Pelosi's Drug Plan Unlikely to Pass or Work, Critics Say

By Nathan Burchfiel | July 7, 2008 | 8:32pm EDT

(Editor's note: During her "first 100 hours" as speaker of the House of Representatives, Rep. Nancy Pelosi has identified seven key agenda items, one of which is to reduce the price of prescription drugs.)

( - House Speaker Nancy Pelosi (D-Calif.) is promising to work to make prescription drugs more affordable, but some critics on both sides of the aisle are skeptical that her plan will work - if it even passes.

The plan, scheduled to be addressed in the House on Jan. 12, would give the government the authority to negotiate with pharmaceutical companies over the cost of prescription drugs for seniors participating in Medicare.

The Medicare Modernization Act of 2003 contains a "non-interference" provision that prohibits the government from involving itself in drug price controls. The Democratic plan would remove that provision.

In an article posted on the liberal Huffington Post website in November, Pelosi wrote that Democrats "will make health care affordable for all Americans, and we will begin by fixing the Medicare prescription drug program, putting seniors first by negotiating lower drug prices."

But some liberal political experts, like Brookings Institution senior fellow Alice Rivlin, are skeptical that the effort will be successful.

Rivlin, who is also a professor at Georgetown University, said in a discussion Wednesday that allowing government to negotiate drug prices isn't a "high priority."

She said it's "not clear that a government, particularly this government, would get a better deal from the drug companies by direct negotiations than the drug plans can get on their own."

"It might have some negative consequences," Rivlin added, saying drug companies may keep prices up, to give themselves bargaining room in negotiations with government.

The program could also have a negative effect on seniors who need the drugs, according to Greg D'Angelo, a research assistant at the conservative Heritage Foundation.

"Individual plans can decide not to sign a contract with drug companies and make a deal on a price but both the drug companies and seniors still have other options," D'Angelo told Cybercast News Service. "Drug companies can negotiate with other private plans and seniors can switch plans."

"If the government takes it over," D'Angelo said, "the drug is available or not available."

Advocates of government negotiation contend that the government should harness the power of a large buying force to pressure drug companies to lower their prices.

On its website, the Medicare Rights Center says "by using the collective clout of 43 million members, Medicare can obtain drug prices that actually benefit older adults and people with disabilities, rather than the drug industry."

Calling price negotiation "one of the top issues on the agenda," the organization says the idea that private-sector bargainers can achieve lower prices than the government is "spin."

"Part D plans are simply passing increases in drug prices directly on to members while many people with Medicare struggle to afford their medicines," the Medicare Rights Center says. Part D is the federal plan that subsidizes the cost of prescription drugs for Medicare beneficiaries.

But D'Angelo said the private sector is better qualified to bargain with drug companies than the government because the private sector represents more Americans than are covered by Medicare.

D'Angelo referred to a report in which he wrote that pharmacy benefit managers (PBMs) - the private sector negotiators - "cover approximately 217 million individuals, or 76 percent of the population, with the largest, Caremark, covering 80 million," or nearly twice the number Medicare represents.

"By allowing Medicare beneficiaries to buy private plans that contract with PBMs, Congress enables Medicare beneficiaries to take advantage of the large market clout of the private sector," D'Angelo wrote.

Ain't Broke? Don't Fix It

The Department of Health and Human Services believes the Medicare Part D plan has been successful in getting seniors cheaper drugs without government negotiation.

"While the average premium expected a year ago was $37 [per month], enrollees are actually paying premiums that average less than $24," the department's Centers for Medicare and Medicaid Services said in a mid-2006 statement.

It estimated that "90 percent of all Medicare beneficiaries have good drug coverage" and that "thanks to Part D, seniors are saving an average of $1,100 a year."

In a 2004 letter to then Senate Majority Leader Bill Frist (R-Tenn.), the Congressional Budget Office said that striking the non-intervention provision "would have a negligible effect on federal spending."

This was the case, it said, because it estimated that "substantial savings will be obtained by the private plans and that the Secretary would not be able to negotiate prices that further reduce federal spending to a significant degree."

"Eight in 10 beneficiaries are satisfied," D'Angelo said. "Why would you break something that's working?"

During the Brookings discussion, Rivlin said that while the reform would probably pass the House, it would likely ... get vetoed anyway."

In November, Health and Human Services Secretary Michael Leavitt said he favors allowing the private sector to negotiate drug prices.

"Government negotiation of drug prices does not work unless you have a program completely run by the government," Leavitt told the New York Times. "Democrats say they want the government to negotiate prices. What they really want is government-run health care."

See Also:
Pelosi's Pledge #1: Give Americans a Raise (Jan. 3, 2007)
Pelosi's Pledge #2: Tuition Promise Could Hurt More Than Help (Jan. 4, 2007)
Pelosi's Pledge #4: Pelosi Holds Out 'Hope' for Cures for Diseases (Jan. 5, 2007)
Pelosi's Pledge #5: Dems Vow to Restore Integrity, Fiscal Responsibility (Jan. 5, 2007)

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