Democrats and consumer advocates complain that the Republican-crafted
compromise does little to contain soaring drug costs.
They say that by handing the Medicare drug program's administration to
private insurers, Congress missed a chance to exert pressure on
pharmaceutical companies to reduce prices.
Representatives of the industry's main lobbying arm, the
Pharmaceutical Research and Manufacturers of America (PhRMA), declined
yesterday to discuss the legislation.
But the clearest indication that the bill offers a brighter future for
the industry came from Wall Street, where pharmaceutical stock prices
have steadily risen over the past week as the legislation's prospects
for passage improved.
Analysts at Goldman Sachs & Co. project the new Medicare benefit could
increase industry revenue by 9 percent, or about $13 billion a year.
After objecting for years to proposals to add prescription drug
coverage to Medicare, the pharmaceutical lobby recently shifted
positions and poured enormous resources into shaping the legislation.
Since the 2000 election cycle, the industry has contributed $60
million in political donations and spent $37.7 million in lobbying in
the first six months of this year.
The lobbying continued in earnest this week with a television and
print advertising campaign urging passage of the bill.
In one series of witty commercials sponsored by the industry-backed
Alliance to Improve Medicare, elderly citizens look into the camera
and demand:
"When ya gonna get it done?"
One Republican with ties to the industry said drugmakers eluded the
three things they feared most: legalized importation of lower-cost
medicines, many of them patented or made in the United States;
government price controls; and easier market access for generic drugs
that cost considerably less than brand-name drugs.
About 24 percent of Medicare beneficiaries -- nearly 10 million senior
citizens -- do not have any prescription benefits.
Some of them buy medicine at the highest retail prices.
Academic studies and anecdotal evidence suggest, however, that many go
without prescription medicines and would become new customers for
drugmakers if the bill becomes law.
The remaining 30 million Medicare recipients buy some supplemental
drug coverage, according to the most recent government figures.
Even those with some drug coverage are expected to spend more with the
new benefit, said Fredric E. Russell, whose investment management
company owns several drug stocks.
Whenever a new health benefit is offered, he said, patients and
doctors jump at the chance to take advantage of it.
Under the bill, beginning in 2006, all Medicare beneficiaries would
have the option of buying a drug plan for about $35 a month, plus a
$275 annual deductible.
Insurance companies and pharmacy benefit managers (PBMs) would
administer the programs for the government.
The great unknown is what sort of prices those insurers will
ultimately negotiate on behalf of their Medicare clients, said
Kristine Bryan, senior health care analyst at Brown Brothers Harriman
& Co.
"Generally, when you have a large purchaser, you have the ability to
demand better pricing," she said.
Republican congressional staffers also point out that because the bill
waives a requirement that state Medicaid programs receive the "best
price" available, the new private insurers could save Medicare $18
billion.
It would, however, likely increase states' drug costs.
Perhaps the most striking political victory for the pharmaceutical
industry was the decision to reject provisions that would have allowed
Americans to legally import drugs from Canada and Europe, where
medications retail for as much as 75 percent less than in the United
States.
Polls show that an overwhelming majority supports the change, and the
House approved the provision, 243 to 186.
But the Bush administration and pharmaceutical lobby said the move was
dangerous and would cut into future research and development.
The provision was dropped from the bill's final version.
From The Washington Post, 11/21/03:
http://www.washingtonpost.com/wp-dyn/articles/A1925-2003Nov20.html
Drugmakers Protect Their Turf
Medicare Bill Represents Success for Pharmaceutical Lobby
By Ceci Connolly
Washington Post Staff Writer
Friday, November 21, 2003; Page A04
No industry in negotiations over the $400 billion Medicare
prescription drug bill headed to the House floor today outpaced the
pharmaceutical lobby in securing a favorable program design and
defeating proposals most likely to cut into its profits, according to
analysts in and out of the industry.
If the legislation passes as Republican leaders predict, it will
generate millions of new customers who currently lack drug coverage.
At the same time, drug-manufacturing lobbyists overcame efforts to
legalize the importation of lower-cost medicines from Canada and
Europe and instead inserted language that explicitly prohibits the
federal government from negotiating prices on behalf of Medicare
recipients.
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Republicans and the health industry play footsie.
Harry
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