Prescription Drug and Medicare Improvement Act of 2003

PRESCRIPTION DRUG AND MEDICARE IMPROVEMENT ACT OF 2003

AMENDMENTS NOS. 975 AND 976

    Mr. GRASSLEY. Mr. President, the Senator from West Virginia raises an important point in his amendment. In the underlying bill from the Senate Finance Committee, beneficiaries who are enrolled in both Medicaid and Medicare—and this is the group we call dual eligibles—would continue to receive drug coverage under the Medicaid Program.

    Some of my colleagues have argued that by having dual eligibles remain in the Medicaid Program, Congress is thus treating these vulnerable seniors as second-class citizens and subjecting them to lower quality benefits. I strongly disagree with that point of view.

    I have worked closely with my Finance Committee colleagues on the development of this package, and we had an opportunity during this debate to reflect on the concerns that were raised by the Senator from West Virginia and also by others during the debate last summer of the so-called tripartisan bill, meaning the bill that was before the Senate in 2002.

    All of us authoring the underlying bill took these concerns to heart. We made the decision that it was most beneficial to these seniors to continue to build off the existing Medicare and Medicaid low-income assistance programs that they know and understand.

    That said, I remind my colleagues that the intent of this legislation is to expand prescription drug coverage to our senior citizens who do not have access to the prescription drugs and who are faced with paying a large share of their income for their drug coverage.

    About two-thirds of the citizens of the United States today have some coverage for prescription drugs. Retirees from major corporations have prescription drugs paid for in their retirement plans. We have people who are in Medicare plus their Medigap policies that also have some coverage, and then we have lower income people who are dual eligibles who are covered under both Medicare and Medicaid. This makes up 60-some percent of the seniors of America who have some drug coverage.

    We want to fill in the gap for those who do not have drug coverage or might have inadequate drug coverage. Quite frankly, for people who already have drug coverage, particularly those who have lower incomes, who are covered by State Medicaid Programs, we felt it was best not to upset their coverage, not to give that group any angst about how they might be covered in the future while the debate on this legislation was going on and how it might be put in motion, so we decided just to leave those as is.

    The Senator from West Virginia believes it would be better if we would cover them under our plans that are meant for people who have no coverage whatsoever.

    We are in a situation where coverage experienced by those who are dual eligible is the issue before us. These seniors currently have drug benefits through the Medicaid Program. In fact, many advocates and beneficiaries describe these benefits as very generous. Medicaid beneficiaries have come to know their drug benefits, along with its nominal levels of cost sharing. We should not require seniors to leave coverage with which they are comfortable.

    Further, I remind my colleagues that we are discussing populations eligible for both Medicare and Medicaid. Medicaid was created to assist individuals who do not have the means to pay for their share of health care costs. That is a responsibility that is shared by the Federal Government and by State governments. Medicaid pays for many benefits that Medicare does not.

    Is the purpose of the prescription drug bill before us to grant fiscal relief to the States, which would be what the amendment of the Senator from West Virginia would do? I do not believe that is what we should be doing.

    We all know the purpose of the prescription drug bill is to provide prescription drugs to seniors who do not currently have access to drugs or otherwise would be paying extremely high drug costs and, hence, the provisions of our legislation for catastrophic coverage.

    However, recognizing the costs associated with covering the cost of providing prescription drug coverage to dual-eligible populations, the bill before us does provide nearly $18 billion in new Federal dollars to compensate States for some of these additional costs, mostly because it is a fast growing part of the Medicaid budgets of most States.

    The funding we provide in this bill will be channeled to States by federalizing the cost of Part B premiums for dual eligibles in a subclass called qualified Medicare beneficiaries. This is because the prescription drug bill before us provides minimum standards that ensure the benefit provided through Medicaid is at the same high quality that is being provided through Part D of our Medicare Program.

    As is usually the case, the argument would be made yet that we should still do more and perhaps serve this population differently than we do. But, in fact, we developed the underlying bill to best utilize the availability of $400 billion, an absolute figure that we must be in; otherwise, we are subject to a point of order and, in a sense, instead of 51 votes it takes to pass this body, one could argue it would take 60 votes. If we exceeded the $400 billion, we would have to have 60 votes.

    Our approach helps to deliver care that is consistent with current law but, most important, familiar to vulnerable beneficiaries.

    A prime rationale behind our legislation is it really does not make seniors do anything they do not want to do. We set up a new Medicare Program that is closer to what baby boomers have in the workplace today. They can choose that or they can choose to stay in the 1965 model Medicare.

    People who want to stay in the 1965 model Medicare can choose voluntarily to join a prescription drug program. They do not have to. We wanted to help those who are in Medicaid to stay in Medicaid if they wanted to. They do not have to go into these new programs.

