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Advocates Renew Push to Give Medicare the Power to Negotiate Drug Prices

By Jane Norman, CQ HealthBeat Associate Editor

March 12, 2010 -- The health care overhaul could well be a bitter pill to swallow for members of Congress who support a popular remedy they've promised voters for years — giving Medicare the power to wheel and deal on prices for prescription drugs.

House Democrats' demand that the secretary of Health and Human Services be allowed to negotiate with drug companies as part of the overhaul ran head-long into an agreement the White House had struck with the pharmaceutical industry. Under that deal, drugmakers would agree to give Medicare breaks on drug prices, up to $80 billion, during the next 10 years. That would in turn help provide Medicare drug coverage in what is known as the "doughnut hole," a gap in which seniors must pay 100 percent of their drug costs. Drug companies weren't about to agree to the negotiating authority on top of the $80 billion.

Drug negotiation for Medicare's 40 million beneficiaries was in the House-passed health care bill (HR 3962), but removed during initial talks on a combined House-Senate measure. President Obama didn't mention it in his overhaul proposal.

Now advocates in the House want negotiation included as the overhaul nears its last frenzied days of action. If they fail there, they are expected to seek a standalone bill, especially if a comprehensive overhaul is defeated and lawmakers want narrower measures that could still symbolize progress on health care — and appeal to seniors at the polls.

Proponents of the bill, such as John Rother, executive vice president of policy and strategy for AARP, say significant savings could be obtained through negotiation.

Even if the overhaul is adopted, supporters argue that a standalone measure should be approved because it would be years before many of the larger bill's provisions take effect — and seniors need help with prescription drug costs sooner. AARP reported in October that prescription costs rose by 9.3 percent in one year, despite a 0.3 percent reduction in the Consumer Price Index.

A Ban on Negotiating
Ever since the Medicare prescription drug Part D law was enacted in 2003, its ban on bargaining authority has rankled Democrats. When the party took control of Congress in 2007, the House quickly approved bipartisan legislation to repeal the ban — though the bill died under threat of a presidential veto and amid opposition in the Senate.

Now, some question why it's been stripped from what's supposed to be their crowning achievement in health care. The lack of negotiating authority is a "huge deficiency" in the overhaul, said Rep. Peter Welch, the Vermont Democrat who's the chief sponsor of the primary stand-alone bill (HR 4752). It has more than 70 co-sponsors, including a Republican, Jo Ann Emerson of Missouri.

"There's no meritorious argument against it, only a political argument against it," said Welch, adding that it could affect his vote for the overhaul. "And that political argument, of course, is that the pharma companies will be 'upset,' and I'm not sure that's a sound basis for public policy."

However, there are other arguments — namely that it won't work. The Congressional Budget Office, analyzing a similar bill in 2007, told the House Ways and Means Committee that there would be a "negligible" effect on spending because the secretary wouldn't be able to negotiate prices across the broad range of drugs that are more favorable than those already obtained by drug plans under current law.

Yet Welch pointed to disparities between the price of drugs paid by the Veterans Administration, which does have negotiating authority, and prices paid by Medicare.

"We are the biggest purchaser of drugs, we the taxpayers, yet we pay retail when we buy wholesale," Welch said. "I mean, you can't make that up."

Ken Johnson, senior vice president at PhRMA, said negotiations between drugmakers and Part D plan sponsors generate significant savings. "What's more, many experts contend that the only way the government could effectively negotiate lower costs is to limit access," Johnson said.

Another skeptic is Dan Mendelson, a consultant who oversaw health budgets in the Clinton administration. CBO won't score the bill for savings, and Democrats aren't going to poke the drug industry in the eye, he said. Any plus? "It sounds good to consumers who are facing high drug costs," Mendelson said.

Public opinion is important, though, and polls have found broad support for negotiating authority. Vicki Gottlich, a lawyer for the Center for Medicare Advocacy, a nonprofit group that supports the legislation, said seniors frequently ask her about it.

Yet she's not optimistic about this year, but said she thinks lawmakers will be forced to continue to examine the burgeoning Medicare program for savings, especially as prescription drug prices continue to rise.

"I don't think it's going away," Gottlich said.

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