After an at times contentious debate, the House on January 12, 2007, approved the Medicare Prescription Drug Price Negotiation Act of 2007 (H.R. 4), legislation to require the HHS Secretary to negotiate prescription drug prices starting in 2008. The Medicare Part D program currently prohibits such negotiations. The mostly partisan vote was 255 to 170.
Earlier in the week, CMS and the Congressional Budget Office (CBO) released analyses of the legislation that stated it would have a "negligible effect"; on federal spending since the Secretary would be unable to negotiate prices across the broad range of covered Part D drugs that are more favorable than those obtained by PDPs under current law.
"The inability to drive market share via the establishment of a formulary or development of a preferred tier significantly undermines the effectiveness of this negotiation," said Paul Spitalnic, Director of the Parts C and D Actuarial Group in CMS' Office of the Actuary, in a January 11, 2007 statement. Senate Finance Committee ranking member Charles Grassley (R-Iowa), a staunch opponent of the proposal, said at a January 11, 2007 committee hearing that the 2003 Medicare Modernization Act (PubLNo 108-173) doesn’t prohibit Medicare from negotiating prices. "It prohibits the government from interfering in those negotiations," he said. Negotiations that take place between Medicare PDPs and the drug makers are working Grassley said. “Competition among plans has lowered costs for the taxpayers and beneficiaries," he said.
Legislators respond
Speaking in favor of the legislation, Rep. Mike Ross (D-Ark.) said, “We’re trying to correct a wrong” that was made when the prohibition was included in the Medicare Modernization Act of 2003 (MMA) (PubLNo 1090173). House Ways and Means Committee Chairman Charles Rangel (D-N.Y.), who said he would have liked more time to consider the proposal, said negotiation could serve as a tool to lower drug prices. He added that the fact the pharmaceutical companies oppose the legislation so strongly indicates there is something wrong with the current system.
Republicans tried to defeat the bill. "It's a flawed piece of legislation," said Dave Camp (R-Mich). Current price negotiations by the PDPs are more effective than any government negotiations would be, he said. He added that the bill, which was pushed through as part of Democrat's 100-hour agenda, should have gone through the regular legislative process.
"It's flat out wrong to think the government will negotiate a lower price in a competitive marketplace," said Rep. Joe Barton, R-Texas. House Ways and Means ranking member Jim McCrery (R-La.) said that since the bill would restrict the Secretary's ability to change formularies, the Secretary would not be able to do a better job of negotiating than the program is already doing. A Republican motion to defeat the bill failed 196 to 229. The proposal faces a tougher battle in the Senate. "It'll probably die there," said Barton.
H.R. 4 would require the Secretary to negotiate with drug manufacturers the prices that could be charged to prescription drug plans (PDPs) for covered drugs, but would prohibit the Secretary from requiring a particular formulary and would allow PDPs to negotiate prices that are lower than those obtained by the Secretary. The bill would also require the Secretary to report to the Congress every six months on the results of his negotiations with drug manufacturers
CMS, CBO analysis
Both CMS and the Congressional Budget Office (CBO), however, have In a letter sent on January 10, 2007, letter to Energy and Commerce Committee Chairman John Dingell (D-Mich.), the CBO stated, "We assume that the negotiations would be limited solely to a discussion about the prices to be charged to PDPs. In that context, the Secretary's ability to influence the outcome of those negotiations would be limited." The letter added that prices for covered Part D drugs would continue to be determined through negotiations between drug manufacturers and PDPs.
Source: CCH Washington Bureau, January 12, 2007
For more information on this and related topics, consult the CCH® Medicare and Medicaid Guide.
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