U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

89–865 PDF 2014

MESSING WITH SUCCESS: HOW CMS’ ATTACK 

ON THE PART D PROGRAM WILL INCREASE 

COSTS AND REDUCE CHOICES FOR SENIORS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

FEBRUARY 26, 2014 

Serial No. 113–119 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

RALPH M. HALL, Texas 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

BEN RAY LUJAN, New Mexico 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

SUBCOMMITTEE ON HEALTH

JOSEPH R. PITTS, Pennsylvania 

Chairman 

MICHAEL C. BURGESS, Texas 

Vice Chairman 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

CATHY MCMORRIS RODGERS, Washington 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

RENEE L. ELLMERS, North Carolina 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

JOHN D. DINGELL, Michigan 

ELIOT L. ENGEL, New York 

LOIS CAPPS, California 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

GENE GREEN, Texas 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

HENRY A. WAXMAN, California (ex officio) 

(II) 

(III) 

C O N T E N T S 

Page 

Hon. Joseph R. Pitts, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 1 

Prepared statement .......................................................................................... 2 

Hon. Marsha Blackburn, a Representative in Congress from the State of 

Tennessee, opening statement ............................................................................ 3 

Hon. Frank Pallone, Jr., a Representative in Congress from the State of 

New Jersey, opening statement .......................................................................... 9 

Hon. Gene Green, a Representative in Congress from the State of Texas, 

opening statement ................................................................................................ 10 

Hon. Michael C. Burgess, a Representative in Congress from the State of 

Texas, opening statement .................................................................................... 10 

Hon. John Shimkus, a Representative in Congress from the State of Illinois, 

opening statement ................................................................................................ 21 

Hon. Bill Cassidy, a Representative in Congress from the State of Louisiana, 

opening statement ................................................................................................ 21 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 24 

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

prepared statement .............................................................................................. 173 

WITNESSES

Jonathan Blum, Principal Deputy Administrator, Center for Medicare, Centers for Medicare & Medicaid Services, Department of Health & Human 

Services ................................................................................................................. 35 

Prepared statement .......................................................................................... 37 

Answers to submitted questions ...................................................................... 175 

Douglas Holtz-Eakin, President, American Action Forum ................................... 123 

Prepared statement .......................................................................................... 126 

Answers to submitted questions ...................................................................... 190 

Carl Schmid, Deputy Executive Director, The AIDS Institute ............................ 135 

Prepared statement .......................................................................................... 137 

Joe Baker, President, Medicare Rights Center ..................................................... 140 

Prepared statement .......................................................................................... 142 

SUBMITTED MATERIAL

Letter of February 18, 2014, from Jerry Neff, Chief Medical Officer, 

Centerstone of Indiana, et al., to Marilyn Tavenner, Administrator, Centers 

for Medicare & Medicaid Services, submitted by Mrs. Blackburn ................... 4 

Statement of February 26, 2014, by the National Kidney Foundation, submitted by Mr. Burgess ......................................................................................... 12 

Statement of February 26, 2014, by the American Society of Transplant 

Surgeons, submitted by Mr. Burgess ................................................................. 14 

Letter of February 26, 2014, from James L. Martin, Chairman, 60-Plus Association, to Mr. Pitts, submitted by Mr. Pitts ..................................................... 22 

Letter of March 7, 2014, from Abcam, Inc., et al., to Marilyn B. Tavenner, 

Administrator, Centers for Medicare & Medicaid Services, Department of 

Health & Human Services, submitted by Mr. Pitts .......................................... 26 

Page

IV 

Memorandum of July 29, 2008, from Daniel R. Levinson, Inspector General, 

Department of Health & Human Services, to Kerry Weems, Acting Administrator, Centers for Medicare & Medicaid Services, Department of Health 

& Human Services, submitted by Mr. Pitts 1

Report, dated July 2008, ‘‘Review of Medicare Part D Contracting for Contract 

Year 2006,’’ submitted by Mr. Pitts 1

Letter of February 25, 2014, from Alliance for Retired Americans, et al., 

to Mr. Pitts and Mr. Pallone, submitted by Mr. Pitts ....................................... 52 

Letter of February 26, 2014, from Ronald F. Pollack, Executive Director, 

Families USA, to Mr. Pitts and Mr. Pallone, submitted by Mr. Pallone ........ 55 

Letter of February 25, 2014, from David A. Balto, Attorney at Law, Independent Specialty Pharmacy Coalition, to Mr. Pitts and Mr. Pallone, submitted by Mr. Pallone .......................................................................................... 57 

Letter of February 25, 2014, from Alaska Pharmacists Association, et al., 

to Marilyn B. Tavenner, Administrator, Centers for Medicare & Medicaid 

Services, Department of Health & Human Services, submitted by Mr. 

Pallone .................................................................................................................. 60 

Letter of February 25, 2014, from Saul M. Levin, CEO and Medical Director, 

American Psychiatric Association, to committee and subcommittee leadership, submitted by Mr. Murphy .......................................................................... 80 

Letter of January 14, 2014, from Mr. Murphy to Marilyn Tavenner, Administrator, Centers for Medicare & Medicaid Services, Department of Health 

& Human Services, submitted by Mr. Murphy ................................................. 83 

Statement of February 26, 2014, by the National Association of Chain Drug 

Stores, submitted by Mr. Pitts ............................................................................ 94 

Letter of February 18, 2014, from Daniel R. Salomon, President, American 

Society of Transplantation, to Marilyn B. Tavenner, Administrator, Centers 

for Medicare & Medicaid Services, Department of Health & Human Services, submitted by Mr. Pitts ................................................................................ 101 

Letter of February 25, 2014, from Dan Weber, President and Founder, Association of Mature American Citizens, to Mr. Pitts and Mr. Pallone, submitted by Mr. Pitts .............................................................................................. 103 

Memorandum of February 25, 2014, ‘‘Proposed Interpretation of the Noninterference Provision Under Medicare Part D,’’ Congressional Research Service, 

submitted by Mr. Gingrey ................................................................................... 113 

Article, dated June 6, 2012, by Mr. Burgess, ‘‘Medicare-less: Patients will 

have fewer options under Obamacare,’’ Washington Times, submitted by 

Mr. Burgess .......................................................................................................... 170 

1The memorandum and the report are available at http://docs.house.gov/meetings/IF/IF14/20140226/101788/HHRG-113-IF14-20140226-SD006.pdf. 

(1) 

MESSING WITH SUCCESS: HOW CMS’ ATTACK 

ON THE PART D PROGRAM WILL INCREASE 

COSTS AND REDUCE CHOICES FOR SENIORS 

WEDNESDAY, FEBRUARY 26, 2014 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON HEALTH, 

COMMITTEE ON ENERGY AND COMMERCE

Washington, DC. 

The subcommittee met, pursuant to call, at 10:01 a.m., in room 

2123 of the Rayburn House Office Building, Hon. Joseph R. Pitts 

(chairman of the subcommittee) presiding. 

Members present: Representatives Pitts, Burgess, Shimkus, Murphy, Blackburn, Gingrey, Lance, Cassidy, Guthrie, Griffith, Bilirakis, Ellmers, Barton, Pallone, Capps, Schakowsky, Green, Barrow, Christensen, Castor, Sarbanes, and Waxman (ex officio). 

Staff present: Clay Alspach, Chief Counsel, Health; Sean 

Bonyun, Communications Director; Matt Bravo, Professional Staff 

Member; Karen Christian, Chief Counsel, Oversight and Investigations; Noelle Clemente, Press Secretary; Paul Edattel, Professional 

Staff Member, Health; Brad Grantz, Policy Coordinator, Oversight 

and Investigations; Sydne Harwick, Legislative Clerk; Sean Hayes, 

Counsel, Oversight and Investigations; Robert Horne, Professional 

Staff Member, Health; Peter Kielty, Deputy General Counsel; Chris 

Pope, Fellow, Health; Chris Sarley, Policy Coordinator, Environment and the Economy; Heidi Stirrup, Policy Coordinator, Health; 

Josh Trent, Professional Staff Member, Health; Ziky Ababiya, 

Democratic Staff Assistant; Phil Barnett, Democratic Staff Director; Eddie Garcia, Democratic Professional Staff Member; Kaycee 

Glavich, Democratic GAO Detailee; Amy Hall, Democratic Senior 

Professional Staff Member; Karen Lightfoot, Democratic Communications Director and Senior Policy Advisor; and Karen Nelson, 

Democratic Deputy Staff Director, Health. 

Mr. PITTS. The subcommittee will come to order. The Chair recognizes himself for an opening statement. 

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH 

OF PENNSYLVANIA 

The Medicare Part D Prescription Drug Benefit is a government 

success story. Last year, nearly 39 million beneficiaries were enrolled in a Part D prescription drug plan. Competition and choice 

have kept premiums stable. In fact, in 2006, the first year the proVerDate Mar 15 2010 14:14 Sep 29, 2014 Jkt 037690 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 F:\113-119 CMS ATTACK PART D JKT REQ 9-25-14\113-119 CMS ATTACK PART D PEND
2 

gram was in effect, the base beneficiary premium was $32.20 a 

month. In 2014, the base beneficiary premium is $32.42; a 22-cent 

increase over 9 years, and still roughly half of what was originally 

predicted. More than 90 percent of seniors are satisfied with their 

Part D drug coverage because of this. African-American and Hispanic seniors report even higher levels of satisfaction, at 95 percent 

and 94 percent, respectively. 

The program has worked so well because it forces prescription 

drug plans and providers to compete for Medicare beneficiaries, 

putting seniors, not Washington, in the driver’s seat. Part D should 

be the model for future reforms to the Medicare Program. Instead, 

in its January 6, 2014, proposed rule, the Centers for Medicare & 

Medicaid Services, CMS, proposes to dismantle the very features of 

the program that have made it so popular and successful. CMS has 

taken it upon itself to interpret the noninterference clause in the 

statute to mean that it can interfere with negotiations between 

plans and pharmacies. Congress expressly created the clause to 

prevent CMS from doing what it intends to do in this rule, yet 

CMS is choosing to ignore the law. 

The proposed rule seeks to essentially eliminate preferred pharmacy networks. A 2013 Milliman Study shows that preferred pharmacy networks will save taxpayers $870 million this year, and anywhere from $7.9 billion to $9.3 billion over the next 10 years. CMS 

itself says that 96 percent of the Part D claims it reviewed showed 

seniors saved money at preferred pharmacies, and nearly 25,500 

seniors in my congressional district have chosen Part D plans with 

a preferred pharmacy network, yet CMS would take that away 

from them. 

Today, the average senior has 35 different plans to choose from 

this year. This rule would reduce that choice to 2 plans. Fifty percent of the plans offered today will be gone, and the healthcare 

that seniors like may go with it. Limiting seniors’ choices like this 

will inevitably lead to higher cost. By some estimates, the restrictions on the number of plans that could be offered could cause premiums to rise by 10 to 20 percent. Cost to the Federal Government 

may increase by $1.2 to $1.6 billion, according to a study by 

Milliman. 

How is this beneficial? I am at a loss to understand why CMS 

has proposed these changes, and what problems with the Part D 

Drug Benefit it is attempting to solve. I don’t see how any of these 

proposals provide tangible benefits to seniors, but I do see more bureaucracy, less choice and competition, and higher cost to both 

beneficiaries and the Federal Government in the future if the proposed rule is enacted. 

I urge Secretary Sebelius and Administrator Tavenner to rescind 

this rule. And I welcome our witnesses here today. I look forward 

to their testimony. 

[The prepared statement of Mr. Pitts follows:] 

PREPARED STATEMENT OF HON. JOSEPH R. PITTS

The Medicare Part D prescription drug benefit is a government success story. 

Last year, nearly 39 million beneficiaries were enrolled in a Part D prescription 

drug plan (PDP). 

3 

Competition and choice have kept premiums stable. In fact, in 2006, the first year the program was in effect, the base beneficiary premium was $32.20 a month. In 

2014, the base beneficiary premium is $32.42—a 22-cent increase over 9 years—and 

still roughly half of what was originally predicted. 

More than 90 percent of seniors are satisfied with their Part D drug coverage because of this. African-American and Hispanic seniors report even higher levels of 

satisfaction, at 95 percent and 94 percent, respectively. 

The program has worked so well because it forces prescription drug plans and 

providers to compete for Medicare beneficiaries—putting seniors, not Washington, in 

the driver’s seat. 

Part D should be the model for future reforms to the Medicare program. 

Instead, in its January 6, 2014, proposed rule, the Centers for Medicare & Medicaid Services (CMS) proposes to dismantle the very features of the program that 

have made it so popular and successful. 

CMS has taken it upon itself to interpret the ‘‘noninterference’’ clause in the statute to mean that it can interfere with negotiations between plans and pharmacies. 

Congress expressly created the clause to prevent CMS from doing what it intends 

to do in this rule. Yet CMS is choosing to ignore the law. 

The proposed rule seeks to essentially eliminate preferred pharmacy networks. 

A 2013 Milliman study shows that preferred pharmacy networks will save tax- payers $870 million this year and anywhere from $7.9 billion-$9.3 billion over the 

next 10 years. 

CMS itself says that 96 percent of the Part D claims it reviewed showed seniors 

saved money at preferred pharmacies, and nearly 25,500 seniors in my district have 

chosen Part D plans with a preferred pharmacy network. Yet CMS would take that 

away from them. 

Today, the average senior has 35 different plans to choose from this year. This 

rule would reduce that choice to two plans. Fifty percent of the plans offered today 

will be gone, and the health care that seniors like may go with it. 

Limiting seniors’ choices like this will inevitably lead to higher costs. By some estimates, the restriction on the number of plans that can be offered could cause premiums to rise by 10–20 percent. Costs to the Federal Government may increase by 

$1.2 to 1.6 billion, according to a study by Milliman. 

How is this beneficial? 

I am at a loss to understand why CMS has proposed these changes and what 

problems with the Part D drug benefit it is attempting to solve. 

I don’t see how any of these proposals provide tangible benefits to seniors, but 

I do see more bureaucracy, less choice and competition, and higher costs to both 

beneficiaries and the Federal Government in the future if the proposed rule is enacted. 

I urge Secretary Sebelius and Administrator Tavenner to rescind this rule. 

I welcome our witnesses here today, and I look forward to their testimony. 

Mr. PITTS. Thank you, and I yield the remainder of my time to 

the gentlelady from Tennessee, Mrs. Blackburn. 

OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TENNESSEE 

Mrs. BLACKBURN. Thank you, Mr. Chairman. I thank you for the 

hearing today, and I have to agree with you, Medicare Part D is 

very popular with seniors, and the majority of beneficiaries not 

only participate in Part D, they express satisfaction with the program, and it is definitely working the way it was intended. 

I join you in being very concerned about the rule and the proposed rule. This is something that would not serve groups well, certainly not my seniors in Tennessee. There are over 250 groups 

which include patients and physicians that oppose the rule, and I 

would like to submit a letter from an organization, Centerstone. I 

submit that for the record. They provide mental health care in Tennessee. 

Mr. PITTS. Without objection, so ordered. 

[The information follows:] 

4 

5 

6 

7 

8 

9 

Mrs. BLACKBURN. And I thank the gentleman for yielding the 

time, and I yield back the balance of my time. 

Mr. PITTS. The Chair thanks the gentlelady. Now yields to the 

ranking member of the subcommittee, Mr. Pallone, 5 minutes for 

an opening statement. 

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY 

Mr. PALLONE. Thank you, Chairman Pitts. 

The Centers for Medicare & Medicaid Services, CMS, recently 

proposed program changes to the Part D Prescription Drug Benefit 

for 2015, and I believe it is important that we thoughtfully examine these changes, and the effects they will have on the program 

and on beneficiaries. 

Unlike my Republican colleagues’ tactics towards the Affordable 

Care Act, my initial opposition to the Part D law has not stopped 

me from working to improve and strengthen the program for seniors. In fact, the ACA took important steps to address the inadequacies that first caused me concern. Specifically, we closed the 

doughnut hole. So I welcome today’s hearing so we can learn from 

the agency and other stakeholders about what is working and not 

working in the Part D Program, and, of course, how we can 

strengthen the program to work better for seniors and taxpayers 

alike. 

Truthfully, it frustrates me that the Republicans are politicizing 

this issue using alarmists and exaggerated rhetoric to make a politically motivated point. Given the significance of the Medicare 

Program, I hope we can have a constructive and sincere discussion 

today on CMS’ recent proposals regarding the Medicare Drug Benefit. The committee has a valuable function of monitoring and looking for ways to improve programs under its jurisdiction, however, 

let’s not forget that CMS also plays a role in ensuring that its programs are working as effectively and efficiently as possible. One 

way it does this is by promulgating regulations to make adjustments, and respond to changes in the healthcare landscape and 

evolving needs. Importantly, part of the federal rule-making process involves making the proposed program changes available for 

public comment, and taking comments into consideration before finalizing the regulation. 

Mr. Chairman, there are many positive provisions in this rule 

that, even if it is not perfect, I do not agree with the naysayers who 

have called for its dismissal outright. Rather, we should move forward on how best to achieve our objectives for a Part D program 

that serves its beneficiaries as best as possible. For example, the 

proposed rule seeks to make improvements to transparency, and to 

reducing fraud and abuse. These are issues I think we can all 

agree are important to continue to work on. I can also see the value 

in offering meaningful choices for beneficiaries, rather than just 

more choices, which create unnecessary complexity in making plan 

choices. 

Now, there are some policies in this proposed rule that give me 

pause. In particular, the proposed Protected Classes policy. I think 

everyone here should share in the administration’s goal of lowering 

10 

prices, but I do worry that the benefits to Medicare may not outweigh the risks when it comes to vulnerable patient populations. 

So, Mr. Chairman, I just hope that today we can have meaningful discussion about these policies. I look forward to hearing from 

our witnesses about the rule, and how we can continue to improve 

and strengthen Part D. 

I’d like to yield now the remainder of my time to Mr. Green, if 

he’d like. 

OPENING STATEMENT OF HON. GENE GREEN, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. GREEN. Thank you. Thank you for yielding to me, and I want 

to thank the chairman and also the ranking member for having the 

hearing today. 

Some of us were on the committee when we drafted the prescription drug plan, Medicare Part D, in 2003, and it was also a very 

partisan issue, just like the Affordable Care Act. In fact, in some 

of my emails over the years that said that the Affordable Care Act 

was passed at night, I really remember the vote being left open for 

about 6 hours, and I think our vote was about 5:00 a.m. in the 

morning, and my colleague from Illinois knows that. So even Congress can work at night sometimes on both issues. And I also recall 

that the Affordable Care Act had trouble rolling out. We actually 

worked with our constituents to help people use community college, 

community computers to help people access it, even though I considered the plan flawed. Although over the years there have been 

changes and a reform, mainly administrationwise, and I think that 

is what we are going to see today. 

While it is clear that Part D programs provide prescription drugs 

for Medicare beneficiaries who previously didn’t have it, there is 

still room to improve the program. And I have concerns about individual provisions in the proposed rule, but I support increased 

transparency and expanded access to affordable pharmacies, and 

cost sharing for Medicare beneficiaries. 

And again, I thank my colleague for yielding the time, and I 

yield back. 

Mr. PALLONE. And I yield back, Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentleman. Now recognize the 

vice chair of the subcommittee, Dr. Burgess, for 5 minutes for an 

opening statement. 

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BURGESS. I thank the chairman for the recognition. Mr. 

Blum, welcome to our committee today, and to our other witnesses, 

we are happy to hear from you. 

So December of last year, the end of 2013, marked the 10-year 

anniversary of the creation of the Medicare Part D Prescription 

Drug Benefit. Not only has Part D come in at 45 percent under 

budget, the Congressional Budget Office has reduced its 10-year 

projections for Part D by over $100 billion for each of the last 3 

years. The success of Part D is largely attributed to its competitive, 

free-market structure. 

11 

I would remind my friend from Texas that, different from the Affordable Care Act, the Part D changes were noncoercive and based 

on free-market principles, entirely different from the ACA. 

So despite a proven track record of success, the Center for Medicare & Medicaid Services has proposed to fundamentally restructure the Part D Program; restructure it with a 700-page rule allowing the government to interfere in private plan negotiations, restrict beneficiary choice of plans, and limit incentives that lower 

costs for consumers. Only in Washington would there be a big government solution in search of a problem that simply does not exist. 

The interference by the Centers for Medicare & Medicaid Services is projected to eliminate almost half of current Part D plans 

in 2015. So what effect will that have? Well, it is going to drive 

premiums higher for nearly 14 million seniors, and increase costs 

across the entire Medicare Program. Even more concerning is the 

proposal by the Centers for Medicare & Medicaid Services to eliminate several of the protected classes of drugs under Part D. We all 

remember when Dr. McClellan came to this committee, and the 

Democrats asked some pretty incisive questions, and Dr. McClellan 

was able to defend the Part D Program based on the fact that there 

would be these protected classes under Part D. They were designed 

to ensure that vulnerable populations of patients have continued 

access to lifesaving drugs. Not all drugs are interchangeable, especially in the case of immunosuppressants. 

Without this committee getting into the pharmacology of how 

these drugs work, if we don’t understand how they work, how can 

we change the policy so that—and not affect the patient at the 

same time? The removal of these drugs from protected class status 

risks the lives of current and future beneficiaries, further jeopardizing transplanted organs and patients’ lives. 

Yet again, the Centers for Medicare & Medicaid Services has proposed a policy that is penny wise and pound foolish. Not only has 

the program increased patient access to drugs, and made positive 

effects on the health of beneficiaries, the program has extended the 

solvency of the entire Medicare Program, saving billions of dollars 

over the past 10 years. So rather than continue a successful program and encourage innovation, now we are faced with a rule to 

ruin one of the only working parts of our current healthcare system, leaving patients with the short end of the stick. 

I would like to submit for the record a statement by the National 

Kidney Foundation and the American Society of Transplant Surgeons. And yield to Mr. Shimkus. 

Mr. PITTS. Without objection, so ordered. 

[The information follows:] 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS 

Mr. SHIMKUS. Thank you. And I thank my colleague and friend. 

More than 250 organizations united for a common goal, protecting seniors and individuals with disabilities from harmful 

changes to Medicare Part D. And that is what your proposed rule 

actually does, is harm seniors. It gives them less choices, it will 

project higher costs, and from an administration that cut $716 billion out of Medicare, to propose a 700-page rule trying to fix something that is not broken, is disastrous at a time when people are 

paying more, even in the national healthcare rollout. 

It is safe to say when I go to my district, people pay more now 

for their insurance and get less, and this is just going to fall down 

to our seniors. 

I also want to focus on the fact that Medicare Part D has been 

successful. I want to focus on medical therapy management issues, 

that moving that level down that small is just going to hurt medical therapy management for those bigger populations that actually 

need the care. 

And I yield the rest of my time to Dr. Cassidy. 

OPENING STATEMENT OF HON. BILL CASSIDY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF LOUISIANA 

Mr. CASSIDY. Thank you. 

I am a doc, and so when I talk to constituents back home about 

how changes by Obamacare and this administration are going to 

decrease their choices and increase their costs, I understand the 

issue. 

