Democrats Demand Medicare Coverage, Price Controls for Rx Drugs

By Jeff Johnson | July 7, 2008 | 8:28 PM EDT

Capitol Hill ( - House and Senate Democrats used the release of a study on the price of senior citizens' medications to demand Monday that any prescription drug benefit passed by Congress be provided as part of the federal Medicare program and include price controls.

"We are not talking about something optional. We are talking about medicine," said Sen. Debbie Stabenow (D-Mich.), coordinator of the Senate Prescription Drug Task Force. "If it's not affordable, it's not available."

Stabenow pointed to a study released by Families USA, an advocacy group that criticizes pharmaceutical company profits and promotes federal government intervention in the healthcare marketplace.

The study, entitled "Bitter Pill: The Rising Prices of Prescription Drugs for Older Americans," claims the prices of the 50 medicines most frequently used by the elderly rose at nearly three times the rate of inflation during calendar year 2001.

"Seniors live on fixed incomes that, at best, rise on inflation," said Ron Pollack, executive director of Families USA. "Drug prices, however, are skyrocketing much faster than inflation and these prices are making life-saving medicines increasingly unaffordable for millions of seniors."

The group's study claims that of the 50 most often prescribed drugs for seniors, 36 had a cost increase of approximately 1.5 times the rate of inflation and 18 of the medications increased in cost at a rate three or more times the rate of inflation. (Energy prices were excluded from the rate of inflation in the calculations because of their volatility.)

Pollack said drug companies spend that money, not for research and development of new medicines as they claim, but for marketing.

"The expenditures for research and development are dwarfed by expenditures for marketing, advertising, and administration," he said. "The money that's spent on research and development is dwarfed by how much money the companies are making as profits."

Not so, says Jeff Trewhitt of the Pharmaceutical Research and Manufacturers of America (PhRMA).

"All aspects of marketing and advertising in 2000 ... cost about $15.7 billion," Trewhitt said. "The amount spent on research and development alone that year was about $26.5 billion.

"So we spent about $10.5 billion more on research and development in 2000 than we did on all aspects of marketing and advertising," he said.

Trewhitt added that those costs include "everything from sales representatives meeting with doctors, to free samples being given to doctors ... direct-to-consumer advertising, [and] continuing medical education seminars," all efforts devoted to sales and marketing.

But Rep. Frank Pallone (D-N.J.), chairman of the House Democrat's Health Task Force, claims House Republicans have drafted a prescription drug benefit plan designed to benefit drug makers, not seniors, because they are "in the pockets of the pharmaceutical drug industry." He criticizes the Republican plan because it "does nothing with regard to price."

"I don't think we're ever going to see a prescription drug program that passes both houses and that gets signed into law unless it's a Medicare benefit, unless it addresses, in some way, the issue of price," Pallone said.

Stabenow also insists that the plan be offered as part of Medicare.

"The second goal that we have in the Senate is to lower prices for everyone," she added.

While Stabenow says she wants to lower prices by "creating more opportunities for competition and giving states flexibility," Trewhitt says his group fears some in Congress may have another idea.

"If, in fact, it is true that they want to put in place government-mandated price controls, it's going to mean a continuation of the status quo under Medicare with limited choices for the patients and price controls for the healthcare provider, which we already have under Medicare," he argued.

Many health care professionals have simply stopped providing services to Medicare patients, Trewhitt explained, because they cannot even cover their costs with the limited reimbursement Medicare offers.

He says before Americans get embroiled in a debate over price controls, they need to seriously question the Families USA study.

"The inflation rate has moderated a great deal," Trewhitt, citing statistics from IMS Health, showing a drug inflation rate of 3.9 percent in 2000, compared to an average price increase of 10 percent per year in the 1980s.

He claims HMOs "are getting increasingly generous price discounts, in the range of 20 to 40 percent, and they've driven down the inflation rate. So there is cost containment in the marketplace."

In fact, IMS Health found that of the 16.9 percent increase in 2001 prescription sales, 8.7 percent resulted from a higher volume and mix of prescriptions dispensed, while only 4.9 percent came from price increases, and 3.3 percent from the introduction of new medicines.

Trewhitt says the pharmaceutical industry supports prescription drug coverage for seniors under Medicare, but only if the system is seriously reformed.

"The best way to reform it is to have a transition away from predominant government control over the provision of health care under Medicare, to much greater reliance on marketplace competition and choice," he said.

Trewhitt points to the Federal Employee Health Benefit Program, which serves nine million federal employees, including members of Congress. Under that plan, federal employees choose from a variety of health coverage plans and payment programs to design the health coverage that best suits their individual needs.

"Our thought is, if that private sector approach to health care and drug coverage is good enough for members of Congress, then it ought to be good enough for elderly patients under a reformed Medicare program," he said.

Pallone says he and other Republicans will attempt to amend the House Republican plan when it comes to the floor, after the House Rules Committee finalizes plans for consideration of the bill, possibly as early as Wednesday of this week.

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