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Democrats Unveil Bill to Lower Medicare Drug Costs

By Emily Ethridge, CQ Staff

June 16, 2011 -- House and Senate Democrats introduced legislation to reduce drug costs in Medicare's prescription drug program, a measure that exemplifies the kinds of changes to health entitlements that Democrats say they are willing to accept in the negotiations over raising the debt limit.

The measure, introduced in the House and Senate, would require drug companies to provide prescription drug rebates to those eligible for both Medicare and Medicaid, as well as to seniors in the low-income subsidy plan in the Medicare Part D prescription drug program.

Democrats hailed the bill as a way to wring more savings out of the Medicare program, on top of the ones included in last year's health care law (PL 111-148, PL 111-152), without cutting benefits.

"We face a stark choice," said Henry A. Waxman, D-Calif., ranking member of the House Energy and Commerce Committee. "The Republicans have proposed eliminating basic Medicare and Medicaid guarantees. But Democrats have better ideas. This bill saves Medicare more than $100 billion by eliminating drug manufacturer windfalls instead of hurting seniors."

The bill would reduce the deficit by $112 billion over 10 years, according to the Congressional Budget Office.

But the Pharmaceutical Research and Manufacturers Association, which represents brand-name drug companies, panned the measure.

"Already, negotiations between biopharmaceutical research companies and Part D plans are leading to significant rebates on medicines," said deputy vice president Karl Uhlendorf. Uhlendorf. "In addition, price controls in Part D would likely lead to increased premiums on certain beneficiaries in the program, according to the Congressional Budget Office."

Republicans maintain that significant changes to Medicare and Medicaid, which together account for about one-fifth of federal spending, are necessary to reduce deficit spending. The House-passed fiscal 2012 budget proposal (H Con Res 34) would transform Medicare from a program that guarantees a range of specified health benefits to one in which seniors receive an annual stipend to purchase private insurance beginning in 2022—something Senate Democrats have flatly rejected.

Democrats said their bill would force drug companies to shoulder the burden of the cuts, rather than seniors and the disabled.

"Rather than dismantling Medicare and Medicaid, we can reduce the deficit by over $112 billion by eliminating a taxpayer-funded windfall for drug companies," said bill sponsor Sen. John D. Rockefeller IV, D-W.Va.

President Obama's bipartisan fiscal commission recommended the rebate idea as a way to pay for blocking scheduled cuts in payment rates to physicians who treat Medicare patients. Rep. Pete Stark, D-Calif., said the Democrats' bill could be used in the same way to strengthen Medicare.

"The savings from this legislation could pay for a multi-year 'doc fix'— something we tried to do in a comprehensive way but have had to address yearly so Medicare's payments to doctors aren't slashed," said Stark, ranking member on the Ways and Means Subcommittee on Health.

Democrats said the 2003 Medicare prescription drug program law (PL 108-173) lifted the requirement that manufacturers pay rebates on drugs used by so-called "dual eligibles," resulting in increased drug costs for the program.

Under the bill, drug manufacturers would be required to pay the difference between the average rebate they pay to private drug plans in Part D, and 23.1 percent of the drug's average manufacturer price, starting in 2013. If the prices increase more quickly than the rate of inflation, manufacturers would pay additional rebates.

Also, five Democratic senators wrote a letter to Minority Leader Mitch McConnell, R-Ky., asking him to abandon proposals that would transform Medicare or cut benefits, and instead look for cuts along the lines of those included in the health care overhaul law.

The House budget resolution "would bring unnecessary suffering to American seniors, while missing the salient fact that health care costs are exploding for everyone, no matter who the insurer is," said the letter, signed by Sheldon Whitehouse of Rhode Island, Tom Harkin of Iowa, Patty Murray of Washington, Charles E. Schumer of New York, and Debbie Stabenow of Michigan.

"The House-passed Ryan budget also overlooks the fact that the Affordable Care Act makes significant changes to our health care system to control health care costs, changes that are already underway. To protect Medicare, we should build on these kinds of delivery system reforms, rather than cut seniors' benefits," the senators wrote.

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