Medicare Prescription Drug, Improvement, and Modernization Act of 2003-Conference Report

MEDICARE PRESCRIPTION DRUG, IMPROVEMENT, AND MODERNIZATION ACT OF 2003-CONFERENCE REPORT

Mr. SCHUMER. Mr. President, our seniors deserve a comprehensive, meaningful drug benefit under Medicare-it's something that I, like so many of my colleagues, have been fighting for years. The world of health care has changed, and Medicare should be updated to give seniors the services and care they need.

I voted for this bill when it first came to the Senate because I thought it was a good start, and I hoped we could build on it in conference. Unfortunately, now that I see the result, I have to say this is not good enough for New York's seniors-in fact, the bad parts outweigh the good.

The bill contains some good things-it provides a good benefit for seniors who have low incomes or very high drug costs who have no other drug coverage. But for the average middle class senior with moderate drug costs, the benefit is much too small.

In fact, the way this benefit is structured, hundreds of thousands of New Yorkers who currently have coverage may actually end up worse off than they are today-and that doesn't sound like a benefit to me.

When I voted for the bill the first time around, I said that if it got any weaker, got any closer to the House version, I could not, in good conscience, support it. And, unfortunately, that seems to be what has happened here.

Other than the generic drug provisions-which represent a huge win for consumers across the board-it seems in every other case where the choice was between seniors and the big drug companies, the big drug companies have won.

Of all the bad things in this bill, the thing that angers me the most is that Congress has squandered away the single best weapon we have against rising drug costs by forbidding Medicare from using its buying power to negotiate lower drug prices with the drug companies.

At a time of rising budget deficits and escalating costs, it really makes you wonder why the Congress would go out of its way to forbid the Federal Government from using its buying power to get prices like we do through the VA.

If the Federal Government leveraged its full buying power under Medicare, we might not have a doughnut hole in this benefit at all.

The impact of this reckless prohibition is best seen by a Boston University study that shows that the drug companies will earn windfall profits of $139 billion over the next eight years alone from this bill.

This bill not only ensures we will be paying the highest possible price for drugs in this country, but it also guts any chance at reimportation-guaranteeing the drug companies a captive audience.

Is that the Republicans' idea of cost containment?

What this bill does is ensure that the government is gouged by the drug companies while putting a huge bulls-eye on the Medicare program. The prohibition on negotiating and artificial "cost containment" mechanisms in this bill will simply help the opponents of Medicare justify shifting more and more costs onto the backs of seniors.

Under the drug benefit before the Senate today, the average middle class senior could still be saddled with up to 80 percent of their drug costs. And almost 30 percent of beneficiaries would actually pay more for this Medicare drug benefit than they would be getting back in drug coverage. What kind of relief is that?

So this bill represents a paltry benefit-or no benefit at all-for most people who currently have no drug coverage. I had hoped that the bill would-at the very least-help provide a down payment for the one-third of New Yorkers who currently
have no coverage, but I don't think it even does that.

In fact, there is a very good chance this benefit will actually jeopardize access to affordable drugs for New Yorkers who currently have good coverage.

Of the 2.7 million Medicare beneficiaries in New York State, 989,000 have prescription drug coverage from their former employers; 329,000 are enrolled in the state's pharmaceutical program-known as EPIC; and about 537,000 are covered under New York's Medicaid program.

First, let's look at the EPIC program. Right now, EPIC is available to individuals with incomes less than $35,000 and couples with incomes less than $50,000. People in EPIC currently have access to nearly any drug their doctors prescribe, and can go to virtually any pharmacy in the state to get their prescriptions filled.

I fought to get strong language in the Senate version of the Medicare bill that would have provided these New Yorkers with a benefit better than the one they get through EPIC.

The Senate bill would have provided New York State a subsidy equal to about $375 million per year to help it continue the EPIC and even expand it to provide a more generous benefit, to cover the disabled, which the State currently does not do, and to enroll even more people.

The watered-down compromise in the conference report leaves far too many questions unanswered.

Under the bill, if the State wants to use any of the new Federal investment in Medicare, it has to force EPIC seniors to go and enroll in a Medicare private plan and the State legislature will have to go back to the drawing board and restructure the entire EPIC program to coordinate with the Medicare plans.

The end result will be a program so laden with red tape that it is a virtual certainty that seniors fall through the cracks and lose coverage. It will be an administrative nightmare for the State to implement.

I have yet to hear one compelling argument for how the bill before the Senate will enhance the EPIC program. The State can't even tell me what will happen to EPIC and the 329,000 seniors who depend on it if this Medicare bill passes.

Even more shocking is that the bill gives the private Medicare plans a say in how generous any additional state coverage can be. The way I read it, under the new scheme, the Medicare plans will be able to limit which drugs an enrollee has access to and limit what pharmacies they can go to-no such restrictions currently exist for EPIC enrollees. In short, when it comes to EPIC, many seniors may be worse off with the bill than without it.

One of the other major concerns I have about this bill is that it simply doesn't do enough to protect retirees who have good employer-sponsored coverage.

The conferees made some progress toward reducing the employer drop rate by giving employers a tax break worth an additional $18 billion. However, to truly protect retirees from losing coverage would cost about $65 billion.

Even with the change made in conference, an estimated 215,000 New Yorkers will likely lose their retiree coverage if this bill becomes law, and many others may see their options narrowed. That's simply too big a risk for me.

In addition, starting in 2005, all Medicare beneficiaries would be saddled with higher deductibles for doctor visits. Under the bill, Medicare premiums would no longer be universal, but higher for all beneficiaries with incomes of $80,000 and up-a provision which disproportionately affects states like New York.