Medicare was cut $716 billion to fund Obamacare, and frankly, 

when you cut that much, it has got to give. It is going to force 

beneficiaries to find new healthcare plans, despite the President’s 

promise that you could keep your health insurance if you like it, 

period. Instead, they get cancellation notices. 

Now, the Medicare cut $300 billion, or to the Medicare Advantage Program, and now I understand that—for—there is a further 

3.55 percent cut on top of the cumulative 6.5 percent cut that the 

industry has already suffered. It is a very popular program. If you 

cut funding, seniors have less choice and increased cost. 

Moving forward, we must preserve that and decrease those costs. 

We need policies that help seniors, not threaten access and choice. 

I look forward to the questioning. Thank you. I yield back. 

Mr. PITTS. The Chair thanks the gentleman and seeks unanimous consent to enter into the record the letter from Sixty-Plus Association. 

Without objection, so ordered. 

[The information follows:] 

22 

23 

24 

Mr. PITTS. The Chair now recognizes the ranking member of the 

full committee, Mr. Waxman, 5 minutes for an opening statement. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you, Mr. Chairman. 

Today’s hearing will focus on the Medicare Part D drug program. 

When President Bush signed the Part D benefit into law, Democrats had many concerns. We thought the structure of the law was 

too confusing for beneficiaries, we thought the doughnut hole was 

bad for seniors, and we felt the law did not do enough to reduce 

drug costs, and most of us voted against it. But, Mr. Chairman, we 

didn’t find dozens of ways to sabotage the program. We didn’t send 

out massive document requests in order to delay and intimidate 

contractors. We didn’t shut down the government to try to force its 

repeal, or vote over 40 times to repeal the law. Instead, we worked 

with the Bush administration to make sure our constituents could 

get the benefits they deserved, and ultimately, as part of the Affordable Care Act, we improved benefits, closing the Part D doughnut hole. 

Mr. Chairman, your constituents and the Nation would be much 

better off if your party took a similar approach to the Affordable 

Care Act. 

We improved the Part D law, but there are still adjustments we 

can make to strengthen the program for both beneficiaries and taxpayers, improving transparency and addressing fraud and abuse. 

CMS recently proposed a rule that would make some of these 

changes. I appreciate the agency’s efforts. They show that the administration continues to work to improve Medicare for seniors. 

The proposed Part D rule provisions would increase transparency, and increase access to community pharmacy services. 

Many community pharmacies have been unable to participate in 

Part D plan’s preferred networks, even if they are willing to meet 

the plan’s preferred prices. CMS proposes to allow any pharmacy 

who can meet the plan’s prices to participate. This change would 

increase pharmacy access for patients, particularly in underserved 

communities where patients may not have access to preferred pharmacies. 

CMS has also proposed simplifying beneficiary choices under 

Part D. CMS and patient advocates have long noted that seniors 

find the array of plan choices dizzying, and that plans are using 

the multitude of choices to segment risks and maximize profit. It 

makes sense for both the patient and the taxpayer that CMS address these matters. 

There are other places where I would like to see the agency 

rethink its approach. In particular, the Six Protected Classes policy. I share the administration’s goal of lowering prices, and ensuring that Medicare is able to get the best deal possible. CMS has 

correctly observed that eliminating some drugs from the Protected 

Classes category would allow Part D plans to negotiate for lower 

prices, but it is hard to ignore the concerns of patient groups and 

Medicare advocates that these changes will make it more difficult 

for seniors to get the drugs they need. 

25 

There is a better way. Adopting my Part D Drug Rebate Bill, the 

Medicare Drug Savings Act would be a much sounder and beneficiary-friendly approach. This bill would allow Part D to get some 

discounts on drugs for low-income seniors that Medicaid and private sector purchasers receive. It would, according to the CBO, 

save over $140 billion over the next decade. 

The administration was correct to include this provision in its 

new budget. It is a commonsense idea that would save taxpayers 

billions of dollars without affecting access to Part D drugs for seniors. 

Mr. Chairman, I am pleased that Deputy Administrator John 

Blum is here today to explain CMS’ approach in the Part D rule. 

I look forward to discussing how we can improve Part D for seniors, and reduce taxpayers’ costs, and yield back the balance of my 

time. 

Mr. PITTS. The Chair thanks the gentleman, and again seeks 

unanimous consent to enter a letter to Administrator Tavenner 

from a coalition of 250 organizations on Medicare Part D. 

Without objection, so ordered. 

[The information follows:] 

26 

27 

28 

29 

30 

31 

32 

33 

34 

35 

Mr. PITTS. We have on our first panel today Mr. Jonathan Blum, 

Principal Deputy Administrator, Centers for Medicare & Medicaid 

Services, U.S. Department of Health & Human Services. Thank 

you for coming today. You will have 5 minutes to summarize your 

testimony. Your written testimony will be placed in the record. You 

are recognized for 5 minutes for your opening statement. 

STATEMENT OF JONATHAN BLUM, PRINCIPAL DEPUTY ADMINISTRATOR, CENTER FOR MEDICARE, CENTERS FOR 

MEDICARE & MEDICAID SERVICES, DEPARTMENT OF 

HEALTH & HUMAN SERVICES 

STATEMENT OF JONATHAN BLUM 

Mr. BLUM. Thank you. Chairman Pitts, Ranking Member 

Pallone, members of the committee, thank you for the opportunity 

to discuss our thoughts on ways to improve the Part D Drug Program. 

Mr. PITTS. Just pull that a little closer to you, if you can. Yes, 

thanks. 

Mr. BLUM. We believe the Medicare Part D Program has never 

been stronger. All Medicare beneficiaries have many plan choices 

to select from, premium growth has been flat, and the Affordable 

Care Act took strong steps to close the Part D coverage gap or 

doughnut hole. By 2020, the gap will be completely closed. 

In general, Medicare beneficiaries are satisfied with their drug 

coverage, and there is growing evidence that the Part D Drug Benefit has led to some decreases in other program costs. 

While Medicare Part D is strong, we also see many 

vulnerabilities that can and should be addressed. This year, Medicare Part D will cost more than $70 billion, or about 12 percent of 

total program costs. According to CBO, total Part D spending is 

projected to grow dramatically faster than other parts of the program. These projected spending trends, as well as other 

vulnerabilities, led us to take a comprehensive review of the program, and to propose in an open and transparent way some 

changes to our current regulations. According to our actuaries, the 

proposed rule will reduce overall program costs and Part D premiums. 

In addition to rapid spending growth, we see other 

vulnerabilities in Part D. First, while we see broad measures of 

beneficiary satisfaction, CMS receives far too many complaints 

from beneficiaries. In 2013, the program received over 30,000 complaints from beneficiaries regarding their Part D coverage. Far too 

high. Second, we see very high rates of inappropriate prescribing. 

While we are very, very sensitive to the concerns we have heard 

over changing the Protected Classes designation for three drug 

classes, we have to acknowledge the requirement for Part D plans 

to cover all drugs in these classes, with very little restriction, has 

led to harmful overprescribing—particularly antipsychotic drugs to 

sedate nursing home patients. Third, the program has too much 

prescriber fraud. This agency made a commitment to the Homeland 

Security Committee to reduce this fraud. This proposed rule honors 

that commitment. Fourth, we have seen too many Part D sponsors 

have significant compliance issues that have resulted in harm to 

36 

Medicare beneficiaries. Fifth, we see weak data evidence that preferred pharmacy networks always leads to cost savings for beneficiaries and the taxpayers. Sixth, while most beneficiaries have 

many plan choices, the evidence suggests that beneficiaries rarely 

change plans, even though they could reduce their out-of-pocket 

costs by changing plans. We support private plan competition in 

Medicare Part D, so long as beneficiaries can understand their 

choices and make changes easily. And seventh, CMS, under current 

regulations, cannot share detailed Part D claims data with outside 

researchers. We believe this data, if shared appropriately, can 

make the program even stronger. 

Our proposed Part D rule is designed to address all these 

vulnerabilities, and to make the benefit work better for Medicare 

beneficiaries. In short, we believe that we must celebrate Part D’s 

success, but also take a critical look at its vulnerabilities and take 

action where we can. The status quo is hardly perfect. However, we 

deeply respect the views of those who have stated their concerns 

and opposition to the rule, particularly patient groups and their 

concerns over the changes to the protected class definition. CMS 

will listen very carefully to the views of all Part D stakeholders 

and partners. We will make our final decisions after carefully reviewing all stakeholders’ comments. 

Thank you. Happy to address your questions. 

[The prepared statement of Mr. Blum follows:] 

37 

38 

39 

40 

41 

42 

43 

44 

45 

46 

47 

48 

Mr. PITTS. The Chair thanks the gentleman. And we will now go 

to questions and answers. I will begin the questioning. Recognize 

myself for 5 minutes for that purpose. 

Mr. Blum, nonpartisan experts are warning us that millions of 

seniors will see higher costs and fewer choices if this regulation is 

finalized. Seniors in my district tell me how much they enjoy the 

Part D Program, many times when I talk to them. 

As you acknowledge in your testimony, the Medicare Drug Benefit is under-budget, and 94 percent of seniors are happy with it. 

Why would CMS propose this regulation if everyone is telling us 

that it is going to force seniors to lose their plans, decrease access 

and increase cost? 

Mr. BLUM. Well, a couple of points, Mr. Chairman. We see the 

overall Part D Program being a tremendous success, but the nonpartisan CBO projects that Part D spending in the next 10 years 

will grow faster than the other parts of the program. It is the fastest-growinig line item for the Medicare Program. The entire Medicare Program, since the Affordable Care Act, has dramatically been 

reduced, but for Part D. Part D is projected to be the fastest-growing program. 

Now, CMS’ proposed rule is a consistent path for us to simplify 

plan choices, to reduce, you know, kind of extra plans being offered 

by the same plan sponsors. CMS started this work back in 2010. 

We heard the same concerns from the plan industry, the PBM industry, that those changes would raise premiums, decrease choices, 

create greater dissatisfaction. That hasn’t happened. 

As you pointed out during your opening statement, the Part D 

premium has stayed flat, while at the same time we have reduced 

kind of extra plan choices dramatically, cut them in half. And looking at the past track record, the arguments that we are hearing 

today were similar arguments that we heard back in 2010, but 

those arguments back in 2010 did not prove true. 

Mr. PITTS. Given the fact that the President’s healthcare law cut 

$716 billion from seniors’ Medicare Program, and we are already 

seeing how those cuts are negatively impacting seniors throughout 

the country, why should they believe that this proposed rule won’t 

hurt them even more? 

Mr. BLUM. Well, I think going back to the payment reductions 

that were passed in the Affordable Care Act, while we appreciate 

that there is now reduced spending within the Medicare Program, 

we see that every—signs on quality have increased. We see more 

private plans wanting to come into the program, we see premiums 

remain flat. The Part D premium this year was negative. Part D 

premiums, premiums for plans, have fallen, not risen. So we appreciate the fact that we are paying less today than we paid for some 

services before the Affordable Care Act, but every quality sign that 

we track, every quality sign that we measure, has gone up, premiums have gone down, and so we believe very strongly that beneficiary care, beneficiary costs have not been impacted by these 

changes. 

Mr. PITTS. The law includes a noninterference clause, which prohibits the government from interfering with competition, and this 

has helped to prevent CMS from interfering with negotiations beVerDate Mar 15 2010 14:14 Sep 29, 2014 Jkt 037690 PO 00000 Frm 00052 Fmt 6633 Sfmt 6633 F:\113-119 CMS ATTACK PART D JKT REQ 9-25-14\113-119 CMS ATTACK PART D PEND
49 

tween drug plans and pharmacies. Such a prohibition has helped 

reduce costs for our seniors. 

I and my colleagues read your regulation to violate the noninterference clause. In fact, department officials have weighed in 

against the very interpretation included in the proposed rule. I 

would ask that you open the document, document 1, in the document binder before you. This memo is from the HHS Inspector 

General, and I would ask you to read the highlighted portion of the 

document. You can go ahead and read that out loud. 

[The information is available at http://docs.house.gov/meetings/ 

IF/IF14/20140226/101788/HHRG-113-IF14-20140226-SD006.pdf.] 

Mr. BLUM. So this is a statement to Kerry Weems back in 2008: 

‘‘We agree that the Act prohibits the Government from interfering 

with negotiations between PDP sponsors and pharmacists and from 

instituting a price structure for the reimbursement of covered Part 

D drugs.’’ 

Mr. PITTS. Now, did you or agency staff specifically review the 

Inspector General’s memorandum before issuing your proposed 

rule? 

Mr. BLUM. I don’t know. I can check. I personally did not, but 

I think it is important for us to explain why we chose to propose 

this change. 

CMS, in the course of day-to-day interactions with plans and 

pharmacies and other entities, gets drawn into individual contract 

disputes. Plans ask us to arbitrate contract disputes with pharmacies and other entities. Pharmacies ask us to arbitrate disputes 

from Part D plans. And we agree, the statute is clear: CMS shall 

not interfere with the price structures. What we try to do is to articulate when and will not CMS interfere with these contract disputes. 

Now, our challenge is on a day-to-day basis that plans and pharmacies ask us to arbitrate, and we wanted to propose a clear definition, not to degrade the noninterference clause but to strengthen 

it to make sure that we are absolutely clear with partners, stakeholders, when CMS won’t arbitrate contract disputes, but we have 

no intention to negotiate price structures. The law is very clear. 

During my time on the Senate Finance Committee, that I had a 

hand in helping to draft that provision, I understand the intent, I 

understand why that was included. 

Mr. PITTS. Well, you know, I am not sure it is responsible for 

agency staff to issue a rule that completely contradicts the written 

legal opinion of the HHS Inspector General. 

So with that, I’ll recognize the ranking member, Mr. Pallone, for 

5 minutes for questions. 

Mr. PALLONE. Thank you, Mr. Chairman. 

You know, I know you mentioned, Mr. Chairman, the Medicare 

Advantage changes in the ACA, and as you know, nearly every Republican in the House of Representatives voted for or supported the 

very same changes or savings. In fact, the savings were part of the 

Republican budgets written by the House Budget Chair, Paul 

Ryan, in 2011, 2012, and 2013, and these same policies put in place 

by the ACA were continued in these budgets, and the majority of 

House Republicans voted for them in each of those years. 

50 

But let me ask Mr. Blum. If you listen to the critics of the proposed rule that you are discussing today, it sounds like the end of 

western civilization as we know it, and the refrain we keep hearing 

is that most beneficiaries are satisfied, and costs are lower than 

anticipated when the program was enacted 8 years ago, therefore, 

we should make no changes. And today’s hearing is titled ‘‘Messing 

With Success.’’ But, frankly, I believe that we should continually 

seek to improve Medicare for beneficiaries and taxpayers. It seems 

strange to me that people would want to block changes that could 

improve the program. In fact, organizations representing these socalled satisfied beneficiaries that we keep hearing about, such as 

the National Council on Aging, National Committee to Preserve Social Security, and Families USA, strongly support many of your 

proposed changes. 

So could you comment on why CMS chose to move forward a proposal to further strengthen Part D at this time? 

Mr. BLUM. Well, we see the program being tremendously successful. We also see that the program has many vulnerabilities. We receive recommendations from the IG frequently for us to take 

stronger steps to reduce prescriber fraud in the program. We see 

that, while the Part D premium has remained stable over the past 

several years, that is only one part of Part D’s costs, and the Part 

D premium doesn’t measure the complete cost of the program. Part 

D is projected to spend faster than other parts of the program, dramatically faster than the Part A Program, the Part B Program. 

We feel it is our responsibility to propose changes to improve the 

operations. We also feel that it is our responsibility to do it through 

the propose and notice comment period. We want to create a conversation about the best ways to improve the Part D Program. We 

respect and we will carefully review the comments, concerns and 

the criticisms, but for us to argue that the Part D Program is perfect, the status quo is perfect, is contrary to what we see as our 

obligations to this committee, to the Congress, and to the beneficiaries that we serve. 

Mr. PALLONE. Well, I certainly agree. We have also heard that 

the unfettered competition in the Part D Program is responsible for 

bringing costs down below initial projections, and that the CMS 

rule is messing, I think the word is, with competition, but could 

you comment on what had led to the lower costs in Part D? I know 

you have already, but maybe a little more. 

Mr. BLUM. Well, two points I think that are important for us to 

state on the record. If you speak to our CMS actuaries and ask 

them what has accounted for the lower costs than projected back 

in 2003, I believe the number 1 answer would be the fact that we 

have much more generic prescribing happening in the Part D Program, and the fact that we have fewer brand-new breakthrough 

medications right now on the market than the CMS actuary, and 

CBO, staff projected back in 2003. So it is not necessarily private 

competition that has caused the lower Part D cost trends previously, but the fact that we have kind of fewer brand-name drugs 

coming onto the program. 

I think it is also important for this committee to understand that 

the Part D Program is not a truly competitive model, that it is not 

simply that CMS pays a fixed capitated payment to Part D plans; 

51 

they can negotiate said benefits as best they see fit. Medicare in 

many respects is a cost-based program. For the low-income beneficiaries, Medicare pays just about the full cost of the benefit, not 

based upon a fee schedule, but based upon the prices Part D plans 

negotiate. For beneficiaries that exceed certain thresholds, the catastrophic limit, Medicare pays just about the full cost of those 

drugs past that limit. So to say that Part D is competitive in a pure 

sense doesn’t meet the statutory definition of the program, and I 

think what our actuaries tell us is that the primary reason that 

Part D spending has been lower than projected is the fact that we 

have more generic prescribing, due to the fact that we have fewer 

new brand-name drugs brought to market. 

Mr. PALLONE. Thank you. Mr. Chairman, I have 4 letters—I 

would ask unanimous consent. I have 4 letters in support of the 

rule and the provisions that foster greater transparency and competition, as well as enhance beneficiary protections, from beneficiary advocacy groups, including the Medicare Rights Center, 

Families USA, Independent Specialty Pharmacy Coalition, and the 

National Community Pharmacists Association. 

Mr. PITTS. Without objection, so ordered. 

[The information follows:] 

52 

53 

54 

55 

56 

57 

58 

59 

60 

61 

62 

63 

64 

65 

Mr. PALLONE. Thank you. 

Mr. PITTS. The Chair thanks the gentleman. Now recognizes the 

vice chair of the full committee, Mrs. Blackburn, 5 minutes for 

questions. 

Mrs. BLACKBURN. Thank you, Mr. Chairman. Thanks, Mr. Blum, 

for being here. 

Avalere has said that the changes you are going to make would 

eliminate 39 percent of all of the enhanced plans by 2016, and that 

would be 214 of the current 552 enhanced PDP’s to be terminated 

or consolidated. 

So what would you say to the seniors in my district who like the 

plan that they have but cannot keep it if you get your way? 

Mr. BLUM. Well, there are a couple of things, Congresswoman. 

First is that CMS, since 2009, has put in place a strategy to reduce 

the number of kind of extra plans that sponsors provide. We started that process back in 2009/2010. We heard the same—— 

Mrs. BLACKBURN. You are doing this through the rules? 

Mr. BLUM. Correct. 

Mrs. BLACKBURN. OK. Let me ask you this. Avalere also said 

that the regulation would impact 7.4 million of the 7.9 million 

Medicare beneficiaries who are enrolled. That is 94 percent. So why 

would you and the President support a regulation which is going 

to disrupt 94 percent of seniors in Medicare Part D who have a 

plan that they like, and would really like to keep it but you are 

not going to let them do that? 

Mr. BLUM. So I think it is important to think about the history 

of the marketplace. Before the doughnut hole was closed, Part D 

plans oftentimes offered kind of supplemental benefits to fill in 

that doughnut hole. The doughnut hole is now being closed due to 

the Affordable Care Act. 

By 2020, the doughnut hole will be completely closed. There have 

been very strong steps so far to close that doughnut hole. We 

see—— 

Mrs. BLACKBURN. OK—— 

Mr. BLUM [continuing]. Little opportunity for Part D plans really 

to distinguish themselves from other plans—— 

Mrs. BLACKBURN. So you see this—— 

Mr. BLUM [continuing]. Those same sponsors offered—— 

Mrs. BLACKBURN [continuing]. As an opportunity? 

Mr. BLUM. We see this as a way to simplify the Part D Program, 

to make it much easier to navigate. The concerns that—— 

Mrs. BLACKBURN. So by limiting choice and options, you see that 

as a simplification and a way to improve this program? 

Mr. BLUM. I think some of the concerns that I hear, oftentimes 

from the beneficiary community, are that there are many Part D 

choices, too many to choose from, and we know from academic literature that the more choice, more confusion—— 

Mrs. BLACKBURN. So you think people are confused? 

Mr. BLUM. I think—— 

Mrs. BLACKBURN. That seniors are confused—— 

Mr. BLUM. I personally hear—— 

Mrs. BLACKBURN [continuing]. And they need CMS to—— 

Mr. BLUM. I personally hear—— 

Mrs. BLACKBURN [continuing]. Simplify that? 

66 

Mr. BLUM [continuing]. Tremendous confusion—— 

Mrs. BLACKBURN. OK, let me—— 

Mr. BLUM [continuing]. From the beneficiary community. 

Mrs. BLACKBURN. Let me ask you another question. You have 

talked about actuaries a lot. Are you listening to actuaries or enrollees? 

Mr. BLUM. We listen to both beneficiaries—— 

Mrs. BLACKBURN. You are listening to both? 

Mr. BLUM [continuing]. And—— 

Mrs. BLACKBURN. OK. 

Mr. BLUM. And to our career actuaries. 

Mrs. BLACKBURN. OK. Well, you know, the surveys show that 95 

percent of the seniors are satisfied with their plan, and Part D is 

estimated to cost 48 percent less than initially estimated by the 

CBO, and Milliman has projected that if your new rule goes into 

effect, the Federal Government will be on the hook for $1.6 billion 

more than expected in 2015. So where are you going to get the 

money? 

Mr. BLUM. So I think a couple of things. I think we see a future 

for the Part D Program that is growing very quickly; 10 percent 

per year. That is dramatically faster than other parts of the program. 

Mrs. BLACKBURN. OK. 

Mr. BLUM. So to say that we shouldn’t take a critical look at the 

future, we don’t agree. 

We heard the same concerns back in 2010 that premiums would 

skyrocket, beneficiaries would be left by their plan when CMS 

started to—— 

Mrs. BLACKBURN. Yes, we heard that—— 

Mr. BLUM [continuing]. Consolidate—. 

Mrs. BLACKBURN [continuing]. About the Affordable Care Act, 

and that indeed is happening. I will tell you, I have plenty of stories I can share with you there. 

Well, if Part D is not broken, then why do you think you need 

to go put something in here that is going to cost more, limit options, take seniors out of their plans, you know, it doesn’t make a 

whole lot of commonsense, Mr. Blum. And I think that what we 

would like to do is see seniors who have a product they like, they 

are satisfied, bear in mind Medicare is something seniors have had 

money coming out of their paycheck every day of their working life 

and going into a Medicare trust fund, and they have prepaid their 

participation in this program, and I think that CMS needs to be 

listening to those enrollees and maybe paying less attention to 

these actuaries that obviously are going to give you—let me ask 

you this. What is your goal? What are you trying to achieve by 

this? What is your outcome? 

