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Senate Finance Committee to Examine How—And How Well—Drug Negotiations Would Work

By John Reichard, CQ HealthBeat Editor

January 5, 2007 -- While House Democrats already have developed specific bill language that would empower the Department of Health and Human Services secretary to negotiate directly with drugmakers, their Senate counterparts are moving more slowly on the issue of prices paid by Medicare for prescription drugs. And they aren't committed to taking the approach followed by their House colleagues.

House Democrats introduced their bill (HR 4) Jan. 5 and were expected to vote on the measure Jan. 12. But Senate Finance Committee Chairman Max Baucus, D-Mont., announced Friday that his focus next week on the issue will be on studying the issue, not voting on it.

Baucus plans to hold a Jan. 11 hearing that will include testimony from various academics and the Government Accountability Office on the issue of direct negotiating authority. He wants to conduct a careful study of how secretarial negotiating authority would work, said spokeswoman Carol Guthrie. On tap to testify are economists from Harvard and Yale and health policy scholars from Johns Hopkins University and the Heritage Foundation.

Senate Majority Leader Harry Reid, D-Nev., has introduced S 3 on the Medicare drug pricing issue, but the measure is simply described as a bill that would "provide for fair prescription drug prices for Medicare beneficiaries." Guthrie said the measure is more of a "sense of the Senate" proposal and it doesn't get into the mechanics of pricing negotiations. Guthrie offered no details on a Democratic timetable for more specific legislation, emphasizing Baucus' commitment to carefully studying the issue.

House Energy and Commerce Committee Chairman John D. Dingell, D-Mich., and House Ways and Means Committee Chairman Charles B. Rangel, D-N.Y., announced that they have more than 190 co-sponsors for the House version (HR 4), including Missouri Republican Jo Ann Emerson. "I am proud that this legislation is coming to the House floor for consideration and urge its passage," Emerson said in a press release.

Democrats said AARP, the AFL-CIO, Consumers Union, Families USA, and the National Committee to Preserve Social Security and Medicare support HR 4.

The Bush administration, meanwhile, began gearing up to counter the legislation, which would provide the HHS secretary with direct negotiating authority. It issued a "Part D Medicare Prescription Drug Benefit Fact Sheet" chock-full of statistics about the availability of plans, low premiums, and savings under the current system.

It said direct negotiating authority for the HHS secretary "requires limiting access to some drugs, while promoting others in exchange for price discounts. A 'Medicare formulary' would thus limit access to some drugs in order to offer a preferred position to others," CMS said. "By allowing individual plans to negotiate with drug companies directly and offering beneficiaries the choice of plan that best meets their needs, the Medicare prescription drug program balances the goals of meaningful price discounts and access to a wide variety of drugs," the CMS document said. House Democrats say their bill would obtain large savings without a government formulary or new restrictions on access to pharmaceuticals.

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