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Medicare Prescription Drug Price Negotiation Act of 2007--Motion to Proceed

Location: Washington, DC



Mr. SPECTER. Mr. President, I voted for cloture to cut off debate on the motion to proceed because I think that the Senate should proceed to give full consideration to the proposed legislation which would authorize the Secretary of Health and Human Services to negotiate with the pharmaceutical companies under Medicare Part D coverage. In the past, I have favored such proposals because of the argument that the Secretary's bargaining power would result in lower negotiated prices.

In light of the conclusion by the Congressional Budget Office in a letter dated April 10, 2007 from Director Peter R. Orszag to Chairman MAX BAUCUS that the new authority to the Secretary ``would have a negligible effect on federal spending because we anticipate that under the bill the Secretary would lack the leverage to negotiate prices across the broad range of covered Part D drugs that are more favorable than those obtained by PDPs [prescription drug plans] under current law,'' I have reviewed the negotiation process under existing laws.

The underlying facts are that the pharmacy benefit managers who negotiate prices for the prescription drug plans represent substantially more people than the Secretary would under Part D. For example, Medco represents 62 million people, Caremark represents 80 million and Wellpoint represents 30 million, contrasted to the 29 million people covered under Medicare Part D. Accordingly, it may be that the pharmacy benefit managers have even greater leverage than the Secretary would if the Secretary were authorized to negotiate prices. That is not certain because the negotiations between the pharmacy benefit managers and the pharmaceutical companies are conducted on a confidential basis, so that it is not known with certainty that the lowest prices are obtained or that the cost savings are all passed on to the prescription drug plans.

The latest Congressional Budget Office estimate for Part D costs is $388 billion below the original estimates, for the 10-year period from fiscal year 2007 to fiscal year 2016. That suggests the current system is working well.

Extended Senate floor deliberation would provide an opportunity to debate these issues and obtain greater detail on the facts.

One of the additional arguments favoring giving the Secretary power to negotiate was the analogy to the savings achieved through the negotiating power of the Department of Veterans Affairs. In analyzing the VA's bargaining power, it must be noted that the Veterans Department represents 4.4
million veterans, a much smaller number than represented by the pharmacy benefit managers. It is also important to note that among brand-name drugs listed on the 300 most popular drugs for seniors, only 42 percent are available to the VA plan because the pharmaceutical companies declined to provide some of the drugs because of their unwillingness to meet the price determined unilaterally by the VA. On the other hand, it is estimated that PDPs under Medicare Part D have access to 97 percent of the brandname drugs among the most favored 300 drugs. The Medicare Part D beneficiaries have an opportunity to select the prescription drug plans that best meet their prescription drug needs, with the opportunity to select a new plan on an annual basis.

Notwithstanding these factors, there may be answers and compelling arguments in support of the proposed legislation to give the Secretary negotiating authorities. A full debate by the Senate on these important issues would pose the opportunity to resolve these complicated questions and come to a reasoned judgment. The Senate will doubtless revisit this issue in the future. In the interim, I intend to inquire further and consider these issues in greater depth to determine what policies would best serve the interests of the beneficiaries of Medicare Part D.

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