Statement on Introduced Bills and Joint Resolutions

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS -- (Senate - February 01, 2005)

Mrs. FEINSTEIN. Mr. President, I rise today to join my colleagues Senator Snowe, Senator Wyden and Senator McCain in introducing the bipartisan Medicare Enhancement for Needed Drugs, MEND, Act of 2005. This legislation is an important step toward controlling the spiraling cost of prescription drugs for America's seniors.

The MEND Act addresses what I saw as a major weakness of the Medicare Modernization Act of 2003 when I voted for the bill. The Medicare Modernization Act offers an opportunity for the Federal Government via the Secretary of Health and Human Services to harness its bulk purchasing power to deliver lower drug prices for our seniors.

However, the Medicare bill prohibits the HHS Secretary from doing just that.

I have said several times that I would work to see that this prohibition on the HHS Secretary from negotiating with drug manufacturers be stricken and I was pleased that Secretary Tommy Thompson, upon announcing his departure as HHS Secretary, acknowledged publicly that he sought the negotiating power that this legislation provides. Secretary Thompson said, "I would have liked to have had the opportunity to negotiate."

First and foremost the bill strikes the prohibition language in the Medicare bill, also called the noninterference provision.

I strongly believe that the HHS Secretary should be given the authority similar to that of other Federal entities that purchase prescription drugs in bulk to negotiate prices with manufacturers of prescription drugs to ensure that beneficiaries pay the lowest possible price for their prescription drug plans.

The CBO has told us that the effect of striking the "noninterference" provision would have a "negligible effect" on federal spending. CBO's conclusion is based on their prediction that private plans will be able to obtain savings that will be greater than what the Secretary will be able to achieve and that simply striking this provision does not ensure that the Secretary will use the negotiation authority.

Meanwhile, our seniors are being given no guarantee that private plan competition will mean lower drug prices for them. So while CBO makes this conclusion that private market forces will bring about savings, the federal government is forced to sit on the sidelines, unable to leverage its purchasing power to negotiate lower drug prices. The Federal Government cannot even participate in negotiations for prescription drug plans for which it assumes the risk.

That is simply wrong and the MEND Act corrects this flaw in the Medicare bill.

Second, if a future HHS Secretary does not agree with Secretary Thompson's view that he be given the opportunity to negotiate with drug manufacturers, there must be circumstances under which the Secretary is required by law to negotiate.

The MEND Act mandates two scenarios under which the Secretary must negotiate with manufacturers. First, the Secretary must negotiate with manufacturers of covered Part D drugs for the fallback prescription drug plan.

The "fallback" plan is a guaranteed drug benefit to beneficiaries living in areas where only one private plan, or none, shows up. In areas where a "fallback" prescription drug plan is triggered, the federal government must offer the standard drug benefit and assume performance risk.

However, the Federal Government does not have a say in the prices manufacturers charge them in the "fallback."

To ensure that the Federal Government achieves the lowest available price for enrollees in a "fallback" plan, the MEND Act requires that the Secretary negotiate drug prices in such plans.

The MEND Act also requires the Secretary to participate in negotiations upon the request of an approved prescription drug plan or Medicare Advantage prescription drug plan.

If the untested theory that private plans can achieve larger drug price discounts than the Secretary could negotiate proves to be false because the smaller insurers in the private market cannot achieve the savings larger, more established companies can, a company can petition the Secretary to negotiate with drug manufacturers on their behalf.

So that seniors can make an "apples to apples" comparison when determining which drug plan offers them the most competitive drug prices, the bill requires that the Secretary of HHS determine the average aggregate beneficiary costs and savings basic prescription drug plans are able to achieve to better inform seniors about which plan might suit them best.

I have heard concerns raised by many of my constituents about the impact the Medicare bill will have on their Medigap plans. This bill directs the HHS Secretary to work with the National Association of Insurance Commissioners to conduct a review of the changes to the Medigap policies in the new drug benefit for the purpose of evaluating its impact on Medicare beneficiaries.

Lastly, the bill requires GAO to conduct a review of the retail cost of prescription drugs in the U.S. during 2000 through 2003 with an emphasis on the prescription drugs most utilized for individuals age 65 or older. Subsequent reviews will be required annually through 2007.

And, it requires GAO to conduct an annual study that compares the average retail cost in the U.S. for each of the 20 most utilized prescription drugs for individuals 65 or older with the average price at which private health plans acquire each such drug, the average price at which the Department of Defense and Veterans Administration each acquire such drug, and the average negotiated price for each such drug that eligible beneficiaries enrolled in a prescription drug plan under Part D of Medicare pay.

As someone who voted for the Medicare bill and has seen the cost estimate of that bill go from $400 billion to $534 billion and someone who is very concerned about the growth of entitlement spending, I believe that this bill will shed light on one of the big drivers of health care costs, the cost of prescription drugs.

CBO projects that Americans over 65 will spend $1.8 trillion on prescription drugs over the next ten years. Recent studies of U.S. and Canadian drug-price comparisons show that, on average, prices charged by manufacturers, wholesalers, and retailers were higher in the U.S., most recently by about 70 percent.

For example, an American consumer pays $62.99 for a 30-day supply of the popular cholesterol-lowering drug Lipitor. The same consumer in Canada is paying $35.42. For Prevacid, used to treat acid reflux, an American consumer pays $120.99 for a 30-day supply whereas a Canadian consumer pays $44.27.

If we do not address the exorbitant costs of prescription drugs in this country today, we threaten the viability of programs like Medicare for future generations. I am pleased to join Senators SNOWE, WYDEN and MCCAIN in the fight for lower prescription drug prices for our seniors.

I urge my colleagues to join me in supporting this important legislation.

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