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House approves negotiation for lower prices for Medicare drugs

WASHINGTON—House Democrats ignored a White House veto threat and passed legislation Friday that would require the government to negotiate lower drug prices for the Medicare prescription drug program.

By a vote of 255-170, with 24 Republicans joining the majority, Democrats scored a symbolic if not substantive victory, rejecting a Republican-crafted ban on government negotiations that many feel is too generous to the drug industry.

"Today's vote is a resounding victory for American's seniors over the special interests," said House Speaker Nancy Pelosi, D-Calif.

The legislation gained a prominent ally this week when Senate Finance Committee Chairman Max Baucus, D-Mont., voiced his support for the measure. In 2003, he'd backed Republican efforts to establish the drug program. But even if the Senate passes the House bill, it faces almost certain death because the White House renewed a threat to veto it.

"If this bill is presented to the president, he will veto," White House spokesman Tony Snow said Friday. He cited government studies concluding that the legislation wouldn't save money for either the government or consumers.

To override a veto, each house of Congress must approve by a two-thirds majority. A recent national survey by the Kaiser Family Foundation found that 85 percent of Americans favored government negotiations, including 65 percent who strongly support it.

Democrats maintained that the successful House vote was just the first step in their efforts to tweak the Medicare drug plan. They pledged additional oversight hearings and legislation if President Bush kills the measure.

"We urge the president to reconsider his opposition and to work with us to give Medicare beneficiaries a better deal on their prescription drug prices and to get a better deal for American taxpayers," said Rep. Pete Stark, D-Calif.

The bill would require Health and Human Services Secretary Michael Leavitt to negotiate prices on behalf of nearly 30 million Medicare recipients with drug coverage through private plans and Medicare managed-care plans. The bill gives the secretary broad discretion on how to pursue negotiations and would allow private plans to get discounts below those negotiated.

While many experts say that negotiations could yield substantial cost reductions in the short run, they caution that drug industry revenue would suffer, and research and development of new drugs would eventually decline. Critics also say that government negotiations would be tantamount to price controls.

The staunch Republican opposition reflects the ideological divide between Republicans and Democrats over how the federal government should work to contain rising health care costs while expanding coverage to more Americans. Democrats feel the government should leverage Medicare's 43 million beneficiaries to win steep discounts from drug manufacturers. Republicans, ever wary of big government, believe competition among private drug plans will keep prices down.

That's why Republican lawmakers, working with the drug and insurance industries, blocked efforts to establish a government-run Medicare drug plan in 2003 and prevented Medicare from negotiating prices with drug makers. Medicare enrollees are instead covered through hundreds of private drug plans that the government subsidizes. Competition among those plans is helping to keep prices down, and surveys indicate most seniors are satisfied with their coverage.

"This competitive model works and it's doing exactly what Congress intended," said Minority Whip Roy Blunt, R-Mo.

Others fear that some drug manufacturers won't accept low government rates and could withdraw their medications from the Medicare program, reducing seniors' access to the widest range of drugs.

Geoffrey Joyce, a senior economist at the RAND Corp., a research center in Santa Monica, Calif., disagreed. He said drug makers would be unlikely to ignore the lucrative market for seniors if Medicare negotiations became law.

"To produce another pill is costing them pennies, so even if the government-negotiated price is 50 percent off (the average wholesale price), it's still profitable for these companies to sell their drugs at this price," Joyce said. "I don't think the threat that you'll see more restricted choice among beneficiaries is real."

Health and industry experts disagree on the merits of government negotiations.

Donald B. Marron, acting director of the Congressional Budget Office, wrote this week that the legislation would likely have only a "negligible effect" on federal drug spending.

But since the CBO doesn't know what Medicare private drug plans pay for medications—because the information is proprietary—Marron can only speculate about potential government savings, said Gerard Anderson, director of the Center for Hospital Finance and Management at Johns Hopkins University.

Marron's position contradicts former CBO Director Douglas Holtz-Eakin, who in a 2004 letter to Sen. Ron Wyden, D-Ore., said government negotiations offer the "potential for some savings" on drugs with no therapeutic or generic alternatives. Wyden and Sen. Olympia Snowe, R-Maine, have introduced legislation that calls for negotiations on Medicare drugs with no therapeutic alternatives.

Rep. Rodney Frelinghuysen, R-N.J., said Friday's legislation was designed to punish the drug industry for its financial success. Several House Democrats did voice outrage at bulging drug company profits after the Medicare drug program was launched in January 2006.

"Drug company profits increased by over $8 billion in the first six months of the program," said Rep. John Lewis, D-Ga. "Eight billion, while seniors and taxpayers pay the bill? It is wrong and it is unnecessary, and today it is our duty, our obligation and our mandate to change that and bring down drug prices."

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(c) 2007, McClatchy-Tribune Information Services.

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