WASHINGTON — The bill that House Democrats unveiled Friday to lower drug prices for the elderly contains a provision that could make it difficult -- or maybe even impossible -- to achieve its goal, some critics said.
The legislation would direct the federal government to use its huge market power to bargain for lower prices with drug manufacturers on behalf of some 23 million seniors enrolled in the Medicare prescription program.
But a provision in the bill would explicitly prohibit the government from creating a list of approved drugs, known as a formulary -- thus taking away a powerful lever commonly used in such pricing negotiations. Fear of not being included on such a list of approved drugs is one of the principal reasons manufacturers agree to lower prices.
"If you don't have the power to bump a drug off the formulary, you have no negotiating clout," said Robert Laszewski, a health policy consultant to insurers and other healthcare companies. "Any good capitalist will tell you that you can't negotiate with somebody unless there is the expectation that you may not purchase their product."
Under the Medicare prescription system, benefits are provided by private insurance companies, which rely on lists of approved drugs to negotiate price cuts. Premiums that the elderly pay to the private companies are heavily subsidized by the government.
The program was designed by Republicans and passed in 2003 over bitter opposition from most Democrats, in part because it prohibited the government from negotiating price cuts. Freeing the government's hands was high on the list of actions Democrats had vowed to take when they gained control of Congress.
It's unclear how the apparent concession to industry will affect the political fortunes of the bill. It may help to blunt some arguments against it from critics who say that the government would be dictating prices and therefore reducing access to medicines. However, the concession seems unlikely to win over the drug industry.
"This is a trade-off," said a House Democratic leadership aide, who could not be identified because he is not authorized to talk to the press. "We felt we couldn't go as far as Veterans Affairs does, where they actually take drugs off the formulary."
The VA is known for driving tough deals on drug prices, but it covers many fewer medications than the typical Medicare plan.