    Finally, I remind my colleagues that the adoption of this amendment will not expand coverage at all. It will simply shift the cost to the Federal Government and, in time, to other Medicare beneficiaries.

    So after careful thought, because at one time we did debate internally the substance of the amendment by the Senator from West Virginia to federalize all dual eligibles, we thought maybe we should include that in the program, but we figured it raised a lot of questions from people who are already adequately covered and who seemed to be very satisfied.

    Also, there are some additional costs that would subtract from what we could do for those who have no coverage for prescription drugs whatsoever, and in order to get the most bang for the dollar within the $400 billion that is in the budget for this program, we decided to leave the dual-eligible program alone. That is why I suggest we defeat Senator Rockefeller's amendment when it comes to a vote.

    I yield the floor.

    Mr. ROCKEFELLER. Will the Senator yield?

    Mr. GRASSLEY. Mr. President, the Senator will try to answer a question, yes.

    Mr. ROCKEFELLER. I thank the Senator, and this is in the form of a question. I fully understand the constraints of the $400 billion, as the chairman of the Finance Committee indicates, and I think we all understood that to do a full prescription drug benefit, it was going to take substantially more than that, particularly if one included other matters. But would the Senator not agree that there are really two ways of looking at dual eligibles and their dependence now upon Medicaid which is paid by the States?

    Up until the fairly recent past, States were doing very well and Medicaid benefits, to some degree, were expanding. I reflected on that as to my State. The other way of looking at it is to look at what is happening to Medicaid now in the States because of the balanced constitutional amendment requirements and because of the fiscal condition of the States, which is getting worse every single day, and the fact that Medicaid is the fastest rising cost in any State government budget, and the fact that the States have complete control over what happens to the Medicaid benefit.

    So would the Senator from Iowa not agree that if a State using Medicaid, which is a combination of State and Federal funds, nevertheless decides to cut—since that is optional within the State, under the Government's control, that the Governor can cut that and indeed has done so, as we have been reading and hearing about, and indeed can limit coverage, cap coverage and therefore cut back tremendously on the so-called drug coverage that the chairman of the Finance Committee was extolling?

    I agree that if we were in a flush time and the States were able to afford a good drug benefit under Medicaid and use it for that particular dual-use population, the Senator is right, but I think we are looking now at a period of a number of years where we are not going to be in that situation. I think that puts the dual eligibles, 74 percent or less of poverty, at terrible risk, and that is not something I associate with my understanding of the values of the Senator from Iowa, whom I so much respect.

    Mr. GRASSLEY. Mr. President, I cannot disagree with the Senator from West Virginia, but I think the answer is that there are 50 different answers to his question from the standpoint of there being 50 different States with 50 different budget situations. So there is not just one answer to his question.

    Another way to say it is I would have to understand the situation in 50 different States and then, in a sense, give 50 different answers. But there is a recognition on the part of the Congress of what the Senator from West Virginia says and a response by the Federal Government to that, albeit a temporary response, when over a 2-year period of time we decided to put $20 billion of State aid to the States, and we did that through the tax bill recently signed by the President of the United States, of which $10 billion was earmarked for Medicaid solely because the Congress understood the problems the Senator from West Virginia has adequately described, and then another $10 billion of other State aid that a State is free to use for Medicaid or anything else.

    I assume some States that have very bad Medicaid fiscal problems might take some more of that additional $10 billion to use for Medicaid.

    In further answer to my colleague's question, what we face is the issue of about $16 billion a year just for drug costs. Multiply that times the 10 years we have to look ahead. That is about $160 billion, I believe, of the $400 billion which would go then for groups who are already covered, detracting then from the 30-some percent of people who have no prescription drug coverage.

    We would like to fill in the gap of those who have no coverage as opposed to some who have very good coverage. I know it varies from State to State how Medicaid might cover certain groups of seniors with prescription drugs, but I think the Senator would say they have had a better program for sure than most people—except maybe those who are on a corporate retirement plan, which is only about 30 percent of our people—than anybody else, particularly those who have no coverage whatsoever.

    In further answer to the question of the Senator from West Virginia, it is a case of priorities. We have suggested those who already have some coverage, and very good coverage, we would basically leave untouched and then would try to use our resources for those who have no coverage whatsoever.

    The PRESIDING OFFICER. The Senator from West Virginia.

    Mr. ROCKEFELLER. I apologize for not speaking through the Presiding Officer before, but will the Senator from Iowa yield for only one additional question?

    Mr. GRASSLEY. I yield for an additional question.

    The PRESIDING OFFICER. The Senator is recognized.