Mr. BLUM. I think we have several goals. We want to reduce the 

prescriber fraud in the program, we want to make the benefit less 

confusing, more clear to our beneficiaries, we want to make sure 

that when the program pays the majority of costs for low-income 

beneficiaries, that we are paying the best possible rates. When we 

see preferred pharmacy networks being created, we want to encourage innovation—— 

Mrs. BLACKBURN. OK. 

67 

Mr. BLUM [continuing]. So long as those cost savings get passed 

on to our beneficiaries, passed on to the taxpayers. 

Mrs. BLACKBURN. OK. 

Mr. BLUM. So Part D, yes, has been tremendously successful, but 

we do not think it is perfect, nor do we get that—— 

Mrs. BLACKBURN. My time has expired. One last question. Can 

you cite for me the statute that gives you the opportunity to go in 

and settle these disputes between the manufacturers and the pharmacies? 

Yield back. 

Mr. BLUM. Sorry, is that a question or—— 

Mr. PITTS. Did you want to respond? 

Mr. BLUM. We are happy to provide our legal clarification. We 

see that the changes to the noninterference don’t weaken, but they 

strengthen. On a day-to-day basis we are pulled into many disputes 

that we feel that we need to provide clear rules. 

Mr. PITTS. OK. The Chair thanks the gentlelady and now recognizes the ranking member of the full committee, Mr. Waxman, 5 

minutes for questions. 

Mr. WAXMAN. Thank you, Mr. Chairman. 

Mr. Blum, there is a lot of concern about the proposed rule removing two classes of drugs, antidepressant and 

immunosuppressants, from the list of protected classes. I would 

like to hear your rationale. I know there are cost concerns, and cost 

concerns are always legitimate. 

When I did my oversight work on Part D in 2007 and 2008, my 

investigations also revealed the prices for the drugs on the Protected Classes list were much higher than they should have been, 

but I think seriously the concerns that have been expressed by patients, that removing drugs from the Protected Classes list will 

mean their Part D plans may not cover them, and seniors will not 

be able to get the drugs they need. 

Give us your rationale here. 

Mr. BLUM. Well, I think we came to this proposal with difficulty, 

with much analysis, and kind of weighing the pros and cons for a 

proposed change, and one of the reasons why we felt comfortable 

to take a careful step towards lifting the class definition is that the 

Part D Program has many protections built into place; the appeal 

system, transition policy, the very rigorous formulary review that 

we do for Part D plans. 

We cover drugs in about 140 drug classes, and we have 6 classes 

that are now protected, and other drug classes that treat very important conditions, diabetes, hypertension, congestive heart failure, 

don’t receive this designation, yet we don’t hear the concerns regarding beneficiaries having access to the drugs they need. 

Mr. WAXMAN. Well, there are a lot of concerns being expressed—— 

Mr. BLUM. Sure. 

Mr. WAXMAN [continuing]. About this, and I appreciate your efforts to reduce the taxpayer cost, and I know you are serious about 

making sure that seniors can get the drugs they need, but I believe 

there is a better way, and I have introduced to the last two Congresses the Medicare Drug Savings Act that would end one of the 

worst giveaways that was included in the original Part D bill. 

68 

For people who were covered by Medicaid, before Part D, there 

was a rebate for these dual eligibles, and when Part D was adopted, suddenly that rebate ended and the prices of those drugs went 

up so that the Medicare Program paid a much higher price. It was 

a sweetheart deal. It resulted in a substantial drug manufacturer 

windfall at taxpayers’ expense. 

My bill would reverse that windfall, adding drug a manufacturer 

rebate so that Medicare Part D prices are no higher than prices in 

programs like Medicaid. 

Do you have any thoughts on this rebate bill? 

Mr. BLUM. Well, I think the President supports the legislation. 

In his last budget, the President proposed a very similar change to 

your legislation, to enable the Part D Program to receive better 

prices for drugs that were previously paid much less when the 

beneficiaries received their benefits through State Medicaid Program. 

Mr. WAXMAN. I would not interfere in any way with any of the 

drugs that people would get, it would just mean a huge savings for 

those drugs, restoring the price we pay for those drugs that the 

manufacturers received prior to Part D. 

We have heard a lot of concern about Medicare beneficiaries, and 

I know that, Mr. Chairman, your side of the aisle talks a good 

game when it comes to being concerned about Federal spending. I 

would like to suggest that our committee look at this opportunity, 

take action, and pass this bill, Medicare Drug Savings Act, which 

would cut beneficiary costs, protecting seniors, make sure they 

have access to drugs. 

Mr. Blum, I have heard a great deal about CMS’ discussion of 

the noninterference provisions in the proposed Part D rule. Part D 

statute states, ‘‘Secretary may not interfere with the negotiations 

between drug manufacturers and pharmacies and PDP sponsors; 

and may not require a particular formulary or institute a price 

structure for the reimbursement of covered Part D drugs.’’ 

So we have a witness that has gone on to suggest that your rule 

rests on a questionable legal foundation, it violates the intent of 

the Congress. I would like to understand this proposal a little better. Does your proposal rule interfere with negotiations between 

drug manufacturers and pharmacies? 

Mr. BLUM. No. 

Mr. WAXMAN. Does your rule interfere with negotiations between 

drug manufacturers and PDP sponsors? 

Mr. BLUM. No. 

Mr. WAXMAN. Does your rule require a particular formulary? 

Mr. BLUM. No. 

Mr. WAXMAN. Does your rule institute a particular price structure? 

Mr. BLUM. No. 

Mr. WAXMAN. So it would seem to me that your rule does not do 

anything that the Part D statute prohibits you from doing, yet the 

mere specter of the word ‘‘noninterference’’ has set some industry 

groups ablaze. 

Could you briefly explain what your rule does in this area? My 

understanding is that the proposed rule merely states that whatVerDate Mar 15 2010 14:14 Sep 29, 2014 Jkt 037690 PO 00000 Frm 00072 Fmt 6633 Sfmt 6633 F:\113-119 CMS ATTACK PART D JKT REQ 9-25-14\113-119 CMS ATTACK PART D PEND
69 

ever prices are, they all have to be reported consistently, is that 

correct? 

Mr. BLUM. Correct. I think we want to make sure that we are 

clear when and won’t the agency will become involved in how Part 

D plans operate. As I expressed earlier, we often get pulled into 

disagreements, contract disagreements, contract disputes. Our 

principle is to make sure that Part D plans honor the requirements, that they have to have complete pharmacy networks, complete pharmacy access standards, but to me and to the agency, this 

proposed change clarifies what we believe the clause should mean 

in operations, to us that work to strengthen the requirement, not 

weaken it, but we have no intention to interfere in the price negotiations between Part D stakeholders. 

Mr. WAXMAN. Thank you. Thank you, Mr. Chairman. 

Mr. PITTS. Chair thanks the gentleman. Now recognize the gentleman, Dr. Burgess, 5 minutes for questions. 

Mr. BURGESS. Thank you, Mr. Chairman. And, Mr. Blum, thank 

you, and thank you for being here. 

If I understood correctly in your comments to Chairman Pitts, 

you said that costs are going down. You extolled some of the virtues of the Part D Program, and then in the next breath you said 

some of the fastest growth is projected to be in the Medicare Part 

D Program. 

It reminds me of the old line from the Marx Brothers movie: 

‘‘Who are you going to believe, me or your own eyes?’’ So it almost 

can’t be both ways. One or the—— 

Mr. BLUM. Well—— 

Mr. BURGESS. One or the other has got to be true. 

Mr. BLUM. Let me clarify, please. So looking back, Part D has 

cost the taxpayers, cost beneficiaries less than what CBO and the 

CMS actuaries projected back in 2003. That is true, and that is a 

great statement for us to make together, and a reason to celebrate 

Part D’s success. 

When you look at CBO’s current projections for the future, not 

the past but the future, Part D total spending, not just the Part 

D premium but all the pieces that the program pays, the low-income subsidy, the reinsurance, that is the fastest-growing part of 

the program. 

Mr. BURGESS. Correct. But you just have to ask, what is that 

based on? So let me ask you—— 

Mr. BLUM. Why do you—you know the answer to that question. 

Mr. BURGESS. Let me—well, let me ask you. When you have this 

proposed rule that is some 700 pages, that I assume that you have 

read and approved—— 

Mr. BLUM. Yes. 

Mr. BURGESS [continuing]. Is that correct? 

Mr. BLUM. Correct. 

Mr. BURGESS. Can you provide the committee with the cost analysis that you did for this rule? 

Mr. BLUM. Sure. By requirement, we have to do an economic estimate. This rule was significant, so per OMB process, we put our 

estimate—— 

Mr. BURGESS. Have you provided that to the committee? 

Mr. BLUM. That is part of the rule. 

70 

Mr. BURGESS. OK. Have you provided it already, or is it coming? 

Mr. BLUM. We are happy to send a copy of the rule to you. 

Mr. BURGESS. Let me ask you this. In that, is there also going 

to be the delineation of the legal justifications for proposing the 

rule? 

Mr. BLUM. The proposed rule went through our general counsel. 

They cleared it. We are happy to answer any questions regarding 

their legal views regarding the regulation. 

Mr. BURGESS. Well, let us—and we need that. I mean it is critical to our discussion. 

On the noninterference that has come up several times this 

morning, the noninterference policy, the cornerstone of the Part D 

Program, under the proposed rule, CMS reinterprets this part of 

the statute, asserting the language of the law does not apply to negotiations between pharmacies and prescription drug sponsors. So 

in my mind, there is some confusion as to why, after 10 years, your 

agency felt that it must now reinterpret the noninterference clause. 

What has changed that propelled you to make this distinction? 

Mr. BLUM. Well, I think we interact with our Part D plan sponsors on a day-to-day basis. We approve, we review, we have a very 

rigorous process—— 

Mr. BURGESS. Do you have evidence to which you can point and 

provide to this committee why—— 

Mr. BLUM. We are happy to do that. 

Mr. BURGESS [continuing]. You have changed? 

Mr. BLUM. Yes, we are happy to do that. 

Mr. BURGESS. I would ask you to submit that for the record, and 

how do you anticipate how the Center for Medicare and Medicaid 

Services intervention in these negotiations to improve the program. 

What is your expectation of improvement, can you provide that to 

the committee? 

Mr. BLUM. Absolutely. 

Mr. BURGESS. Are you aware of the requirements within the oftmentioned Affordable Care Act, are you aware of the requirements 

to keep the proprietary contract terms confidential? That is Section 

3301 of the PPACA. And it seems to me it would be contrary to 

the policy you are proposing in the Part D proposed rule. 

Mr. BLUM. We are happy to review that section of the statute to 

make sure that we are consistent. 

Mr. BURGESS. And again, I would—you need to do that and it 

needs to be detailed. 

Let me just ask you again about, were you or Administrator 

Tavenner or Secretary Sebelius, did you receive any legal memoranda, was any legal memorandum prepared for you that provided 

you the ability to proceed forward with this rule? 

Mr. BLUM. I am not sure about legal memorandum. 

Mr. BURGESS. Well, let me restate that to the proposed noninterference interpretation. 

Mr. BLUM. So let me be clear. All major regulations go through 

rigorous review through the department. That includes our general 

counsel staff. The general counsel cleared the regulation, which 

means they believed that CMS had the authority—— 

Mr. BURGESS. And had you received a memorandum to that effect? 

71 

Mr. BLUM. I don’t know, but I can check for you, sir. 

Mr. BURGESS. We need, the committee needs that. 

Let me just ask you, were there any doctors on the panel that 

evaluated the immunosuppressant drugs relative to the proposed 

protected class? 

Mr. BLUM. The CMS chief medical officer for Medicare was part 

of the panel. And—— 

Mr. BURGESS. So is that—— 

Mr. BLUM [continuing]. By the way, he was the same chief medical officer that helped design the Protected Classes back in 2005. 

Mr. BURGESS. Well, was there—has there been any breakthrough 

or change in the science on immunosuppressant drug treatments 

since 2005 that many of us on the committee might have missed? 

Mr. BLUM. Well, I think we recognize the very strong views of 

patient groups, physician groups. We understand this is a significant change. 

Mr. BURGESS. Mr. Blum, I am going to run out of time. With all 

due respect, it is not just strong views, you give the wrong immunosuppressive, you lose the graft. This may be a graft that has 

been given a living donor, or someone who donated that upon their 

demise, but you reject a graft. That is a big deal, and it costs you 

at CMS a ton of money to then put that kidney patient, graft recipient back on dialysis after they reject their graft, or worse, then 

pay for another transplant some point down the road. I mean that 

is an incredible inefficient use of funds. So it is hard for me to believe that you really have the cost benefit analysis in hand when 

this type of behavior is allowed to go on at CMS. 

Thank you, Mr. Chairman, for your indulgence. If the gentleman 

wishes to respond, but I will yield back. 

Mr. BLUM. I pledge that the agency will carefully review both the 

clinical arguments and the concern from patient classes regarding 

the changes to the Protected Classes. We understand this is a 

change. We understand that there are clinical implications, and we 

will take a very careful look at the comments and the thoughtful 

arguments coming to us during the comment process. 

Mr. PITTS. Chair thanks the gentleman. Now recognize the gentleman from Texas, Mr. Green, 5 minutes for questions. 

Mr. GREEN. Thank you, Mr. Chairman, and thank you, Mr. 

Blum, for being here. 

I understand that some plans have used significant incentives, 

for example, zero cost sharing, to steer patients to the mail-order 

pharmacies, and I believe patients, of course, should be able to 

choose the pharmacy setting that best meets their needs, whether 

it be mail-order or bricks and mortar; however, CMS found that 

these incentives caused increased demand for mail-order prescriptions, sufficient to disrupt timely delivery of prescriptions to patients. In a retail setting, the beneficiary often was notified of a 

problem with a prescription in real time, or within hours, but when 

it happens with a mail-order, the time it takes to find, communicate, and resolve the problem may delay the delivery date and resulting in gaps into the therapy. 

I believe that timely access to medicines are critical for patients, 

and I understand CMS is proposing to establish requirements for 

timely fulfillment of prescriptions from mail-order pharmacies, as 

72 

well as for home delivery services and retail pharmacies. This 

would provide consistent expectations for beneficiary access to 

drugs. 

Mr. Blum, when you proposed these standards for the timely delivery, did you come up with these standards, or were these guidelines already in existence that you used to develop your proposed 

standards? 

Mr. BLUM. Well, I think we looked at common standards for any 

kind of mail-order program. We believe strongly that we should 

have both pharmacy networks and mail-order options for our beneficiaries, that both should provide value to our beneficiaries and 

provide clear standards. We want to make the options stronger for 

our beneficiaries, to work better for our beneficiaries, we want to 

make sure that beneficiaries understand the benefits of preferred 

pharmacy networks, community pharmacies and mail-order pharmacies, to ensure that both the beneficiaries see clear benefits from 

different delivery options, but also the taxpayers. And I think more 

importantly, we want to make sure that plans operate with consistent standards. 

We receive complaints from beneficiaries regarding the timeliness, the accuracy of drugs being shipped to them by mail. We 

think it is appropriate for all plans to compete on a level playing 

field to ensure that they’re providing consistent care and consistent 

delivery to our beneficiaries. 

Mr. GREEN. OK. Beneficiary groups are strongly supportive in 

ensuring timely access to their needed medicines, whether provided 

by a pharmacy counter or the mail-order. Could you further elaborate on the proposal and the ruling why CMS believes this is an 

important beneficiary protection to pursue? 

Mr. BLUM. Well, I think we, right now, have standards for pharmacies to fulfill drugs in a timely manner. We believe that similar 

kinds of timely standards are appropriate for mail-order pharmacies as well, and we want to make sure that beneficiaries receive timely delivery. We want to make sure that we have clear 

standards, but our goals simply are to provide uniformity throughout how the benefit is delivered, and to ensure that plans compete 

in a transparent way. 

Mr. GREEN. OK. Mr. Chairman, those are my only questions, and 

I will be glad to yield back. 

Mr. PITTS. Chair thanks the gentleman. Now recognizes the gentleman from Illinois, Mr. Shimkus, 5 minutes for questions. 

Mr. SHIMKUS. Thank you, Mr. Chairman. Mr. Blum, it is good to 

see you again. We have worked together before, and welcome. 

I go to schools a lot and they talk about the Constitution, and 

so these questions are meant just as a position of a constitutional 

basis of what’s Article One, which is Article Two. And the basic 

premise, even I taught government history, was that the administration enforces law. That is the job of the administration. So these 

questions are posed based upon a real concern out there in America 

that this administration does not enforce the law, or picks and 

chooses which pieces of the law they want to enforce. 

So let me begin with stating that, as you know, the statute clearly states that CMS may not interfere with negotiations, and I 

73 

quote, ‘‘between drug manufacturers and pharmacies and PDP 

sponsors.’’ 

I was here, as a few of us were, when Part D was passed. That 

was an intentional to put that in the law, to ensure that CMS 

would not interfere with any of these three parties. 

Can you tell me why CMS has chosen, based upon this proposed 

rule, to go against the law as Congress intended? 

Mr. BLUM. Well, I think on a practical basis, and overseeing the 

Part D Program on a day-to-day basis, we constantly or frequently 

get asked to intervene in contract disputes by plans, by hospitals, 

by pharmacists. And so we don’t necessarily always feel that we 

can simply say no, we are not going to interfere when beneficiary 

access is a concern. We have no interest to negotiate prices between Part D plans and pharmacies and drug manufacturers, but 

on a day-to-day basis, particularly when a—— 

Mr. SHIMKUS. Well, let me—and I appreciate that, but wouldn’t 

it be a better response if you feel the need to do that, than to have 

someone sponsor a piece of legislation and correct the law? 

Mr. BLUM. Well, I think we—— 

Mr. SHIMKUS. I mean constitutionally. I mean just—— 

Mr. BLUM. Yes—— 

Mr. SHIMKUS [continuing]. In the real world of how we teach our 

kids, that would be the correct answer. 

Mr. BLUM. Well, I am not a constitutional lawyer, so I can’t 

speak to that process with authority, but what I can articulate is 

the day-to-day challenge of how we operate the program, how we 

get drawn into individual disputes. We are open to the best ways 

to—— 

Mr. SHIMKUS. Well, let me follow on because I have two more 

questions that just kind of follow on with this. 

In the original final Part D regulations published in 2005, CMS 

separately responded to comments on its original proposed regulation as follows: ‘‘As provided in Section 1860D–11(i) of the Act, we 

cannot intervene in negotiations between pharmacies and Part D 

plans.’’ And again, in the same document, as provided in Section 

1860D–11(i) of the Act, ‘‘we have no authority to interfere with the 

negotiations between Part D plans and pharmacies, and, therefore, 

cannot mandate that Part D plans negotiate the same or similar 

reimbursement rates will all pharmacies.’’ 

So if that was the ruling from CMS based upon the law, how can 

the agency today say it is not unlawfully interpreting the noninterference clause, when CMS clearly stated in 2005 that it does not 

have the authority to negotiate between plans and pharmacies? 

Mr. BLUM. Well, I think two points, Congressman. One, we are 

happy to provide our legal justification to this committee as to how 

we got to our proposal. But second, the 2005 regulations were 

drafted at a time before CMS had experience with reviewing, negotiating and approving competing Part D plans. 

When I was on the Senate Finance Committee, I think the working assumption would be only a handful of the standalone Part D 

drug plans would choose to provide coverage. The good news is we 

have many, many entities wanting to provide drug coverage to our 

beneficiaries. We have more plans wanting to come into the program every year. And I think the operational realities, the comVerDate Mar 15 2010 14:14 Sep 29, 2014 Jkt 037690 PO 00000 Frm 00077 Fmt 6633 Sfmt 6633 F:\113-119 CMS ATTACK PART D JKT REQ 9-25-14\113-119 CMS ATTACK PART D PEND
74 

plexities of day-to-day negotiations and interactions with the agency and partners created us—or caused us to take this proposal. 

Mr. SHIMKUS. Let me finish with this. In the preamble discussion 

and the final regulation issued in April 2010, CMS stated the noninterference provisions in Section 1860D–11(i) of the Act explicitly 

provides that the Secretary may not interfere with the negotiations 

between pharmacies and PDP sponsors, which would include payment negotiations between the party sponsors and pharmacies for 

MTM services. 

Mr. Blum, you were director of the Center for Medicare, and had 

operational authority over the Part D Program in 2010. Why did 

you—why did your interpretation of noninterference change—— 

Mr. BLUM. Well, I think—— 

Mr. SHIMKUS [continuing]. Four years later? 

Mr. BLUM. I mean, I think with more experience, with more, you 

know—— 

Mr. SHIMKUS. But again, that is a debate on the law. 

Mr. BLUM. Well—— 

Mr. SHIMKUS. The law is pretty clear. 

Mr. BLUM. Well, we understand the concerns regarding the legality of the provision. We are happy to provide our justification. 

What I can say is that the complexity to oversee this benefit has, 

you know, caused us to reinterpret certain—— 

Mr. SHIMKUS. You are not tasked to reinterpret the law. You are 

tasked to follow the law. 

Thank you, Mr. Chairman. I yield back. 

Mr. PITTS. Chair thanks the gentleman. Now recognizes the gentleman, Mr. Barrow, 5 minutes for questions. 

Mr. BARROW. Thank you, Mr. Chairman. And thank you, Mr. 

Blum, for being here. 

Mr. Blum, for seniors, Medicare is kind of like home; when you 

have to go there, they have to take you in. When it comes to prescription drug benefits, Medicare Part D is like home; when you 

have to go there, they have to take you in. So I want to take stock 

of what positive has happened before we assess the cost of the benefits to seniors, to our customers, as opposed to the institutional interests that you all have. 

First of all, why do you think the program is costing less than 

it was originally projected to? What is your number one—what is 

the number one takeaway we get from you as to why the program 

is costing less than projected? 

Mr. BLUM. Well, I think there are many reasons why the Part 

D Program has cost less than the 2003 projection. I think the first 

reason is that the Part D Program pays for many more generic 

drugs today than I think CBO or the CMS actuaries projected back 

in 2003. I think Part D private plan competition also has caused 

the Part D premium growth to stay moderate, but I think the number one reason is the fact that we have many more generic drugs 

provided through the Part D Program than projected back in 2003 

by CBO and the CMS actuaries. But—— 

Mr. BARROW. Referring to your secondary consideration, more 

competition than anticipated, does that also have a role in this; the 

fact that some folks are providing generics and others aren’t? Isn’t 

that—— 

75 

Mr. BLUM. Well, I think there are—— 

Mr. BARROW [continuing]. A little cause and effect there? 

Mr. BLUM. Well, I think there are three, you know, kind of primary reasons. The first is, you know, due to the fact that we have 

fewer new blockbuster brand-name drugs today on market than I 

think what the actuaries, CBO, projected back in 2003. I think the 

second reason is Part D private plan competition. Plans compete 

very hard for their members, which is why we do not agree that 

Part D premiums will skyrocket due to some changes in how we 

oversee Part D plans. And third is, the agency is a much more rigorous reviewer of Part D bids and benefit plans coming into CMS. 

CMS negotiates vigorously with Part C plans, Part D plans, but I 

think the number one reason that both CBO and CMS actuaries 

would cite why the costs are lower than projected back in 2003 is 

the fact that we have fewer new blockbuster brand-name drugs 

than was previously the case back in 2003. 

