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Drug Bill Demonstrates Lobby's Pull    [

    Negotiating Lower Drug Prices
    The New York Times | Editorial

    Friday 12 January 2007

    From all the ruckus raised by the administration and its patrons in the pharmaceutical industry, you would think that Congressional Democrats were out to destroy the free market system when they call for the government to negotiate the prices of prescription drugs for Medicare beneficiaries. Yet a bill scheduled for a vote in the House of Representatives today is sufficiently flexible to allow older Americans to benefit from the best efforts of both the government and the private drug plans.

    The secretary of health and human services should be able to exert his bargaining power with drug companies in those cases in which the private plans have failed to rein in unduly high prices - leaving the rest to the drug plans. The result could be lower costs for consumers and savings for the taxpayers who support Medicare.

    Under current law, written to appease the pharmaceutical industry, the government is explicitly forbidden from using its huge purchasing power to negotiate lower drug prices for Medicare beneficiaries. That job is left to the private health plans that provide drug coverage under Medicare and compete for customers in part on the basis of cost.

    The Democrats' bill would end the prohibition and require - not just authorize - the secretary of health and human services to negotiate prices with the manufacturers. That language is important since the current secretary, Michael Leavitt, has said he does not want the power to negotiate.

    No data is publicly available to indicate what prices the private health plans actually pay the manufacturers. But judging from what they charge their beneficiaries, it looks like they pay significantly more for many drugs than do the Department of Veterans Affairs - which by law gets big discounts - the Medicaid programs for the poor, or foreign countries.

    The administration argues, correctly, that the private plans have held costs down and that there is no guarantee the government will do any better. The bill, for example, prohibits the secretary from limiting which drugs are covered by Medicare, thus depriving him of a tool used by private plans and the V.A. to win big discounts from companies eager to get their drugs on the list. The secretary does have the bully pulpit, which he can use to try to bring down the cost of overpriced drugs.

    The bill also does not require the secretary to negotiate prices for all 4,400 drugs used by beneficiaries. A smart secretary could simply determine which prices paid by the plans seemed most out of line with the prices paid by other purchasers and then negotiate only on those drugs. The private plans are explicitly allowed to negotiate even lower prices if they can. This sort of flexibility should pose no threat to the free market. It is time for the Medicare drug program to work harder for its beneficiaries without worrying so much about the pharmaceutical companies.

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    Drug Bill Demonstrates Lobby's Pull
    By R. Jeffrey Smith and Jeffrey H. Birnbaum
    The Washington Post

    Friday 12 January 2007

Democrats feared industry would stall bigger changes.

    Before taking control of the House last week, Democratic leaders briefly considered proposing a new government-run prescription drug program as a way to reduce seniors' drug costs, according to Democratic aides and lawmakers involved in the deliberations.

    But House Speaker Nancy Pelosi (D-Calif.) and her allies chose a far less ambitious plan - to require the government to negotiate for lower Medicare drug prices - that will come to a vote today. They stepped back largely out of concern that the pharmaceutical industry would stall a complex change, denying them a quick victory on a top consumer-oriented priority, aides say.

    They had reason to be wary: Despite years of lopsidedly favoring GOP lawmakers with campaign cash and other benefits, the drug lobby continues to wield tremendous power in the Democratic-controlled Congress. It also still has the backing of the White House: President Bush said yesterday that he will veto the Democratic proposal if it lands on his desk.

    To strengthen their position, drug firms and their trade groups have been transforming their Washington operations by hiring top Democratic lobbyists to gain access to new committee chairmen, bolstering Democratic political donations and spending millions on public relations campaigns to overcome an image, indicated in recent surveys, that the industry puts profits ahead of patients.

    Even longtime industry nemeses like Rep. Fortney "Pete" Stark (D-Calif.), chairman of a House health panel, are impressed. "They're pretty potent," he said this week. "They're not bush-leaguers when it comes to spending money and lobbying."

    This month alone, the Pharmaceutical Research and Manufacturers of America spent more than $1 million on full-page newspaper ads touting the success of the existing Medicare drug system.

    Drug companies spent more on lobbying than any other industry between 1998 and 2005 - $900 million, according to the nonpartisan Center for Responsive Politics. They donated a total of $89.9 million in the same period to federal candidates and party committees, nearly three-quarters of it to Republicans.

