WASHINGTON – Newly in charge House Democrats have fashioned clear marching orders for the nation's health chief: Negotiate lower drug prices for seniors on Medicare.
They'll try to get the orders passed next week. The goal is to use the economic leverage of the millions of people in the program to drive a better bargain with drug makers.
The legislation is one of House Speaker Nancy Pelosi's priorities for the first 100 hours of the new Congress. However, the two-and-a-half-page bill contains no details about how the negotiations would occur, such as which drugs the secretary would bargain for or how much funding should be set aside to staff the negotiations.
The bill's author, Rep. John Dingell, D-Mich., said such a detailed plan is unnecessary, adding that if the secretary of Health and Human Services was "too dumb" to figure out how to establish the negotiations, then a new secretary was needed. He did not name HHS Secretary Mike Leavitt.
"This is not something that will require a rocket scientist to address," said Dingell, chairman of the House Energy and Commerce Committee. He said he did not expect the HHS secretary to negotiate the prices of all medicine used by seniors, but to prioritize efforts on those drugs that are most important.
Leavitt has made it clear that he doesn't want the authority to negotiate drug prices for Medicare beneficiaries.
"We have a proven track record over the past year that the private marketplace is working for beneficiaries and for taxpayers," said HHS spokeswoman Christina Pearson. "We believe the private marketplace will do a better job than the government in yielding savings."
The bill is scheduled to come up for a vote Friday. More than 190 lawmakers have signed on so far. Democrats are expected to use their new majority powers to successfully move it through the House, but from there, its prospects are dim.
The Bush administration has come out strongly against government negotiations, and Senate Majority Leader Harry Reid, D-Nev., would have to recruit at least nine Republicans to get the 60 votes necessary to ensure the bill can come up for a vote.
In preparation for the vote, the administration released new estimates of how much the benefit would cost. Originally, the program was expected to cost $926 billion from 2006 to 2015. Now the administration has dropped the estimate to $640 billion.
The most recent drop is largely because of competition among prescription plans resulting in lower costs, said Leslie Norwalk, administrator for the Centers for Medicare and Medicaid Services.
"If it's working, why would you want the government to interfere with these negotiations?" Norwalk said.
The Senate Finance Committee has scheduled a hearing on the issue for Thursday. The spokeswoman for Sen. Max Baucus, D-Mont., the committee's new chairman, said he wanted to get the facts first before taking a position.
Under the current program, seniors enroll in private plans administered by insurers. They usually pay a monthly premium and pay for a portion of their medicine. The federal government also subsidizes the coverage, with extra help going for coverage provided the poor. The plans themselves determine which medicines they will cover and how much they will pay.
The bill creating a drug benefit under Medicare specifically forbids the HHS secretary from interfering in negotiations between drug manufacturers and plan sponsors, or between pharmacies and plan sponsors.
John Breaux, a former Democratic senator from Louisiana who is now a registered lobbyist at Patton Boggs LLP, said the noninterference provision was standard practice in bills calling for a Medicare drug benefit.
"That's always been Democratic doctrine and Republican doctrine as well," said Breaux, whose firm represents Pfizer, Bristol-Myers Squibb and other drug makers.
A Kaiser Family Foundation poll found that 81 percent of seniors support the idea of government negotiations.
The AARP, which has nearly 38 million members, is taking out ads in major newspapers around the country to generate support.
"Our view is that the plans are doing a decent job of negotiating, but we think we can do more by giving the secretary this authority," said David Certner, director of federal affairs for the AARP. "We think we need to use every tool available."
The trade association representing some of the drug plan sponsors, such as UnitedHealthcare, WellPoint and Medco, said the current benefit works. "It's premature to say let's go ahead and change a program that is working," said Mark Merritt, president of the Pharmaceutical Care Management Association.
The Veterans Affairs Department negotiates the price of medicine that it purchases, and the department routinely gets substantial discounts.
But Merritt said government negotiations lead to fewer choices when it comes to medicines and less access when it comes to what pharmacies will dispense the medicine. In some states, VA patients have to drive great distances to pick up their medicine, or they have to get it through the mail.
"What seniors want to know is that they're saving money, that they have choice, and that they have convenience," Merritt said. "If direct negotiation can do all that, then it's a different story, but there's a burden of proof, a hurdle they have to jump in showing that's the case."
Drug makers will also oppose the Democrats' effort.
"While we are very supportive of the Medicare prescription drug benefit and are committed to making a good program even better, we remain opposed to any price control schemes which would limit the choice of medicines available to seniors and disabled Americans," said Ken Johnson, senior vice president of the Pharmaceutical Research and Manufacturers of America.