Mr. BARROW. All right, we have taken stock of how we got here, 

now I want to take stock of where this—how the—where you want 

to take us. 

Let us talk about the costs and the benefits of the proposed rule. 

I heard in response to previous questioning that your understanding—your cost benefit analysis is in the rule. I want to focus 

for a second on the costs and benefits to our customers, as opposed 

to the cost and benefits to CMS as the—the institutional interests 

you all have in managing the program the way that you all think 

it ought to be managed. 

Can you tick off for me just what you think of the principle costs 

to seniors of the direction you all want to take us in? What is going 

to be the impact as far as they are concerned? 

Mr. BLUM. Well, I think we look at costs in kind of multiple 

ways. One, we want to make sure that the premiums, Part B premiums, Part D premiums, remain—growth remains tempered. The 

Part B premium has been flat and for the first year has, I think, 

come down, which is due to the changes passed by the Affordable 

Care Act. The Part D premium in the last several years has stayed 

flat. We also want to make sure the cost sharing that beneficiaries 

pay—— 

Mr. BARROW. Well, but my point is it stayed flat without taking 

the direction that you all want to take us in. Do you see foresee 

any kind of cost impact to the customers as a result of the proposed 

rule? 

Mr. BLUM. Well, I think we should look back at CMS changes 

over the past 4 or 5 years. 

In 2010, we required plans to offer no more than 3 plans, you 

know, coming down from 5, 6, 7 of benefit offerings down to 3. We 

heard arguments from the same entities that we hear from today 

that premiums will skyrocket, when, in fact, they didn’t, they 

stayed flat. So we don’t see, based upon prior experience, that, 

when going from 3 plans down to 2, particularly with the Part D 

doughnut hole being filled in, that we will see—— 

Mr. BARROW. Well, I am asking you whether or not there have 

been any—there are any adverse impacts to seniors, to our customers, as a result of the proposal you all are making, and I am 

hearing you say none. What are the proposed benefits that you 

76 

think the seniors are going to get out of the proposed changes you 

all want to make? 

Mr. BLUM. Well, I think they will see greater clarity, they will 

have greater confidence that the program is doing everything we 

can to reduce provider fraud. They will—— 

Mr. BARROW. That is more of an institutional interest than a customer interest. 

Mr. BLUM. Well, I think our customers have an interest to make 

sure that the program doesn’t pay inappropriately. 

Mr. BARROW. Sure, but they want to make sure that they are 

going to have the full range of options they have got too, and they 

want to make sure they are not going to lose out on this as—— 

Mr. BLUM. Well, here—— 

Mr. BARROW [continuing]. In some other way. 

Mr. BLUM. Well, here is the past 5 years. We have more sponsors 

than ever before wanting to come into the program. For 2015, we 

continue to see more plan sponsors wanting to come into the program to expand benefits, consistent with the past trends. We have 

heard arguments since the Affordable Care Act that the changes 

due to the Affordable Care Act would reduce plan premiums, when, 

in fact—I am sorry, would raise premiums. They have come down 

by 14 percent. 

So I think we have to look at the past 5 years in order to make 

judgments regarding the future. 

Mr. BARROW. Mr. Chairman, thank you very much. I would like 

to follow up on this but my time has expired. 

Mr. PITTS. The Chair thanks the gentleman. Now recognizes the 

gentleman from Pennsylvania, Dr. Murphy, 5 minutes for questions. 

Mr. MURPHY. Thank you, Mr. Chairman. 

Despite the success of Medicare Part D, CMS proposed a rule 

last month that would threaten the health and wellbeing of our 

most vulnerable seniors: those with mental illness. 

Now, having authored the Helping Families in Mental Health 

Crisis Act, which is H.R.3717, cosponsored by many members of 

this committee, it codifies protected class status for antidepressant 

and antipsychotic medications. And having written to Administrator Tavenner on this issue last month, I am deeply concerned 

that the agency’s proposal will have huge, unintended consequences. 

Now, this is not one of cost-saving or convenience, it is not about 

swapping generic and brand drugs. Apparently, a panel is what advised you on making these changes, and some consultant. Do you 

have a list of the panel members who made this decision? 

Mr. BLUM. We can provide it. They were CMS career physicians 

and pharmacists. 

Mr. MURPHY. Psychiatrists? 

Mr. BLUM. I don’t know, but I can check for you, sir. 

Mr. MURPHY. I see. I would think that psychiatric medication, 

some decision would be made by a psychiatrist. 

So these are career people, so they work where? 

Mr. BLUM. Within CMS, but I want to also clarify—— 

Mr. MURPHY. Are they practicing physicians? 

77 

Mr. BLUM. I am not sure, but one thing I want to also clarify is 

that our analysis is on the Web. We proposed the change in an 

open way, and we understand—— 

Mr. MURPHY. No, I read the analysis, and it does not say who 

did it, and it has very limited things. 

So let me offer you something. So is it true that, in terms of the 

proposed rule, there were things from the APA Practice Guidelines 

that said the effectiveness of antidepressant medications is generally comparable between classes and within the class of medications? You know that is what the register wrote, are you aware of 

that? 

Mr. BLUM. Yes. 

Mr. MURPHY. OK. Is it your view that drugs covered in Medicare 

Part D 6 protected classes are interchangeable? 

Mr. BLUM. I think—our clinical review is that some of the drugs 

are today and—— 

Mr. MURPHY. I—no, I didn’t ask—well, let me go on. Did you 

validate your findings with the American Psychiatric Association? 

Mr. BLUM. We proposed these changes in an open way. We are 

going to listen very carefully to comments from all medical societies. 

Mr. MURPHY. Including the National Association on Mental Illness—— 

Mr. BLUM. We will—I plan—— 

Mr. MURPHY [continuing]. And the National Council for Behavioral Health? 

Mr. BLUM [continuing]. Tomorrow—we will work very carefully 

with both the clinical patient communities to ensure that our—— 

Mr. MURPHY. How about the National Institute on Mental 

Health? 

Mr. BLUM. We are happy to meet with all stakeholders. 

Mr. MURPHY. Now, I have in my hand a letter here from the 

American Psychiatric Association, and I want to read you a couple 

of quotes from this. It says, ‘‘We find it particularly disturbing that 

CMS used selective and improper references to APA Treatment 

Guidelines as justification for limiting coverage of these medications.’’ The letter goes on to state that ‘‘selective quoting from our 

guidelines and flawed clinical logic apparently led CMS to conflate 

the supposed ‘interchangeability’ of drugs within the classes of both 

antidepressants and antipsychotics with overall evidence for efficacy when this is just one element of a drug’s appropriateness for 

an individual patient.’’ 

Were you aware that CMS selectively quoted from the APA? 

Mr. BLUM. Well, I think one of our principles, sir, was to make 

sure that we—— 

Mr. MURPHY. Yes or no—— 

Mr. BLUM. We—— 

Mr. MURPHY [continuing]. Were you aware? 

Mr. BLUM. We wanted to make sure that our analysis was public, 

detailed—— 

Mr. MURPHY. I see. There is a letter in front of you. You have 

that letter? 

Mr. BLUM. Yes. 

Mr. MURPHY. There is a highlighted section. 

78 

Mr. BLUM. Sure. 

Mr. MURPHY. Could you read that out loud? 

Mr. BLUM. ‘‘CMS also cited the APA Treatment Guidelines in 

support of its claim that there is a ‘lack of unique effects for distinguishing individual drug products when initiating drug therapy’ 

and that treatment guidelines ... generally do not advocate preference of one SSRI drug over another for initiation of therapy. 

CMS’ conclusion is not supported by the evidence it cites. It misinterprets and misrepresents APA’s clinical practice guidelines 

multiple times as justification for limiting patient access to’’ the 

necessary products. 

Mr. MURPHY. Exactly. So it is important. I mean, you are going 

back then for a comment, but you didn’t list them in the first place. 

Do you know what an SSRI is? 

Mr. BLUM. I have been advised. 

Mr. MURPHY. Do you know how long it takes for one to take effect? 

Mr. BLUM. Not personally, but I have been advised. 

Mr. MURPHY. About 2 to 4 weeks, and yet there is a standard 

here if it doesn’t have an impact on someone’s hospitalization within 7 days, it can be disregarded. 

Do you know that according to the National Alliance on Mental 

Illness, that seniors who died by suicide, 20 percent of them do it 

the day of their doctor’s appointment, 40 percent the week of their 

doctor’s appointment, and 70 percent the month of their doctor’s 

appointment? So psychiatrists and their patients know that not all 

medications are created equal. Each one is in a different therapeutic, or within a therapeutic class have different molecular 

makeups, different side effects, different drug-drug interactions, 

they impact a person’s brain in unique ways, which is why physicians and patients with serious mental illness often try different 

therapies until they find the right one that works. 

If you restrict access to these drugs, you restrict the treatment 

of mental illness, you impact increasing hospital stays, you raise 

suicide rates among a population that has an increased suicide rate 

once people reach 65, and you restrict and you forbid the use of 

life-saving drugs. 

On behalf of the mental health community, I urge CMS to reconsider, because senior citizens with schizophrenia, bipolar illness or 

depression, this is a matter of life and death. So I want to ask you, 

will you commit to removing this unscientific, callous, and antimedical decision that will lead to harm for seniors with mental illness? 

Mr. BLUM. Sir, I will commit to making sure that our policy is 

right for patients. 

Mr. MURPHY. Sir, you are not a physician. You are the people’s 

worst fears. You have no background, no education, no training, 

and it sounds like the people in this panel are not practicing physicians either and not psychiatrists. You are practicing medicine 

without a license. This cannot stand. For people who are at high 

risk for depression and suicide and mental illness, I urge you to go 

back and remove this rule. 

Thank you. I yield back. 

Mr. PITTS. Chair thanks the gentleman. Now recognize—— 

79 

VOICE. [Inaudible.] 

Mr. PITTS. Without objection, so ordered. 

[The information follows:] 

80 

81 

82 

83 

84 

85 

Mr. PITTS. The Chair now recognizes the gentlelady from Virgin 

Islands, Dr. Christensen, for 5 minutes for questions. 

Ms. CHRISTENSEN. Thank you, Mr. Chairman, and thank you, 

Mr. Blum. 

I have a similar question to begin with. We have had many 

issues with CMS over N-stage renal disease patients and the regs 

that have been changed over the years. Were there any transplant 

physicians who served on the panel? 

Mr. BLUM. I don’t believe so, but again, CMS proposed these 

changes in an open, transparent way. We walked through every detail of our analysis, and we welcome feedback, we welcome disagreement to ensure that we get the policy right. 

Ms. CHRISTENSEN. Well, given the risks to this vulnerable population, which make up a large part of the CMS-covered—especially 

Medicare, covered population, it—doesn’t—if they do not receive 

the appropriate immunosuppressant medication, doesn’t CMS think 

it is important for a transplant physician who has experience treating patients with varying organ transplants to weigh in on how 

clinical practice guidelines should be interpreted? 

Mr. BLUM. We agree that CMS should do everything possible to 

make sure that patients receive the drugs prescribed to them, that 

meet their clinical needs. I think it is important to recognize that 

we pay for about 140 drug classes, and while we have 6 protected, 

we don’t hear the concerns regarding lack of that kind of patient 

access—however, we deeply recognize and deeply appreciate the 

concerns from patient groups, physicians, and we pledge to make 

sure that we listen, we understand, and to have our final policies 

best serve patients. 

Ms. CHRISTENSEN. And we appreciate that. My experience is that 

clinical guidelines are an important reference for physicians to use 

to identify the treatments with the strongest evidence base, but 

that they are indeed a guide and the decisions and 

immunosuppressant drug regimens and psychiatric medications 

must be tailored to the individual patients’ needs, and this decision 

is best made by the transplant physician who really knows the 

medical history of the patient. 

I have a question that I also need to ask. CMS is proposing to 

make changes to the number of enhanced plans that can be offered 

by any one sponsor, and to the number of contracts a sponsor can 

have in a bid region. I want to ask about this proposed requirement. 

I have seen one industry-sponsored study that says 7 million 

beneficiaries will be affected, a letter by the chairman notes that 

more than 8 million will be affected, another industry-sponsored 

study cites 14 million people who will be affected. The number 

seems to be growing like Pinocchio’s nose. On the other hand, organizations representing Medicare beneficiaries are strongly supportive of the proposed two-plan requirement. They believe it 

strengthens the program for beneficiaries, making choices more 

meaningful and making sure plans aren’t gaming the system. 

So I would like to provide you with the opportunity to discuss 

these proposals. My first question is why did CMS believe it was 

important to address these issues, and rationalize the number of 

86 

plans that can be offered in an area? Was the agency seeing gaming? 

Mr. BLUM. Well, I think one game that we have seen right now, 

or that the program is now experiencing, is that some plan sponsors offer what they call enhanced coverage, that is actually coverage far cheaper than their basic benefits. And that is a strategy 

to select healthier beneficiaries to lower-cost plans. 

Now, that may be good for the program, but on the other hand, 

what happens is that the low-income beneficiaries who are auto-assigned to that higher-premium plan, if the program pays the full 

premium cost, that costs the government, not saves the government. So we need to take a balanced look at how plan structures 

are being offered to ensure they best serve beneficiaries, they are 

not confusing, but they also lower total program costs—— 

Ms. CHRISTENSEN. Let me try to get a—— 

Mr. BLUM [continuing]. In our program. 

Ms. CHRISTENSEN [continuing]. A couple—thank you for that 

clarification. Could you comment on how the Federal Government 

taxpayers and plans—well, I guess you did, with dual eligible beneficiaries are paying more than they should because of the way the 

plan sponsors are offering multiple plans in that area. Did that 

pretty much address that question? 

Mr. BLUM. Well, I think dual-eligible beneficiaries pay the same 

copayment. They are fixed in statute, but the Medicare Program 

pays just about the complete cost of those drugs, not based upon 

a set fee schedule, but based upon the prices negotiated by the Part 

D plans. We want to make sure that we are paying the right, correct, fair rates on an apples-to-apples basis with the Part D plans. 

Ms. CHRISTENSEN. And some of us cited this proposal will hurt 

dual eligible beneficiaries in the basic plans, but I interpret it exactly oppositely. Some enhanced plans with dual eligibles are not 

enrolled and may be consolidated with other plans, but dual eligible will benefit from lower costs in the basic plans that they enroll 

in. If I could just get an answer to that. Is that correct? 

Mr. BLUM. Well, I think we want to make sure that when plans 

provide what is called enhanced coverage, that it is more generous 

than their basic plan offerings; one, so beneficiaries clearly understand what it means to sign up for coverage that is enhanced, but 

also to make sure that when the program is paying the complete 

cost, the full premium, that we are not paying more than what we 

should if the plan structures were more consistent. 

Ms. CHRISTENSEN. Thank you, Mr. Chairman, for allowing the 

answer. 

Mr. PITTS. Chair thanks the gentlelady, and now recognizes the 

gentleman from Virginia, Mr. Griffith, 5 minutes for questions. 

Mr. GRIFFITH. Thank you, Mr. Chairman. I appreciate that. 

Let me start off by saying that I am concerned when you keep 

saying, you know, you can provide us with the legal status memorandum. This appears to be a major controversy as to whether or 

not this—these changes are legal, and most of the folks up here believe that it is not legal, particularly when it is so large a change. 

And I will have to tell you, this is what happens when one agency 

goes rogue. It wasn’t yours, but, you know, I dealt with the 

Solyndra situation, as many people up here did, and general counVerDate Mar 15 2010 14:14 Sep 29, 2014 Jkt 037690 PO 00000 Frm 00090 Fmt 6633 Sfmt 6633 F:\113-119 CMS ATTACK PART D JKT REQ 9-25-14\113-119 CMS ATTACK PART D PEND
87 

sel there did not give legal—good legal advice, in my opinion. They 

gave bad legal advice, the agency acted on it, and I think they violated the law not once, but about 3 times. And that was my opinion 

after reviewing all of the documents involved, and all the opinions 

involved, is they got bad counsel. So I am going to ask you to get 

a second opinion after you provide us with what you already have 

from your legal counsel, I am going to ask that perhaps you look 

at getting a second opinion because this is a very serious matter, 

and it appears that the legality is in serious question. 

Now, that being said, I have a little bit different tack, because 

last year, based on conditions in my district, I asked you all to do 

something, and that was to take care of our pharmacies. And I 

have recently had a conversation with one of my pharmacists who 

is willing to accept the price negotiated in the region, you know, 

just let me be able to provide my customers with the drug that 

they need, or the drugs that they need, and he has been told no. 

And so when you say to us today that you are getting a lot of complaints, I understand that. 

Now, my question is last year I wrote a letter, and I am going 

to write you another letter, thanking you all for taking care of the 

community pharmacies, and saying, hey, if you meet the price, you 

can do it, because I represent a mountainous district, it may not 

be the big mountains they have in the west, but in the east we 

have some pretty good mountains in southwest Virginia. And so if 

you don’t have a preferred pharmacy, you might be in the same 

county, but you might not be in an area where my people can get 

there easily, particularly if we happen to have 20 inches of snow 

on the ground, it is going to be even more difficult to travel those 

10, 20, 30 miles that may pile up to get to the next pharmacy that 

is on the list. And so I do appreciate what you all did in that regard. 

Question becomes whether or not you have a legal basis to do it. 

Now, under your theory, with what you are changing in this rule, 

and, of course, it is not the whole 800 or 700-and-some pages, and 

I do have serious questions about the rest of it, you are trying to 

take care of that situation, you are trying to make it so that my 

constituents can go to the pharmacy down the street instead of 

having to drive around the mountain to the next pharmacy over, 

isn’t that correct? 

Mr. BLUM. So I think a couple of things. We want to make sure 

that we are proposing these changes in an open and transparent 

way. And so one of the benefits is that, going through the notice 

and comment process, we get the best legal advice, not just from 

our lawyers but from the Congress, from outside stakeholders. 

And so to your first point about getting a second opinion, that 

is precisely why we chose to go through the notice and comment 

process. 

To your second question regarding the pharmacists protections, 

we believe that Part D plans should be able to offer tiered pharmacy networks. We see evidence that they do reduce costs for the 

program, for beneficiaries, but we have two principles. Principle 

one is that beneficiaries need to benefit from those tiered pharmacy 

networks. It can’t just be the plan sponsor that benefits, but it has 

to benefit both the beneficiaries and the taxpayers. And we agree 

88 

that tiered pharmacy networks need to be fair, not just to the plan, 

not to the beneficiary, but to the community pharmacists. And so 

we have a hard time seeing the data evidence that we are seeing 

today, that the evidence for cost savings is mixed, and telling community pharmacies, well, they can’t participate with major Part D 

plans. We want those tier pharmacy networks to be fair, we want 

to make sure that beneficiaries see clear savings, but we agree that 

preferred pharmacy tools can be a good tool for the Part D program 

if structured correctly. 

Mr. GRIFFITH. And here is the concern you are hearing today. 

Look, I think if you are fair to the beneficiaries, and I want fairness as well, if you are fair to the beneficiaries then you are being 

fair to the community pharmacists because, in most cases, particularly in the rural areas, the folks know their pharmacists, they 

want to go to that pharmacist, and they go to somebody who is 

close by, and they want to make sure they don’t have to drive 

around the mountain to get to the other side of the mountain in 

order to get their drugs, because it may not look like much on a 

map, but it is a big deal when you are having to drive that. But 

I have to say, you know, Mr. Shimkus was right earlier when he 

said the whole idea is if you don’t have the authority, it doesn’t 

matter how much fairness you want, you need to bring that to us, 

and you need to say we need a bill to make this fair. And if what 

I need to do to take care of my people is to introduce a bill, then 

I will do that, but let us make sure that we don’t have the Constitution being set aside because it is inconvenient. 

I yield back. 

Mr. PITTS. Chair thanks the gentleman. Now recognizes the 

gentlelady from California, Mrs. Capps, 5 minutes for questions. 

Mrs. CAPPS. Thank you, Mr. Chairman. And Deputy Administrator Blum, thank you for your testimony today. 

I believe this proposed rule has some serious problems, but it 

also includes some important steps forward to ensure that future 

CMS decisions are based on the best data available. But today’s 

hearing shows that it is important for us to be cautious as we 

evaluate ways to make this program more sustainable and efficient. 

One area that I would like to add my voice of concern is in the 

proposal to eliminate some of the protected classes of prescription 

drug coverage. You know, I have been a public health nurse for too 

many years in my community, and I understand that access to the 

right treatment at the right time is very critical for some of our 

most vulnerable groups, and I have grave concern that if this rule 

is proposed, it could put that in jeopardy. This is especially important as many of the ailments that would lose this status are said 

common—morbidities affecting perhaps many more individuals 

than we might think. And while I have concerns about access for 

vulnerable populations due to that part of the rule, I do want to 

applaud the agency for another change that will also have an important impact for improving care for patients, and that is the enhanced eligibility criteria for Part D medication therapy management, the MTM Program. 

I welcome CMS’ recognition of the importance of MTM that it 

plays in increasing medication adherence, improving healthcare 

89 

outcomes, and reducing overall program costs. Specifically, the proposed rule would lower the threshold for beneficiary eligibility, 

meaning that an additional 161⁄2 million beneficiaries could be able 

to benefit from this important service. 

My question is, would you outline the specific benefits that you 

envision this expansion will deliver to beneficiaries as well as to 

the Part D Program, just so we get that on the record? 

Mr. BLUM. Well, one of the things that we know is that there are 

greater opportunities to assist beneficiaries, to ensure they stay 

compliant, to help manage complicated polypharmacy regimes. Our 

team sees growing evidence that the MTM Programs can help to 

improve drug compliance, can lower overall costs of the program. 

We agree that a well-designed Part D benefit works not only to improve patient care, but to lower total program costs. And so our 

goal is to expand the availability of these programs to more beneficiaries, to ensure more beneficiaries get the benefits of these programs. 

Mrs. CAPPS. Thank you. And, you know, clearly, there have been 

some concerns about the policies in this and other proposed rules. 

Maybe it is a lack of understanding, maybe it is just the complexities of the issues, but one of the main concerns we hear from supporters and opponents of changes proposed by CMS is that the data 

is not accurate. The proposed rule we are discussing today seems 

to get at some of those data discrepancies by requiring uniform 

standards for reporting negotiated drug prices across Part D sponsors, but I know that some groups are concerned that this could 

interfere with negotiations regarding drug prices with pharmaceutical manufacturers. It is a very complicated arena, but would 

you now expand on CMS’ intent for this particular aspect of the 

proposed rule? What is the goal of this portion of the rule, and how 

do you think this is going to affect price negotiations, which, after 

all, is the bottom line? 

Mr. BLUM. Well, I think a couple of things, Congresswoman. The 

Part D benefit is not a purely capitated program where CMS simply pays a premium to plans and lets the plans negotiate prices. 

There are other payment mechanisms built within the Part D Program. There are risk corridors, reinsurance, catastrophic coverage, 

the fact that for many low-income beneficiaries, dual eligibles, the 

program pays just about the entire cost of the drug bill. 

