Attorney General's News Release

February 6, 2006

Nixon says Missouri will lose millions over new federal prescription drug plan; announces plan to file lawsuit

Columbia, Mo. — Attorney General Jay Nixon will go to court to challenge the federal government over a provision in the new prescription drug plan known as Medicare Part D, which took effect Jan. 1. Nixon said today the plan not only has left many seniors without needed medication, it also will saddle Missouri taxpayers with $400 million in additional costs over the next five years and infringes dramatically on state sovereignty.

“This was touted as a measure that would help seniors with obtaining their medication and cost the state no more than what it was currently spending on prescription drugs,” Nixon said today at a news conference in Columbia. “It’s failing on both counts. While its flaws in helping seniors get their needed medications have been widely reported, the extra burden on Missouri taxpayers is less well-known.

“The plan contains what is known as a ‘clawback’ provision, which requires the states to make monthly payments to the federal government to partially fund the drug benefit,” Nixon explained. “This clawback will cost Missouri approximately $400 million over the next five years. This is money that could be used here in Missouri to provide health care to our citizens.”

Under Part D of the Medicare Modernization Act, the federal government provides prescription drugs through private sector health plans to approximately 135,000 senior and disabled Missourians eligible to receive benefits under both Medicare and Medicaid.

Nixon expects to file the lawsuit later this month. He also expects that Missouri will be joined in the lawsuit by California, whose state Attorney General announced similar intentions last Thursday, as well as by other states, including Texas. The lawsuit, which would be filed in the U.S. Supreme Court, would ask the court to block the federal government from mandating the payments and threatening the states with significant fiscal harm.

Nixon said the federal prescription drug program unconstitutionally forces the state to pay the federal government for a federal program over which the state has absolutely no control. Missouri’s legal challenge will argue that the clawback provision is unconstitutional because it:

• Requires states to pay a tax to the federal government.
• Infringes on state sovereignty by commanding state legislatures to appropriate funds to support a federal program.
• Infringes upon essential state government functions.
• Imposes an invalid condition on the receipt of federal funds.

One of the biggest reasons why the formula is costing Missouri taxpayers so much, Nixon said, is that the clawback is based on costs for fiscal year 2003. Since that time, Missouri has greatly decreased Medicaid costs through the use of generics, preferred drug lists and other cost-saving reforms. The Part D formula for determining the clawback includes an inflation rate of 35 percent for the past three fiscal years, when Missouri’s increase has only been 17 percent.

At the same time, Missouri has also decreased its Medicaid costs in part through higher rebates from drug manufacturers. While Missouri currently receives a 25 percent rebate, the Part D formula takes into account a rebate level of only 18 percent.

“The Part D formula that determines the state payments is one of the biggest problems with this whole program,” Nixon said. “It doesn’t take into account the steps that states have taken to reduce costs, so the benchmark is flawed. Part D might be a cash cow for the pharmaceutical companies, but it certainly isn’t benefiting Missouri seniors or taxpayers.”

Inquiries from consumers should be directed to consumer@ago.mo.gov or 1-800-392-8222 (from within Missouri) or 573-751-3321 (outside Missouri).

All media inquiries should be directed to Press Secretary John Fougere.

E-mail      Phone: 573-751-8844         Fax: 573-751-5818