The ability of the federal government to negotiate drug prices with pharmaceutical companies is shaping up as the first healthcare policy hot button of 2007.
On Friday, January 12, the House of Representative passed HR 4, the Medicare Prescription Drug Price Negotiation Act of 2007, by a 255-170 vote.
The bill faces an uncertain future in the Senate, and the day before the House vote, the White House issued a statement indicating that President Bush would veto any legislation seeking to require drug price negotiation.
Several reports also surfaced in early January, in advance of the vote in the House, suggesting and drug price negotiations would have only limited effectiveness and that current cost constraint approaches, particularly the Medicare Part D prescription drug benefit, were restraining drug prices.
HR 4, a bill to amend part D of Title XVIII of the Social Security Act, requires the Secretary of Health and Human Services to negotiate lower covered Part D drug prices on behalf of Medicare beneficiaries. The bill passed only one week after it was introduced.
"Negotiating for lower prescription drug prices is a long overdue step toward making healthcare more affordable for Medicare beneficiaries," said Ways and Means Chairman Charles B. Rangel (D-NY), one of the co-sponsors of the bill. "Congress should do all it can to put the needs of the American people before those of special interests."
The written statement from the White House, released the day before the bill passed, said Bush would veto the legislation, contending that it represents government interference that limits competition and access to life-saving drugs, reduces convenience and ultimately would "increase costs to taxpayers, beneficiaries and all American citizens."
The White House pointed to results achieved so far by Medicare Part D as evidence that current policies are limiting drug prices.
In the days before the House passed HR 4, the Department of Health and Human Services reported that predicted Medicare costs for the Part D prescription drug benefit for fiscal year 2008 would be $189 billion lower than was originally predicted in 2003, when the benefit was created.
Bids for the program are lower, and there's been lower actual growth in drug costs, the agency said in explaining the revised estimates.
"Our new estimates provide clear evidence that consumer choice is working," said HHS Secretary Mike Leavitt. "Government interference will result in fewer choices and less consumer satisfaction."
In addition, an analysis by the Congressional Budget Office indicated that the new legislation would have limited effectiveness in lowering federal spending. Drug prices are only one part of the equation in overall system costs, and the inability of the Secretary to establish a formulary would limit the leverage necessary to get major concessions on drug prices, a CBO letter to Rep. John D. Dingell (D-MI), another of the bill's co-sponsors, said.
An analysis in the Washington Post indicated that Medicare pays 58 percent more for drugs than the Veterans Administration, which has an established formulary and is able to use that limited panel of drugs to negotiate better prices with drug manufacturers.
Senate opposition seemed strong, where Democrats had only a narrow advantage over Republicans. Some Republican stalwarts indicated their opposition to the bill and indicated they might filibuster to block its passage.
Sen. Chuck Grassley (R-Iowa) released a flood of statements regarding the bill, questioning exactly how a drug negotiation plan would work, since the bill doesn't specify an approach.
"This is a bill of goods. It won't work," he said. "It's bad for Medicare beneficiaries and other consumers alike. Nobody wins. I hope the Senate will defeat this bill, and if not, I look forward to a presidential veto."