    Mr. ROCKEFELLER. The Senator has responded simply by saying he would have to answer it in 50 different ways because there are 50 different States. To that I say yes, and all of them are either in the process of or will be in the process of cutting Medicaid and, therefore, the dual beneficiaries.

    I ask the Senator from Iowa, is there not a further consideration, and that is when we are dealing with this maximum poor number of people under Medicare, or Medicaid in the case of the dual eligibles, we are also dealing with something which has not been discussed on this floor or indeed was not discussed in the Finance Committee at any length at all, and that is a really frightening problem of assets that, for example, one can apply, one can be under this program up to 130 percent of poverty. Then there is another one that says you can be under this Part B plan up to 160 percent of poverty, but if your assets reach over $4,000, assets which you maintain, you are then kicked from the lower to the upper bracket without any discussion. There is enormous penalty, for example, for owning a car, for owning anything. You would not be living in rural Calhoun in West Virginia without a car. Your home is exempted but nothing else is.

    At one point I was thinking of offering an amendment—and I may still do so—exempting burial plots from the asset test that would be applied to poor people.

    I ask the Senator from Iowa if he would say a word on this whole question, adding to the dual eligibles and deciding if—as he said, we have to pick our priorities—we are going to leave it to the States, even though I argue that States will cut that. Is it not also bringing up this whole subject of the assets of the poor families and the effect on them if they become ineligible for the bracket in which they belong and, therefore, cannot afford prescription drugs.

    Mr. GRASSLEY. Mr. President, I will answer the Senator's question by giving some detail about the issue of the asset test. It is a legitimate point of discussion as we deal with this legislation. Rather than just speaking specifically to his question, I answer it more generally with how we try to respond to the issues he brought up.

    The asset test in the underlying bill is the same asset test currently used for determining eligibilities for the qualified Medicare beneficiaries, specified low-income Medicare beneficiaries, and qualified individuals. Those are three separate categories of low-income people that I just described.

    S. 1 provides a generous low-income subsidy for those who are below 160 percent of the Federal poverty level. Currently, in order for some individuals under 160 percent of poverty to receive limited Medicaid protections, there must be both an income test and an asset test. In the underlying bill, we simply follow the same rules in order for low-income beneficiaries to see assistance with their prescription drug coverage. By including the Medicaid asset test for Medicare prescription drug subsidies, we are providing beneficiaries with seamless health coverage. We are not confusing beneficiaries, and we are not adding additional administrative burdens to the States.

    I will give some background on the current asset test included in the Medicaid Program. The group called qualified Medicare beneficiaries are individuals below 100 percent of poverty. In 2006, the annual income limit is $9,670 for individuals and $13,051 for couples. This qualified Medicare beneficiary group is allowed to have assets below $4,000 for individuals and $6,000 for couples. That is exactly what the Senator from West Virginia asked me about and implied some limitations because of that.

    Yes, there are limitations because of that, but they are legitimate limitations within the priorities of our $400 billion budget limit.

    Then we have the category of specified low-income Medicare beneficiaries, and then the qualified, and those are people with incomes between 100 percent of poverty and 135 percent of poverty. In 2006, the annual income limits of this group, $13,054 for individuals, $17,618 for couples, these two groups are allowed to have assets below $4,000 for individuals and $6,000 for couples. Beneficiaries between 136 percent of poverty and 159 percent of poverty will have annual income limits of $15,472 for individuals and $20,881 for couples in 2006. Beneficiaries between 136 and 159 percent of poverty would not be subject to those asset rules.

    Current law establishes resource limits for low-income elderly or disabled individuals. Let me emphasize, this is not a newly added restriction on certain low-income Medicare beneficiaries. However, current law also provides States with the flexibility to choose to disregard all or part of these resources.

    The issue of changing this asset test is one that would very drastically increase the number of eligible beneficiaries. Understand that the question the Senator from West Virginia raised about changing the asset test would very dramatically increase the number of people eligible.

    Now, again, we get back to the priorities of fitting in the $400 billion in the budget. Give more help to this group of people that already have some help from our legislation, then there is less for other people, particularly less for people who have no help whatever.

    A study was prepared by the Kaiser Family Foundation estimating this group could be as many as 11 million individuals if the asset test were eliminated and obviously to a lesser extent if it were increased by some amount.

    S. 1 currently includes a provision requiring the General Accounting Office to conduct a study and make recommendations to Congress by the year 2007 regarding the extent to which drug utilization and access to covered drugs differs between qualifying dual eligibles who receive subsidies and individuals who do not qualify solely because of the application of the asset test. This report ensures that there will be opportunities in the future to debate the question raised by the Senator from West Virginia.

