Battle over Medicare Rx shaping up.
While incoming Speaker of the House Nancy Pelosi (D., Calif.) vowed to take action on direct negotiations in the first 100 legislative hours next year, hearings on the issue are likely to drag into the next election season.
One major hurdle for Democrats is that the 2003 Medicare Modernization Act bars the government from interfering in drug price negotiations. Health and Human Services (HHS) Secretary Michael Leavitt stands by that provision, saying the Democratic proposal would unravel the private competition at the heart of the Part D program.
"The idea of the government negotiating drug prices really isn't about the government negotiating drug prices," Leavitt told reporters. "It's a surrogate for a much larger issue, which is really government-run health care."
All eight newly elected Democratic senators favor direct negotiations. Senator-elect Amy Klobuchar of Minnesota, for one, says the Centers for Medicare and Medicaid Services should be able to negotiate the same drug discounts as the Department of Veterans Affairs (VA).
Drug prices negotiated for the VA are substantially lower than Medicare Part D prices, notes Pelosi. Savings from government negotiations for Part D prices could be used to close the gap in coverage known as the doughnut hole, she adds.
But some independent experts say the VA model may not apply to Medicare. And disagreements among Democrats, combined with the Bush administration's opposition, may compound any chance of adapting the VA system for Part D.
Moreover, new discounts from drug companies could overshadow the Democrats' effort. AstraZeneca PLC, for one, has launched the AZ Medicine & Me initiative, which makes such medications as the breast cancer drug Arimidex available to qualifying seniors at $25 or less for a 30-day supply--as little as one-tenth the cash price. The program was announced two days after the election.
While the cost of Part D has been lower than projected, there is evidence that it could be even less. A Consumers Union study in South Florida of six widely used drugs found that the VA's average prices were almost half that of Medicare's.
But, the experts say, Medicare's huge size (it covers more than eight times the number of patients as the VA) makes discounting problematic. VA officials can limit the drugs in their formulary, offering Zocor, for example, but not Lipitor. In total the VA covers some 1,300 medications, while the No. 1 Part D prescription drug plan, the AARP's MedicareRx, covers some 4,300.
Such challenges have led one prominent supporter of direct negotiations to change his mind. Tommy Thompson, President Bush's first HHS secretary, had lamented the government's lack of negotiating power, but he said recently that Part D was working much better than expected and that there was no need for a change.
Democrats have no firm plan for direct negotiations, and Rep. Pete Stark (D., Calif.), the incoming chairman of the Ways and Means subcommittee on health, says at least two proposals are under consideration. The option with the best prospects of passing and surviving a presidential veto would be to repeal the negotiating ban and set drug price ceilings. Private insurers would be able to compete to offer prices below the caps. A second idea would establish a Medicare-run drug plan that negotiates with drug makers in competition with PDPs.
Stark says that under the current system benefits for pharmaceutical companies far outweigh those for seniors.
But in the Senate, Max Baucus of Montana, who will have jurisdiction over Medicare as chairman of the Finance Committee, was one of two Democrats to vote this year against direct government negotiations with drug makers.
AARP policy director John Rother says there should be a level playing field between the consumer and drug manufacturers. He advocates public hearings on direct negotiations, calling a repeal of the 2003 ban a good starting point.
Some pharmacists say Congress should go beyond direct negotiations and eliminate the role of pharmacy benefits managers in Part D and end the doughnut hole.
"If consumers were expected to pay premiums for 12 months of auto, life or medical insurance and then only receive six months' worth of coverage, they would say the insurance companies were getting rich without providing them with a real benefit," says Mike James, vice president of governmental affairs for the Association of Community Pharmacists Congressional Network (ACPCN). "Logic should tell Congress that America's seniors are getting a skewed drug benefit while pharmacy benefits managers and other plan sponsors report record profits as a direct result of offering Medicare Part D plans."