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House Bill Aims to Lower Drug Prices

November 18, 2009 -- The House passed legislation (HR 3962) on Nov. 7 that includes a number of provisions that Democrats believe could lead to lower prescription drug prices.

The bill would allow the secretary of Health and Human Services to negotiate prices with drug manufacturers participating in Medicare's prescription drug benefit, which the industry has long opposed. It would expand rebates that drug companies must pay the government for drugs provided to Medicaid recipients and would require the same rebates be paid for low-income seniors enrolled in Medicare's drug program. And it would encourage seniors on Medicare's plan to use generic drugs by offering them a free prescription fill when they switch from a brand-name drug.

AARP has endorsed the House bill, while PhRMA has not.

"While well-intentioned, the bill—as passed—would have the unintended consequences of killing tens of thousands of jobs in our industry at a time when the American economy is struggling and unemployment has soared above 10 percent," Johnson said in a statement after the measure was passed.

PhRMA made an agreement this summer with the White House and Senate Finance Chairman Max Baucus, D-Mont., to contribute $80 billion over 10 years toward the cost of a bill that Baucus' committee has approved (S 1796). House Democratic leaders, however, say they are not bound by that agreement and believe more savings can be extracted from the drug industry.

The House committee leaders asked GAO to essentially duplicate AARP's work, comparing recent price increases for brand-name and generic products with measures of inflation. They also asked GAO to single out any particular products or companies that "demonstrate anomalous drug pricing trends" relative to the rest of the industry.

GAO has previously identified spikes in drug prices ahead of major legislation affecting the industry. In 2002, the year before Congress passed the law that established Medicare's drug benefit (), GAO found that prices for 44 brand-name and 43 generic drugs commonly prescribed for federal employees increased 6.7 percent, compared with price increases of 4 percent and 4.3 percent for the same drugs in 2000 and 2001.

The committee leaders said they expect the GAO report to provide a "benchmark" for drug prices before the health care overhaul, and they would request a follow-up study if the bill becomes law and its policy changes are implemented.

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