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February 24, 2006
Implementation of Medicare Part D
Below if the testimony of Walgreen's CEO concerning how Medicare Part D is working from their perspective.
Testimony
of David W. Bernauer
Chairman and Chief Executive Officer
Walgreen Co.
February
08, 2006
Chairman Grassley, Ranking Member Baucus, and Members of the Senate Finance
Committee, I am David W. Bernauer, Chairman and Chief Executive Officer of Walgreen
Company, which is based in Deerfield ,
Illinois
Walgreens is the nation's largest pharmacy chain with sales of more than
$42 billion last year. We have provided pharmacy service to patients for 105
years and have more experience meeting the prescription needs of patients than
any other pharmacy in the country. Today, we operate more than 5,100 pharmacies
in 45 states and Puerto Rico
Preparing Walgreens for Medicare Part D
Walgreens and the chain drug industry in general recognize that Medicare
Part D is the most significant expansion of Medicare since its inception. We
are pleased that millions of additional seniors now have access to prescription
drug coverage as a result of the new Part D benefit. However, there have been
several important challenges for beneficiaries and pharmacists in transitioning
to the new Part D benefit.
We appreciate all the steps that have been taken by CMS, states, and plans
to work with us to ease this transition for beneficiaries and pharmacists. For
example, we appreciate all the time and effort expended by CMS in working with
our industry and the health plans in developing the “TrOOP facilitator”. This
tool allows pharmacies to electronically query a special database that is
supposed to instantaneously return information to the pharmacist about the Part
D plan in which a Medicare beneficiary has been enrolled, including the
beneficiary's billing information. It will also facilitate coordination of
benefits with other payers. The development of the TrOOP facilitator was a very
important public-private partnership that should serve as the model for how
current and future Medicare Part D implementation issues are addressed.
We appreciate the fact that many senior HHS and CMS officials have visited
dozens of retail pharmacies across the nation over the past few weeks –
including Walgreens' pharmacies – to see first hand the challenges that
pharmacists and beneficiaries are having with Part D. We know from talking with
them that these visits have been an eye-opening educational experience. We hope
these visits have helped them better understand the environment in which we
provide pharmacy services and result in practical ideas and solutions for
addressing the issues that were brought to their attention.
At Walgreens, our pharmacies are committed to helping seniors understand
the new Part D drug benefit. Like many other chain pharmacies, we developed an
extensive education and outreach program to train our pharmacists, district
pharmacy supervisors, and other senior personnel about Part D. We've had more
than 1,400 pharmacy staff employees volunteer to speak in their communities to
senior groups about Part D and educate them on the benefits and enrollment
process. In fact, our pharmacists will continue these senior outreach efforts
throughout the enrollment period. Twice last fall, we held week-long Medicare
Part D information days at our pharmacies nationwide. We also developed our own
Medicare prescription insurance plan report - called the Walgreens Rx Savings
Advisor - which provides seniors with a free, personalized list of Part D plan
options based on their current prescription drug needs. We have provided
500,000 individually, personalized reports to date, including 282,000 in
January alone. Our patients have found this to be an important part of their
decision process in selecting a Medicare Part D drug plan.
In addition, many of our pharmacists have taken extra time and effort to
learn the “ins and outs” of Part D so they can help beneficiaries understand
how to make the most of the new drug benefit. Pharmacists are also doing all
they can to be sure that Medicare beneficiaries' prescriptions are filled in a
timely manner. I know that many of our pharmacists have worked long hours to
obtain correct billing information for beneficiaries as well as correct copay
information. I cannot say enough about the dedication of the pharmacists that
work for Walgreens – and pharmacists all across the country – in trying to make
this benefit work.
Walgreens knew that implementing Part D would be a monumental task, and
that the proverbial “rubber would meet the road” at the 52,000 community retail
pharmacy counters across the country. Consequently, we did everything possible
to prepare our pharmacists and pharmacy staffs understanding they would have an
essential role in making the program work. That's because pharmacists know
their patients' medication needs, and are ultimately responsible for providing
them with their prescriptions. Pharmacists know the importance of medications
in managing the chronic medical conditions of the elderly.
Current Implementation Issues with Part D
We want to provide you with an honest assessment of how the Part D program
is going from the pharmacy perspective, now that we are well into the second
month of the program's operation. In general, implementation of the program is
going better as compared to the early weeks of the program. This is due
primarily to tens of thousands of individual efforts by CMS staff, the insurance
plans, and pharmacists across the country who found ways to navigate through
the roadblocks of determining coverage for their Medicare patients.
