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Measure Would Expand Drug Discount Program

By Michael Teitelbaum, CQ Staff

June 8, 2007 -- A bipartisan group of House members has introduced legislation to expand a prescription drug discount program that benefits low-income individuals.

The measure (HR 2606) would expand Medicaid's "340B" drug program to allow more hospitals and community health centers to purchase drugs at discounted rates. Health care providers who qualify for the program pay 40 to 50 percent less for prescription drugs than average wholesale price, the bill's sponsors said.

Introduced by Rep. Bobby L. Rush, D-Ill., and cosponsored by Reps. Jo Ann Emerson, R-Mo., and Bart Stupak, D-Mich., the proposal would expand the program to inpatient services for hospitals currently covered under the program. It also would help critical access hospitals, sole community hospitals, rural referral centers, Medicare-dependent hospitals, and other providers.

The program was created as part of a 1992 veterans' health care law (PL 102-585) and was designed to limit the cost of outpatient pharmaceutical drugs paid by safety net hospitals, community health centers, and other providers who serve the most vulnerable patient populations. The law requires pharmaceutical manufacturers participating in the Medicaid program to provide discounts on covered outpatient drugs purchased by participating entitles.

At a news conference Thursday, Rush and Stupak said hospitals in their districts could potentially save millions of dollars if the bill became law. For example, Mt. Sinai Hospital in Chicago would save approximately $2.5 million per year.

Rick Pollack, executive vice president of the American Hospital Association, said the measure would help hospitals now struggling to survive. "With resources already stretched to the limit, discounts on drugs will serve as welcome relief to spiraling pharmaceutical costs," Pollack said. He also said the Medicaid program would "see lower costs for achieving much-needed prescription drug savings."

Rush said he was confident that the Energy and Commerce Committee—the panel on which he and Stupak serve—would pass the bill and it would get to the House floor by the end of the year.

Ken Johnson, senior vice president of the Pharmaceutical Research and Manufacturers of America (PhRMA), said the group was reviewing the legislation, but noted that it would expand the Medicaid drug discount program "substantially."

"Adding new categories of covered entities to the 340B program and allowing each covered entity to use multiple contract pharmacies without any safeguards are imprudent given recent evidence that the program's safeguards against drug diversion may not be working effectively," Johnson said in a statement.

In addition, he said, the measure would expand "pharmaceutical product price controls, which various studies . . . have shown can discourage innovation."

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