Families USA Medicare Report

FAMILIES USA MEDICARE REPORT

Mr. DURBIN. Mr. President, today a report was released showing the median difference between the lowest Medicare discount card price and the best available price for the Veterans' Administration. The difference was 58 percent.

Most people realize we are about to start this Medicare prescription drug plan. This plan was created to give seniors a discount on prescription drugs, which is something we need. Prescription drugs keep seniors healthy, and the healthier they are the better their lives and the less costs to taxpayers.

But many of us objected to the original Medicare prescription drug plan because it was drawn up, frankly, by the pharmaceutical companies. They were unwilling to give up any of their profits to a Medicare plan, and that is how the law was written. As a result of that, many of us voted no, saying there is a model we should follow. Currently, the Veterans' Administration provides prescription drugs to hundreds of thousands of veterans across America. To provide the drugs, the Veterans' Administration bargains with the pharmaceutical companies for the lowest possible price. We said, Why wouldn't the Medicare system, which is much larger--embracing, I think, some 40 million Americans--why wouldn't the Medicare system be in a strong bargaining position to get the same discounted drug prices and therefore help the seniors to lower costs and reduce the burden on taxpayers that have to subsidize this program? It makes sense for the VA, why wouldn't it make sense for Medicare? The pharmaceutical companies ended up winning that debate. They ended up creating a system under Medicare which does not allow the Medicare system to bargain for lower drug prices.

A group called Families USA took a look at the Medicare drug discount cards being used by seniors today and compared the best prices--not the worst, but the best prices being paid by seniors with those discount cards with the amount being paid by the Veterans Administration for identical drugs. Now we took a look at the most prescribed drugs for seniors, Families USA did, and here is what they found:

For Norvasc, the lowest price per year for treatment under Medicare-approved discount, $467; VA pricing, $301; percentage difference, 54 percent.

Protonix, $827 to Medicare; $253 is what the VA pays; a difference of 226 percent. And Zocor, $793 under Medicare prescription drug cards; $167 a year at the VA. That means we will pay, under the Medicare prescription drug plan, the President has signed and is about to go into effect, almost four times as much for the same drugs that are being dispensed at the Veterans Administration.

That tells a story. It tells us if we use the same bargaining power as the VA, we could save seniors and taxpayers dollars.

When the Medicare prescription drug benefit was designed, it was for the pharmaceutical companies and the HMOs, not for seniors. This report from Families USA makes that point.

Medicare has 25 times the number of people covered by the program as the Veterans' Administration. Imagine, for a moment, the bargaining power of Medicare compared to VA. Unfortunately, instead of simply offering a drug benefit through Medicare and negotiating these bulk discount prices, this Congress and the President handed the drug benefit over to these private pharmaceutical companies.

The bill we passed in 2003 is almost impossible to describe. I can't understand how most seniors will get through this bureaucratic mess that we created with this bill. CMS announced last week that there will be 34 active pharmaceutical regions in the United States. Each one of these regions will have 11 to 20 organizations offering prescription drugs. Illinois, my State, will have 16. So with an average of 15 plans in each region, there will be 510 different organizations across the Nation negotiating with pharmaceutical companies.

It is easy to see we have reduced the bargaining power of these plans in each one of these regions and therefore can expect to pay even more for the basic drugs that the seniors need. Instead of the Secretary of Health and Human Services negotiating on behalf of one pool of 41 million seniors for lower drug prices, Medicare's purchasing power has been divided into 510 small fractions. Bulk purchasing by the Department of Health and Human Services would surely save Medicare significantly more money than handing the negotiation over to these private sector negotiators.

There is a lot of talk in Congress these days about reimportation of drugs from other countries as a way to lower prices. Look to the North. Canada has much lower drug prices than the United States for exactly the same drugs, made by the same companies, that are sold in the United States. However, with just 2 percent of the worldwide pharmaceutical market, Canada does not possess the market power necessary to influence prices through negotiation. They do it through regulation.

The United States, on the other hand, has 53 percent of the worldwide prescription drug market. Half of it is made up of Medicare beneficiaries. Imagine the savings we could achieve simply by giving the Medicare program the authority to negotiate on behalf of its beneficiaries. Unfortunately, in addition to dividing up the purchasing pool, the Medicare prescription drug bill Congress passed specifically forbids the Secretary of Health and Human Services to negotiate with drug companies for lower prices.

The obvious question is, What good would that do if you gave the Secretary the power to negotiate? You remember the anthrax crisis--we all do; and the fear of anthrax contamination led many to prescribe Cipro as a drug to protect those who might have been exposed. This was in October 2001. After anthrax was found on Capitol Hill, this drug Cipro made the news. The average retail price for Cipro in 2001 was $4.67 for each tablet. That is when the anthrax crisis started. So Secretary Tommy Thompson, in President Bush's Cabinet, and the President of Bayer Corporation, announced a pricing agreement for the Government purchase of Cipro in which Bayer would provide HHS with the first 100 million of Cipro at 95 cents per tablet. Look at that, when we bargained with Bayer to reduce the price of Cipro, they cut it down to less than a fourth of what was being charged before this negotiation.

The Government reserved the right to purchase an additional 100 million tablets at 85 cents and another 100 million at 75 cents. Through negotiation, Secretary Thompson brought down the price of Cipro by 490 percent.

That same negotiating mechanism can and should be used on behalf of seniors in America to reduce the cost of prescription drugs and the cost to taxpayers. According to the Washington Times, after the deal was struck, Secretary Thompson said at a press conference:

Everybody said I wouldn't be able to reduce the price of Cipro. I'm a tough negotiator.

We should have let Secretary Thompson negotiate these prescription drug prices on behalf of all Medicare beneficiaries, but the bill specifically prohibits him from doing it.

I have introduced a bill called the Medicare Prescription Drug Savings Act, which instructs the Secretary of Health and Human Services to offer a nationwide Medicare-delivered prescription drug benefit in addition to the PDP and PPO plans available in the 10 regions and negotiate repurchasing agreements on behalf of beneficiaries who choose to receive their drugs through the Medicare-administered benefits.

Beneficiaries who choose to enroll in the Medicare-administered benefit can stay enrolled as long as they desire. Giving Medicare the authority to negotiate is the right prescription for real savings on drug prices. Not only will this bill provide seniors with lower cost drugs, it will give them a choice to enroll in a Medicare-delivered plan, cutting down on the confusion that the privately delivered system has already created.

Critics and the pharmaceutical industry would say my bill is price controls and big government. They are wrong. It is good old-fashioned free market economics. If one buys in bulk, the price goes down. It is also a benefit in the system that American seniors believe works. Let's make this process easier and cheaper for seniors and the Federal Government as well by allowing seniors to receive their drugs through Medicare and instructing the Secretary of Health and Human Services to negotiate the best price for seniors and America's taxpayers.

http://thomas.loc.gov/