Now, we have no interest or no policy desire to interfere with the 

negotiations between Part D drug plans and pharmaceutical manufacturers, but we believe that those prices should be reported, kind 

of in a consistent way, to make sure the program is paying fairly, 

and if the Part D plan is benefitting from the lower negotiated 

price, and given the large size of the premium costs, the cost sharing, the catastrophic coverage, the reinsurance, the risk corridor, 

that those prices should be paid—should be reported in a consistent way to ensure those discounts not just get retained by 

plans, but get passed on to beneficiaries and to the taxpayers that 

are funding the vast majority of the program costs. 

Mr. PITTS. Chair thanks the gentlelady. Now recognizes the 

gentlelady from North Carolina, Mrs. Ellmers, 5 minutes for questions. 

90 

Mrs. ELLMERS. Thank you, Mr. Chairman. And thank you, Mr. 

Blum, for being with us today. 

Mr. Blum, I think it is important that you know that over a half 

a million seniors in North Carolina will be affected by these proposed rules, and I just want to start off by stating that fact. 

I am a little concerned with the interpretation that you—CMS 

has on not interfering or arbitrating or mediating between pharmaceutical companies and manufacturers. You are basically coming in 

and saying, ‘‘We are not going to be in the middle, what we are 

going to do is take over and dictate.’’ Is that not essentially what 

you are doing? 

Mr. BLUM. I don’t see any desire or attempt for us to dictate the 

negotiation of prices between Part D plans and providers, manufacturers. We believe in private plan competition, we believe in choice, 

but choice that is fair to beneficiaries and fair to the taxpayer. 

Mrs. ELLMERS. OK, and you have stated that, and you are basically reiterating what I said, but essentially what you are saying 

is you are going to come in and control the situation as a whole, 

kind of as a whole umbrella effect—— 

Mr. BLUM. That is not what I said—— 

Mrs. ELLMERS [continuing]. Of control. 

Mr. BLUM [continuing]. Congresswoman. What I said is that we 

get pulled into disagreements between plans, pharmacies, other entities. And so our view is this clarification helps to strengthen the 

noninterference, to describe precisely how we interpret it on a dayto-day basis, but from a day-to-day basis, CMS continuously gets 

pulled into disputes—— 

Mrs. ELLMERS. OK. Well, let us move on. Let us move on. The 

CMS rule proposed that prescription drug plans are limited to offering only one standard benefit and one enhanced benefit. Is this 

correct? 

Mr. BLUM. That is correct. 

Mrs. ELLMERS. So essentially, 50 percent of the plans that are 

available now will be decreased and eliminated? 

Mr. BLUM. I think, a couple of clarifications. The first is, this is 

a continuation and a continuous pathway for us to reduce the number of enhanced plans. There are only 2 percent of Medicare beneficiaries that are in that category of plans that could be eliminated—— 

Mrs. ELLMERS. But—— 

Mr. BLUM [continuing]. If CMS chose to finalize the proposal. 

When CMS moved from 5 plans down to 3 plans, we heard the 

same concerns, the same arguments, that premiums would skyrocket, that beneficiaries would go without coverage, they would 

have to change plans. And as we have heard, you know, throughout 

this hearing, the Part D premium has stayed constant, has stayed 

flat. So we need to be concerned regarding the comments and the 

criticisms coming to us regarding this change, but we also have to 

look on the past 4 or 5 years to really make a complete judgment 

regarding this proposed change. 

Mrs. ELLMERS. OK, well, there again, to your point that you are 

making, you are basically justifying the reasoning behind eliminating, as you pointed, only 2 percent of these patients receive the 

benefit from what is being eliminated, correct? 

91 

Mr. BLUM. I am trying to give the justification for CMS’ proposal. 

This is still on comment, and we have—— 

Mrs. ELLMERS. And this is—— 

Mr. BLUM [continuing]. Made no policy—— 

Mrs. ELLMERS [continuing]. From a perspective of trying to save 

dollars in healthcare, is that correct? 

Mr. BLUM. I think our total estimate, if the proposed change is 

completed, is that it is overall savings, small but overall savings, 

and we are also trying to make the benefit work better for our 

beneficiaries. 

Mrs. ELLMERS. Do you realize, though, that the changes that are 

being made to Medicare Part D will then actually increase the 

spending in Medicare Part A and Part B, because many times 

these patients will then be rehospitalized, sent to the hospital for 

care? 

You cited in part of your justification at the beginning the 

vulnerabilities, one of which has to do with the protected classes 

of drugs. Nursing home patients being a large patient body that receives those medications, that is an ongoing issue. Have you ever 

been to a nursing home before? 

Mr. BLUM. Yes, I have. And, also, we understand that the nursing home industry is also very concerned regarding the high rate 

of use, and the high degree of variability in antipsychotic use—— 

Mrs. ELLMERS. OK, so would it not be more efficient, then, to go 

to the source? You cited overprescribing of medication. Wouldn’t it 

make more sense to narrow down who it is that is overprescribing 

drugs than it would be to eliminate the entire program? 

Mr. BLUM. Well, I think we have—Congresswoman, we have 

worked very closely with the nursing home industry—— 

Mrs. ELLMERS. OK, I only have one more moment, because it is 

not the nursing home that prescribes the drug, it is the physicians 

that prescribe the drugs. So I want to make that clarification. In 

relation to the potential impact on seniors, because of any willingness provider provision, staff of the Energy and Commerce Committee spoke with the Office of the Actuary, who told them, ‘‘Any 

time you make a network wider, costs go up.’’ Can you respond to 

that? Because you have just told me that this is an effort at decreasing cost. 

Mr. BLUM. I agree that pharmacy networks have the potential to 

lower costs for the program for beneficiaries. In our current program today, we see strong evidence that pharmacy networks do reduce costs. We also see evidence that some pharmacy networks in 

their current forms don’t lead to cost savings for our beneficiaries 

and for the program. 

Mrs. ELLMERS. So, basically, what you are saying is a direct complete—— 

Mr. BLUM. What I am saying is—— 

Mrs. ELLMERS [continuing]. Opposite opinion of the—— 

Mr. BLUM. No, that is not what I am saying. 

Mrs. ELLMERS [continuing]. Office of the Actuary. 

Mr. BLUM. What I am saying is that we believe that pharmacy 

networks, if structured correctly, make clear to beneficiaries the 

pros and cons of preferred pharmacy networks versus not, they do 

reduce cost, but the data right now shows that some pharmacy netVerDate Mar 15 2010 14:14 Sep 29, 2014 Jkt 037690 PO 00000 Frm 00095 Fmt 6633 Sfmt 6633 F:\113-119 CMS ATTACK PART D JKT REQ 9-25-14\113-119 CMS ATTACK PART D PEND
92 

works in their current forms don’t reduce costs for beneficiaries. 

Our goal is to make sure that preferred pharmacy networks work, 

and work well for beneficiaries, but also work well for—— 

Mrs. ELLMERS. Thank you. I—— 

Mr. BLUM [continuing]. And—— 

Mrs. ELLMERS [continuing]. Have gone way over my time—— 

Mr. BLUM [continuing]. And for the—— 

Mrs. ELLMERS [continuing]. So I appreciate—— 

Mr. PITTS. The Chair thanks the gentlelady. Now recognizes the 

gentlelady from Florida, Ms. Castor, 5 minutes for questions. 

Ms. CASTOR. Well, I want to thank you, Chairman Pitts, for calling this Oversight hearing for Medicare Part D, and thank Mr. 

Blum who is here from the Center for Medicare and Medicaid Services, and thank everyone at CMS for working to improve Medicare 

Part D, helping to simplify it for beneficiaries, make benefits more 

meaningful and cost-effective for everyone. But it has to be balanced by science, and I think that many of the many advocates for 

beneficiaries and those who have chronic illnesses and other sicknesses have very valid points about the Protected Class Policy. 

So I want to make sure everyone is aware; this is a proposed 

rule, this is what CMS has proposed in January, correct? 

Mr. BLUM. Correct. 

Ms. CASTOR. And there is an open comment period where you 

can receive comments from people all across the country, whether 

they are medical, professionals, beneficiaries, family members, 

pharmacists, is that correct? 

Mr. BLUM. That is correct, Congresswoman, and we pledge to 

meet with all stakeholders on this issue to understand comments 

and concerns, and this is proposed and we pledge to talk to clinicians, beneficiary groups to ensure that—— 

Ms. CASTOR. And the comment period is—— 

Mr. BLUM [continuing]. We get the policy right. 

Ms. CASTOR [continuing]. Open until when? 

Mr. BLUM. I believe March 10, March 14. 

Ms. CASTOR. OK. Mr. Blum, many private insurance plans steer 

patients toward preferred pharmacy networks and mail-order pharmacies in an attempt to lower costs, but CMS has found that total 

drug costs were not consistently lower in preferred pharmacy networks, and, in fact, the retail pharmacies in the nonpreferred network were actually offering savings to the Medicare Trust Fund 

through discounted generics at prices below those offered by pharmacies with preferred cost sharing. 

And I hope you have reviewed the research done by the National 

Community Pharmacist Association. The community pharmacists 

chose one commonly purchased prescription drug plan, and entered 

in the Medicare plan finder for the most frequently prescribed 

drugs; the generic version of Lipitor, the generic version of Plavix, 

Diovan and Nexium. The costs were then compared between preferred, mail-order and nonpreferred pharmacies in 9 cities across 

the country, and according to the analysis, I think it is quite surprising, 89 percent of the time preferred pharmacy costs to Medicare were higher than those of nonpreferred pharmacies, and 100 

percent of the time, mail-order costs to Medicare exceeded those of 

nonpreferred pharmacies. 

93 

Now, this is really counterintuitive to how you think it would 

work. How can Medicare be paying more for mail-order and more 

for drugs at preferred pharmacies? Medicare is supposed to be benefitting from competition here that will bring prices down, and it 

is troubling that plans are offering little to no savings in the aggregate in their preferred pharmacy pricing, particularly in mail-order 

for generic drugs. So instead of passing on lower costs available 

through economy scale of deeper discounts, a few sponsors are actually charging the program higher prices. So preferred networks 

and mail-order pharmacies should save the patient and the Medicare Program money, I would think. 

So I would like to ask you first, is the situation I have described 

where mail-order and preferred pharmacies are costing Medicare 

more than community pharmacies, similar to what CMS found in 

your analysis of Part D? 

Mr. BLUM. Thank you for the question. 

First, to clarify. The comment period for the proposed rule closes 

March 7. I apologize for not giving the accurate answer. 

To your question regarding preferred pharmacy networks. I think 

the reason why CMS proposed this change was that we saw similar 

data results. When you look at the actual cost of the drug being 

paid by the program, being paid by the beneficiary through cost 

sharing, there is not a consistent pattern that preferred pharmacy 

networks, mail-order, lead to consistent lower prices for beneficiaries, for the program. And we want to make sure that our Part 

D plans have all the cost containment tools that they can use to 

lower costs, benefit beneficiaries, benefit taxpayers, but when the 

program is permitting plans to restrict some pharmacies to not participate within their networks, we believe the principle should be 

that we need to demonstrate there is savings to our beneficiaries, 

to our taxpayers. 

So we embrace preferred pharmacy networks so long as they are 

fair to beneficiaries, they are fair to pharmacists, and they are fair 

to the taxpayers that fund the vast majority of the cost of the program. 

Ms. CASTOR. So you would agree that it is inconsistent with the 

Part D law that preferred networks would cost Medicare more 

money? 

Mr. BLUM. I think the intent of the program is to ensure that 

Part D plans have tools to lower costs, not just the premium, but 

cost sharing, reinsurance payments, risk corridor payments, and 

that should be the principle that the Medicare Program follows. 

Ms. CASTOR. Thank you very much. I have nothing else. 

Mr. PITTS. Chair thanks the gentlelady. Now ask consent to submit for the record three letters: one from the National Association 

of Chain Drug Stores, one from the American Society of Transplantation, and one from the Association of Mature American Citizens. 

Without objection, so ordered. 

[The information follows:] 

94 

95 

96 

97 

98 

99 

100 

101 

102 

103 

104 

Mr. PITTS. Now the Chair recognizes the gentleman from New 

Jersey, Mr. Lance, 5 minutes for questions. 

Mr. LANCE. Thank you, Mr. Chairman. 

Good morning to you, Mr. Blum. I will be concentrating on what 

I believe is an overreach by the department, and I understand 

when the law was written, there was a debate whether there 

should be negotiations involving the Federal Government, but as I 

read the law, that was clearly decided in the statutory law and I 

am deeply concerned at what I believe is the illegal reading of the 

law by the agency. 

My concerns go not only to this situation but to several other situations where the administration has unilaterally delayed the 

ACA. I think the administration should have come to us in Congress with statutory change, recess appointments argued before the 

Supreme Court several weeks ago. I believe the Supreme Court will 

rule those recess appointments were unconstitutional. EPA regulation under the Clean Air Act, argued before the Supreme Court 

earlier this week. Now, that is not your purview, any of those matters, I understand that, but you are here this morning regarding 

the topic under discussion. 

There is a legitimate debate in this country; whether or not there 

should be negotiations by HHS, I understand that, but the noninterference provision is, in my judgment, unambiguous that that 

is not the right or the responsibility of HHS, it does not permit negotiations between Part D sponsors and pharmacies. And as I understand what was statutorily created, Senator Grassley stated, for 

example, that the noninterference provision is at the heart of the 

bill’s structure for delivering prescription drug coverage through 

market competition. I think that is a good deal for consumers, rather than through price fixing by the CMS bureaucracy. 

In the conference report at the time the legislation became law, 

this is a direct quote, ‘‘In order to promote competition, the Secretary is prohibited from interfering with the negotiations between 

drug manufacturers and pharmacies and PDP sponsors.’’ Between 

drug manufacturers and pharmacies and PDP sponsors. And yet as 

I read what has occurred in this proposed rule, prohibits only HHS’ 

involvement in negotiations between drug manufacturers and pharmacies, and between drug manufacturers and PDP sponsors, but 

under the rule, not prohibiting HHS involvement in negotiations 

between pharmacies and PDP sponsors. Am I accurate in that? 

Mr. BLUM. I think we have clarified how we interpret the noninterference provision of the statute. I agree that they were vitally 

important to the framework of the 2003 legislation. During my 

time on the Senate Finance Committee—— 

Mr. LANCE. Yes. 

Mr. BLUM [continuing]. I worked very closely with Senator 

Grassley’s office—— 

Mr. LANCE. Yes. 

Mr. BLUM [continuing]. And so I agree with—— 

Mr. LANCE. That is why I raised it. 

Mr. BLUM [continuing]. The premise. Now, we do not believe that 

the Part D Program should interfere with price negotiations—— 

Mr. LANCE. Um-hum. 

105 

Mr. BLUM [continuing]. As I said previously, oftentimes Part D 

plans, pharmacists try to bring the agency into contract disputes. 

We felt it was important to clarify how we interpret the noninterference clause, but I am very familiar with how it was drafted, very 

familiar—— 

Mr. LANCE. Probably more familiar—— 

Mr. BLUM [continuing]. With—— 

Mr. LANCE [continuing]. Than I. 

Mr. BLUM. Yes. 

Mr. LANCE. Well, thank you. Let me say, I think that the current 

interpretation is novel, and I think it strains statutory credulity. I 

think it strains the statutory text beyond reasonable limits. 

Now, I am an attorney, and I am familiar with the deference doctrine under Chevron, but as I read applicable law, particularly 

from the DC Circuit and from the Second Circuit, I think this goes 

well beyond any deference that would be permitted under the 

Chevron doctrine. And, undoubtedly, this will be litigated if the 

rules are finalized, and I would urge the administration, based 

upon sound principles of law, to reconsider this matter, and if a 

change is required, as is true in so many areas, the ACA, recess 

appointments, EPA regulations, I urge the President of the administration to come before Congress to seek statutory change. 

Thank you, Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentleman. Now recognizes the 

gentleman from Maryland, Mr. Sarbanes, 5 minutes for questions. 

Mr. SARBANES. Thank you, Mr. Chairman. Thank you, Mr. Blum, 

for being here. 

I think it is an important undertaking what CMS is doing. I 

think it is a fair expectation on the part of the taxpayers and the 

beneficiaries that periodically you kick the tires on the program, 

even if it is working very well and we are all happy with the track 

record. I mean when this was first rolled out, there were problems. 

Democrats who were initially concerned about the program, I think 

stepped up to try to improve it, and we now have a program that 

works well and is respected by its beneficiaries. So that doesn’t 

mean that you don’t come along every so often and try to make it 

better, which is what you said. 

So we ought to be going through this exercise, and I endorse the 

process that you have undertaken. The rule—the proposed rule covers a lot of different areas, as you have indicated. I share some of 

the concerns you have heard with respect to removing the Protected Class for certain categories of drugs, and as you know, there 

is a broad coalition that has expressed those concerns, and I encourage the agency to pay careful attention to that. 

In terms of the requirement to reduce the number of plan offerings, I agree with you, I think that is an important step to consider. I think you are right to point to the alarm that existed the 

last time you did something like this, and the track record now 

shows that it has been an improvement overall. And there is still 

potential for a lot of confusion on the part of seniors and beneficiaries when they look at the plan offerings. So as long as you are 

not diminishing the quality of the options that are available across 

the board, I think that that is a reasonable change to pursue. 

106 

I share, and you have seen this on both sides of the aisle, concerns on the part of independent and community pharmacists that 

they are not getting the full benefit and access to some of these 

preferred networks and so forth, and that is clearly something that 

the rule is trying to address. 

The Medicare Program, the Part D Program, is not permitted to 

negotiate with drug manufacturers, correct? 

Mr. BLUM. Correct. 

Mr. SARBANES. But you reimburse plans that are themselves negotiating with those drug manufacturers. 

Mr. BLUM. Correct. Part D plans negotiate the formularies and 

negotiate the prices with manufacturers. It is not true that CMS 

simply pays a fixed premium to Part D plans. We pay many other 

separate payments that are based upon the actual prices being negotiated. We don’t plan or don’t want to interfere in those negotiations. But the 2003 law that was legislated created many separate 

payment mechanisms that the program pays Part D plans. And, for 

many beneficiaries, we’re essentially a cost-based reimbursement, 

particularly for the dual-eligible beneficiaries that receive continuity of coverage. 

Mr. SARBANES. It is certainly fair for the program to expect that 

if the plans are securing discounts, that some of that benefit would 

come back to the program and to the taxpayers. If the program was 

not doing a reimbursement, if the patient was paying directly to a 

plan that originally cost $100 for a drug, and the plan was paying 

the manufacturer $75 and getting a $25 mark-up, but then was 

able to go negotiate and get that for $50, there would certainly be 

an outcry on the part of the consumer if none of that savings was 

being passed through. I think the transparency that the program 

is demanding in terms of what the drug pricing is and how it 

works is to get to the notion that taxpayers also have a rightful expectation that, if there are significant discounts being earned by 

the plans relative to the manufacturers, that some of the benefit 

of that ought to come back to the program. And that doesn’t—that 

interest on your part in transparency does not translate into interference or trying to negotiate directly with manufacturers, or anything else, that is just basic fair transparency. Is that not right? 

Mr. BLUM. Correct, and we believe that competition has served 

the Part D Program well in the past 10 years. At the same time, 

we believe that prices reported to the program for purposes of paying cost-sharing assistance or other, you know, kinds of payment 

mechanisms need to be reported in a consistent way to ensure that 

competition is fair, to ensure that both beneficiaries and taxpayers 

benefit from that competition. 

Mr. SARBANES. Thank you. 

Mr. PITTS. Chair thanks the gentleman. Now recognize the gentleman from Louisiana, Dr. Cassidy, 5 minutes for questions. 

Mr. CASSIDY. Hi, Mr. Blum. 

Mr. BLUM. How are you? 

Mr. CASSIDY. You always know your stuff, man. I don’t always 

agree with you, but you know your stuff, so thank you. 

Let us just put it on the table. In your testimony, you mentioned 

the concerns, recent changes to the MA Program will result in 

lower enrollment, higher cost appear unfounded, but let us be honVerDate Mar 15 2010 14:14 Sep 29, 2014 Jkt 037690 PO 00000 Frm 00110 Fmt 6633 Sfmt 6633 F:\113-119 CMS ATTACK PART D JKT REQ 9-25-14\113-119 CMS ATTACK PART D PEND
107 

est, only a small fraction of the scheduled cuts have come into 

being, and, indeed, the cuts that were already scheduled were papered over by large grants by CMS. I would note, GAO questioned 

the legality of those demonstration projects. A cynic would say they 

were being papered over prior to the last presidential campaign, 

but far be it for me to accuse the administration of politics. 

So given that, I mean you see no basis that these cuts going forward could have an impact on the care that patients are receiving? 

Mr. BLUM. So before the Affordable Care Act was signed into 

law, Medicare paid on average about 13 to 14 percent more than 

the same cost for the traditional Fee-For-Service Program. Today, 

we are paying roughly about 103 percent of costs on average, compared to the Fee-For-Service Program. So a dramatic decrease in 

the total cost that the program paid private plans. That includes 

the costs to our quality bonus demonstration. 

During that time period of dramatically lower premiums—— 

Mr. CASSIDY. But going—I—not to interrupt, we have limited 

time, I don’t mean to be rude. Going forward, there are further 

cuts, I think, what, I see J.P. Morgan says that payments will be 

cut at least 4 percent in 2015, which is more than you suggest, but 

nonetheless, so the cuts begin to accelerate. 

Mr. BLUM. So we estimate that the proposed change that CMS 

put forward last week for the Medicare Advantage Plans, on average, will be roughly the same change that was finalized for 2014, 

the current year. For—— 

Mr. CASSIDY. But without the demonstration projects. 

Mr. BLUM. Net, net. So, you know, apples-to-apples comparison. 

In 2014, we are on track to exceed our 5 percent growth projection—— 

Mr. CASSIDY. But let me ask you. Those cuts are in addition to 

the previous cuts. 

Mr. BLUM. So—— 

Mr. CASSIDY. So you add cuts—you have more cuts, you have 

more cuts in ’16 and more cuts in ’17, at some point the cumulative 

effect, that—saying 3 percent this year is not going to result in any 

worsening that 3 percent last year, ignores the fact that you had 

3 percent last year. 

Mr. BLUM. So every year, CMS phases in parts of the Affordable 

Care Act changes. Every year, we hear that plans will pull out, 

benefits will be cut—— 

Mr. CASSIDY. No, no. Now you are dodging the question. The fact 

is is that you have an accumulation of cuts. So, sure, we can speak 

about rhetoric and about how, you know, you give grants and somehow it doesn’t happen, but there is 3 percent, there is 3 percent, 

and it accelerates, and to say that it doesn’t—that is not going to— 

I mean are you really maintaining that these cuts are going to 

eventually have no effect? 

Mr. BLUM. I think—— 

Mr. CASSIDY. Yes or no. 

Mr. BLUM. What we are saying is our—what I believe is that the 

past 5 years we have seen—— 

Mr. CASSIDY. Never mind. That is fine. I don’t mean to be rude 

but this is clearly a talking point. I don’t mean to be rude but I 

am not getting a yes or no, I am sorry. 

108 

Next, one of your things is that you are going to require physicians to be enrolled in Part D in order to participate. Now, I am 

a doc. I get so sick of bureaucrats telling me how to run my show. 

