CBO: Price Negotiations Would Not Lower Medicare Drug Costs

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 (California Healthline [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).

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).

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 (California Healthline [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).

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 UC-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).

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.