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Bill would let Medicare bargain for drugs

The House legislation would end the GOP ban on the government seeking lower prices for seniors' prescriptions.

January 12, 2007|Ricardo Alonso-Zaldivar | Times Staff Writer

WASHINGTON — The new Democratic majority in the House is expected to pass a bill today that directs Medicare to negotiate lower drug prices for 23 million seniors, setting up a clash with President Bush that could help determine the direction of changes in healthcare -- whether the government plays a major role or relies on private enterprise.

The prescription drug bill repeals a Republican-approved ban on letting the government negotiate with manufacturers for lower prices. And prospects for Senate action on a similar measure improved Thursday when a key Democrat, finance committee Chairman Max Baucus of Montana, announced that he had changed his mind and could support some form of bargaining authority for Medicare.

Meanwhile, the White House said Bush would veto the House bill if it should reach his desk, saying "government interference impedes competition, limits access to life-saving drugs ... and ultimately increases costs."

The narrow debate over Medicare pricing is part of a broader battle over healthcare. Many Democrats believe government should take a strong hand in reshaping the system to expand insurance coverage and rein in costs. Bush has advocated individual action by informed consumers and employers, with government playing a supporting role -- setting ground rules and providing subsidies or tax breaks.

The Medicare drug program was intended to be a prime example of how Bush's approach could work. Private insurers negotiate with the drug industry and offer varied plans; seniors pick the one that suits them best. Democrats argue that using for-profit companies raises costs and that the government, with greater buying power, can force down prices.

As Congress continues to work on the issues, the House bill may prove to be more of a symbolic first step than an ultimate solution.

For one thing, the Congressional Budget Office has calculated that the legislation is unlikely to save money. That's because, seeking to make it more politically palatable, the bill's authors prohibited the government from establishing a list of preferred drugs for Medicare. Such lists, called formularies, are a widely used bargaining chip.

Several experts told a Senate hearing Thursday that the private insurance plans that deliver the Medicare benefit probably didn't need any help to negotiate prices for most medications. "I see nothing that warrants heavy-handed intervention in this market," Baucus said.

But he noted that "there are areas of the drug benefit in which market competition is not working," and added that "the total prohibition on negotiations should be eliminated."

Some of the experts agreed that the plans were probably paying too much for certain brand-name drugs.

In the heat of last year's campaign, many Democrats boldly talked of bargaining hard with drug makers to cut prices for seniors, and maybe even save enough to close the coverage gap in the Medicare prescription benefit that has become known as the "doughnut hole."

What may ultimately emerge from Congress could be more modest.

"What the Democrats would like to do is find something that would pass both houses and that the president would have a hard time vetoing," said Joseph Antos, a healthcare policy analyst at the business-oriented American Enterprise Institute.

"A simple, stand-alone bill like the one they are going to pass in the House can be stopped," added Antos, who opposes the legislation as a form of government price control. "What couldn't be stopped is something that combines some kind of [Medicare] negotiation with a lot of other must-pass provisions, which is how the hard work of legislating normally gets done."

Some Democrats and Republicans are already considering compromises, such as government negotiation for single-source drugs that have no competition or seeking discounts for medications developed through taxpayer-funded research. Baucus wants to launch a program to provide consumer-oriented information about the effectiveness of competing drugs, hoping to steer patients and doctors to the most cost-effective choices.

"The key for Congress is to zero in so that negotiations are in critical areas where bargaining power can really be of benefit to seniors and to taxpayers," said Sen. Ron Wyden (D-Ore.), co-author of a bill that would focus negotiations on single-source medications and those developed through government-funded research, such as the breast cancer drug Taxol, or Gardasil, the new vaccine against cervical cancer.

"It doesn't have to be an all-or-nothing proposition," said Sen. Olympia J. Snowe (R-Maine), Wyden's co-author.

Unlike the House bill, an approach like the one Wyden and Snowe are taking could save money, according to the budget office.

ricardo.alonso-zaldivar@

latimes.com

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