MAY 10, 2006 -- Eli Lilly announced plans Wednesday to continue distribution of free or low-cost drugs to certain low-income enrollees in the new Medicare drug benefit, reversing an earlier decision to end its giveaway program for all Medicare beneficiaries to avoid running afoul of federal anti-kickback law.

Meanwhile, a Johnson & Johnson official provided new details Wednesday about a "Companion Rx Program" involving at least five big drugmakers to jointly offer low-cost drugs to millions of low-income Medicare beneficiaries once they reach the "doughnut hole" portion of the Medicare drug benefit.

The doughnut hole is the part of the 2003 benefit (PL 108-173) in which Medicare picks up none of the costs of a prescription until yearly out-of-pocket prescription drug outlays grow large enough to trigger "catastrophic" protection in which Medicare pays 95 percent of prescription costs.

The drugmakers revealed their new moves the day before a meeting between drug company executives and Senate Finance Committee members organized by Chairman Charles E. Grassley, R-Iowa, and ranking Democrat Max Baucus of Montana. The meeting aims to pressure drugmakers to continue giveaway programs.

Drug companies have said federal authorities could construe the giveaways as an illegal inducement to beneficiaries to continue seeking brand-name drugs when their prescriptions are no longer subject to coverage gaps in the Medicare drug benefit and Medicare begins picking up the tab. To the extent generic substitutes are available, Medicare loses money on brand-name drug prescriptions.

But an advisory opinion issued April 18 by the Department of Health and Human Services Office of the Inspector General (OIG) to drugmaker Schering-Plough explained how a giveaway program could keep providing drugs to low-income enrollees in the Medicare drug benefit without violating anti-kickback law.

The Schering-Plough program is acceptable, according to the opinion, because it "operates entirely outside" the Medicare prescription drug benefit. Under the Schering-Plough program, Medicare would never pick up the costs of the brand-name drugs involved. The value of drugs received under the program would not count toward the out-of-pocket total needed to trigger catastrophic protection.

That opinion has led companies to change their minds about shutting down the "pharmaceutical assistance programs" for Medicare drug enrollees, said Gayle Goldin, director of community partnerships with Volunteers In Health Care, an organization that tracks pharmaceutical assistance programs for hospitals and doctors that treat the poor.

Goldin said that on the day the advisory opinion was issued, up to 30 of the programs were set to close their doors to Medicare enrollees as of May 15. Now that total has dropped to 24, she said. Most of the 24 are small drug companies, she said.

Lilly announced that its "LillyAnswers" program will continue through the end of the year for certain Medicare beneficiaries. Patients enrolled in the program as of Dec. 31, 2005, who have not yet enrolled in the Medicare drug benefit, are eligible to continue in the program until the end of 2006.

A new "LillyMedicareAnswers" program will continue assistance next year for two Lilly drugs for certain people who have signed up for Medicare drug coverage. The HHS Inspector General must first approve LillyMedicareAnswers, however.

Like the Schering-Plough program, LillyMedicareAnswers would function outside Medicare, with the two drugs—Forteo, an osteoporosis treatment, and Zyprexa, a drug for schizophrenia and bipolar disorder—not counting toward the catastrophic coverage trigger. "Bridge benefits" would be available in some cases this year for the two drugs for LillyAnswers participants enrolling in Part D.

To qualify for LillyMedicareAnswers, a person would have to be enrolled in the Medicare drug benefit and have an income below 200 percent of the federal poverty level. In addition, he or she would have to have been denied extra drug benefits provided to Medicare beneficiaries with incomes at 150 percent or below and meet an assets test.

Goldin said a number of Lilly drugs that are part of LillyAnswers would not be part of the new program, notably the insulin product Humulin and the anti-depressant Prozac.

'Companion Rx'
To provide payment assistance with a broad range of drugs in the doughnut hole, five big drug companies are seeking federal approval for a program they are calling Companion Rx. They've met with the OIG, the Federal Trade Commission, the Centers for Medicare and Medicaid Services, and Senate Finance Committee staffers, said an executive with one of the five companies.

According to the executive, David Martin of Johnson & Johnson Health Care Systems, the program would target 7 million to 9 million Medicare beneficiaries with incomes between 151 percent and 200 percent of the federal poverty line who do not qualify for the low-income subsidy Medicare provides to fund relatively generous drug benefits for those at 150 percent and below.

Once they have reached the doughnut hole, they would pay 35 percent of prescription costs, with the Companion Rx program picking up the other 65 percent. The program would allow access to a wider range of lower-cost drugs than any individual drug company's pharmaceutical assistance program provides.

Martin said the value of the prescriptions would count toward the catastrophic trigger, however. But the program also would include generic versions of the brand name drugs involved. The aim is to get more companies involved in the program, Martin said.

He did not name the four companies other than J&J but said they are members of the Together Rx Access program, which provides low-cost drugs to uninsured Americans under age 65 with incomes below 300 percent of the federal poverty line. Goldin indicated that obtaining federal approval for Companion Rx would be a challenge.

The 35 percent liability for prescription costs would still be a large burden for many beneficiaries, she said. But she added that a program that provides payment assistance in the doughnut hole and also counts toward catastrophic protection would be particularly helpful.