    "You can hardly swing a cat by the tail in Washington without hitting a pharmaceutical lobbyist," said Sen. Charles E. Grassley (R-Iowa), a key sponsor of the 2003 legislation that created the current program.

    The industry worked closely with the Republican Congress to shape the Medicare prescription drug program, which included a provision barring the government from negotiating with the pharmaceutical industry for lower prices. In the three-year run-up to passage, industry lobbyists poured more than $6 million into both Republican and Democratic campaign coffers, dispatched an army of more than 800 lobbyists to Capitol Hill and quietly funded seniors organizations and patient advocacy groups that opposed Democratic alternatives.

    Democrats opposed the legislation, but now that they have a chance to rewrite the law, they are pressing for what party leaders concede is only a minor alteration. "This is a first step," said Rep. Charles B. Rangel (D-N.Y.), chairman of the House Ways and Means Committee.

    The House proposal would require the government to negotiate with the pharmaceutical industry for lower prices on behalf of the private insurers that run the drug benefit program. The impact on prices could be small, however, since the government does not buy drugs directly for Medicare and manufacturers could ignore federal pressure to lower prices without consequence.

    The Bush administration has long opposed the idea of direct government negotiation with drug companies for Medicare, asserting that it would impede competition among the private drug plans. Mike Leavitt, the secretary of health and human services, has said he does not want to implement such a measure.

    The bill leaves intact three provisions of the 2003 law that industry analysts agree played a more direct role in boosting pharmaceutical profits. These include a controversial ban on the importation of cheaper medicines from Canada, a provision that forces roughly 7 million Medicaid patients to buy drugs that are not subject to price limitations, and provisions requiring private insurance plans to remain small and numerous, which dilutes their leverage in price negotiations with drugmakers.

    Rep. Marion Berry (D-Ark.), a registered pharmacist, lined up more than 170 House Democrats last year to support a Medicare-run drug plan meant to force sharply lower prices, and he said the House leadership considered seeking it now but set it aside. "It was primarily a judgment call from the speaker, to keep everybody on board," Berry said. Pelosi aides confirmed the account.

    The drug industry lobbying effort started to tilt Democratic as soon as it was clear that Democrats were headed for victory in the midterm elections. The industry is working "to expand areas of contact, develop relationships with those who are in charge," said former senator John Breaux (D-La.), a lobbyist for the industry.

    The political action committee of the drug company Amgen gave Rep. John Conyers Jr. (D-Mich.), the new chairman of the House Judiciary Committee, $8,500 during the 2006 election cycle, amounting to three-quarters of all its donations to him over the past decade. In the Senate, GlaxoSmithKline's PAC contributed $8,000 during the cycle to Sen. Kent Conrad (D-N.D.), the new Budget Committee chairman. That is more than the $6,000 total that the PAC had given to Conrad since 1997.

    Helping lead the industry's charge is Breaux, the former senator, who is one of only two Democrats who played a role in drafting the 2003 bill. He said he plans to hopscotch the country holding public seminars on solving health-care problems, often in the states and districts of members of Congress who are pivotal to drug legislation. It is part of a program, called Ceasefire on Health Care, that is bankrolled by the drug company Pfizer and has featured speakers such as Sen. Blanche Lincoln (D-Ark.) and Sen. Gordon Smith (R-Ore.), who both sit on the Finance Committee.

    "We need to get access to key Democrats now," said former representative James C. Greenwood (R-Pa.), president of the Biotechnology Industry Organization, a prominent industry group.

    In an effort to bolster its image, Pharmaceutical Research and Manufacturers of America is also sponsoring a program that distributes low- and no-cost drugs to poor people, called the Partnership for Prescription Assistance. A few of the program's beneficiaries have been brought to Washington and given media training so they can promote the program in local news outlets and in television ads.

    While the association has told House members that it has "issues" with today's measure, most of its focus will be on the Senate, where lobbyists say they have a better chance of blocking the bill. Democrats control that chamber, 51 to 49, and 60 votes are needed to pass such controversial bills.

    Even if the House bill passes both chambers of Congress, supporters take seriously the veto threat by Bush, who got $1.17 million from the industry for his 2004 reelection campaign.

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    Staff writer Christopher Lee, research database editor Derek Willis and staff researcher Richard S. Dreze