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February 22, 2006     (512) 463-0300

SENATE FINANCE COMMITTEE CONSIDERS NEW FEDERAL DRUG PROGRAM

The Senate Finance Committee today heard testimony regarding the state's savings through the a new federal drug program, and the difficulties Texas pharmacists are having in switching over to the federal system. Beginning on January 1, 2006, the federal government implemented a new plan to cover most of the cost of providing prescription drugs to Medicare members. Known as "Medicare Part D", this program replaces the states' responsibility for paying for drugs for retirees.

According to Legislative Budget Board analysts, the state will see savings of about $400 million per year in its Medicare budget. Most of these savings, however, will be sent back to the federal government to offset its cost in providing drug coverage. After sending back this money, and paying for other miscellaneous costs to the federal government related to Medicare Part D, Texas should save about 10 percent of its annual Medicare budget.

The federal program, administered by the Centers for Medicare and Medicaid Services (CMS), has had some difficulty in extending coverage to all eligible patients, especially those who qualify for both Medicare and Medicaid. Under the new law, these patients, called "dual-eligibles", will receive prescription drug coverage from Medicare Part D. Because of implementation and computer-related problems, most of these dual-eligibles are not yet covered by the federal program. CMS has authorized state governments to pay for drug coverage for these patients out of existing state health funds, with the promise of 100 percent reimbursement in the future. This reimbursement program originally covered costs through February 15, but allows states to extend this deadline on a week-to-week basis. Texas is currently in its second such extension.

One of the problems this confusion regarding payment has caused is an increased cost to pharmacies. Richard Beck, Executive Vice President of Pharmacy Affairs for American Pharmacies, an independent pharmacy co-op, says that many local pharmacists are obligated to provide patients with medications, without seeing payment from the state or federal government for weeks or even months. He added that pharmacists in the state have spent millions of dollars to educate employees and patients about the new, often confusing system, and have had more difficulty in signing up patients for the correct drug plan.

Still, the overwhelming problem, says Beck, is the cost that pharmacies are incurring over delayed payments from the government. One pharmacist in the co-op has had to close his business because of these increased costs, and more are considering closing or borrowing hundreds of thousands of dollars to offset expenses.

Session video and all other webcast recordings can be accessed from the Senate website's audio and video archive pages.

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