Healthy Skepticism Library item: 16224

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Publication type: news

Rowley J
Drugmakers’ Deal Doesn’t Bind Congress in Health-Care Debate
Bloomberg.com 2009 08 08
http://www.bloomberg.com/apps/news?pid=20601087&sid=aRJ2L450Pam8

Full text:

The bargain U.S. drugmakers struck with President Barack Obama for the pharmaceutical industry to absorb no more than $80 billion in cost cuts as part of a health-care overhaul can’t be enforced on Congress, lawmakers say.

Democratic lawmakers pushing health-care legislation, including House Speaker Nancy Pelosi and House Energy and Commerce Committee Chairman Henry Waxman, both California Democrats, have said Congress isn’t bound by the agreements negotiated by the Obama administration and six industry groups to help cut a total of $2 trillion from medical spending over 10 years.

“Their agreements don’t bind me whatsoever,” Democratic Senator Tom Harkin of Iowa said Aug. 6, just hours after Senate Democrats questioned top White House aides about the agreement with Pharmaceutical Research and Manufacturers of America, the Washington-based industry trade group known as PhRMA. “We can do what we want.”

Secrecy surrounding the talks between Obama aides and health-care representatives may have created confusion over the contents of the agreement with drugmakers and upset lawmakers as they learned about it in news reports.

“When I read about it, it gave me some heartburn,” Senator Charles Schumer, a New York Democrat, said Aug. 6 after the New York Times reported the administration stood by its deal to protect the drugmakers from cuts beyond the $80 billion in government-spending reductions on medicines over a decade.

Prescription-Drug Prices

Already, Waxman’s Energy and Commerce Committee has included in its version of health-care legislation a provision long opposed by PhRMA to empower Medicare to negotiate drug prices for the government health program’s “Part D” prescription-drug benefit for senior citizens.

House leaders, seeking to gain support for a health-care overhaul from a bloc of fiscally conservative Democrats known as Blue Dogs, have sought deeper cuts in spending for government health-care programs.

Nadeam Elshami, a spokesman for Pelosi, said in an e-mail that “the speaker supports the work” of three House committees that have approved legislation “to squeeze more money out of the system, including from the pharmaceutical industry.”

The legislation being drafted in Congress would extend health-insurance coverage to as many as 47 million uninsured people and aims to cut spiraling medical costs. Congress is also considering setting up a public insurance plan to compete with private insurers as part of an effort to lower premiums.

The House Ways and Means Committee version of the legislation would empower the so-called “public option” insurance program to negotiate with drug manufacturers over the prices for prescription medicines.

Negotiating Power

When the Medicare prescription-drug benefit was enacted by Congress in 2006, the then-Republican majority thwarted attempts by Democrats to authorize the government to use its purchasing power to negotiate price discounts with drug manufacturers.

At the Aug. 6 meeting with Senate Democrats, White House Deputy Chief of Staff Jim Messina told lawmakers the agreement between the administration and the drugmakers didn’t require Obama to discourage Congress from requiring price negotiations for the Medicare program, according to Harkin and Senator Sherrod Brown, an Ohio Democrat.

Deal or Not

“Whether the White House made a deal or not,” Congress would still be free to impose such a requirement, Brown told reporters.

It is unclear whether giving the Medicare program authority to negotiate drug prices would save the government money even though the proposal is pushed by Democrats as a cost saver.

Democrats, citing lower per-patient drug costs for the government program for military veterans, argued that $358 in government savings for each patient in 2006 resulted from the power the Veterans Affairs Department has to negotiate drug prices.

Still, the nonpartisan Congressional Budget Office has told Congress that such price negotiations wouldn’t result in significant savings to the Medicare program.

“The impact on Medicare’s overall drug spending would likely be limited,” the CBO said in an April 10, 2007, letter to Democratic Senator Ron Wyden of Oregon.

‘Eye on the Ball’

“We are keeping our eye on the ball and doing everything we can to make health-care reform a reality this year,” Ken Johnson, a PhRMA senior vice president, said in a telephone interview. “We have made an $80 billion commitment.”

“We continue to oppose government interference with private-sector negotiation in the Medicare prescription-drug program because, according to CBO, it will not save any money and it could restrict patient access to needed medicines,” Johnson said in an e-mail.

White House spokesman Robert Gibbs yesterday defended the administration’s agreement with drugmakers, saying, “we feel like $80 billion is an appropriate amount” of cost savings. “The legislation in the House is in that ballpark.”

Industry Groups

Drugmakers were among six groups that pledged to help Obama fund a health-care overhaul by cutting medical spending.

The other groups were hospitals, device makers, doctors, labor unions and insurers. Their representatives offered no specifics when the agreement was announced earlier this year. Representatives of these groups have been negotiating with the White House.

Hospitals, which account for 31 percent of annual health-care spending in the U.S., announced July 8 an agreement to cut $155 billion in costs over 10 years. Reduced payments for Medicare, the program for the elderly and disabled, account for $103 billion in savings. Another $50 billion cut would be made to “disproportionate share” payments, which are made to hospitals for treating large numbers of uninsured patients.

The cuts would begin in 2015 and be gradually increased as more Americans get insurance coverage through the overhaul efforts.