exception of Medicare Part D, all large purchasers of prescription drugs negotiate better prices, including Medicaid and private insurers,” according to a bill summary from Rockefeller’s office. “This bill simply restores negotiated prices for low-income Medicare beneficiaries.”

However, Matthew Bennett, senior vice president of the Pharmaceutical Research and Manufacturers of America, said in a statement that the legislation “would bring higher premiums and copays, more restricted access to medicines for seniors and Americans with disabilities, and diminished research on the next generation of medicines.”

“Unlike familiar consumer rebates that return savings to shoppers, this policy would undermine a successful and popular program to send ‘rebates’ to the Federal Treasury, not seniors,” Bennett said.

Previous attempts to pass the legislation in past Congresses have failed due to strong opposition from the drug industry. But lawmakers are under increasing pressure to find ways to reduce the federal deficit.

“We can no longer afford this waste,” said Sen. Richard Blumenthal, D-Conn., a co-sponsor of the Senate bill. “We are pressing for deficit reduction as never before in the history of this country. … This cut gives new meaning to the phrase ‘low-hanging fruit.’”

“Things take time,” Rockefeller said Tuesday. Drugmakers, he said, “say they are going to lose their profits and they are going to have to cut their research and development. Their research and development have been going down steadily for years,” Rockefeller said. “Pre-2006, when [drug makers] did have to do a negotiated rate, their [research and development] was at a greater level than it is today.”

AARP and the National Committee to Preserve Social Security and Medicare support the legislation.

President Barack Obama’s fiscal 2014 budget also includes a proposal that would require drugmakers to pay rebates to Medicare for the program’s low-income recipients, which include dual eligibles. The administration’s proposal would require drugmakers to pay the difference between the rebate levels they now provide to Part D plans and the Medicaid rebate levels.

This article was produced by Kaiser Health News with support from The SCAN Foundation.