    There is a limited number of dollars available for the Medicare drug benefit. In the writing of this bill, we made a conscious decision to devote excess dollars to filling the gap in coverage—which means what we commonly refer to around here as the donut hole—rather than eliminating or changing to some extent the asset test the Senator from West Virginia is asking me about.

    This bill already provides generous coverage to low-income seniors. This amendment will not only cost more money, it will add more confusion to both States and Medicare beneficiaries.

    I hope I have sufficiently explained the rationale behind our bill. I may not have directly answered the question of the Senator from West Virginia, but I thought I should take time to explain the rationale behind our bill.

    I yield the floor and suggest the absence of a quorum.

AMENDMENT NO. 974

    Mr. GRASSLEY. This is the Drug Competition Act of 2003. I filed it as an amendment to S. 1. I do it in a bipartisan way with Senator Leahy and many others.

    Our amendment will help Federal regulators ensure that antitrust laws are not being violated and that there is full and unfettered access to competition for prescription drugs under the law.

    What I want to do is make sure American consumers—and in the case of prescription drugs for Medicare, senior citizens—are able to get the lifesaving drugs they need and to do it in a competitive manner with resulting lower prices.

    Our patent laws provide drug companies with incentives to invest in the research and development of new drugs, but the law also provides that generic drug companies have the ability to get their own drugs on the market so there can be price competition and lower prices for prescription drugs. We have a legal system in place that provides such a balance; that is, the Hatch-Waxman law. Ultimately, we want consumers and seniors to have more choices and to get drugs at lower prices.

    So I was concerned when I heard reports that the Federal Trade Commission had brought enforcement actions against brand-name and generic drug manufacturers that had entered into anticompetitive agreements, resulting in the delay of the introduction of lower priced drugs. Our amendment targets this problem.

    I would like to explain in a little more detail the problem. Under the Hatch-Waxman Act, manufacturers of generic drugs are encouraged to challenge weak or invalid patents on brand-name drugs so that consumers can benefit from lower generic drug prices. Current law gives temporary protection from competition to the first generic drug manufacturer that gets exclusive permission to sell a generic drug before the patent on the brand-name drug expires. This gives the generic firm, then, a 180-day head start on all other generic companies.

    However, the FTC discovered that some companies were exploiting this law by entering into secret deals, which allowed the generic drugmakers to claim a 180-day grace period, and to block, then, other generic drugs from entering the market, while at the same time getting paid by the brand-name manufacturer for withholding sales of generic versions of the drug. Quite a sweet deal.

    This meant, then, under this sweet deal, that consumers continued to pay high prices for drugs rather than benefiting from more competition and consequently lower prices.

    The Federal Trade Commission brought antitrust law enforcement actions against the brand-name and generic drug companies that had engaged in this anticompetitive behavior. In addition, the Federal Trade Commission conducted a comprehensive review of agreements that impacted the 180-day exclusivity period. The FTC found that there are competition problems with some of these agreements that potentially delayed generic drugs entering the market—just the opposite of what the FTC wanted to happen. So the FTC made this recommendation:

    Given this history, we believe that notification of such agreements to the Federal Trade Commission and the U.S. Department of Justice is warranted. We support the Drug Competition Act of 2001, introduced by Senator Leahy, as reported by the Committee on the Judiciary.

    As the Federal Trade Commission has indicated in its report, the Grassley-Leahy amendment, the Drug Competition Act of 2003, is a simple solution to the 180-day exclusivity period and the problems the FTC has identified. Our amendment would require drug companies that enter into agreements relating to the 180-day period to file documents, those very documents with the FTC and the Department of Justice. Our amendment would impose sanctions on companies that do not provide timely notification. This process would facilitate agency review of the agreements. It would do it to determine whether they have anticompetitive effects. Making sure the agreement between the generic and brand-name drug companies is in compliance with the law is good for the American consumer because it guarantees free, full, and fair competition.

    Both Senator Leahy and I worked with the Federal Trade Commission and the Department of Justice, the generic and brand-name drug companies, and other interested groups in crafting the language contained in this amendment, and I think we have a very good work product that I am offering the Senate. We tried to address everyone's concerns and we tried to limit the scope of the act. We also made every attempt to ensure that the notification requirement did not unnecessarily burden industry.

    I am not aware of any opposition to this language. In fact, the Drug Competition Act, passed out of the Judiciary Committee and the full Senate last year by unanimous consent, and the Federal Trade Commission report came out in full support of the Grassley-Leahy amendment as a way to help preserve healthy and open competition in the drug markets.

    The Grassley-Leahy amendment will ensure that consumers ultimately are not hurt by secret, anticompetitive contracts, so the consumer can get competition and lower drug prices almost immediately. I urge my colleagues to support the Grassley-Leahy amendment.

    I yield the floor.