Democrats Gearing Up for Changes in Medicare Drug Plans
DRUGS
The New Britain Herald
Tia Albright
Boston University Washington News Service
December 12, 2006
WASHINGTON, Dec. 12 – Democrats hit the midterm election campaign trail this year promising to repeal a ban on the government’s negotiating with manufacturers for lower prescription drug prices. But as the January shift of power nears, the new majority must prepare to face some hurdles.
The Medicare Part D prescription drug program, which Congress created in 2003, has been criticized for not lowering prices enough but praised for being less expensive and more effective than expected.
Congressman-elect Christopher Murphy (D-5th), who pushed hard for health care reform as a state senator and in his campaign against Rep. Nancy Johnson, said that reducing constraints on the government is his primary concern.
“There is no way to explain the prohibition of bulk purchasing, except that it was asked for by the drug companies,” Murphy said. “To me and a lot of people in Connecticut, it makes sense to immediately give the government the power to negotiate prices in order to reduce the cost of the program.”
Johnson, an author of the Part D legislation, has praised the current Medicare program.
Part D, which added drug coverage to Medicare, includes dozens of stand-alone drug insurance plans. Most plans pay 75 percent of prescription costs up to $2,400 each year and 95 percent when beneficiaries’ costs exceed $3,850. But between those two amounts—the so-called coverage gap or “doughnut hole”—most plans cover none of the costs. There are only a few plans, with higher premiums, that offer coverage of some or all drug costs during the gap.
Connecticut’s prescription drug plans offer 51 coverage options, with monthly premiums ranging from $13.40 to $87.40. Fifteen of the plans seek to alleviate the problems associated with the doughnut hole by offering coverage during the gap. But only two of these will cover both generic and preferred brand-name drugs; the 13 others will cover generic drugs only.
Murphy said that allowing the government to directly negotiate prescription drug prices would help lower the cost.
Despite the debate over the government’s power to negotiate the costs and the extent of coverage during the gap, some experts and pharmaceutical representatives argue that the program has surpassed expectations, saved money and has a high satisfaction rate among beneficiaries.
Marilyn Moon, the director of the health program at the American Institutes for Research, a nonprofit, nonpartisan organization, said that even if the Democrats lift the negotiating ban, they would need the cooperation of the government’s prominent health care officials.
“I think the government certainly could negotiate for lower prices, but it’s difficult to take that one restriction, repeal it and assume that everything will work fine,” said Moon, who is a former trustee of the Social Security and Medicare trust funds.
The Democrats would need the cooperation of Secretary of Health and Human Services Michael Leavitt, whose department is responsible for decisions on health care, Moon said.
“He certainly said that he wouldn’t do it and that he doesn’t want to do it, so that is a major complication,” Moon said.
Murphy said he hopes Leavitt will decide to cooperate, but if not, it would be necessary to make direct negotiations mandatory.
A September survey by J.D. Power and Associates found that nearly 80 percent of the 3,400 beneficiaries surveyed were satisfied with the current program.
Urban Institute president Robert D. Reischauer, a former director of the Congressional Budget Office, said the program has performed surprisingly well.
“Our worst fears have not come to pass,” he said. “There are problems with the drug benefit, but they’re embedded in the structure imposed by legislation.”
The Centers for Medicare and Medicaid Services could get prescription drugs cheaper than they are being sold for, but if Medicare is going to set prices and say they will not pay anything higher, that is not negotiation but imposition, Reischauer said.
The program is saving seniors hundreds of dollars a year while helping them live healthier lives, said Ken Johnson, president of the Pharmaceutical Research and Manufacturers of America, which represents drug companies.
“The negotiations are occurring – as they should be – between prescription drug plans, several of which already purchase medicines on behalf of tens of millions of Americans, and pharmaceutical companies,” he said.
The program was expected to cost the government $633 billion over 10 years, but that estimate has been lowered $516 billion, said Jeff Nelligan, director of media affairs for the Centers for Medicare and Medicaid Services.
The Medicare Part D drugs benefit has enrolled 22.5 million seniors since it took effect in January. Experts had estimated that the average monthly premium for 2006 would be $37 per month and close to $40 for 2007. However, the average 2006 premium was $24 and will remain the same in 2007, Nelligan said.
“Competition among the insurance plans and the drug manufacturers has resulted in the low prices that will continue into 2007,” Nelligan said.
A poll conducted in early November shows that a majority of Americans favor allowing the government to negotiate prescription drug prices.
In the survey by the Henry J. Kaiser Family Foundation, a non-profit foundation focused on health care issues, 85 percent of the 1,867 adults polled, including majorities of Republicans, Democrats and independents, said they favored government negotiations.
John C. Rother, policy director for AARP, a lobby for senior citizens, said he thinks that there is more than one way for the government to help lower drug prices.
“The current program has been remarkably successful, given all of the obstacles faced, but it hasn’t done what many of us hoped it would do, in a sense that it hasn’t put enough pressure on the manufacturers to lower prices,” he said.
Rother suggested that the government can do a number of other things to pressure the drug companies, including legalizing importation of drugs from Canada and other countries, increasing research on which drugs work best and pricing them accordingly, and restricting practices that hike prices – such as direct-to-consumer advertising.
“Lifting the ban is certainly the first step to doing a number of things that people think would improve the prescription drug plan,” Moon said. “So, I think it’s not a bad thing to do, but Congress would have to make other changes to ensure that it happens and it’s effective.”
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