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House Passes Bill to Cut Medicare Prescription Drug Costs

White House Promises a Veto if the Measure Passes the Senate

By Joseph S. Enoch
ConsumerAffairs.com Congressional Correspondent

January 12, 2007

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The House today passed a bill heralded as decreasing prescription drug costs for America's seniors.

The bill, H.R.4, would require the Secretary of Health and Human Services to negotiate prices with drug companies. The negotiated prices would be standardized across the U.S. for Medicare Part D beneficiaries.

Republican opponents say the bill, which passed 255-170, is would actually raise drug prices and retard pharmaceutical competition, putting a crimp in research on new drugs. Actuaries from the Centers for Medicare and Medicaid Services (CMS) agree.

"Although the bill would require the Secretary to negotiate with drug manufacturers regarding drug prices, the inability to drive market share via the establishment of a formulary or development of a preferred tier significantly undermines the effectiveness of this negotiation," Paul Spitalnic, Director of the Parts C and D Actuarial Group in the Office of the Actuary said in a CMS prepared statement.

"Manufacturers would have little to gain by offering rebates that aren't linked to a preferred position of their products, and we assume that they will be unwilling to do so," he argued.

Regional Disparities

A recent study found that seniors across the nation are paying wildly different drug prices based on their location.

According to the study, a 78-year-old woman suffering from osteoporosis, high blood pressure, a spine fracture and arthritis, would pay $4,113 out of her pocket for medication if she lived in Michigan. Meanwhile, that same woman living in Ohio would pay $16,856 out of pocket.

H.R.4 aims to abandon those disparities by negotiating the prices on a national scale.

Senate Finance Chairman, Sen. Max Baucus (D-Mont.), who has remained cool on the issue in the past, held a hearing to discuss the many pros and cons Thursday.

"I do not buy the argument that the sky will fall on the prescription drug market if we remove this clause," he said at the conclusion of the hearing.

"The HHS secretary has a goldmine of data, the ability to get more data, dozens of agencies, and tens of thousands of public servants at his disposal. That is quite a toolbox with which to seek fair drug prices for seniors. It is time to open that toolbox for Medicare," Baucus said.

However, opponents fear that H.R.4 would restrict prescription choices for senior citizens because the only drugs that would be offered through the new plan would be those whose prices had been negotiated.

Republicans also say that H.R.4 may increase drug prices for veterans because the bill would be fighting for cheap medication with the veterans' drug plan which utilizes a similar format.

Bad for Drug Stores?

Opponents also say the bill could have a devastating effect on pharmacies. It might require the drugs to either be mailed to senior citizens or require them to pick up their drugs at distributors throughout each state. That move could put many pharmacies out of business because many of them rely heavily on the profits from medications purchased by Part D beneficiaries.

Pharmacists, along with the drug companies, have powerful and influential lobbying organizations and work mostly behind the scenes to protect their economic interests, which may or may not coincide with those of seniors struggling to pay for the medications that keep them alive and independent.

The very process of debating the pros and cons of the measure is a reminder to Congress and everyone else that, as it's currently written, Medicare Part D is extremely confusing, a serious hindrance for seniors who may be dealing with dementia.

With all the reams of data, dual eligibilities and different plans, many senior citizens are "lost in a blizzard," said Rep. Jim McDermott (D-Wash.).

After McDermott, who attended medical school, admitted that even he is confused by all the facets, he asked, "How is my 97-year-old mother supposed to understand all this?"

Bush Votes No

Despite the seemingly countless pros and cons swirling around Part D, the only prescription that counts will be the one written by President Bush, who has left little doubt he will veto H.R. 4 if it manages to make it to his desk.

"The Medicare Part D program is delivering better benefits than expected at a much lower cost than originally estimated, in large part because competition between plans has meant that seniors can choose the most affordable coverage that best meets their needs," according to a White House statement.

"The Administration strongly opposes H.R. 4, which would not only repeal the prohibition against the Federal government interfering in negotiations between Part D plans, pharmacies, and drug companies for lower Part D drug prices, but would require that the Federal government negotiate directly with drug companies."

And that, for now, is the last word.

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