As more and more beneficiaries receive their actual identification cards
from Part D plans, and CMS and the plans enter data into the TrOOP facilitator
more quickly, the situation is improving. Today, the chances are greater that
the beneficiaries' plan and billing information will be active when the
beneficiary comes into the pharmacy as compared to a few weeks ago. In fact,
the lack of accurate data in the system was the primary reason why so many low
income individuals may have been charged higher copays than they should have
been charged.
Walgreens would like to make some recommendations on how CMS, states and
Part D plans might address some of the implementation issues we are having with
Part D:
Modify Enrollment Effective Dates: Because individuals are becoming eligible
for Medicare everyday, and the dual eligibles have the option of changing plans
every month, one systemic issue that needs addressing is what's commonly
referred to as the “enrollment lag”.
Right now, a beneficiary can join a Part D plan anytime during a month and
expect the enrollment to be effective the first day of the next month. But if they
apply in the last few days of the month, it is not possible for CMS and the
plans to process the beneficiary's application, confirm eligibility with CMS,
and provide the critical “4Rx” billing information to TrOOP facilitator – so
that it is in the pharmacy system - in such a short timeframe.
In fact, the lack of data in the system as a result of late-month
enrollments or plan switches has been, and may continue to be, the single most
challenging issue that pharmacists face with Part D. If we don't have the data,
we cannot fill the prescription, and that triggers a whole series of potential
calls to CMS and the plans to obtain this billing information. For this reason,
we suggest that policymakers address the ”enrollment lag” issue.
Multiple options are available to address this issue, and we want to work
with CMS and plans to find a solution. Some see the solution as educating
beneficiaries that, by enrolling late in a month, there will be delays in the
activation of their prescription drug coverage. Others have suggested that an
enrollment deadline be established each month so that there is sufficient time
to process applications and enter the billing information in the system.
Whatever the options, it is important to address this systemic issue soon.
Promote Standardization among Plans' Policies and
Procedures: Virtually
100% of all prescription claims are processed electronically today, making
pharmacy claims processing far more efficient than any other segment of health
care. Yet, third-party prescription administrative issues still consume almost
one-quarter of the average pharmacist's work time. These administrative tasks
have further multiplied as Part D has come on line due to the dozens of new
Part D plans each having their own policies, processes and procedures for
pharmacists to follow in order to fill prescriptions.
Like most chain pharmacy companies, Walgreens has developed standard
workflow processes in our pharmacies that allow for the most efficient filling
of prescriptions. But, these varied and onerous third party prescription
processing issues disrupt the pharmacy workflow and dramatically reduce the
efficiency in filling prescriptions for Medicare beneficiaries.
We would all agree that the pharmacist's time is better spent interacting
with Medicare beneficiaries and other patients, helping them to understand how
to take their medications, rather than sorting through paperwork. In addition,
the tens of thousands of hours spent each year by pharmacy personnel in
resolving these third party administrative issues needlessly drive up the costs
of these programs for plans and the Federal government. Thus, it would seem to
be to everyone's benefit to reduce the administrative costs of processing
prescriptions.
To that end, we urge CMS to use its leverage, as the largest payer for
prescription drugs in the nation, to bring plans and pharmacies together to
create and require more standardization in third party prescription claims
processing, pharmacy messaging, and procedures that would benefit Medicare Part
D, Medicaid, and other Federal health care programs. For example:
· Some Part D plans require that we fax
forms to physicians to obtain prior authorization to dispense some medications,
while other plans require us to call the plans' “help desk.” We need plans to
develop consistent and standard messages and procedures for pharmacists. For
example, all plans should have the same method for overriding messages on
non-formulary drugs and for dispensing transitional supplies of medications. We
also suggest that CMS standardize the plans' transition policies to reduce
confusion among pharmacies and beneficiaries, and do a much better job of
explaining the policies on the front end.
· Part D plans should also develop
consistent messages to pharmacies that differentiate when a drug is “non
formulary” in contrast to when a drug is “not a Part D covered drug”, such as a
benzodiazepine. A message that simply tells the pharmacist that a drug is “non
formulary” is not descriptive enough for the pharmacist to make this
distinction.
Because of the lack of clarity in the message, some pharmacists may spend
time seeking approval from Part D plans for a drug that would never be covered
under Part D. This is a poor use of time for the pharmacist, the plan, and the
beneficiary.
If a plan is not going to cover a drug because it is not on the formulary,
the pharmacist needs to know that information at the point of sale, so they can
take necessary steps to bill any other wrap-around coverage that the
beneficiary might have.