There are so many things that already are looking at me. I mean 

physicians must be one of the most scrutinized people in terms of 

bureaucracy staring at them. Why are we going to kick our box 

from the ability to prescribe if they are not a Medicare provider? 

Mr. BLUM. Well, I testified to the Senate Homeland Security 

Committee, based upon reports from the IG that found that the 

program was paying for prescriptions written by prescribers that 

were not licensed physicians. We think it is appropriate for us to 

have the same standard—— 

Mr. CASSIDY. Now stop. If I may, there are other ways to weed 

out unlicensed physicians. Do we have to say, OK, you can—if you 

are licensed, you cannot work for a nursing home in an underserved area, you are not going to be able to work for them, because 

somebody without a license should be kicked out anyway. 

Mr. BLUM. Well, that is the situation that we have today. That 

is the rule that we have today, that we rely on State pharmacy licensure, and that hasn’t worked. 

Mr. CASSIDY. Now, I will say that that doesn’t mean that now we 

are going to use, as a surrogate for that not working, another set 

of regulations. As—speaking for my fellow physicians who are 

groaning under the burden of paperwork laid upon them by CMS, 

and thinking about getting out of the system because they are so 

sick of it, this threatens a senior’s access to physician care because 

CMS doesn’t understand that one more piece of paperwork is just 

enough to make me retire to Florida. 

Mr. BLUM. Well, we understand the burdens, but we also—— 

Mr. CASSIDY. If you do, you are not operationally understanding 

it. 

Mr. BLUM. Well, our principle is to make sure that prescribers 

who are writing scripts pay for the Part D Program, are licensed—— 

Mr. CASSIDY. I don’t see the rationale for that beyond you don’t 

think other laws are being implemented, being enforced. It seems 

better to enforce those other laws than add on more regulation. 

Mr. BLUM. Well, those are State laws, and I think we feel that 

we have a responsibility to ensure that the taxpayers that front the 

vast majority of costs to the Part D Program are paying for prescriptions that are written by legitimate physicians. 

Mr. CASSIDY. With that defense of further centralization of 

healthcare and to the Federal Government, I yield back. 

Mr. PITTS. Chair thanks the gentleman. Now recognize the gentleman from Kentucky, Mr. Guthrie, 5 minutes for questions. 

Mr. GUTHRIE. Thank you, Mr. Blum. Thank you for coming. I appreciate that. 

I just want to first go back to what—I think are questions that 

Mr. Shimkus and you had. If I heard correctly, which I think I did 

because I wrote it down, he quoted a 2010 position that CMS had 

that would not have allowed this rule to go forward, and then you 

said, and I quote, ‘‘reinterpreted the law’’ to allow this rule to go 

forward. You also said that you understand the legal concerns that 

we have, not in that exchange, but you understand the legal conVerDate Mar 15 2010 14:14 Sep 29, 2014 Jkt 037690 PO 00000 Frm 00112 Fmt 6633 Sfmt 6633 F:\113-119 CMS ATTACK PART D JKT REQ 9-25-14\113-119 CMS ATTACK PART D PEND
109 

cerns that we have, which I would say you understand that, the 

basis is quite questionable or else you wouldn’t understand our concerns if you didn’t understand how we could question that. And you 

say that you have been pulled in by other groups to get involved 

in negotiations, and you had to come up with this rule because 

other groups want you to be involved. And I hear from people all 

the time in my district; veterans, other things that they are in bad 

situations, and I just have to say to them I wish I could help you, 

but the law is the law, and it is my job to change the law and fix 

the law to help you in that situation, but I can’t just go reinterpret 

the law. And that is what you said. And I think all of my colleagues, whether Republican or Democrat, House or Senate, should 

be really concerned with what you said today; that there could be 

a position of CMS, you want to do something different so you go 

back and reinterpret the law on a questionable basis. Or I think 

that—I just want to put out this—what was said, and I will give 

you a chance to respond to that if you want to do so, or I can go 

into my questions. 

Mr. BLUM. Well, I think a couple of things. As I said during my 

opening statement, the Part D Program has many vulnerabilities, 

and we did a comprehensive review based upon the policy concerns 

that come to us from members of Congress, stakeholders, partners, 

and based upon our own operational experience. We chose to propose changes, to talk about our principles, to testify here today to 

discuss our concerns, to discuss the vulnerabilities that we see. 

Mr. GUTHRIE. Well, did you have to reinterpret the law to go forward with this? 

Mr. BLUM. We want to invite comment, we want to invite conversation, that we don’t believe the status quo for the Part D Program is perfect. There are vulnerabilities. We have to accept that. 

We have to accept the program is spending $70 billion, the fastest 

projected—— 

Mr. GUTHRIE. Well, let me—— 

Mr. BLUM [continuing]. Program—— 

Mr. GUTHRIE [continuing]. Just—I only have a—I want to get to 

the question, but if you have a—if all that is true, and if we accept 

all that, but that doesn’t mean you can just do it without the legislative—— 

Mr. BLUM. And that is precisely what—— 

Mr. GUTHRIE [continuing]. Authority. 

Mr. BLUM. That is precisely why we go through the notice and 

comment period. We want to invite a perspective, we wanted to testify before this committee to explain our rationale, to hear disagreement. 

Mr. GUTHRIE. But to the legal side. I am not just saying whether 

the—— 

Mr. BLUM. Well—— 

Mr. GUTHRIE [continuing]. Rules are correct or not or—— 

Mr. BLUM [continuing]. During the comment process, many 

stakeholders submit legal opinions, law firms submit comments to 

us to tell us whether we are right or we are wrong. 

Mr. GUTHRIE. Well, I don’t—but you had to reinterpret the law 

to get to where you were, that was your quote. 

Mr. BLUM. I would call it a clarification, sir. 

110 

Mr. GUTHRIE. OK. Well, you—OK, you said—one complaint I 

don’t hear from my constituents is Medicare Part D. I just don’t 

hear from them on Medicare Part D as a problem moving forward. 

And you did say in your opening statement—— 

Mr. BLUM. I would invite you to look at the complaint—— 

Mr. GUTHRIE. I am going to look to your complaints and see, but 

I don’t—when I go to town hall meetings, nobody stands up and 

says I don’t like my drug plan. But—so one of the things you said, 

you support competition as long as seniors understand. And, you 

know, that—I imagine going into a superstore and saying here is 

the aisle limited choices for people that are 65 and older, and here 

is the rest of the superstore for everybody else. And, you know, it 

just says, you know, they do understand and it is—the Milliman 

report says up to 15 percent of Part D plan choices may be eliminated or materially changed during 2015 or 2016, based on provisions in the rules. So some of my constituents will have plans that 

they chose, plans that they like, and if they like what they have, 

they can keep it, as we have heard, and I know that when constituents under the ACA were—plans were changed, and people were 

just saying, well, they were paying for something they shouldn’t 

have paid for because it wasn’t worthy insurance. I have heard that 

even in this committee. And, obviously—so that is just assuming 

people don’t understand what they are buying. And I don’t think 

that is the case. I think people are far more sophisticated and 

smarter than maybe what those kinds of comments give them credit for. 

And so what do I tell my constituents if they can’t get plans because they are limited? You said it is only 2 percent, but that is 

2 percent. 

Mr. BLUM. Well, I think a couple of things. One is we want to 

make sure that we are incorporating into our final policies the 

views from the beneficiary communities, beneficiary stakeholders. 

What we hear from the beneficiary community is that the benefit 

is confusing. We see from the academic literature that beneficiaries 

would have the opportunity to reduce their out-of-pocket costs dramatically by changing plans. We want beneficiaries each year to 

take a critical look at their benefit offerings, because we know that 

many beneficiaries will be able to save, reduce their out-of-pocket 

costs. That is why we have private plan choices. We want competition, we want beneficiaries to evaluate and be able to understand 

the benefits for different plan options, but we know that most beneficiaries year-to-year don’t change plans, even though they could 

benefit dramatically by changing plans. 

Part of the reason that we hear from the beneficiary community, 

and again, we invite this public conversation, is the benefit is confusing. We see plans cherry-picking the healthiest beneficiaries, 

raising costs for the rest of the program. But we will respectfully 

review and carefully review comments sent to us to make sure that 

we are fostering competition, but in a way that helps beneficiaries 

choose the best possible plan, but also make sure the taxpayers 

don’t overspend. I would hope the Congress would want us to manage the Part D budget in the most prudent way. 

Mr. GUTHRIE. Well, thanks. I do appreciate you coming today. 

Appreciate it, and I yield back. 

111 

Mr. PITTS. Chair thanks the gentleman. Now recognizes the gentleman from Georgia, Dr. Gingrey, 5 minutes for questions. 

Mr. GINGREY. Mr. Blum, you have been with CMS since 2009, is 

that correct? 

Mr. BLUM. Correct. 

Mr. GINGREY. You have been in this current position, number 2 

guy, for, what, about a year? 

Mr. BLUM. Roughly speaking, yes. 

Mr. GINGREY. Yes. And I certainly can understand a new coach 

coming in, wanting to do something kind of drastic, but quite honestly—and I commend you on the transparency aspect of this proposed rule, but I think the rule is boneheaded. In fact, Bill O’Reilly 

would probably call it pinheaded. 

I would expect, since you have been around since 2009, that you 

know on, let us say, a 5-year average, the last 5 years, how many 

participants in Medicare Part D, the prescription drug plan, have 

reached the doughnut hole, what percentage on average over the 

past 5 years? 

Mr. BLUM. I don’t have the numbers in my head, but what is 

true is many fewer beneficiaries are hitting the doughnut hole because it is being closed. 

Mr. GINGREY. Yes, but I suspect that number is pretty low. I am 

surprised you don’t have that. Maybe somebody behind you could 

whisper in your ear—— 

Mr. BLUM. We would be happy—— 

Mr. GINGREY [continuing]. And tell you—— 

Mr. BLUM. But I believe the numbers are roughly year-toyear—— 

Mr. GINGREY. Well—— 

Mr. BLUM [continuing]. And it changes year-to-year, roughly 3 to 

4 million Medicare beneficiaries hit the doughnut hole—— 

Mr. GINGREY. Yes. Yes 

Mr. BLUM [continuing]. Each year. However, but—— 

Mr. GINGREY. I would suggest that, you know, you are trying to 

kill a gnat by torching a village. You are trying to fix things that 

are not broken, and to do it, maybe the optics of closing the doughnut hole look great. And so you have to go back and say, well, we 

are going to look at these Protected Classes, and we are going to 

do something about that and we are going to save money so we can 

close the doughnut hole. And look, listen to these 6 drug classes. 

Antineoplastics, that is cancer, ladies and gentlemen. 

Anticonvulsants. Maybe we ought to add marijuana to that. 

Antiretrovirals, that is AIDS drugs. Antipsychotics. 

Antidepressants. Anti-immunosuppressants. These are people who 

have had transplants—renal transplants, and if they don’t get the 

drugs necessary within 3 to 5 years—they can’t pay for them, and 

all of a sudden they reject these transplants. 

I just, you know, I wish I could tell you that I was shocked at 

the egregiousness of this proposed rule, and that this was all just 

a mistake, but that would be too kind. 

At this point, we must recognize the pattern of this administration attacking any healthcare program that empowers a free market, no matter the pain it causes beneficiaries. I personally, as a 

physician, find it reprehensible that the administration is so 

112 

against any market-based system, that they are willing to once 

again harm seniors to serve the purpose. My colleague from Maryland said, you know, every now and then you have to kick the tires 

to see if a program is working. Well, on the Affordable Care Act, 

you—every time you kick the tires, your foot goes through the sidewall. So maybe you are a little reluctant, so you kick the tires of 

a good program and your foot comes bouncing right back in your 

face. And that is what is going on here. And let us be clear, this 

proposed rule will destroy the Part D Program as we know it. It 

will limit our seniors’ coverage options, and it will force higher premiums, unwarranted changes to a program where beneficiaries are 

overwhelmingly satisfied. It just doesn’t make sense. 

Now, Mr. Blum, even as I disagree with the contents of the rule, 

I also question whether CMS, you guys, even have the legal authority to reinterpret the clear Congressional intent in the Medicare Modernization Act of 2003. I was here. I was here when that 

was passed. The Energy and Commerce majority staff requested 

that CRS review the legality of your actions, and we requested a 

memo in response. The memo cites, and I will just give you a little 

bit of it because I am running out of time, a Supreme Court decision that interpreted a statute, a court should always turn first to 

one cardinal cannon before all others; that a legislature says in a 

statute what it means, and it means in the statute what it says. 

Mr. Blum, Congress has opined on this. Why does CMS feel the 

need to act at all when the law is crystal clear on this issue? 

Mr. BLUM. Well, I haven’t seen the CRS reports. I would welcome 

having a chance to look at it. 

Mr. GINGREY. Well, Mr. Chairman, I request unanimous consent 

that we make this report from the Congressional Research Service 

on the proposed interpretation of the noninterference provision 

under Medicare Part D as part of a permanent record. And I will 

come back to the—— 

Mr. PITTS. Without objection, so ordered. 

[The information follows:] 

113 

114 

115 

116 

117 

118 

119 

120 

121 

Mr. GINGREY. Let me just conclude. I am urging you, Mr. Blum, 

to withdraw this rule, and I personally, as a member of this committee, am prepared, and I will also urge our leadership, fight with 

every tool available to repeal this rule legislatively if you guys do 

not heed the wishes of our seniors and the American people. 

I have gone over my time, and, of course, I yield back, Mr. Chairman. 

Mr. PITTS. Chair thanks the gentleman. And I would like to ask 

the staff to provide a copy to the minority, please. 

Chair now recognizes the gentleman from Florida, Mr. Bilirakis, 

5 minutes for questions. 

Mr. BILIRAKIS. Thank you, Mr. Chairman. I appreciate it very 

much. 

And again, I represent over 100,000 seniors in the Tampa Bay 

area, and they seem to be very pleased with Medicare Part D, and 

I am along with Dr. Gingrey: If it ain’t broke, don’t fix it. 

Mr. Blum, specifically, I am concerned about CMS’ reinterpretation of the noninterference clause of the Medicare Part D statute. 

It was clearly written so that CMS would not interfere with the negotiations between drug manufacturers, pharmacies, and Part D 

sponsors. 

You may or may not know that I am in a unique position here, 

since my father, Congressman Mike Bilirakis, was the chairman of 

the subcommittee, and again, he remembers the intent of the law 

as written by him and his colleagues, and it was not to allow CMS 

to interfere in any of these negotiations. And I was in the legislature at the time in 2003, and I followed this as well, and that was 

my interpretation of the law, that the intent was for CMS not to 

interfere, and not to allow CMS to interfere again in the negotiations. 

You should know that, of course, you were the—I believe you 

were on Senator Baucus’ staff at that time, so I am sure you remember. So I would like to ask you, Mr. Blum, are you telling me 

that the authors of the legislation, of course, including my father, 

are wrong when they say that they intended for CMS not to interfere in these negotiations? 

Mr. BLUM. So going back to my days on the Senate Finance Committee, I worked with your father and his staff during the conference committee that produced the final Part D legislation, and 

so I understand well the intent of the Congress at the time. Senator Baucus, my former boss, and the team that he had, myself included, were directly involved in the drafting of the Part D legislation. So I understand well why Congress chose to put in place the 

noninterference clause. 

While we understand the disagreement, and it is clear from this 

hearing today there is a disagreement, we proposed the change 

with the interest to make the provision work better, to have it be 

stronger, to make it really clear when CMS will and won’t get involved with contract disputes—with Part D sponsors and pharmacies. We get asked frequently to get involved with those disputes, and we want to kind of articulate to the public when and 

won’t CMS try and broker, you know, beneficiary access issues or 

pharmacy network issues. 

Mr. BILIRAKIS. OK. 

122 

Mr. BLUM. We will thoroughly review—I look forward to looking 

to the CRS documents to understand our authority to make sure 

that our legal team understands it, but as I said several times during this hearing, our intention is not to interfere with the price—— 

Mr. BILIRAKIS. Thank you. 

Mr. BLUM [continuing]. Negotiations. 

Mr. BILIRAKIS. And you understood the intent of the law then, 

and now you understand it as well. 

Mr. BLUM. Having served on the Finance Committee staff during 

the 2003 drafting, I understand the 2003 legislation—— 

Mr. BILIRAKIS. Thank you. 

Mr. BLUM [continuing]. Well. 

Mr. BILIRAKIS. Thank you, sir, because I don’t have a lot of time, 

I want to get onto the next question. Appreciate it. 

You justify some of the changes in the rule as a means to address prescription drug abuse. It seems to me that we could manage some of the prescription drug problem through the use of a 

pharmacy lock, the lock-in program, where a single point of sale 

could provide more protection against the problem of doctor shopping, pharmacy shopping, and inappropriate drug therapies for 

high-risk beneficiaries. Pharmacy lock-in has been used successfully in State Medicaid, of course, as you know, and also with 

TRICARE and commercial insurance. Are you in support of pharmacy lock-in, sir? 

Mr. BLUM. I testified on the record last summer to the Senate 

Homeland Security Committee that we believe lock-in provisions 

can help to reduce inappropriate prescribing, prescriber fraud. We 

have concluded that Congress would have to act to authorize us to 

allow pharmacy lock-in, but we believe that is a change that Congress should make. 

Mr. BILIRAKIS. So in other words, you agree with the pharmacy 

lock-in. Why isn’t it in this particular rule? 

Mr. BLUM. We don’t have the authority for that change. I testified that Congress would have to give us that authority. 

Mr. BILIRAKIS. OK. I have introduced a bipartisan bill on this 

particular issue, but staff at CMS have not replied to requests from 

this committee for technical assistance on this bill. Today, would 

you commit to me, you personally, to review this legislation that 

I have offered? I have actually filed it. It has been about a couple—— 

Mr. BLUM. Absolutely. 

Mr. BILIRAKIS [continuing]. A few months. So I would like to get 

your feedback—— 

Mr. BLUM. Yes. 

Mr. BILIRAKIS [continuing]. With regard to this legislation. Would 

you personally commit to me that you will review that and respond 

to me? 

Mr. BLUM. Absolutely. 

Mr. BILIRAKIS. OK, thank you very much. Appreciate that. 

Mr. PITTS. Chair thanks the gentleman. Chair thanks Mr. Blum 

for spending 21⁄2 hours with the subcommittee this morning. We 

really appreciate your time and patience. We will send you additional questions. We ask that you please respond to those promptly. 

123 

There are two things I want to highlight. Dr. Burgess’ question 

was for the full and complete cost analysis that led to the rule. If 

you will provide that. And Mr. Guthrie’s question, the call sheets, 

the full complaint data that you referenced that you say shows seniors don’t like their Part D plans, would you provide those to the 

committee? 

Mr. BLUM. To clarify the complaint data, in 2013 CMS received 

over 30,000 complaints on various Part D issues. We have to protect beneficiary confidentiality, but we will do our best to make 

sure that we can summarize that data in a way that would be helpful to this committee. 

Mr. BURGESS. Redact the names and let us have it. 

Mr. PITTS. Go ahead. 

Mr. BURGESS. Mr. Chairman, I think you can redact the names 

and let us have the information. 

Mr. BLUM. We will look into it. 

Mr. BURGESS. The complaints themselves will be significant. 

Mr. BLUM. Yes, we will look into it, sir. 

Mr. BURGESS. Thank you, Mr. Chairman. 

Mr. PITTS. All right. Chair thanks the gentleman. We will now 

take a 5-minute recess as the second panel sets up. 

[Recess.] 

Mr. PITTS. Our time of recess having expired, we will go to our 

second panel. We have three witnesses on our second panel today. 

We have Mr. Douglas Holtz-Eakin, President, the American Action 

Forum; Mr. Carl Schmid, Deputy Executive Director, The AIDS Institute; Mr. Joe Baker, President of the Medicare Rights Center. 

Thank you all for coming. You will each have 5 minutes to summarize your testimony. Your written testimony will be placed in the 

record. 

Dr. Eakin, you are recognized for 5 minutes for your opening 

statement. 

STATEMENTS OF DOUGLAS HOLTZ–EAKIN, PRESIDENT, AMERICAN ACTION FORUM; CARL SCHMID, DEPUTY EXECUTIVE 

DIRECTOR, THE AIDS INSTITUTE; AND JOE BAKER, PRESIDENT, MEDICARE RIGHTS CENTER 

STATEMENT OF DOUGLAS HOLTZ––EAKIN 

Mr. HOLTZ-EAKIN. Well, thank you, Chairman Pitts, and Ranking 

Member Pallone, members of the committee, for the privilege of 

being here today to discuss what I consider to be a crucial proposed 

rule from CMS. 

You have my written statement. Let me make just a few brief 

points at the outset. First, as has been discussed, the Part D Program has a tremendous record of success. It has come in well below 

the projected budget costs, and I note with irony that Mr. Blum 

said one reason to do this rule is CBO was saying it is going to 

cost so much in the future, when it came in at $55 billion, after 

my CBO projected it would cost $122 in 2012. 

It also has had stable beneficiary premiums, it has a very high 

level of beneficiary satisfaction, 85 percent of seniors are very 

happy with Part D. For those who are interested in the statistics 

on this, I will point out 30,000 complaints is less than 1/10 of a perVerDate Mar 15 2010 14:14 Sep 29, 2014 Jkt 037690 PO 00000 Frm 00127 Fmt 6633 Sfmt 6633 F:\113-119 CMS ATTACK PART D JKT REQ 9-25-14\113-119 CMS ATTACK PART D PEND
124 

cent of Medicare beneficiaries. So we have approval at 85, complaints at under 1/10 of 1 percent. And seniors have, in 2013, at 

least 23 choices in every plan area. And so that record of success 

is not an accident. If you think about how Part D works, the plans 

sit in the middle and the plan sponsors, and they negotiate with 

the drug manufacturers discounts on their drugs on the basis of a 

volume of business they can deliver. And to do that, over here they 

go out and offer different plans with different formularies, not to 

confuse seniors but to attract more volume and get better deals 

over here, and they develop these preferred pharmacy networks 

with special provisions, again, by offering lower prices, they get 

more volume, they get more ability to negotiate over here with the 

drug manufacturers. That capacity to undertake these negotiations 

is at the heart of the success of Part D. And for Mr. Blum to suggest that by setting a saving standard—a minimum saving standard, that you have to get in a preferred pharmacy network, that 

is a direct intervention in the price negotiation for those pharmacies, and to suggest that you offer to someone you have never 

negotiated with exactly the same deal you have given to somebody 

you have negotiated with, that is a direct intervention of the negotiations. I believe that the idea that this is not violating Congressional intent with the noninterference clause is just transparently 

false. I mean I was there at the birth of the Part D benefit, as were 

many in this committee. This is just flatly inconsistent with what 

Congress intended. 

I am not a lawyer, so I don’t know about the statutory authority, 

but the lawyers I have consulted with say they don’t have the authority to do this. And for Mr. Blum to suggest that it somehow 

strengthens the noninterference clause is just Orwellian 

doublespeak, and I am deeply troubled by the fact that they would 

do this. 

