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Medicare Drug Coverage: Very Much Still a Work in Progress

Executive Summary

After decades of public policy debate, the passage of a prescription drug benefit for seniors-Medicare Part D-hardly settles the issue. Indeed, the heavy lifting really begins now because the recently enacted legislation represents a model drawn more in sand than stone. So there is plenty of time and opportunity for all parties to continue to shape this program more to their liking. For the moment, we do know that seniors are slated for drug coverage beginning in 2006 and price controls are off the table. But there are still major questions concerning the implementation. Looming over the whole debate: the specter of rising costs. The Congressional Budget Office's $400 billion prediction-for the ten years spanning 2004 to 2013-has already been characterized as too low. Bush administration aides estimates that the figure should be closer to $540 billion. Given all this uncertainty, the drug industry should be prepared for rough Medicare seas in the foreseeable future.

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Making His Mark on CMS: McClellan & Cost-Effectiveness

As the new leader of the Centers for Medicare and Medicaid Services (CMS), Mark McClellan, MD, PhD, faces two immediate priorities in implementing the new Medicare Prescription Drug Act. First, he needs to rollout the temporary drug discount card program. Second, he will oversee the promulgation of regulations to further clarify the law's meaning. But this isn't all that's on McClellan's mind. He's thinking more broadly about his opportunity to run CMS.

Making His Mark on CMS: McClellan & Cost-Effectiveness

As the new leader of the Centers for Medicare and Medicaid Services (CMS), Mark McClellan, MD, PhD, faces two immediate priorities in implementing the new Medicare Prescription Drug Act. First, he needs to rollout the temporary drug discount card program. Second, he will oversee the promulgation of regulations to further clarify the law's meaning. But this isn't all that's on McClellan's mind. He's thinking more broadly about his opportunity to run CMS.

Concerning Canada

It's technically illegal for US citizens to buy pharmaceuticals from Canada, but that's not stopping anybody. Indeed, the trend is gaining momentum at the state level. Pharmaceutical and biotech companies have a range of options for responding to re-importation, such as emphasizing the safety risks of new purchasing channels, limiting shipments into Canada, and getting tougher in price negotiations. Making pricing a trade issue might help the industry, but it's a tough case to argue. If worse comes to worst, companies may need to take legal recourse. If re-importation continues unchallenged, it is likely to lead to US price controls.

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