· Part D plans also need to return
information to the pharmacist about formulary medication options if the
medication prescribed by the physician is a non-formulary drug. The
infrastructure is in place to allow for this, but no one has required plans to
do this. This has become, and will continue to be, a big issue with dozens of
Part D plans, each with a different formulary and different tiers within their
formulary, not to mention that each plan can change the drugs on the formulary
with a simple 60 days notice. It is literally impossible for pharmacists to
keep track of all these formularies. Part D plans have posted formularies on
their websites, and such information is also available through Epocrates, but
it remains much more efficient for the pharmacist if the plan returns the
information in a message to the pharmacist at point of sale. This reduces the
wait time for the beneficiary and can reduce the number of inquiries to the
plan; hence, the need for when a plan rejects coverage, it should include a
message to the pharmacist indicating formulary options for the prescribed drug.
· It is important that we work through
issues relating to when a drug is covered under Medicare Part B versus Part D.
There is potential overlap for coverage under both programs depending on how a
medication is being used and how it is being administered. We believe it's
important to minimize the extent to which plans are using “prior authorization”
on drugs that could be covered under either Part B or Part D. We need to work
toward a solution that provides Part D plans with important clinical
information from the Part B DMERCs so that the plan can determine whether the
pharmacist should bill the drug to Part D or Part B without costly and
burdensome prior authorizations.
Ensure that States Work Directly with Part D plans
and CMS on Reimbursement: Many states felt compelled to step up to the plate during the early days of
Part D implementation and cover the prescription drug costs and copays of some
of their dual eligibles who couldn't obtain their drugs under Part D. We have
been working with the states that have implemented these programs to ensure
that we understand their interim policies. Some states have defined and
implemented their programs better than others, and the wide variety of these
programs has been another challenge to processing claims for dual eligibles.
Almost every state has indicated that they intend to seek recovery of the
funds that they are spending for these temporary programs from Part D plans.
Pharmacies have worked diligently to only bill these temporary state Medicaid
programs as a payer of last resort. Pharmacists are making every reasonable
effort to bill a Part D plan or the Wellpoint/Anthem Point of Service (POS)
system, if the dual eligible individual comes to the pharmacy without their
identification card, and/or the information cannot be found in the TrOOP
facilitator. However, pharmacists cannot be expected to spend countless hours
on the phone trying to get these two options to work before they bill a state.
States should work directly with Part D plans to recover any monies that
they spent for Part D drugs without involving pharmacies as billing
intermediaries. CMS has pledged to pay states for the costs of covered Part D
drugs – without involving pharmacists - through a temporary demonstration
program. To be eligible for this demonstration program, the state must cease
operating their emergency coverage programs by February 15 th . That may be an
unrealistic deadline if additional problems occur in February with the dual
eligibles, so we urge CMS to approach that deadline with flexibility.
However, we think that CMS and the states should recognize that retail
pharmacy does not want to be caught in the middle of recovery and collection
efforts if states and plans have disputes regarding whether prescriptions
should have been dispensed. We encourage states to carefully consider using
this demonstration program to recoup their monies. We also ask CMS to use their
influence to dissuade any state from using a pharmacy recoupment initiative to
recover monies from Part D plans through retail pharmacies. Moreover, we urge
CMS to require that states ensure that pharmacies are made whole for the tens
of thousands of emergency prescriptions that they dispensed to Medicaid
recipients when the pharmacist was unable to file a claim with a Part D plan.
Similarly, as in the case with states that are seeking recoupment of monies
from Part D plans, we believe that pharmacies must not be caught in the middle of
any payment reconciliation that might have to be made between Part D plans if,
for example, the beneficiary has switched from one plan to another. Any
adjustments that need to be made between plans in these situations should be
done through a plan-to-plan reconciliation process, rather than involving
retail pharmacies as billing intermediaries. We encourage CMS to do all they
can to encourage plans to complete work on the plan-to-plan reconciliation
process that was started several months ago to avoid these potential
situations.
Addressing Part D Issues Moving Forward
Right now, we are all working together to address implementation issues in
the very early stages of the new Part D benefit. We are making progress, but we
obviously have more work to do and we are willing to do our part. The fact of
the matter is that we may be fine-tuning this benefit for many years to come.
Beyond the issues that we have already described, we see several other critical
first-year implementation issues for the Part D program.
For example, we should consider that there will be significant challenges
in moving millions of beneficiaries from the non-formulary drugs they currently
take to a plan's formulary drugs. This will have to occur before exhausting
their transition supplies of non-formulary drugs. This challenge will be
especially pronounced for the dual eligibles. These individuals generally take
more medications than other Medicare beneficiaries, so transitioning them to
formulary medications should occur as soon as possible, but as safely as
possible because of the time that it may take. We believe that CMS' recent
decision to require plans to provide a 90-day supply of transition medications
– rather than just a 30-day supply -- will ease the transition to formulary drugs.
