Medicare drug price bill faces uncertain future

Supporters say it would provide beneficiaries with deep discounts. Opponents call it price controls.

By David Glendinning — Posted Feb. 28, 2005

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Washington --A bill that would allow the Dept. of Health and Human Services to negotiate lower drug prices from manufacturers on behalf of Medicare beneficiaries appears to have run into a major roadblock.

Within days of the measure's reintroduction by a bipartisan group of senators, President Bush announced that he would veto any legislation that would prove restrictive to choice under the 2003 Medicare modernization law.

"I signed Medicare reform proudly, and any attempt to limit the choices of our seniors and to take away their prescription drug coverage under Medicare will meet my veto," Bush said.

While Bush did not specify which types of proposed changes would prompt his veto, the administration is on record as opposing the price negotiation bill. White House officials argue that it would limit Medicare beneficiaries' pharmaceutical options without producing notable savings.

Sen. Ron Wyden (D, Ore.), one of the authors of the Medicare Enhancements for Needed Drugs (MEND) Act of 2005, took the announcement as a direct threat against the measure, which is identical to last year's bill.

"By refusing any improvements, the White House is writing a prescription for a program that cannot survive," he said. "I hope the president will reconsider his position."

Bush's stance on the Medicare law could allow him to block other attempts at trimming the ballooning price tag associated with the new drug benefit. Administration estimates now place the benefit's cost over the first 10 years of operation at more than $720 billion.

Wyden and Sen. Olympia Snowe (R, Maine), the bill's lead sponsor, said the MEND Act would ensure that the Medicare prescription drug benefit starting in 2006 would remain affordable to beneficiaries and the federal government. The bill would repeal the so-called non-interference provision in the 2003 reform law, which bars the HHS secretary from bargaining with drugmakers for lower prices.

In addition, the reintroduced legislation would require the department to step in when private Medicare plans request assistance with obtaining lower prices. In an effort to educate beneficiaries, the Government Accountability Office would continuously review and publicize the retail prices of the most commonly prescribed medicines.

Consumer discounts or price controls?

The bill's sponsors said the provisions would allow the government to pass along deep drug discounts often obtained by private insurers.

At the American Medical Association Annual Meeting in June 2004, delegates approved a resolution calling on the group to support federal legislation giving the HHS secretary negotiating power. Physicians supporting the measure said the move was necessary to ensure both the affordability of drugs to patients and the long-term stability of the program.

The pharmaceutical benefit managers that will administer the new benefit have echoed the White House position, insisting that HHS bargaining power would amount to anticompetitive price controls.

Artificially forcing down drug prices would require plans to raise costs elsewhere or restrict benefits to Medicare enrollees, they said.

"Requiring the federal government to directly negotiate prescription drug prices will take away drug choices from seniors and require massive cost-shifting to consumers and employers in the private marketplace," said Mark Merritt, president of the Pharmaceutical Care Management Assn., which represents PBMs. " 'Direct negotiation' is simply shorthand for higher costs and fewer choices."

Drug companies say private market forces will be much more effective at lowering prices for Medicare seniors, said a spokesman for the Pharmaceutical Research and Manufacturers of America.

The legislation also faces stiff opposition from Republican leaders in Congress, who successfully added the non-interference provision to the reform bill to give drug plans flexibility in determining prices.

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External links

Thomas, the federal legislative information service, for bill summary, status and full text of the Medicare Enhancements for Needed Drugs Act of 2005 (S 239) (link)

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