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Officials Propose Increased Medicare Advantage Rates

By Kerry Young, CQ Roll Call

February 11, 2016 -- Senate Finance Chairman Orrin G. Hatch warned President Barack Obama's health secretary Thursday not to try to move toward direct federal negotiations on drug prices, though there is no indication that the administration is poised to do so.

The Utah Republican reminded Health and Human Services (HHS) Secretary Sylvia Mathews Burwell that the 2003 measure (PL 108-173) that created the Medicare Part D drug program deliberately assigned the task of negotiating pharmaceutical prices to the insurance companies that manage this benefit. Hatch told Burwell that he has heard "rumblings" that the White House is considering whether it could use an executive order to allow direct negotiations by federal officials to lower the costs of drugs in the Medicare Part D plans, which is projected to cover roughly $90 billion in purchases this year.

"Such an executive order would be in violation of the law, as the statute explicitly prohibits such interference in private negotiations," Hatch told Burwell on Thursday during a Senate Finance hearing on her department's fiscal 2017 budget request. 

Growing drug costs have become an increasingly hot topic in American politics. GOP presidential contender Donald Trump and the contestants for the Democratic slot, Hillary Clinton and Sen. Bernard Sanders, I-Vt., have spoken in favor of direct Medicare drug negotiations. In its fiscal 2017 budget request, the White House reiterated its support for allowing HHS to negotiate directly on certain expensive medicines, without fleshing out in great detail how this approach would work.

Burwell didn't directly answer Hatch's question about whether the White House has considered any executive action, instead emphasizing that her department is focused on both the needs of the developers of new medicines and of Americans facing high pharmacy bills. Burwell cited a forum on pharmaceuticals that HHS held in November as an example of her approach. 

"It's not just drug prices," Burwell said. "It's about innovation, which is why we actually brought everyone in for a conversation about both of those issues at the end of last year so that we could hear from industry as well as consumers in terms of the issue. As we think about it and the steps that we have taken, we are focused on both innovation as well as that affordability."

Burwell noted that Rob Portman, R-Ohio, had raised concerns about the impact of drug spending on deficits.

"We take that very seriously and are looking for the opportunities that we can do in terms of drug prices," said Burwell. She pointed out a series of steps that the administration has already taken to address concerns about prescription costs, including narrowing a Medicare coverage gap that forced seniors to shoulder some of their drug costs.

Before raising his concerns about Medicare Part D drug negotiations, Hatch complimented Burwell on her performance as HHS secretary. Senators agreed that Burwell has reached out actively to lawmakers in both parties, even amid continuing deep partisan splits over the implementation of the 2010 health care law.

"I want to keep working with you," Hatch said. "Listen to our side, too, and maybe you'll get a lot done."

At the hearing, Burwell addressed a wide range of issues. She promised to follow up on concerns that Sen. Johnny Isakson, R-Ga., raised about seemingly slow progress at the Food and Drug Administration on the review of new sunscreen ingredients. She and Sen. Rob Portman, R-Ohio, discussed their mutual interest in taking steps to curb the widespread use of opioid painkillers that has often served as a pathway to narcotic addiction and heroin use. And Sen. John Thune, R-S.D., asked Burwell to address long-standing concerns about Indian Health Service operations in his state, as Rep. Kristi Noem, R-S.D., had done at a House Ways and Means Committee hearing on Wednesday. 

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