Massachusetts is aiming to become the first state in the USA to require all health insurers to provide coverage for prescription medicines, with individual state residents paying no more than $250 a year for their drugs and families an annual maximum of $500.

Approval of this proposal is expected this month from the board of the Commonwealth Health Insurance Connector Authority, the independent body set up to implement portions of the radical new legislation which will require all adults in the state to purchase health insurance by July 1, although the drug provision requirements will not become mandatory until September 2008.

The state’s proposal, which Connector describes as “leading edge,” would require insurers to design a preventive drug benefit which would be added to the state Minimum Creditable Coverage Plan for “a relatively modest increment to premiums,” envisaged at around $15-$20 per member per month.

This drug benefit, or “Preventive Rx coverage,” would have to cover medications prescribed for reducing the risk of serious illness, such as hypertension and high cholesterol, and for maintaining the health of patients with chronic illnesses, including asthma, HIV/AIDS, arthritis and schizophrenia. It would be provided on a “first-dollar” basis, ie, without the patient having to pay a certain amount (or “deductible”) before benefits could begin.

Other drugs on the plan’s formulary would however carry deductibles, and could be subject to tiered co-payments, co-insurance, restrictions “and other management techniques designed to control premiums,” says the proposal.

CBO warns of pharma “collusion”

Meantime, the Congressional Budget Office has warned lawmakers that publicising the rebates negotiated by Medicare prescription drug plans with manufacturers could lead to an increase in drug prices.

“For a range of medical conditions, drugs appropriate for treatment are available from only a few manufacturers, [and] disclosure of drug-by-drug rebate data on those cases would facilitate tacit collusion among those manufacturers, which would tend to raise drug prices,” writes Peter Orszag, director of the CBO, the Congressional spending watchdog, in a letter to Joe Barton and Jim McCrery, the ranking (Republican) members of the House Committees on Energy and Commerce and on Ways and Means, respectively.

“The current secrecy for rebate negotiations makes it difficult for manufacturers to monitor one another’s behaviour and thus impedes collusive activity. When rebates are confidential, manufacturers can pursue their self-interest in increasing their drug sales at the expense of their competitors by offering rebates without fear of retaliation,” Mr Orszag tells the legislators, who had asked CBO to analyse the potential effects on the Medicare drug benefit if price rebates were publicly disclosed.

Moreover, he goes on, CBO’s understanding is that the rebates secured by PDPs from manufacturers are “somewhat larger” than those achieved by commercial health plans, and that disclosure would create pressure to reduce those rebates, “which would tend to increase costs for both the Medicare program and, on average, for enrolees.”

However, Mr Orszag also says that CBO has now dramatically reduced its estimate of how much a requirement for disclosure would add to Medicare’s costs. In July 2003, the Office had forecast that the requirement in the drug benefit legislation, as it then stood, would increase the programme’s costs by $40 billion over 10 years. Now, however, it believes that the impact “would very likely be less than $10 billion and could be significantly less” during the period. By Lynne Taylor