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Senior Citizen Politics
Negotiating Medicare Drug Prices Hits Obstacles: CBO
Sees No Savings, GOP Senators to Filibuster
Most news is bad news for
proponents of bargaining for drugs
 January 11, 2007 – With debate beginning today and
a vote expected tomorrow on the Democratic proposal (HR 4) to have the
Secretary of Health & Human services negotiate with pharmaceutical
companies for better prices on drugs marketed through the Medicare drug
program, a splash of cold water on the idea came in a letter from the
Congressional Budget Office saying the drug prices would not be lowered
by the legislation. Basically, Acting CBO Director Donald B. Marron said
he doubted the government could do a better job that the prescription
drug plans. (See CBO letter below news report.)
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CMS Joins Those Saying Negotiating Drug Prices for
Medicare Will Not Work
Cites weakness not allowing establishment of
preferred list of drugs
 January 11, 2007 – The Centers for Medicare &
Medicaid Services threw its hat in the ring with those saying the
Democrats' proposal for negotiating with drug companies for lower prices
will not accomplish its goal of lowering drug prices. The statement from
CMS further highlights what has become the focal point of debate – the
legislation does not allow the establishment of a preferred list of
drugs, which would give the government negotiating power with the
companies that want their drugs on this list.
Read more...
Administration Says Medicare Drug Program Cost Drop
Shows No Need to Negotiate on Drugs
Most antifraud complain reports by prescription drug
plans are missing at CMS
January 8, 2007 – Immediately after the Bush
Administration announced revised estimates that lower the expected cost
of the Medicare drug benefit, Health & Human Services Secretary Mike
Leavitt says it proves there is no need for negotiated drug prices. The
Medicare daily report by KaiserNetwork.org also finds problems with the
Centers for Medicare & Medicaid Services missing antifraud "compliance
plans" from Medicare prescription drug plans. (The complete news release
from HHS is below news report.)
Read more...
Read more
on
Politics for Senior Citizens |
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Another report taking the wind out of the sails of
proponents of Medicare price bargaining is an analysis by the Washington
Post of a report that Medicare pays 58% more for the most commonly
prescribed medications than does the Department of Veterans Affairs,
which negotiates directly with pharmaceutical companies. The Post finds
the comparison is not apples-to-apples for several reasons, but a big
difference is the limited choice in the VA program
Still, House Energy and Commerce Committee Chair
John Dingell (D-Mich.), who sponsored the legislation and received the
CBO letter, is pushing ahead and most prognosticators think he has the
votes in the House.
A similar bill has been introduced in the Senate,
where powerful Republican senators are promising a filibuster, according
to the daily report by KaiserNetwork.org.
 Medicare Prescription Drug Price Negotiations Bill
Would Not Lead to Lower Prices, CBO Says
A bill (HR
4) that would require the
HHS
secretary to negotiate directly with pharmaceutical companies on prices
for medications under the Medicare prescription drug benefit would not
lead to lower prices, according to acting
Congressional
Budget Office Director Donald Marron, the AP/Richmond
Times-Dispatch reports (AP/Richmond Times-Dispatch, 1/11).
News reports suggest that the House likely will
approve the legislation on Friday (Kaiser
Daily Health Policy Report [1], 1/10).
In a letter sent on Wednesday to House Energy and
Commerce Committee Chair John Dingell (D-Mich.), who sponsored the
legislation, Marron wrote, "The secretary would be unable to negotiate
prices across the broad range of covered Part D drugs that are more
favorable than those obtained by (the plans) under current law"
(AP/Richmond Times-Dispatch, 1/11).
However, Dingell said, "Common sense tells you that
negotiating with the purchasing power of 43 million Medicare
beneficiaries behind you would result in lower drug prices." He added,
"This isn't the first time the Congress and CBO differed on the amount
of savings a particular bill would achieve" (CongressDaily, 1/11).
Senate Developments
Sens. Olympia Snowe (R-Maine) and Ron Wyden (D-Ore.) on Thursday
introduced a similar bill in the Senate. Senate Majority Leader Harry
Reid (D-Nev.) on Wednesday "signaled that a showdown looms" with
Republicans over the legislation.
Reid said, "My intention now is to have Medicare
negotiate for lower prices."
Senate Finance
Committee ranking member Chuck Grassley (R-Iowa) earlier this
week said that he would lead an effort by Republicans to defeat the bill
with a filibuster.
Sen. Jim DeMint (R-S.C.), who also plans to
filibuster the legislation, said, "It'll be close," adding, "I intend to
make it a clear ideological communications battle." Sen. Norm Coleman
(R-Minn.) said that he would vote against the bill unless supporters can
prove that the legislation would lead to lower prices. He said, "How are
they going to do it without upsetting the (prescription Part D
initiative)?" (Wodele, CongressDaily, 1/10).
Medicare/VA Price Comparison Study Questioned
In related news, the
Washington Post
on Thursday examined reaction to a study released on Tuesday that found
prices in Medicare prescription drug plans on average are 58% higher for
the most commonly prescribed medications than prices paid by the
Department of
Veterans Affairs, which negotiates directly with
pharmaceutical companies on prices for treatments (Lee, Washington Post,
1/11).
The study, conducted by
Families USA,
used data submitted in November 2006 by the five Medicare prescription
drug plans with the highest enrollment numbers. The prices in Medicare
prescription drug plans used in the study represented the amount that
beneficiaries would have to pay for medications when they reached the
so-called "doughnut hole" coverage gap.