The implications, I think, are very important. First, and this is 

your self-interest, if they do this in Part D, they don’t need you 

anymore. Not this committee, not the full committee, not the 

House, not the Senate, not the Congress. They can do whatever 

they want with the Part D benefit, and I believe that is an inappropriate power for an administration to have. And it would also hurt 

the program as a whole because if you are a plan sponsor, and you 

have an administration that has the power to do whatever it wants 

without real consideration of the consequences, you are either not 

going to participate or you are going to charge a lot to participate, 

and that is going to hurt the seniors, which, in the end, are the 

focal point of the program. 

So I believe those provisions are ones that certainly cannot be 

rushed through in the next couple of weeks. It shouldn’t happen at 

all, and I would urge the committee to do everything in their power 

to stop them. 

The other features of the rule, there are many details in here, 

but limiting the number of plans qualms the negotiations that they 

can do with the drug manufacturers. As a result, there is no real 

way that CMS can claim to be monitoring savings in the program 

by looking at one half of this equation. That is incomplete and incorrect, and any support for this rule on that basis has to be questioned. They need to provide a lot better support, as in the cost 

125 

analysis that you mentioned. I think that overall there have been 

some private estimates to suggest the limiting in choice, the limiting competition is going to raise plan bids by about 10 percent. 

That may not directly translate into 10 percent higher premiums 

for beneficiaries, but those 10 percent costs will go somewhere in 

the system. That is bad news for taxpayers, bad news for beneficiaries, or both, and we need to be concerned about that. 

There is no question that I think this leads to higher budget 

costs for a program that has consistently surprised on the downside, and, you know, we have had a lot of discussion, this is going 

to restrict some seniors’ access to their doctors and/or their particular pharmaceuticals, and those are steps in the wrong direction 

from the point of view of the program. 

I guess the last thing I would close with is there has been a lot 

of discussion about seniors getting in the right plan. It is not as 

if there is no other way to do that. This is a terrible way to solve 

that problem. Mr. Blum runs a Web site called Medicare.gov, with 

a plan finder. He might want to devote his efforts to improving 

that. 

Thank you. 

[The prepared statement of Mr. Holtz-Eakin follows:] 

126 

127 

128 

129 

130 

131 

132 

133 

134 

135 

Mr. PITTS. Chair thanks the gentleman. Now recognizes Mr. 

Schmid for 5 minutes for an opening statement. 

STATEMENT OF CARL SCHMID 

Mr. SCHMID. Thank you. Good afternoon. 

The AIDS Institute is pleased to offer our views on CMS’ proposed Medicare Part D rule. Since we believe aspects of the proposed rule would erode a patient’s ability to obtain the medications 

that their providers prescribed, we are urging CMS to scrap the 

proposal to change the 6 protected classes. 

Frankly, just like many of you, we were rather surprised the 

Obama administration would propose such a rule, given its strong 

commitment to quality healthcare, including mental health, and to 

others living with illnesses and diseases. 

For people with HIV, and so many other patients, new drug 

therapies have saved millions of lives, and prolonged millions more. 

The advent of antiretroviral medications in the late ’90’s turned 

HIV from a near certain death to a more manageable disease if patients have access to quality care and medications. 

We know all medications are not the same, and each person reacts differently to a particular drug. Doctors and patients together 

make careful decisions about which therapies are most appropriate 

on a case-by-case basis. Some individuals may develop side effects 

to a particular drug, while another may need a therapy to avoid 

a harmful interaction for a drug being taken for another health 

condition. For people with HIV, drug resistance can occur, requiring them the ability to switch to another drug without interruption. 

It is for these reasons, when Medicare Part D was first implemented, CMS determined that a minimum of only 2 drugs in the 

class, which is what the law requires, was simply not enough for 

certain patients, including those with HIV, mental illness, cancer, 

epilepsy, and those undergoing organ transplantation. The 6 Protected Classes was created so that patients could have access to all 

the drugs in these classes. 

For the past 10 years, Medicare Part D has been working for millions of seniors and people with disabilities, including over 100,000 

people a year with HIV. As part of the Affordable Care Act, Congress even codified the 6 protected classes. We see no reason why 

the protected classes should be changed, and if they were, we 

would like to see more classes of drugs gain protected status rather 

than reducing them, so that more patients can gain access to the 

medications prescribed. 

As I commented earlier, we were shocked when we read the proposed rule. The Secretary used the authority granted to her under 

the ACA to develop criteria to alter the 6 protected classes, and, 

at the same time, proposed to eliminate 3 of them. One would 

think if the administration was contemplating any changes, their 

criteria for class review would be developed first with adequate 

public comment before it was applied. Instead, a very arbitrary criterion was developed in secret, and then arbitrarily applied at the 

same time. 

Thankfully, the proposed rule continues the protections for 

antiretrovirals. That would not be the case for antidepressants and 

136 

immunosuppressants in 2015, and antipsychotics in 2016, if the 

proposed law—proposed rule was finalized. 

Frankly, we are worried. Who will be next? How much longer 

will people with HIV, cancer and epilepsy have access to all the 

medications they need through Medicare Part D? 

Because it is estimated that about half the people living with 

HIV experience mental illness or substance abuse, we are concerned that people with HIV who rely on antidepressants and 

antipsychotics will not be able to access their medications. We are 

also concerned that people with Hepatitis, who we also advocate 

for, who undergo liver transplants, will not be able to access their 

immunosuppressants. 

Medicare Part D, including the 6 protected classes, is working. 

It is enabling the elderly and the disabled to access the medications 

their providers prescribe, and at the same time, saving and prolonging countless lives. We see no reason to change the protected 

classes, and urge the administration to withdraw this proposal. 

We are encouraged by CMS statements this morning they are— 

that they are sensitive to and are carefully listening to our concerns. Hopefully, in the end, they will do the right thing for patients. 

Thank you. 

[The prepared statement of Mr. Schmid follows:] 

137 

138 

139 

140 

Mr. PITTS. Chair thanks the gentleman. Now recognize Mr. 

Baker for 5 minutes for an opening statement. 

STATEMENT OF JOE BAKER 

Mr. BAKER. Thank you, Chairman Pitts, and Ranking Member 

Pallone, for the opportunity to testify today on the proposed rule 

for Medicare Advantage and Part D prescription drug plans. 

Excuse me. As you know, the Medicare Rights Center is the national nonprofit that works to ensure access to people with Medicare, both older adults and people with disabilities. We answer over 

15,000 questions each year from beneficiaries, family, caregivers 

and professionals, and our Online resources receive more than 1 

million visits annually. 

I want to stress 3 key points today. First, we believe that each 

one of the proposed policies reflected in this rule should be evaluated on its own merits, as opposed to supporting or redirecting the 

entire rule as a whole. We note that the comment period, as has 

been said, for the rule is still open, and all interested parties 

should submit comments and give CMS a chance to modify the rule 

based upon those comments. 

In this spirit, I would like to talk about a couple of provisions 

that we strongly support, and others that we do oppose. 

Second, I think the rule reflects CMS’ belief that increased oversight and monitoring is required to ensure that Medicare Advantage and Part D plans are adequately serving people with Medicare. We wholeheartedly agree with this determination. In particular, we strongly support CMS’ proposal to ensure meaningful 

differences among Part D plans by further consolidating plan options. On our helpline, we observed that older adults and people 

with disabilities find choosing among a large number of Part D 

plans to be a dizzying experience. Most people with Medicare fail 

to re-evaluate their coverage options on an annual basis. According 

to one analysis from 2006 to 2010, only 13 percent of beneficiaries 

switch prescription drug plans during each annual enrollment period, despite changes in premiums, cost sharing and coverage. 

So ensuring that there are real meaningful differences between 

offerings from the same plan sponsor reduces confusion and helps 

people better comparison shop. 

Further related to Part D, CMS acknowledges that Medicare Advantage plans with prescription drug coverage are not adequately 

coordinating beneficiary care with respect to drug denials. When a 

Part D drug is denied because it should be covered by Part A or 

B of the plan, CMS finds that some plans are not adequately informing beneficiaries that their drugs should be covered. This indicates that some plans are not living up to their promise to coordinate care efficiently for their members. To fix this, CMS appropriately suggests new requirements for plans to facilitate access to 

these medicines. 

Throughout the proposed rule, CMS demonstrates a commitment 

to enhancing transparency. For instance, increased transparency is 

at the heart of proposals concerning drug pricing fairness, and accuracy with respect to preferred pharmacy. CMS also aims to make 

information about annual changes to Medicare Advantage and Part 

D plans more transparent throughout proposals to strengthen benVerDate Mar 15 2010 14:14 Sep 29, 2014 Jkt 037690 PO 00000 Frm 00144 Fmt 6633 Sfmt 6633 F:\113-119 CMS ATTACK PART D JKT REQ 9-25-14\113-119 CMS ATTACK PART D PEND
141 

eficiary notices ahead of and during the annual enrollment period. 

We support these proposals. 

Finally, CMS aims to increase oversight and monitoring of prescribing providers to address problems with Medicaid—medication 

diversion and abusive practices. We appreciate the rule’s aim and 

that it avoids placing burdensome restriction on beneficiary access 

to needed medicines, but we would like to see additional beneficiary protections in any new system. 

Third, we are deeply concerned about CMS’ proposed policy to 

scale-back the protected classes. Specifically, CMS argues that existing beneficiary protections, including the Part D appeals process, 

will preserve access for beneficiaries if open formulary access is relaxed for antidepressants, antipsychotics and immunosuppressants. 

Based on our experience counseling Medicare beneficiary, we believe these protections are insufficient, especially the Part D appeals process. Echoing our experience, the 2011 data released by 

CMS finds that over half of plan-level denials are overturned by 

the independent review entity; the first time an entity other than 

the plan reviews the appeal. This alarming rate of reversal raises 

serious questions about how well the appeals process is working, 

and demands greater transparencies. We urge members of Congress to request that CMS make plan-level appeals data accessible 

so that targets for improvement can be identified. In addition, Congress should encourage CMS to improve the Part D appeals process, first and foremost by allowing a beneficiary to receive a formal 

denial from the Part D plan at the pharmacy counter, as opposed 

to expecting beneficiaries and their doctors to submit a formal request to the plan for the denial before the appeals process can 

begin. 

Finally, we do believe that pricing is an issue, and CMS is trying 

to get at that through this proposal. We believe that Congress 

should restore Medicare drug rebates for beneficiaries that are dually eligible for both Medicare and Medicaid, which would save taxpayers over $140 billion over 10 years. 

Thank you for this opportunity to testify. 

[The prepared statement of Mr. Baker follows:] 

142 

143 

144 

145 

146 

147 

148 

149 

150 

151 

152 

153 

154 

155 

156 

157 

Mr. PITTS. Chair thanks the gentleman. And we will now go to 

questioning. I will recognize myself 5 minutes for that purpose. 

Dr. Holtz-Eakin, in a recent final regulation issued in April 2011, 

CMS reiterated the noninterference clause’s application to Part D, 

sponsor pharmacy negotiations, in its response to a comment, ‘‘As 

provided in Section 1860D–11(i) of the Act, we are prohibited from 

interfering with negotiation between Part D plans and pharmacies.’’ 

Dr. Holtz-Eakin, you were at CBO during the time that the Part 

D Program was operating. How did CBO interpret the noninterference clause that Congress passed in 2003? 

Mr. HOLTZ-EAKIN. Well, we were asked on numerous occasions 

what would happen if the noninterference clause were to be deleted 

from the law, and indeed shortly after its passage, this is a letter 

from January 23, 2004, we wrote a letter to then-Majority Leader 

Frist, which said that striking the provision would affect negotiations between drug manufacturers and pharmacies and sponsors of 

prescription drug plans. So there is no question that it covered the 

pharmacies, and there is no question that the kind of action that 

CMS is proposing in this rule is at odds with the intent of Congress. 

Mr. PITTS. In the proposed regulation, CMS has reinterpreted the 

noninterference clause, clearly outlined in Federal law, such that, 

in my opinion, the proposed regulation actually contradicts the 

meaning of the statute. 

If CMS can effectively change the meaning of settled Federal law 

via regulation, then we must ask ourselves what are the 

outrebounds of the abuse of that authority. 

Dr. Holtz-Eakin, could CMS require pharmacies or manufacturers to give them records access? 

Mr. HOLTZ-EAKIN. Certainly, they could, and I don’t know what 

the outrebounds are, Mr. Chairman. I am not certainly a lawyer by 

training, but, you know, the clear intent was to not do what is proposed in this rule, and if they are to go forward with this and not 

see it struck down by the courts, which I think it very well would 

be, then there is nothing they can’t do to the Part—— 

Mr. PITTS. Could—— 

Mr. HOLTZ-EAKIN [continuing]. Part D—— 

Mr. PITTS. Could CMS set volume caps on prescriptions under 

Part D? 

Mr. HOLTZ-EAKIN. They certainly could. 

Mr. PITTS. Could CMS require participating pharmacies maintain stockpiles of certain drugs? 

Mr. HOLTZ-EAKIN. Yes, they could. 

Mr. PITTS. The Office of the Actuary at CMS produced an analysis of the estimated budgetary impact of the proposed rule, yet 

they acknowledged in conversations with committee staff that not 

all elements of the proposed rule had been scorned. 

Well, Milliman actually did a complete cost analysis by surveying 

drug plan sponsors and PBM’s to evaluate the anticipated effect of 

the rule on the Part D Program, and found it would cost billions 

of dollars. Do you believe that the American public deserves a full 

cost accounting from CMS on this issue? 

158 

Mr. HOLTZ-EAKIN. I do. I believe this rule is so sweeping as to 

essentially constitute new law, that Congress ask for a budgetary 

analysis from the CBO before it enacts new law, I think the same 

thing should be done in this case. 

Mr. PITTS. CMS rule proposes that prescription drug plans are 

limited to offering only 1 standard benefit, and 1 enhanced benefit 

plan per region, is that correct? 

Mr. HOLTZ-EAKIN. That is correct. 

Mr. PITTS. So let me ask this, if 2 of my constituents are enrolled 

in 2 different enhanced benefit plans offered by the same PDP, 1 

of those 2 seniors will lose their current prescription drug plan 

under the proposed rule, isn’t that correct? 

Mr. HOLTZ-EAKIN. That is correct, and in my written testimony, 

we have an estimate of the number of seniors who would be affected in each State. 

Mr. PITTS. Well, I don’t think CMS should be outlawing seniors’ 

current prescription drug plans by placing arbitrary caps on the 

number of plans that can be offered. CMS should not be taking 

away the prescription drug plans that seniors rely on today, do you 

agree? 

Mr. HOLTZ-EAKIN. I agree with the principle that seniors should 

be able to choose, that choice is an important part of our society. 

I want to emphasize one of the things I said in my opening. You 

can’t look at that in isolation. The ability to have more plans, gets 

you more volume and lowers the cost of the program as a whole. 

And I think the CMS analysis is fundamentally flawed by ignoring 

that. 

Mr. PITTS. All right, thank you. Chair recognizes the ranking 

member, Mr. Pallone, 5 minutes for questions. 

Mr. PALLONE. Thank you, Mr. Chairman. 

I wanted to ask Mr. Baker, when Part D was enacted into law, 

many of us were skeptical the program would work. In fact, we 

were opposed to turning Medicare over solely to private insurance 

companies because of concerns with gaming and the ability to fully 

protect beneficiaries in these plans that may be more interested in 

corporate profits than patient wellbeing. 

Nevertheless, once Part D became the law, Democrats put aside 

their reservations and have worked hard to ensure that patients 

get the best deal possible under the law. And I would contrast this 

with the way the Republicans have behaved since the enactment 

of the Affordable Care Act, actively trying to undermine implementation of the law and keep consumers from getting access to important program benefits. However, the Affordable Care Act made a 

number of improvements to Part D, most importantly, it filled in 

the doughnut hole, and the ACA also made a number of changes 

to the Medicare Advantage Program, ensuring that consumers and 

taxpayers get good value for their dollars. 

So, Mr. Baker, could you talk briefly about the way the Affordable Care Act has improved Part D and Medicare Advantage for 

beneficiaries? 

Mr. BAKER. Well, once again, you are absolutely right. The closure of the doughnut hole has been a great boom to people with 

Medicare Part D coverage, and we hear about that on our helpline. 

As well, with regard to the changes in the Medicare Advantage 

159 

Program that have been implemented through the Affordable Care 

Act, I note the wellness visit that is now covered, preventive care 

that is now covered, the prohibition about charging higher coinsurance or copayment amounts for care, like skilled nursing facility 

care or chemotherapy care. This makes sure that there is no gaming amongst the plans, in trying to provide disincentives for folks 

with, for example, cancer—a history of cancer from joining certain 

plans, from consolidating offerings, once again, as Mr. Blum referred to, in Part D, but also in the Medicare Advantage Program, 

there has been a constant effort by CMS under the Affordable Care 

Act to make sure the plans have meaningful differences. And so 

that has helped consumers understand the program better and use 

the program better, I think. And finally, the out-of-pocket cap that 

CMS has implemented in the Medicare Advantage Program has 

provided seniors with, I think, great security in knowing that, yes, 

they have copayments amount but their—copayments amount in 

Medicare Advantage plans, but they will be capped at a certain 

amount out-of-pocket, and I think that has done a lot to make the 

program more attractive to seniors. They flock to Medigap Programs in the context of original Medicare because they see a lot of 

financial security there for that first dollar of coverage. I think 

many now see the out-of-pocket maximum to Medicare Advantage 

as a similar financial security measuring, and so that has made the 

program more attractive. 

Mr. PALLONE. I know that you expressed significant concern with 

the section of the rule related to categories or classes of drugs of 

clinical concern and which identify classes of drugs require Part D 

plans to include all or substantially all covered drugs on their 

formularies. And you are aware, CMS has indicated that these protected classes of drugs were not necessarily meant to be permanently protected, recognizing now on the one hand in many instances as generics become available, broadly mandating that every 

drug be available may not make sense, but on the other hand, new 

classes of drugs may need to be deemed protected to ensure patient 

access. And as such, the Secretary was directed to establish criteria 

by which identified classes, including new classes of drugs for inclusion under the protected status. 

If you could—I know you are concerned about the Part D appeals 

process. Can you just basically describe some of the problems that 

you see with the current appeals process, and why, if the appeals 

process is not fixed, the protected classes proposal would be especially problematic for patients? 

Mr. BAKER. Yes, I would be happy to. You know, first off, this 

issue that I mentioned earlier about when folks go to the pharmacy 

counter, they get a denial, and in effect, they are told their drug 

is not going to be covered and be dispensed to them, but that is 

not an ‘‘actual denial’’ by the plan. It is not a coverage determination. They then need to either go home or otherwise call or email 

or somehow contact the plan to actually get a coverage determination and denial, and this can take a lot of time, it can take a lot 

of calls. So we are really calling for that denial at the plan counter 

to be the denial or coverage determination that does help them initiate and allow them to initiate an appeal. So that is one issue 

there. 

160 

There are also then 2—at least 2 levels of redetermination that 

the plan has in addition to that denial at the pharmacy counter. 

We believe that could be slimmed to get to the independent review 

entity sooner. I think also we are also concerned generally that 

there is not a lot of data about how plans internally are dealing 

with appeals, and we think that information, some of it could be 

publicly available, and could help consumer gage whether or not 

plans are doing a good job by those who have problems with the 

plans’ determinations. 

Mr. PALLONE. All right, thanks a lot. 

Mr. PITTS. Chair now recognizes the vice chairman of the committee, Dr. Burgess, 5 minutes for questions. 

Mr. BURGESS. And I thank the chairman. 

I would offer for those limited comparisons between ACA and the 

Medicare Modernization Act from 10 years ago. There are some significant differences, of course. The Medicare Modernization Act was 

not the coercive, broad, overreaching legislation that the ACA was. 

There was difference in scope and size, and thus, the implementation, while there may be similarities, there are also vast differences. 

Mr. Schmid, just like you, to say I was blindsided by this rule 

would be an understatement. I thought things were working reasonably well. I don’t understand the discussion, why we are even 

having the discussion about dispensing with any of the 6 protected 

classes. And Dr. McClellan came here and very patiently, in 2005 

and 2006, very patiently went through what the reasons were for 

developing those classes. I think you heard Dr. Murphy talk about 

the—on the psychiatric side. I have discussed on the 

immunosuppressant side. You have very eloquently discussed on 

the—with the antiretroviral drugs, why these are important to 

have these as protected classes. And I really cannot—and I don’t— 

I did not hear from Mr. Blum why there was a reason for doing 

this, so I agree with you. I am completely blindsided by the rule. 

Dr. Holtz-Eakin, I mean, Chairman Pitts asked you this to some 

degree already, but let me just ask you again: What—in your opinion, what was the original intent of the noninterference clause? 

Mr. HOLTZ-EAKIN. Its intent was to make sure that, on both 

sides of the negotiations, that plans had the unfettered ability to 

negotiate aggressively with drug manufacturers, and to structure 

their plans and their pharmacy networks to attract the volume necessary to get good deals with the manufacturers. And the idea was 

to keep the Congress and the administration out of those negotiations. 

Mr. BURGESS. So if we are doing away with the noninterference 

clause, perhaps we are instituting an interference clause. Would 

that be a logical assumption? 

Mr. HOLTZ-EAKIN. I view this as direct interference in negotiations. I don’t see any other way to read it. If I negotiate with you, 

and then turn around and CMS orders me to give him the same 

deal, that is a pretty clear interference. I don’t understand that. 

Mr. BURGESS. Well, of course, Congress loves to interfere, so that 

will give us an opening. 

Mr. HOLTZ-EAKIN. I would encourage you to restrict those impulses please. 

161 

Mr. BURGESS. Well, that is, of course, why we are having this 

discussion, but it would—I mean that interference—then if we 

label that the interference clause, the interference clause is going 

to have an effect on the direct cost to beneficiaries, is it not? 

Mr. HOLTZ-EAKIN. It is. I mean the core costs are the pharmaceuticals, and the deal that can be cut with the manufacturers is 

at the heart of the cost of the program. Things that impair the ability of plans to cut good deals are going to raise the cost to everybody; beneficiaries, taxpayers, it is going to show up somewhere. 

Mr. BURGESS. And I was going to make that point. It is not just 

the beneficiaries, obviously, the person who is ultimately paying 

the bill, which is the United States taxpayer, or our generations to 

follow, since some of it is not paid for immediately, they will all be 

affected by the institution of an interference clause where none existed before. Is that a correct statement? 

Mr. HOLTZ-EAKIN. That is correct. 

Mr. BURGESS. So the proposed CMS rule suggests that, for a 

competitive market to function, that they, Centers for Medicare & 

Medicaid Services, have a duty to ensure that there is a competitive market, and encourage elements to promote competition. So 

maybe as a professor in economics, you can tell us how this interference would promote competition. 

Mr. HOLTZ-EAKIN. I don’t think it is pro-competitive. If you take, 

for example... 

Mr. BURGESS. Well, but between members of Congress, wouldn’t 

it? 

Mr. HOLTZ-EAKIN. Well, just for a second. Just a narrow provision, you know, the idea that any pharmacy should be able to provide at the terms negotiated between and plan and its preferred 

pharmacy network, there is already competition. Anyone can right 

now go to any pharmacy and get their prescription filled. They may 

not get the terms from the preferred network but they can go. That 

forces those who are not in the network to compete on nonpriced 

grounds; service, variety of things in the store, whatever it may be. 

