Senate Rejects Fourth Medicare Prescription Drug Benefit in Two Weeks

The Senate yesterday defeated a compromise Medicare prescription drug benefit proposal, the fourth rejection of a benefit plan in the past two weeks, making it "highly unlikely" Congress will enact a drug benefit this year, the Philadelphia Inquirer reports (Davies, Philadelphia Inquirer, 8/1). The Senate voted 50-49 against the proposal, 11 votes short of the 60 needed for passage under Senate budget rules (Kirchhoff/Milligan, Boston Globe, 8/1). Four Republicans -- Sens. Tim Hutchinson (R-Ark.), Susan Collins (R-Maine), Arlen Specter (R-Pa.) and Gordon Smith (R-Ore.), who co-sponsored the measure with Sen. Bob Graham (D-Fla.) -- voted in favor of the proposal. Five Democrats and one Independent voted against the plan (Dinan, Washington Times, 8/1). The proposal would have provided comprehensive prescription drug coverage for Medicare beneficiaries with annual incomes up to 200% of the federal poverty level, about $17,720 for individuals and $23,880 for couples. In addition, the measure would have provided complete drug coverage for beneficiaries after their annual out-of-pocket prescription drug costs exceeded $3,300, minus a $10 per prescription copayment. Medicare beneficiaries who did not qualify for comprehensive coverage would have received a 5% federal subsidy and a pharmacy discount card, which could have offered annual savings of 20% or more on medications. Under the plan, all but low-income Medicare beneficiaries would have paid $25 annual enrollment fee to receive prescription drug coverage. Beneficiaries would not have had to pay monthly premiums or deductibles. The legislation would have cost an estimated $395 billion over 10 years (California Healthline, 7/31).

Ideological Divide

Prospects for a compromise broke down because of philosophical differences over how best to provide the benefit, not over cost, the Los Angeles Times reports (Hook, Los Angeles Times, 8/1). Democrats prefer to provide a Medicare drug benefit that would be administered by the federal government, while Republicans prefer to rely on private insurers to provide such coverage. "Republicans would not support a drug benefit under Medicare," Senate Majority Leader Tom Daschle (D-S.D.) said (Lueck/McGinley, Wall Street Journal, 8/1). "Republicans overwhelmingly voted against the creation of Medicare, and they've been fighting it now for 40 years. If you want to give it to an HMO, they're for it. But if you want to expand Medicare, they're against it," he added (Boston Globe, 8/1). However, Sen. Rick Santorum (R-Pa.) said that Democrats must "move away from a government-run program," the Washington Times reports. Initially, Democrats supported a 10-year, $594 billion Medicare prescription drug plan that would have been administered by the federal government, while Republicans supported a $370 billion program that would have been managed by private companies. Both proposals were rejected (Washington Times, 8/1). Republicans also offered a 10-year, $160 billion national prescription drug card program designed to lower drug prices through a bulk-rate pooling program, which also was rejected (California Healthline, 7/25).

Political Fallout

The outcome of the debate appears to be a "major setback" for Democrats, who had planned to campaign as "champions of Medicare drug benefits," the New York Times reports. Because the House passed a benefit plan, Democrats may have lost their "historic" advantage on the issue. While each party blamed the other, senators on both sides of the aisle said they will have to answer to seniors for failing to pass a plan (Pear, New York Times, 8/1). The Los Angeles Times reports that proponents hope that enough momentum to pass a plan might be generated if enough seniors "lambaste senators for their inaction" (Los Angeles Times, 8/1). "Senators who really believe that they are going to go home and blame it on the other guys, I think they're going to get a big surprise," Chris Hansen, AARP's director of advocacy, said (Davis, Baltimore Sun, 8/1). "This is not about blaming the other guy, this is about getting it done," Hansen added (Coile, San Francisco Chronicle, 8/1).

