Gov. expects lawsuits

By Thomas Wilson
STAR STAFF
twilson@starhq.com

   Gov. Phil Bredesen said he expects pharmaceutical companies to sue the state over his proposed TennCare reform plan that seeks to limit monthly drug prescriptions and amp up generic and over-the-counter medications to limit the program's future costs.
   "The possibility of suing us is certainly there," Bredesen told media members during a conference call on Monday from Washington where the governor was attending the National Governor's Association Meeting. "I have great respect for the pharmaceutical lobby in Washington, D.C."
   Bredesen said he had already heard "sword-rattling" by some drug companies opposing the reform plan.
   Unveiled to the General Assembly last week, Bredesen's plan seeks to adjust TennCare benefits and to establish limited co-pays for services and pharmaceuticals. The overall strategy is expected to generate an estimated $2.5 billion in cost-savings over four years.
   A TennCare report prepared by McKinsey & Co. projected that TennCare, if left unchecked, will consume virtually all new state revenue -- 91 percent of it -- in 2008. Presently, TennCare accounts for 25 percent of the state's total budget expenditures. The McKinsey report noted that number could rise from 34 to 40 percent by 2008 if reforms were not made.
   Pharmacy costs in TennCare are expected to exceed $2.3 billion this year. Over the past three years, pharmaceutical costs grew 23 percent annually, compared to 9 percent growth in other TennCare costs. The governor's plan limits pharmaceuticals to six prescriptions per months and 10 visits annually to physicians as well as diagnostic tests such as x-rays and laboratory procedures. On average, TennCare enrollees are getting 30 prescriptions a year, compared to a national average of 10.5, according to the McKinley report.
   Bredesen wants TennCare to stop covering antihistamine allergy medication and antacids that are available over-the-counter. The measure could save Tennessee taxpayers up to $130 million. In the TennCare reform plan, the state will no longer pay $5.47 per pill of Zyprexa, which treats schizophrenia, but instead will buy a 33-cent alternative purported to be equally effective.
   Bredesen said his administration had been informed that the reform plan fell under existing legal parameters by the U.S. Centers for MediCare and Medicaid Services, the federal organization responsible for management of both health insurance programs. "You get to invent a drug, patent it, and then require somebody to buy it, which hardly seems like the American way," Bredesen said.
   Bredesen said several governors approached him to talk about the TennCare reform after reading his speech to the Legislature, including Arkansas Gov. Mike Huckabee. He said no formal date had been set to present his reform package to CMS officials although he expects the reform plan to move through CMS later this spring.
   The state dodged a potential regulatory bullet when it declined to participate in a multi-state shared drug purchase agreement. Bredesen noted that CMS officials had overruled a shared drug purchase agreement forged by the state governments of Michigan and Vermont last year.
   In March 2003, both states authorized their pharmacy benefits administrator, First Health Services, to simultaneously negotiate with pharmaceutical manufacturers, using the combined purchasing power of the pooled states' Medicaid drug programs, to try to negotiate deeper discounts, known as supplemental rebates. Bredesen said Tennessee strongly considered joining a similar agreement but backed off for fear that federal regulators would rule the plan not legally viable.
   "I'm very glad we did not put a lot of our eggs in that particular basket," he said.
   Bredesen also said governors heard from President Bush regarding the No Child Left Behind law. Billed as a method of raising accountability and redirecting funds and control to local school systems, the law's federal mandates have burdened several states with failing school districts and stagnant budgets.
   Bredesen said that while federal mandates on local systems through NCLB were considerable, "the amount of money coming down remains considerably less" to fund the educational reforms set forth in the law. He said Education Secretary Rod Paige and his department officials were aware of the concerns facing systems and students.
   "They clearly realize they have their hands full on a couple of these issues," he said.
   Despite the furor over the same-sex marriage debate, Bredesen said the issue had not incited major conversations among fellow governors at the NGA meeting. He did say the presence of California Gov. Arnold Schwarzenegger had set off media frenzy at the governor's meeting. "The number of telephoto lenses that have been brought up here is enormous," said Bredesen.