Medicare drug price push faces hurdles

Washington -- Democratic lawmakers who will take control of Congress next year quickly plan to pass legislation aimed at lowering Medicare beneficiaries' drug prices. Their hopes, however, may be dashed by the strong opposition that awaits them.

To many physicians and other patient advocates, the first step is relatively simple -- take advantage of the federal government's clout to hammer out better deals from pharmaceutical manufacturers.

But before this can happen, Congress must change a provision in the 2003 Medicare law that prohibits the government from directly negotiating medication prices under Part D. That job is currently handled by private sector pharmacy benefit managers that administer the drug benefit.

Groups that favor such a move received a post-election boost when incoming House Speaker Nancy Pelosi (D, Calif.) announced that she would bring up a direct negotiation measure in her chamber within 100 hours of taking power.

"With a new Congress, we hope we can fix Part D," said Judith Stein, director of the Center for Medicare Advocacy. "Let's implement a Medicare prescription drug program that does not funnel billions of dollars to drug and managed care industries at the expense of older people and people with disabilities."

The American Medical Association supports direct drug price negotiations but not outright government price setting. Groups on the same side as the Association on this issue, such as AARP and the Medicare Rights Center, are hopeful that the Democrats' push will result in the enactment of legislation that results in deeper drug discounts and more generous benefits.

But first, lawmakers in favor of the move need to decide on their strategy. With about one month to go before the start of the 110th Congress, Democrats have yet to agree on the way to negotiate prices.

Simply removing the prohibition from the Medicare statute likely would not be sufficient, because that only would open the door for the Health and Human Services Dept. to start playing the role of the PBMs in seeking better deals on drug prices. HHS Secretary Michael Leavitt has said the White House sees major problems with doing this and would not proceed if given that option.

So lawmakers are looking into measures that would force the Bush administration to take on direct negotiation duties. The question now becomes how extensive to make the requirement. Medicare could wrangle over the prices of all drugs or just the more expensive ones in certain classes, or it could offer government-negotiated discounts in certain plans and let the benefit managers administer the rest.

One proposal gaining steam was by Sen. Richard Durbin (D, Ill.), who will be assistant Senate majority leader when Democrats take control of Congress. His plan would require Leavitt to establish at least one government-run Medicare drug plan that would use direct negotiation and compete with privately administered plans.

The opposition lines up

Even if Democrats and supportive Republicans can agree on a plan for Medicare drug price negotiation, they will face strong opposition. Experts on both sides predicted that the House, with Democrats enjoying at least 29 more votes than Republicans, might be able to pass a bill if the Democratic party stays unified. But Senate leaders will have a much tougher time approving the measure with a 51-49 majority. Even then, President Bush could issue a veto that Congress likely would not be able to overturn.

Medicare Rights Center President Robert Hayes said using government bulk purchasing power is simply common sense and that the opposition is driven by an administration looking to protect drugmakers' profits.

Drug manufacturers and pharmacy benefit managers counter that price negotiation is simply shorthand for price fixing. Instead of generating savings that could be funneled into making the benefit more generous for seniors, mandating arbitrary discounts from drug firms would shift costs to other areas of the drug market. This would result in medication rationing and squeeze research and development budgets, they said.

Government interference is not necessary because private-sector competition has driven down prices for seniors, said the Pharmaceutical Research and Manufacturers of America and the Pharmaceutical Care Management Assn., which represents PBMs. Beneficiaries are saving tens of billions on medications and are reporting high levels of satisfaction.

Gail Wilensky, PhD, Medicare administrator in the first Bush administration, said direct price negotiation is "a solution that doesn't have a problem behind it." Unless drug prices and total Medicare Part D spending take a sharp upward turn, Congress should not risk torpedoing the system by stepping in, she said.

The process of determining Medicare prices is not the rational discussion of costs it would be in any other business, and it can lead to undesired results for doctors and others caring for beneficiaries, Dr. Wilensky said.

"Medicare fixes prices; it does not negotiate prices. I go crazy when I hear people say that," she said. "I always ask the audience for any physicians who have ever negotiated prices with Medicare to please raise their hands, and nobody does."

These arguments resonate with Sen. Max Baucus (D, Mont.), incoming chair of the Senate Finance Committee, which has jurisdiction over Medicare. He voted earlier against removing the negotiation ban and has committed only to hold hearings on the issue, not move legislation.

Lawmakers could have a difficult time convincing colleagues that direct negotiation will save money. Congress' budget office has said savings to the program would be negligible.