Post-Recess Plans

Although there does not appear to be "sufficient political will" to pass a drug benefit, senators from both parties "vowed to continue work" on a Medicare drug benefit after the August recess, the Boston Globe reports (Boston Globe, 8/1). Sen. Olympia Snowe (R-Maine), one of the co-authors of the Republican-supported measure, which several senators were trying to merge with the Democratic-backed proposal, said that such a compromise plan could pass. "There's no reason why we couldn't take the opportunity in September" to pass the plan, Snowe said (Rovner/Fulton, CongressDaily/AM, 8/1). Sen. Edward Kennedy (D-Mass.) said, "It's inevitable that we're going to pass it; it's just a question of when" (Los Angeles Times, 8/1). In a statement, HHS Secretary Tommy Thompson said the Bush administration is "disappoint[ed]" the Senate did not pass a plan (HHS release, 7/31). White House spokesperson Ari Fleischer said, "The president believes that where there is a will, there is a way, and he hopes the Senate will find a way to get prescription drug coverage to seniors" (Zuckman, Chicago Tribune, 8/1). However, he added, "Seniors once again will have to continue to wait for long overdue prescription drug coverage" (Los Angeles Times, 8/1).

Generics Bill Passes

While Democrats were "stung by the failure" of the Medicare drug proposals, they "trumpeted their victory" at passing underlying generic drug legislation that had served as the vehicle for several prescription drug plans, including the Medicare benefit proposals, CongressDaily/AM reports (CongressDaily/AM, 8/1). Sponsored by Sens. Charles Schumer (D-N.Y.) and John McCain (R-Ariz.), the bill (S 812) passed on a 78-21 vote (Welch, USA Today, 8/1). The bill would close loopholes in the 1984 Hatch-Waxman Act that delay generic drug competition by giving brand-name drug makers only one 30-month patent extension per product. The bill also would prevent brand- name drug companies from paying generic manufacturers to keep their products off the market and would allow generic drug companies to legally challenge "frivolous patents," including "superficial changes" in a treatment's color or physical design intended only to "stifle competition" (American Health Line, 7/31).

Other Amendments

The approved generics legislation included several other amendments addressing prescription drug costs, including an amendment that would allow states to use the purchasing power of their Medicaid programs to negotiate prescription drug discounts for residents who would not otherwise qualify for Medicaid and an amendment to provide states an additional $9 billion to help cover Medicaid costs (Boston Globe, 8/1). The Schumer-McCain bill also included a measure that would allow wholesalers to buy American-made pharmaceuticals in Canada and resell them in the United States "at below-market prices," the Los Angeles Times reports. The Congressional Budget Office said the bill would save consumers and government agencies $60 billion over 10 years. "I think the pharmaceutical industry today is sort of scratching their head and saying, 'Gee whiz, we don't control the Senate,'" Schumer said. The Pharmaceutical Research and Manufacturers of America "denounced" the Senate vote, saying it was "an example of election-year politics trouncing good policy" (Kemper, Los Angeles Times, 8/1). The prospects for the legislation in the House are uncertain (USA Today, 8/1). The House leadership has "shown little interest in the generics legislation, and the brand-name industry is working hard to keep it that way," the Journal reports (Wall Street Journal, 8/1). "We're not going to even entertain the notion" of generics legislation until the Senate passes a Medicare drug benefit, a spokesperson for House Speaker Dennis Hastert (R-Ill.) said (USA Today, 8/1).

Media Coverage

The following broadcast news programs covered the Senate vote:

ABCNews' "World News Tonight": A transcript of the segment is available online (Judd, "World News Tonight," ABCNews, 7/31).
NPR's "All Things Considered": The full segment is available in RealPlayer Audio online (Rovner, "All Things Considered," NPR, 7/31).
NPR's "Morning Edition": The full segment will be available in RealPlayer Audio online after noon ET (Rovner, "Morning Edition," NPR, 8/1).
PBS' "NewsHour with Jim Lehrer": The full segment is available in RealPlayer Audio online (Dentzer, "NewsHour with Jim Lehrer," PBS, 7/31).
"Marketplace": The full segment is available in RealPlayer Audio online (Palmer, "Marketplace," MPR, 7/31).

This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.