Problems with Pennsylvania’s Prescription Drug Assistance Program Could Be Bellwether for National Drug Benefit

The New York Times on July 13 examined how Pennsylvania's prescription drug assistance program for seniors, which has been experiencing cost-control problems, illustrates the "problems that could become endemic if Congress adds drug benefits to Medicare." Under the program, called Pennsylvania Pharmaceutical Assistance Contract for the Elderly, individuals over age 65 with annual incomes less than $14,000 and couples with annual incomes less than $17,200 can purchase medications for $6. Participants pay no additional costs, and the state places no annual cap on reimbursements for prescriptions. About 225,000 individuals, or 12% of the state's seniors, participate in PACE, which the state established in 1984. The cost of PACE, financed with proceeds from the state lottery, has increased an average of 13% per year since 1997, to $392.6 million in 2001, but revenues from the lottery have remained "flat." In addition, although enrollment in PACE has decreased, the average number of prescriptions filled per participant has "steadily increased" to more than 3.5 per month, up from 2.5 in 1997 and two in 1987. Despite the program's "significant use" of lower-cost generic drugs, the state currently pays an average of $42 per prescription, an increase from $27 in 1997 and $14 in 1987. Ray Landis, an AARP lobbyist, said Pennsylvania's experience should "teach federal officials to be cautious in making assumptions and projections."

Controlling costs
State officials have concluded that they must take "more aggressive steps" to control costs in the program. However, like some members of Congress, "they have been virtually immobilized by lobbying" from senior advocacy groups, pharmacists and pharmaceutical companies that are not "willing to make significant sacrifices," the Times reports. State Sen. Timothy Murphy (R) has introduced a bill (SB 1400) that would establish a prescription drug formulary in PACE, charge participants higher copayments for medications not on the formulary and encourage seniors to use mail-order pharmacies to obtain medications for chronic conditions. In addition, the legislation would establish new limits on reimbursements for generic drugs and would mandate that the state pay no more than the "best price" charged for a prescription drug nationwide to help "extract large discounts" from brand-name drug companies. The bill also would require pharmaceutical companies to pay rebates to the state to offset price increases higher than the inflation rate (Pear, New York Times, 7/13).