[Ip-health] News: Medicare Proposal Urges Incentives for Generic Drugs (NY Times)

[Kate Krauss]

March 6, 2002

Medicare Proposal Urges Incentives for Generic Drugs

By ROBERT PEAR
=20

WASHINGTON, March 5 =8B House Republicans drafting legislation to add
prescription drug benefits to Medicare said today that they would encourage
the use of low-cost generic drugs as an alternative to brand- name medicine=
s
and would try to persuade drug makers to curtail advertising, which has bee=
n
blamed for rising costs.

In the three years that lawmakers have been debating ways to add
prescription drug coverage to Medicare, this is the first time that a
consensus has developed among legislative leaders in both parties favoring
financial incentives for the use of generic drugs as a way to lower costs.

One option is to charge a higher co- payment to Medicare beneficiaries who
buy brand-name medicines rather than generic drugs, which have the same
active ingredients. This is an approach adopted by many private health plan=
s
in recent years. The advertising proposal, however, is novel, and has
already drawn criticism from drug manufacturers and the advertising
industry.

Another option, House Republicans said, is to require patients to pay the
difference between brand- name medicines and the generic versions, which
usually cost much less.

In an interview, Representative Bill Thomas, Republican of California, who
can shape the future of Medicare as Ways and Means Committee chairman, said
patents on many best-selling drugs would expire in the next five years,
allowing generic drugs to enter the market.

If a doctor has a medical reason for prescribing a brand-name drug, he said=
,
Medicare should pay for it. But, he added, if a generic drug works just as
well and the patient wants the brand-name product, the patient should pay
the extra cost.

"If a physician believes that the generic drug meets the needs of a
particular patient, but the patient still wants the brand-name product they
saw advertised on television, then the patient should be able to have the
drug they want, but they shouldn't have it paid for by taxpayers," Mr.
Thomas said. "If the patient wants it enough, they can pay the difference."

Some senators, including Charles E. Schumer, Democrat of New York, and John
McCain, Republican of Arizona, have said they, too, favor incentives to
promote the use of generic drugs. Many governors, labor unions and large
employers, including Wal- Mart and General Motors, have called on Congress
to speed access to generic drugs, saying such medicines could save billions
of dollars.

Medicare generally does not pay for drugs outside the hospital, but
President Bush and most members of Congress have said they want to add such
coverage.

Greater use of generic medications would help control the cost of
prescription drug benefits under Medicare, Mr. Schumer said. "How can you
get more bang for the buck?" Mr. Schumer asked. "Generics are the answer,
the best cure we have right now."

House members of both parties said they were seeking ways to slow the
explosive growth in retail advertising of prescription drugs. They said the=
y
believed that such advertising had contributed to sharp rises in consumer
spending on drugs, one of the fastest-growing items in the nation's health
care budget.

One idea being considered by House Republicans is to charge a higher
co-payment on drugs that are advertised to consumers.

Thus, they said, Medicare might set three levels of co-payment.
Beneficiaries would have to pay the largest amount for advertised brand-
name medicines; a smaller amount for brand-name drugs that were not
advertised, and a very low charge for generic drugs, which as a rule are no=
t
advertised to consumers.

Critics of retail drug advertising say it tends to cause overuse and
inappropriate use of prescription drugs. But drug makers and advertising
agencies say inform and educate consumers.

Richard F. O'Brien, executive vice president of the American Association of
Advertising Agencies, said he was deeply concerned about Congressional
efforts to restrict pharmaceutical advertising. "Advertisers should have th=
e
right to talk about their products to the public, as part of their First
Amendment rights," Mr. O'Brien said. "With increasing frequency in recent
years, the Supreme Court has protected the right of commercial speech."

Mr. Thomas said that consumer education was certainly one purpose of
advertising, but that the desire to increase drug sales and "market share"
was another purpose.

"You cannot ignore the growing amount that's being spent on pharmaceutical
advertising," Mr. Thomas said. "The decision to advertise or not advertise
would be left completely up to the company. But the idea that you are going
to drive up market share by advertising on a product that isn't medically
necessary ought not to be in anyone's mind."

A bill introduced by Representative Pete Stark, Democrat of California,
would deny tax deductions for consumer advertising that presents the
benefits of a drug without accurately describing the risks.

"Such unbalanced advertising is both dangerous and costly," said Mr. Stark,
an expert on Medicare. "Dangerous because it can lead to patients' taking
drugs that they should not be taking, and costly because it raises the
prices of prescription drugs for everyone."

Since the Food and Drug Administration relaxed restrictions on consumer
advertising of prescription drugs in 1997, the amount spent on such ads has
more than tripled, to $2.5 billion in 2000, according to a study by the
National Institute for Health Care Management, a nonprofit, nonpartisan
group.

Retail spending on prescription drugs, which totaled $132 billion in 2000,
has been increasing more than 17 percent a year, and the 50 most heavily
advertised drugs account for half of the yearly increase, the institute
said.