For the study, researchers considered prices for
the 20 medications most commonly prescribed to seniors (Kaiser
Daily Health Policy Report [2], 1/10). According to some
experts, the study "ignores important differences between the two
systems," the Post reports.
For example, VA receives an automatic 24% discount
on the average wholesale prices of medications, and the department has a
limited formulary of approved medications.
CMS "is
prohibited by law from adopting such a list" for the Medicare
prescription drug benefit, in part because beneficiaries "want to have a
wide range of drug choices," according to the Post.
In addition, VA has a much larger health care
infrastructure than Medicare. Former CMS Administrator Mark McClellan
said, "It's apples to oranges. The VA is a closed health care system
relying on mail-order and a tighter formulary than Medicare
beneficiaries have shown they prefer."
Robert Laszewski, a health policy consultant, said,
"The federal government can get lower prices, but only if it's willing
to exclude a certain number of drugs from the formulary. And that's a
huge political leap that I would be very surprised if this Congress
took" (Lee, Washington Post, 1/11).
Opinion Pieces
A radio program and a newspaper featured commentaries on the bill
that would require the HHS secretary to negotiate directly with
pharmaceutical companies on prices for medications under the Medicare
prescription drug benefit. Summaries appear below.
● Robert Reich, "Marketplace":
The bill allows Democrats to "tell seniors and the all-important
AARP
they're forcing Medicare to negotiate with drug companies -- but then
turn around and tell Big Pharma not to worry: their drugs will still be
approved, regardless of price," Reich, a professor of public policy at
the
University of
California-Berkeley, says in a commentary on APM's
"Marketplace." According to Reich, the legislation lacks "real teeth,"
and Democrats should introduce a bill to allow "Medicare to set up its
own drug plan to compete with those of private insurers" (Reich,
"Marketplace," APM, 1/10). The complete segment is available
online
in RealPlayer.
● Mike Leavitt,
Washington Post:
"Some observers point to the massive buying power of the federal
government as the means to exert clout over drug companies, but the
federal government has nowhere near the market power of the private
sector," HHS Secretary Leavitt writes in a Post opinion piece. Leavitt
adds that, under the bill, "one government official would set more than
4,400 prices for different drugs, making decisions that would be better
made by millions of individual consumers" (Leavitt, Washington Post,
1/11).
Broadcast Coverage
WBUR's "Here
& Now" on Wednesday featured a discussion on the bill that
would require the HHS secretary to negotiate directly with
pharmaceutical companies on prices for medications under the Medicare
prescription drug benefit. Guests on the program included Robert Moffit,
director of health policy studies at the
Heritage Foundation,
and Ron Pollack, executive director of Families USA ("Here & Now," WBUR,
1/10). The complete segment is available
online
in RealPlayer.
Letter from
Congressional Budget Office to Sen. John Dingell
Note: Underlining is by SeniorJournal.com.
January 10, 2007
To Honorable John D. Dingell, Chairman
Committee on Energy and Commerce
At the request of your staff, the Congressional
Budget Office has reviewed H.R. 4, the Medicare Prescription Drug Price
Negotiation Act of 2007, as introduced on January 5, 2007. The bill
would revise section 1860D-11(i) of the Social Security Act, which is
commonly known as the “noninterference provision” because it prohibits
the Secretary of Health and Human Services from participating in the
negotiations between drug manufacturers, pharmacies, and sponsors of
prescription drug plans (PDPs) involved in Part D of Medicare, or from
requiring a particular formulary or price structure for covered Part D
drugs.
H.R. 4 would require the Secretary to negotiate
with drug manufacturers the prices that could be charged to PDPs for
covered drugs. However, the bill would prohibit the Secretary from
requiring a particular formulary and would allow PDPs to negotiate
prices that are lower than those obtained by the Secretary. The bill
would also require the Secretary to report to the Congress every six
months on the results of his negotiations with drug manufacturers.
CBO estimates that H.R. 4 would have a
negligible effect on federal spending because we anticipate that the
Secretary would be unable to negotiate prices across the broad range of
covered Part D drugs that are more favorable than those obtained by PDPs
under current law. Since the legislation specifically directs the
Secretary to negotiate only about the prices that could be charged to
PDPs, and explicitly indicates that the Secretary would not have
authority to negotiate about some other factors that may influence the
prescription drug market, we assume that the negotiations would be
limited solely to a discussion about the prices to be charged to PDPs.
In that context, the Secretary’s ability to influence the outcome of
those negotiations would be limited. For example, without the
authority to establish a formulary, we believe that the Secretary would
not be able to encourage the use of particular drugs by Part D
beneficiaries, and as a result would lack the leverage to obtain
significant discounts in his negotiations with drug manufacturers.
Instead, prices for covered Part D drugs would
continue to be determined through negotiations between drug
manufacturers and PDPs. Under current law, PDPs are allowed to
establish formularies—subject to certain limits—and thus have some
ability to direct demand to drugs produced by one manufacturer rather
than another. The PDPs also bear substantial financial risk and
therefore have strong incentives to negotiate price discounts in order
to control their costs and offer coverage that attracts enrollees
through features such as low premiums and cost-sharing requirements.
Therefore, the PDPs have both the incentives and the tools to negotiate
drug prices that the government, under the legislation, would not have.
H.R. 4 would not alter that essential dynamic.
I hope this information is helpful to you. The CBO
staff contacts for further information are Eric Rollins and Shinobu
Suzuki.
Sincerely,
Donald B. Marron, Acting Director
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