However, plans, beneficiaries, and physicians must use this extended time
frame to aggressively start the transition now. To that end, CMS must monitor
whether plans are taking the necessary steps over the next few weeks to help
beneficiaries understand what they need to do and how they need to do it in
order to transition to formulary drugs, so that confusion and delay at the
pharmacy are minimized. The burden of helping beneficiaries to transition their
medications is a shared responsibility, not just the responsibility of
pharmacists.
We also think that there could be a significant last-minute enrollment
surge among beneficiaries before the May 15 th open enrollment deadline. This
could create a sudden surge of individuals that want to use their benefit on
June 1. The entire system needs to be prepared to process these applications
quickly, get the information in the TrOOP facilitator, and be ready to fill
prescriptions for these beneficiaries.
Finally, we are concerned about managing the expectations of individuals
that will fall into the “donut hole” or coverage gap during the middle of the
year. While many seniors were probably aware of the “donut hole” when they
signed up for a plan, we are concerned that some did not or will not fully
understand the issues relating to the “donut hole”. CMS and the plans should
consider ways to help educate beneficiaries about the implications of the
“donut hole” as the middle of the year approaches so that pharmacists do not
bear all the burden of helping seniors understand this component of the benefit
design.
Other Challenges Facing the Industry
While this hearing has been called to examine Medicare Part D
implementation issues, we want to provide the Committee with our views on
another important issue facing the industry. The Budget Reconciliation bill
includes significant cuts to Medicaid. In particular, the bill would reduce
payments to pharmacies for generic medications by about $6.3 billion over the
next 5 years. Walgreens is very concerned about these cuts for several reasons.
· We are concerned that these reductions
in payment will take away much of the incentive for pharmacies to dispense
generic medications. We are perplexed why policymakers and the Congressional
Budget Office (CBO) believe that decreasing generic payments will increase
generic drug dispensing. The total reimbursement to Walgreens for a Medicaid
single-source brand-name drug averages $128, while the average generic
reimbursement is $20. Clearly, increasing generic utilization is the most
effective way to reduce Medicaid costs. In fact, with these payment reductions,
just the opposite will happen, leading to higher – not lower – drug costs to
the government. We believe that many states will need to take action this year
to increase their generic dispensing fee, or they may see a reduction in
generic drug dispensing in their states.
· There is an aggressive implementation
timeline for the new Medicaid pharmacy payment provisions included in the
legislation. In fact, the first implementation milestone occurs this July when
CMS is supposed to make Average Manufacturers Price (AMP) data available to the
states and the public. We are concerned that, under the current definition of
AMP, these data will not reflect the actual prices paid by retail pharmacies
for brand and generic medications. As a result, they could provide a misleading
picture to states, private plans and consumers about the true acquisition costs
of retail pharmacies.
Unfortunately, these data will become public a whole year before CMS
provides more specific direction to manufacturers on how to calculate AMP. That
regulation is expected in July 2007. That means for at least a 12 months, data
will be available in the public realm that may not accurately reflect retail
pharmacies' acquisition costs for prescription drugs. We believe that these
data should not be made public or shared with the states until the AMP can be
more accurately, appropriately, and consistently defined.
· Reductions of this magnitude in
Medicaid, coupled with the economic impact that Part D is having on pharmacy,
will undoubtedly affect access to pharmacies. We do not believe that
policymakers have considered the cumulative economic effect of these programs
on the ability of retail pharmacies to continue to stay in business. Many
pharmacies in the United
States
· The new Federal generic upper limits
are supposed to be implemented in just 11 months – January 1, 2007. Given all
the problems and issues that pharmacies have experienced with the January 1,
2006 implementation of Medicare Part D, we caution policymakers about
implementing another major change in pharmacy payment streams in such a short
period of time after Part D, and especially on January 1 st – which is already
a date of great changes for pharmacies every year.
We urge that policymakers consider the delay or revision of these Medicaid
pharmacy payment changes as the industry adjusts to the operational and
economic challenges of Medicare Part D.
Conclusion
Walgreens appreciates the opportunity to go on the record regarding these
implementation issues in the early stages of the new Medicare Part D benefit.
We are committed to working with Congress, CMS, states, plans and beneficiaries
to ensure that the benefit is delivered in the most efficient manner. We know
that many of these issues will eventually be resolved, but other issues will
develop down the road that will also have to be addressed. We ask that you call
on us if we can provide any further information about these issues. Thank you.
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