Authorizing Government to Negotiate Lower Prices With Drug Companies

AUTHORIZING GOVERNMENT TO NEGOTIATE LOWER PRICES WITH DRUG COMPANIES -- (House of Representatives - November 14, 2006)

Mr. PALLONE. Madam Speaker, last week America went to the polls and sent Washington a message that they wanted a new direction. Unfortunately, when it comes to the Bush administration, it seems as though the voters' call for change has fallen upon deaf ears.

Yesterday, the New York Times reported that the President and the Secretary of Health and Human Services, Mike Leavitt, were ``strenuously opposed to legislation that would authorize the government to negotiate with drug companies to secure lower drug prices for Medicare beneficiaries.''

This is not groundbreaking news. They have said all along that they oppose negotiated prices in the Medicare program. Still, given the outcome of last week's election, it is disappointing that this administration would not even take a moment to reconsider its misguided policies.

Mr. Levitt went on to say, ``I don't believe I can do a better job than an efficient market.'' I agree that the secretary hasn't done such a good job so far, but he shouldn't get too down on himself, he is not entirely to blame. His Republican friends here in Congress have kept him from realizing his potential by legally prohibiting him from negotiating with drug makers.

However, if a Democratic Congress passed a law granting him authority to negotiate prices with drug manufacturers, I am certain we could achieve enormous savings in the Medicare program which could be passed on to America's elderly and disabled in the form of more generous coverage. Indeed, there is a lot of evidence to support this conclusion.

Take, for instance, a study considered earlier this year by the consumer group FamiliesUSA. They compared prices under private prescription drug plans participating in Medicare part D to the prices available through the Department of Veterans Affairs' health system. Their research showed that the government could help lower costs substantially. From November 2005 to April 2006, FamiliesUSA found that virtually all of the part D plans raised their prices for the majority of the top 20 drugs in this study. The median price increase among part D plans for the top 20 drugs prescribed to seniors was 3.7 percent.

Furthermore, for all of the top 20 drugs prescribed to seniors, VA prices in April were lower than the lowest prices charged by part D plans. The median price difference was 46 percent. In other words, Madam Speaker, for half of the 20 drugs, the lowest price charged by any part D plan was at least 46 percent higher than the lowest price secured for the VA. This is what the secretary must be referring to when he talks about the magic of the market.

My Republican friends argue that allowing the secretary to negotiate lower drug prices cannot actually work because the government will act to set prices. This is just more of the same old excuses we have been hearing all along. The truth of the matter is that the President, Secretary Leavitt, and Republicans in Congress are opposed to negotiated prices simply because they want to preserve the profits of the pharmaceutical industry which this program was really written for.

I have to be honest here. The American taxpayer is being ripped off by the Republican prescription drug law. Pharmaceutical companies have reaped record profits since Medicare part D was implemented while the American taxpayer has been left holding the bill.

Before the Republican law went into effect this year, more than 6.5 million low-income Americans received help for their prescription drug bills through Medicaid. Under the Medicaid system, however, States can purchase drugs at the lowest available prices or the best price. While this was good news for the taxpayer, it certainly cut into the profit margins of the pharmaceutical industry. So now those same 6.5 million Americans have been moved into the Republican prescription drug plan. They are no longer receiving the lower prices, and the higher costs, adding up to as much as $2 billion this year alone, will be passed on to the American taxpayer.

This is why American voters rejected the Republican platform last week. Republican policies over the past decade have served special interests like the pharmaceutical industry, and now the American taxpayer is paying the price. Clearly voters are fed up, and they want us in Washington to implement change. Democrats are going to heed their call, Madam Speaker.

We have said from the beginning of our campaign for a new direction that one of the first things we will do when we take back the House is to pass a law that will authorize the government to negotiate lower drug prices. We intend to live up to that promise. The savings from that program can be used to help eliminate the infamous ``doughnut hole'' that millions of seniors have fallen into over the past few months.

While the President and his cronies are threatening to oppose such legislation, I think they would be better served to reconsider. It is time for us to take a long and hard look at the Medicare part D program and see where we can make some improvements. Democrats are not calling for repeal of this law, but we are calling for some changes, changes that the American voters clearly support. I hope that my Republican friends will join us as we work together to improve the Medicare program on behalf of America's seniors.

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