In addition, over 500,000 Medicare beneficiaries in New York-living in Rochester, Buffalo, Glens Falls and the Capital Region-may be selected for the premium support demonstration program which would provide seniors with a false choice of entering a private plan or being forced to pay more for traditional Medicare.

As I have said, the bill does provide a good benefit for low-income seniors and seniors with very high drug costs who don't have access to any other drug coverage. However, the new assets test in the conference version of the bill means that about 150,000 fewer people will qualify for these low income subsidies than under the Senate bill.

Even the seniors who do get this additional assistance will face confusing and difficult choices each year about which Medicare plan to choose.

They will face a confounding maze trying to figure out which plan will cover the drugs they use and allow them to continue to go to the drug store down the street. If they are even lucky enough to find such a plan, it could be gone the next year, or change its premiums or its list of covered drugs, and seniors would be back to square one.

Of course, despite all of these negatives, there are some very important provisions in this bill which make my decision a very difficult one.

The bill includes significant relief for rural, small community and small city hospitals-about $344 million over 10 years for New York's hospitals, which is crucial to ensuring access to high quality care not only in the very rural areas of the state, but also in and around upstate cities like Syracuse, Rochester, and Buffalo.

There is also modest relief for the nation's teaching hospitals in the bill-but it is not nearly enough. New York institutions would see an additional $76 million over the next four years, but this only restores about 11 percent of the total cuts they face over that time period.

The Nation's teaching hospitals are the backbone of our health care system-they do the research and they train the doctors-and I am worried we will not get another opportunity to provide them the resources they need to do their job.

The bill also addresses the crisis in physician payments which was driving so many physicians out of the Medicare program and leaving seniors in the lurch. These provider issues must be addressed-we've fought back the draconian cuts in the Balanced Budget Act for five years now. Our providers are struggling, and it's time to set things straight.

I am pleased that the bill includes provisions based on a bill I introduced with Senator Santorum to stabilize the Medicare+Choice program in the short term.

The changes will ensure that plans in places like Long Island and Westchester get paid on par with plans in other areas of the country and will help significantly bring down premiums in these areas over the next few years.

Perhaps the biggest win in the bill-not only for seniors, but for all consumers, employers, and purchasers of prescription drugs-is the extraordinary victory we have achieved in the face of the unprecedented influence of the big pharmaceutical companies: generic drugs.

The generic drug provisions which Senators GREGG, KENNEDY, MCCAIN and I have been fighting for over the past few years-and which passed the Senate by a vote of 94-1-represent a huge step forward for all seniors, consumers, and purchasers of prescription drugs.

The provisions close loopholes in the law and end the abusive practices in the pharmaceutical industry which have kept lower-priced generics off the market and cost consumers billions of dollars.

The Gregg-Schumer amendments to the Hatch-Waxman Act, would put an end to the practice of brand companies listing frivolous patents for the sole purpose of automatically delaying generic approval. It would also ensure that the 180-day exclusivity period enjoyed by the first generic to challenge a patent cannot be used as a bottleneck to prevent additional generic competition.

First, the Gregg-Schumer provisions would limit brand drug companies to a single 30-month stay of generic approval, and only on patents listed at the FDA before a generic application is filed. This way, the 30-month stay-if there is one at all-will run concurrent with FDA approval of the generic application and minimize delay.

Second, key to ensuring that patent issues are resolved in a timely way, the provisions clarify that a generic applicant has a right to seek a declaratory judgment that its product does not infringe a patent or that a patent is invalid, and direct courts that they must hear these declaratory judgment cases to the maximum extent permitted by the Constitution.

With the removal of the automatic 30-month stay, if the generic company did not have a clear right to seek resolution of potential patent disputes on its own, the brand company could simply file a new patent and sit back and wait-leaving the generic at risk of being sued and having to pay triple the brand's lost profits if it does decide to enter the market. This clarification of the courts' jurisdiction will have an immediate effect on both pending and future declaratory judgment actions brought by generic applicants.

Third, the provisions enforce the patent listing requirements at the FDA by allowing a generic applicant, when it has been sued for patent infringement, to file a counterclaim to have the brand drug company delist the patent or correct the patent information in FDA's Orange Book.

Fourth, the generic provisions revamp the 180-day exclusivity incentive provided in the Hatch-Waxman Act. Under the act, the first generic drug company to challenge a patent on a brand drug has the exclusive right to market its drug for 6 months before any other generic can compete. This feature encourages generic applicants to challenge weak patents and brings consumers much quicker access to affordable generic drugs.

However, at times, brand and generic companies have abused this exclusivity period-both through collusive agreements and use of other tactics that allow the provision to act as a bottleneck to generic competition. The Gregg-Schumer provisions end this abuse because the generic company forfeits its exclusivity if it doesn't go to market in a timely manner.

The way the provision works, if another generic applicant has resolved patent disputes on the patents which earned the first to file its exclusivity-either through a court decision, settlement, dismissal because the brand company says it does not intend to sue, or withdrawal of the patent by the brand company-the first generic applicant has to go to market within 75 days or it forfeits its right to the exclusivity.

If it forfeits, then the exclusivity is lost and any other generic applicant that is ready to be approved and go to market can go. Either way, the provision ensures that consumers have access to a low-cost generic as soon as possible.

I am very pleased that the conferees preserved these important, pro-consumer cost containment provisions. Indeed, they are the only part of this bill where consumers, seniors, and taxpayers prevail over the big drug companies.

In closing, I had truly hoped this Congress would craft and pass a meaningful Medicare drug benefit for seniors-one which would have protected beneficiaries who have access to good coverage through other programs and which would have provided real relief to seniors with no other choice.

While it contains some good provisions, the package before us does neither. I think we can do better, and we owe it to the 40 million seniors in this nation who have waited decades for drug coverage under Medicare to do better than this.