Mental Health Drugs at Issue in Part D Debate

March 1, 2007
Stephen Barlas
Volume 24, Issue 3

The price and availability of psychiatric drugs is expected to be one of the major issues as Congress decides whether to try to find a way to force pharmaceutical manufacturers to lower the prices they charge Medicare Part D drug plans. Antidepressants, antipsychotics, and anticonvulsants are among the 6 categories for which Part D formularies must make available "all or substantially all" medications. As a result, the formularies are unable to bring to bear the drug price reduction strategies they use in other categories.

The price and availability of psychiatric drugs is expected to be one of the major issues as Congress decides whether to try to find a way to force pharmaceutical manufacturers to lower the prices they charge Medicare Part D drug plans. Antidepressants, antipsychotics, and anticonvulsants are among the 6 categories for which Part D formularies must make available "all or substantially all" medications. As a result, the formularies are unable to bring to bear the drug price reduction strategies they use in other categories.

"My view is that these classes are the main problem with Medicare Part D because the current regulations have created weak incentives for cost minimization and do not permit plans to affect demand in response to the cost of a drug, as they do in other classes," Fiona M. Scott Morton, professor of economics at the Yale School of Management, told the Senate Finance Committee on January 11.

Tom Leibfried, deputy director of congressional affairs for the American Psychiatric Association, said he heard Scott Morton's testimony, which he termed "troubling." He explained, "She did not look at the complete cost picture. If a psychotic [person] suddenly loses access to a medication he has been taking successfully and has to be switched to an alternative, there may be a problem with compliance. It could result in higher utilization of emergency room services, for example."

The Centers for Medicare & Medicaid Services (CMS), which runs the Medicare program, cited potentially high physician utilization as 1 of 4 reasons for instituting the "all or substantially all" policy, which was established via guidance, meaning that it has somewhat shaky legal standing.

Leibfried pointed out that Leslie Norwalk, the acting administrator of the CMS, has said that Medicare would be forced to change its "all or substantially all" policy if Congress passes legislation mandating Medicare price negotiation with drug manufacturers.

The cost implications of the "all or substantially all" policy are exacerbated by the fact that some 29% of the 38 million Part D plan participants are what is known as "dual eligibles," meaning that they have a disability, in most cases mental, that had entitled them to medications through Medicaid before January 2006. These individuals were older than 65 years, and so they were switched to the Medicare Part D drug program when it began just over a year ago. As a result, drug companies were able to raise their prices for antipsychotics and antidepressants taken by dual eligibles now under Part D, because Medicare does not require drug companies to sell drugs at their "best price," as Medicaid does.

The potential jeopardy of psychiatric drug availability under Medicare stems from House approval of a bill (HR 4) requiring the secretary of the Department of Health and Human Services (HHS) to negotiate with drug companies to lower their prices. The Medicare Modernization Act of 2003, which created the Part D drug benefit, has a noninterference clause, which prohibits that negotiation or the establishment of any national formulary for Medi-care. Each individual Part D plan has a formulary that follows general guidelines on a number of therapeutic classes. The House bill does not specifically require a national Medicare formulary, however.

Despite its quick passage and bipartisan support, the House bill seems doomed in the Senate, where Finance Committee Chairman Max Baucus (D, Mont) has said that he would support elimination of the noninterference clause but not a requirement that the secretary of HHS actually negotiate with the companies. In any case, President Bush has said that he would veto the House bill and Democrats there do not have enough votes to override a veto.

That does not mean that Senate Democrats and Republicans won't look for any alternative means of slicing drug costs for Medicare recipients. Senators Ron Wyden (D, Ore) and Olympia Snowe (R, Me) have introduced a bill, for example, that requires the secretary of HHS to negotiate prices in instances in which there is 1 brand-name drug in a therapeutic category, in which a drug was created with substantial taxpayer funding for its research and development, or in which a private plan asks for help with prices.

CMS Finalizes Rules for Seclusion and Restraints
Medicare has made a couple of changes to its final rules on use of restraints and seclusion in hospitals that will affect psychiatrists. These rules, which the agency has been tinkering with ever since it issued a proposed rule on Conditions of Participation (CoPs) for hospitals in 1997, affect all hospitals, including specialized psychiatric hospitals, that receive money from either Medicare or Medicaid.

In general, facilities must first try less intrusive methods to pacify a patient whose behavior is an immediate threat to himself, other patients, or staff. Only then can seclusion and restraints be used, and even then their use comes with numerous conditions.

Drugs such as sedatives are still considered restraints, as they were in the proposed rule issued in 1997, and cannot be used to pacify unruly patients. The CMS, however, made it clear in the final rule that psychotropic medications that act as sedatives could still be given to calm patients-and not be considered restraints-if the drug used is a "standard treatment or dosage for the patient's condition."

Another change the agency made was to allow a trained registered nurse or physician assistant to conduct the face-to-face evaluation required 1 hour after a patient is restrained or secluded for management of violent or self- destructive behavior. In the CoPs that Medicare initially published in 1997, only physicians or "other licensed independent practitioners" could do that 1-hour evaluation.