That is how economics works. For them to step in and interfere undercuts that competition. 

Mr. BURGESS. And I, again, don’t mean to interrupt you, but the 

time will draw short. 

And that competition is what gave us the $4 prescription at WalMart, and then other chains followed suit with that. Those are indirect effects of the Medicare Part D law that oftentimes no one 

discusses. So—— 

Mr. HOLTZ-EAKIN. Yes, I think that is one of the reasons it came 

in under budget cost. I mean, we thought the competitive incentives were quite strong with CVL, we did, but a couple of things 

happened that we didn’t anticipate. One is we never had any trouble getting sponsors to enter. There was a fear of having to have 

government fallback plans, those were priced in there. None of that 

ever happened, however competitive incentives. And the second 

was the network size, the pharmacy and the savings in the pharmacies were bigger than we expected. 

Mr. BURGESS. And just as a consequence to that, I mean and Mr. 

Blum testified to the fact that costs came in lower, he thought because of generic prescribing. I will tell you that I think that generic 

162 

prescribed existed because of the so-called coverage gap, or doughnut hole. Now that we have done away with that, or we will do 

away with that in future years, what is going to happen to that 

driver that kept costs low? 

Mr. HOLTZ-EAKIN. Well, and I know you are over, but briefly, I 

don’t think his reading of the record is correct. The biggest difference between the projections and reality was lower enrollment. 

Fewer bodies are cheaper, and that is the top thing, not generics. 

Generics are in there, but there was a lot of generic substitution 

anticipated because a lot of the patented pharmaceuticals were 

going to go off patent over the first 10 years. We knew that so that 

was priced in at the outset, so it is not really a surprise in the 

data. 

Mr. BURGESS. Very good. 

Thank you, Mr. Chairman. I will yield back. 

Mr. PITTS. The Chair thanks the gentleman. Now recognize the 

gentleman from Texas, Mr. Green, 5 minutes for questions. 

Mr. GREEN. Thank you, Mr. Chairman. 

Mr. Baker, you have heard from Mr. Holtz-Eakin’s testimony certain estimates suggest that a large number of beneficiaries would 

lose their current plan due to CMS’ proposal to level the playing 

field for pharmacies wishing to offer preferred cost sharing under 

a plan’s preferred network. To me, this doesn’t sound right. Expanding the availability of pharmacies can often reduce cost sharing as long as they can meet negotiated price, only seems to expand 

access to other places. And it is reasonable to expect that allowing 

any pharmacy to match the competitive prices offered by preferred 

pharmacies would result in more competition and better access to 

lower-priced drugs for seniors. It also would seem to help beneficiaries who prefer to retain trusted relationships with community 

providers at their local pharmacy, as well as beneficiaries who do 

not have nearby access to a big box retailer. 

And my question, Mr. Baker, can you confirm this line of reasoning? Has it been your experience that all beneficiaries can currently access preferred networks and preferred pricing, or are some 

of them left out in the cold? 

Mr. BAKER. It is our experience that some—in our written testimony, our longer, written testimony, we do talk about a woman in 

Maryland who did not, you know, lost access to her local pharmacy 

because they were not able to provide the preferred pricing that 

she could get at another pharmacy where she had not had a 40- 

year relationship with that pharmacy. So we do believe that opening up, just as we have any willing provider in the general networks in the Part D plans opening up, that any willing provider 

in preferred networks will expand options and access for consumers, and we certainly are supportive of that proposal. 

Mr. GREEN. So you agree with helping beneficiaries get access to 

more pharmacies that provide reduced cost is good for those patients? 

Mr. BAKER. Yes, I do. 

Mr. GREEN. OK. It seems that pharmacies who have contracts 

today really don’t want to compete with community pharmacies 

who are prohibited now. Would you comment on this? Wouldn’t allowing participating of any pharmacy who can meet the plan’s 

163 

terms and prices actually help competition and improve access for 

patients? 

Mr. BAKER. I think that, you know, certainly, as Mr. Holtz-Eakin 

was saying, there are other components on which pharmacies can 

compete at such a service, et cetera, what is in the front of the 

house, as it were, and not at the pharmacy counter, but we do believe expanding access by allowing community pharmacies and others to be able to match preferred prices will spur further competition, and certainly increase access and decrease cost for consumers, 

and hopefully for the program itself. 

Mr. GREEN. Well, I would have—I think I remember, because I 

was on the committee when we did this in ’03, it was a very long 

markup, same with the Affordable Care Act, and I think there was 

an amendment to this effect that was part of that, and I am trying 

to—I will go back and look at the records, but I understand that, 

you know, when we deliver healthcare for doctors, you know, the 

office visit is basically the same, you know, if you go have a certain 

procedure, it is basically the same. And, now, granted, we do have 

preferred providers on certain things, but that is not—that is 

through an insurance policy, not necessarily through Medicare, 

but—so anyway. 

I want to yield back to—yield my time to the ranking member. 

Mr. PALLONE. Thank you. Mr. Baker, I wanted to ask, I didn’t 

get a chance, that while you have concerns with the Protected 

Classes Policy, you still do believe that many of the other provisions in the rule that protect patients should go forward, is that 

correct? 

Mr. BAKER. Yes, we do. 

Mr. PALLONE. All right, thank you. I yield back. 

Mr. PITTS. The Chair thanks the gentleman. Now recognizes the 

gentlelady from North Carolina, Mrs. Ellmers, 5 minutes for questions. 

Mrs. ELLMERS. Thank you, Mr. Chairman, and thank you to our 

panel. 

Dr. Holtz-Eakin, I have a question for you that is North Carolina-specific. I am very concerned with the number. I think with— 

this proposed rule has a potential of affecting over half a million 

of my seniors. Do you know how many of those healthcare plans, 

I mean in your numbers and in your research, do you know how 

many plans will be eliminated as a result of this in North Carolina? 

Mr. HOLTZ-EAKIN. We have an estimate that we would be happy 

to get to you. When we—— 

Mrs. ELLMERS. OK. 

Mr. HOLTZ-EAKIN [continuing]. Did our analysis, we found out 

the number of beneficiaries in North Carolina—— 

Mrs. ELLMERS. Um-hum. 

Mr. HOLTZ-EAKIN [continuing]. We then looked at the plans in 

North Carolina, especially the large plans, we could identify those 

that had preferred pharmacy networks that would be eliminated—— 

Mrs. ELLMERS. Um-hum. 

Mr. HOLTZ-EAKIN [continuing]. Or other plans that would be 

eliminated, and we can get that to you. 

164 

Mrs. ELLMERS. Great, thank you. I would appreciate that. You 

know, there was a Milliman study done, a survey analysis in January 2014, CMS Medicare Part D proposed rule, found that approximately 12.9 million Medicare Part D beneficiaries currently enrolled in preferred pharmacy PDPs may experience material premiums and cost-sharing increases in 2015 as a result, on average, 

because of the proposed rule. 

Do you think this is right, is it 12.9 million seniors will be affected this way? What are your thoughts on that? 

Mr. HOLTZ-EAKIN. It doesn’t surprise me. I don’t know if the precise estimates—— 

Mrs. ELLMERS. Um-hum. 

Mr. HOLTZ-EAKIN [continuing]. The right one, but if you change 

the terms the way the rule proposes, there is not really anything 

known as a preferred pharmacy anymore. 

Mrs. ELLMERS. Yes. 

Mr. HOLTZ-EAKIN. So a plan can’t go to pharmacy—— 

Mrs. ELLMERS. Pretty much just goes to—yes. 

Mr. HOLTZ-EAKIN. Right, and so they can’t cut as good a deal, 

the—— 

Mrs. ELLMERS. Um-humMr. HOLTZ-EAKIN [continuing]. Cost sharing will go away and 

the prices—the net price to consumers will go up. 

Mrs. ELLMERS. Which is exactly what I am hearing today as we 

are doing this subcommittee hearing, is there are 2 trains of 

thought that somehow we are going to be saving money—— 

Mr. HOLTZ-EAKIN. Right. 

Mrs. ELLMERS [continuing]. And yet it is contradicting each 

other, that by doing this we are actually going to be saving money, 

and yet we keep seeing that it is actually not going to be the case. 

Mr. HOLTZ-EAKIN. Right. I would just say that the committee, I 

mean this issue has these 2 sides, which is you want to be able to 

take terms of a contract to another pharmacy if you can—— 

Mrs. ELLMERS. Um-hum. 

Mr. HOLTZ-EAKIN [continuing]. Wouldn’t that be great, but can 

you cut a deal with as good of terms and—— 

Mrs. ELLMERS. Um-hum. 

Mr. HOLTZ-EAKIN [continuing]. How does that balance out. There 

has been a lot of work done by the Federal Trade Commission 

whose sole mandate is to identify pro-consumer aspects of the competition, and they have found these preferred networks are very effective in helping beneficiaries and consumers. And I think the 

committee should look at that, and I think CMS should look at that 

one. 

Mrs. ELLMERS. Um-hum. Um-hum. Thank you. Mr. Schmid, you 

know, in my years as a nurse, certainly, one of those groups of patients that I have had the honor of taking care of and come to 

know, and their families I have come to know, are our HIV and 

AIDS patients. So first of all, I just want to thank you for all of 

the work that the institution is doing, because you are a vital, vital 

voice in how much treatment has advanced for our AIDS patients. 

And I just want to ask your opinion. With the provisions that are 

being put forward in this proposed rule, is this not going to have 

165 

a negative effect on our Medicare Part D patients who especially 

are receiving AIDS treatment? 

Mr. SCHMID. Yes, well, right now they are not proposing to eliminate access to antiretrovirals, but as I mentioned in our testimony, 

we are just concerned we could be next. And the criteria that they 

came up with, it was very arbitrary, the 7 days initiate—— 

Mrs. ELLMERS. Um-hum. 

Mr. SCHMID [continuing]. Medication that will result in hospitalization or disability for—— 

Mrs. ELLMERS. Um-hum. 

Mr. SCHMID [continuing]. A typical patient. They are not looking 

at a Medicare patient. Yes, we are very concerned and—for the future and the harm that it could have to patients. 

Mrs. ELLMERS. Um-hum. 

Mr. SCHMID. But most immediately, it would have harm to those 

who need immunosuppressants and antidepressants, and in the future, antipsychotics. And as I said in my testimony, a lot of people 

with HIV also have mental health issues. 

Mrs. ELLMERS. Yes. 

Mr. SCHMID. And so, you know, around 50 percent. So we are 

very concerned about access for medications for them. And then our 

organizations also advocates for people with Hepatitis—— 

Mrs. ELLMERS. Um-hum. 

Mr. SCHMID [continuing]. Who undergo—— 

Mrs. ELLMERS. Um-hum. 

Mr. SCHMID [continuing]. Liver transplants, and they need 

immunosuppressants as well. 

Mrs. ELLMERS. Immunosuppressants, absolutely. Thank you. 

And, Mr. Baker, I just have a quick question for you. The proposed rule change, CMS actually pointed out that, in this discussion that has already gone forward, and hopefully we are going to 

be able to have enough time for a future discussion, although I 

think that that time is falling short. The safeguards that are in 

place, do you feel that these patients are being safeguarded 

enough? And, as we have discussed, the idea that we are actually 

saving money—some of CMS’ own findings are showing that this 

is not the case. What do you say to that? And I will just make one 

point that CMS put forward April 2013. It basically pointed out, it 

said negotiated prices—pricing for the top 25 brands and 25 

generics in Part D Program at a preferred retail pharmacy is lower 

than a nonpreferred network pharmacy. 

How do you justify the position that we are actually going to be 

saving money when we are already doing that, but by making this 

proposed rule change, that we will end up saving more money? 

Mr. BAKER. I think there are projections and—on both sides of 

the ledger, as it were, from various actuaries. I mean, we certainly 

think that, given the track record that Part D has had thus far, 

and the stewardship that CMS has been engaged in, that the proposal will lead to lower costs not only for consumers but also for 

the program itself. And so I think—and that is because of the—any 

willing provider that has been in the pharmacy network overall, we 

are thinking that same will happen in the preferred network. 

Mrs. ELLMERS. Um-hum. So we are projecting that, but we aren’t 

seeing those results though. 

166 

Mr. BAKER. Well, there is a lot of—— 

Mrs. ELLMERS. Thank you. And I apologize, Mr. Chairman. I 

have gone over my time. 

Mr. PITTS. Chair thanks the gentlelady. And now recognizes the 

gentleman from Maryland, Mr. Sarbanes, 5 minutes for questions. 

Mr. SARBANES. Thank you, Mr. Chairman. Thank the panel. 

I wanted to talk first about the consolidation idea which I think 

is a good one. I know the premise of Dr. Holtz-Eakin’s perspective 

is that if you reduce the number of options that are available, that 

undermines competition, that ends up being a problem in terms of 

better prices for the program, and a better set of offerings for the 

beneficiary and so forth, but in order for there to be a competitive 

environment, the people making the choices have to feel that they 

can choose 1 over the other. And my understanding, Mr. Baker, is 

that the evidence suggests that when seniors have that opportunity 

to make a change, they are so typically overwhelmed by the number of options that are available, that they just choose to stick with 

the plan they have. And the competition that you want to encourage among the providers, among the plans, is both with respect to 

any new beneficiaries that are coming in, but also more so with the 

existing pool because that is the bigger part of the opportunity. 

So if, as a practical matter, seniors are coming and saying, well, 

I am in this plan, and yes, I can go choose a different one, but I 

am not going to sit here and go through all of these different offerings, then the market is not really working. I mean the assumptions that your perspective are based on don’t hold. And so if you 

reduce and consolidate this dizzying array of options that are available, you may actually get more people choosing something different, which will send a signal to the plans that are offering these 

opportunities that they have to compete more robustly. 

Now, moving to the issue of the preferred pharmacy providers 

and so forth. I think it is outrageous that there—you have independent community pharmacists that are essentially being locked 

out of the opportunity to participate in a preferred pharmacy network, even when they are willing to accept the same terms. In a 

way that is happening, and I had the benefit of pharmacists in my 

district in Halethorpe, which I represent, a fellow named George 

Garmer who actually came and sat with me and kind of took me 

through his experience, and it may even be that the Maryland 

woman you are talking about was one of his customers, because it 

sounds very much the same, but she really couldn’t stick with his 

pharmacy because the way the copayments were being differentiated between those who were able to be in the preferred pharmacy network and his situation meant that she was going to pay 

another $300 a year if she wanted to continue to go to the pharmacy that she had been going to for 40 years, and where she had 

a relationship. 

So getting to this issue of the market and how it works, there 

is the theory and there is the practice. And I notice that in your 

testimony, you made the statement, Mr. Baker, that with this kind 

of pharmacy provider network manipulation, plans distort market 

behavior by lowering beneficiary cost sharing where the full cost of 

the drug is the same or higher than it would be at nonpreferred 

pharmacy. And this is important. Instead of harnessing the power 

167 

of consumer choice to lower costs overall by aligning lower cost 

sharing with lower total costs, the plans divide the interests of individual beneficiaries on the one hand, and the Medicare Program 

on the other, in order to increase the profits of related entity mailorder pharmacies. That is not the way it should work, and I just 

want to give you another opportunity because I feel pretty passionately about this, just based on this particular constituent who came 

and brought it to my attention, if you could speak again as to why 

this is a distortion of the market that we are supposedly trying to 

encourage here. 

Mr. BAKER. Right. I think the distortion is exactly as you said, 

and that is that these lower cost sharing for beneficiaries into these 

preferred networks is not matched by, in many instances, in some 

instances by actual lower prices for the program. And so you are, 

you know, steering, if you will, beneficiaries to higher cost pharmacies that are either chain pharmacies or pharmacies that are 

wholly or partially owned by the plans themselves. And plans are 

reaping and pharmacies are reaping profits from that. 

We really think that the interests of the program and beneficiaries should be aligned, not only for lower prices, but also because beneficiaries care about the sustainability of the Medicare 

Program and of this benefit, and to the extent that there can be 

that win-win, and also at the same time allowing community pharmacists into the equation to provide the services that they have 

been providing, you have more access at lower prices. 

Mr. SARBANES. My time is up, but I will just note that if you 

have more transparency, it will promote better alignment, I 

think—— 

Mr. BAKER. Yes. 

Mr. SARBANES [continuing]. By definition. Thank you. 

Mr. PITTS. Chair thanks the gentleman. Now recognizes the gentleman from Virginia, Mr. Griffith, 5 minutes for questions. 

Mr. GRIFFITH. Thank you, Mr. Chairman. And, Mr. Chairman, I 

appreciate you having this hearing, and this is one of those hearings where it has put me into a dilemma of sorts because I have 

great concerns that CMS doesn’t have the authority to do a lot of 

things that they are doing in this rule-making process, and I noted 

with interest Dr. Gingrey earlier brought up the report from the 

CRS, and one of the things that he didn’t mention is that what 

they are attempting to do is to take the legislative language and 

shift an ‘‘and’’ to an ‘‘or,’’ and that causes me as an attorney who 

believes that the agencies ought to do what the law says, and if 

there is a problem come back to us, that they ought not be changing the law unilaterally, and that they ought to be exercising the 

constitutional prerogative of bringing their suggestions and their 

recommendations to the United States Congress. 

So on that side, I agree with many of the comments of my colleagues on this side of the aisle. On the other side, I represent a 

fairly rural district, and while it may be lowering the price somewhat to have the preferred network, if the preferred network, the 

chain pharmacy, is located 20 miles away and around the other 

side of the mountain, I have people who aren’t being adequately 

served by this program. 

168 

And so, gentlemen, I ask you, how do we solve that problem? 

How do we solve the problem where we may be getting the price 

down, but we are making it very, very difficult for my constituents 

to get to see the pharmacist who is prescribing their drug, and 

who—and, you know, in these rural areas, particularly a rural, 

mountainous area where they may not have but one pharmacy, and 

if that pharmacy is not in that particular town, part of this preferred network, and they have to go to the next town over, it may 

be a good distance. And particularly when most of these folks may 

not really like getting out driving, particularly, as we have had this 

winter, a fair amount of snow. How do you solve that problem? And 

I don’t mind putting a bill in if that is what you think we need to 

do, but I do think that, Dr. Holtz-Eakin, it may impact the pricing 

somewhat, but there is a big difference between walking down the 

block in New York City and getting from Haysi to Clintwood. 

Mr. HOLTZ-EAKIN. I agree with that completely, and I am not familiar with your district so I won’t pretend too much knowledge, 

but we won’t have to solve all problems with the same provisions. 

And the overall goal of this should be to get prescription drug coverage at as low cost possible for beneficiaries. I mean that is a key 

feature of the design. 

Now, which vender delivers that, I don’t think we should have 

a stake in. Perhaps mail-order is better for some of your folks as 

opposed to traveling at all. Have it delivered to their home. We 

need to make sure that we have a system that allows the negotiations to be as intense as possible with the manufacturers to get 

prices down, and then use a variety of delivery mechanisms to get 

them to seniors. And I think that should be the overall objective. 

No question. 

We should trust the seniors to figure it out. 

Mr. GRIFFITH. Well, of course the problem, in all fairness, with 

mail-order is if you have questions or if you have had a little rash 

that might have been caused by that, your pharmacist is in a far 

better position than your UPS or mail deliverer to—— 

Mr. HOLTZ-EAKIN. OK. 

Mr. GRIFFITH [continuing]. Explain to you that, well, that is actually one of the side effects buried way down in the notes I have 

here. 

Mr. HOLTZ-EAKIN. I would concur, and I—— 

Mr. GRIFFITH. And so that is another problem that I have. 

Mr. HOLTZ-EAKIN [continuing]. Almost never have a—discussion. 

But I guess the second thing I would say is not all competition is 

on prices. We do want low prices, but there are many services associated, you know, advice about prescriptions, people are worried 

about seniors being in the right plan, well, we trust people to make 

choices right up to the age of 64 on the exchanges, and 65 suddenly 

they are incapable? I think they can probably figure it out, but if 

they can’t, they can talk to their pharmacist, am I in the right 

plan, this what I typically have. You know, there are some other 

aspects—— 

Mr. GRIFFITH. I am running out of time. 

Mr. HOLTZ-EAKIN [continuing]. That could be—— 

Mr. GRIFFITH. I do want to give Mr. Baker an opportunity to resolve the dilemma, and you may want to touch on how the CMS 

169 

has the legal authority to go forward with what they are doing, 

even though I agree with you on the any willing provider portions. 

Mr. BAKER. I think that 2 things. One is that, certainly, there 

is a balancing here, and the example that we have in our testimony 

was a $300 difference. So I mean I don’t think the service component allows that person to afford the $300 at the local community 

pharmacy. So I think, once again, the any willing provider is, I 

think, a moderate solution. I mean, I think for 2 reasons I am the 

wrong person to ask about the interference piece, one, because I am 

not—I am a lawyer but I am not, I don’t think, qualified to do this 

constitutional interpretation, and—— 

Mr. GRIFFITH. But you do agree there is a difference between and 

and or. 

Mr. BAKER. I would agree—— 

Mr. GRIFFITH. As a lawyer, you know there is. 

Mr. BAKER [continuing]. With that. 

Mr. GRIFFITH. Yes. 

Mr. BAKER. I will agree with that. 

Mr. GRIFFITH. Yes. Absolutely. And so that is my concern. And 

I hate to cut you off because I am running out of time. 

Mr. BAKER. Sure. 

Mr. GRIFFITH. I have other concerns about both the rule and the 

fact that maybe it is time for us to take a look at some of the 

things that may be working to a disadvantage. I have another letter here from one of my pharmacists who is in a specialized area, 

and they can’t even figure out what they are going to get paid until 

after they have already provided the drug because of the way the 

system is set up, but that—I will have to deal with that another 

time because my time is out. 

I do appreciate it. I have been—this hearing—totally, Mr. Chairman, I have been educated even more on this subject matter, and 

do appreciate it, and that is why we have these discussions and it 

is good to have. 

Thank you, sir, and I yield back. 

Mr. PITTS. Chair thanks the gentleman, and we will provide 

questions to you, if you will please respond in writing promptly. 

I remind members that they have 10 business days to submit 

questions for the record. And I ask witnesses to respond promptly. 

And members should submit their questions by the close of business on Wednesday, March 12. 

Dr. Burgess, you have a unanimous consent request? 

Mr. BURGESS. Yes, Mr. Chairman. I have an opinion piece from 

June of 2012 that almost prophetically foretold the problems that 

would be visited upon the Part D Program by the Affordable Care 

Act, and I would like to submit that for the record. It was a very 

insightful piece that was written. 

Mr. PITTS. Without objection, so ordered. 

[The information follows:] 

170 

171 

172 

Mr. PITTS. This has been a very informative hearing, very important issue. Thank you very much for your—— 

VOICE. Thank you. 

Mr. PITTS [continuing]. Patience. 

Without objection, the subcommittee is adjourned. 

[Whereupon, at 1:24 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

173 

174 

175 

176 

177 

178 

179 

180 

181 

182 

183 

184 

185 

186 

187 

188 

189 

190 

191 

Æ