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Medicare Prescription Drug, Improvement, and Modernization Act of 2003-Conference Report

Location: Washington, DC


Ms. CANTWELL. Mr. President, I rise at this late hour to add my voice in opposition to the legislation that I believe we will be voting on later tonight or early tomorrow morning and to basically explain that I think under this bill, my constituents in Washington State, who would benefit from a prescription drug benefit, or are currently benefiting from something, will be worse off after this legislation than if we did nothing at all.

That is the important point for us to discuss today. Going home to Washington State over the summer, and in September and in October, the voices of Washingtonians basically said we would like to see a prescription drug benefit. Actually, first, they said we would like to see a reduction in the cost of prescription drugs, whether you have a benefit or not. Those who have insurance now are seeing increases in the rates of prescription drugs and cannot afford the continual increase in pricing. I am going to talk about that in a minute. They also said that if you can get a prescription drug benefit, go ahead, but certainly don't do harm by passing something that puts seniors worse off than they currently are.

While I voted for the bill that came out of the Senate, I think this conference report is far off from where we need to go. My colleague from Virginia, who just spoke, talked about the physician reimbursement rate and hospital reimbursement rate, for which I applaud the committee. I point out that the reimbursement rate for Medicare patients that is still within this framework of a national average has Washington State at the very low end. In fact, I think we went from 41st in the Nation to 45th in the reimbursement rate. As a place where we want people to come and provide health care benefits, they are certainly not incentivized under this legislation to want to come to Washington when they can practice in other regions and make more money. I think some of the failures of this bill far outweigh the strengths of the legislation.

I may come at this differently than my colleagues who want to, as I say, privatize Medicare. I certainly believe we have made a promise since 1965 that we would provide a universal benefit of Medicare, provide basic care to our seniors. I think this bill is a failure to expand on that and put a prescription drug under Medicare.

When the Harvard School of Public Health did a study in June of 2002, they asked people: If you retired and you had a choice to get a benefit under the Medicare health insurance program or from a private plan, such as a PPO or HMO, which would you choose? And 63 percent said they wanted a program under Medicare. Only 19 percent said they wanted a plan under a private provider, a PPO or HMO organization. So I think the public is clear that they have said they trust Medicare.

In fact, I found great pleasure recently when the Seattle Post-Intelligencer characterized this debate, I thought, in an editorial cartoon that was really right on the spot:

Two constituents obviously are saying to each other, honey, see, the Republicans-what they promised is that we would get out of the faceless control of the Government bureaucrats on Medicare.

Unbeknownst to the couple, they are sitting in the faceless hands of insurance company executives. I think that is fundamentally what is wrong with this legislation, that while we have had a trusted system for many years and an increase in the cost of prescription drugs going from maybe 5 percent of your health care costs at the time Medicare was introduced to now something like 25 percent of your health care costs, Medicare prescription drug benefits should just be part of basic care under Medicare. Instead, we are saying we are going to subsidize insurance companies to somehow provide a prescription drug benefit for you. I think what we are going to find is that it is going to have disastrous results.

There are a lot of things in this legislation about which I think people in the State of Washington are concerned. Obviously, this particular debate, as the New York Times called it today, is really a debate-I ask unanimous consent that this article be printed in the RECORD, entitled "Medicare Debate Turns to Pricing of Drug Benefits."

There being no objection, the material was ordered to be printed in the RECORD, as follows:

[From the New York Times, Nov. 24, 2003]


(By Robert Pear)

WASHINGTON, Nov. 23.-With Congress poised for final action on a major Medicare bill this week, some of the fiercest debate is focused on a section of the bill that prohibits the government from negotiating lower drug prices for the 40 million people on Medicare.

That provision epitomizes much of the bill, which relies on insurance companies and private health plans to manage the new drug benefit. They could negotiate with drug companies, but the government, with much greater purchasing power, would be forbidden to do so.

Supporters of the provision say it is necessary to prevent the government from imposing price controls that could stifle innovation in the pharmaceutical industry. Critics say the restriction would force the government and Medicare beneficiaries to spend much more for drugs than they should.

The House passed the Medicare bill on Saturday by a vote of 200 to 215, after an all-night session and an extraordinary three-hour roll call. President Bush and House Republican leaders persuaded a few wayward conservatives to vote for the bill, which calls for the biggest expansion of Medicare since its creation in 1965.

In the Senate, debate continued on Sunday, with Democrats asserting that the bill would severely undermine the traditional Medicare program. Senator Edward M. Kennedy, Democrat of Massachusetts, said he would lead a filibuster against the measure.

Democrats acknowledged they did not have the votes to sustain a filibuster. But they said they would use points of order to slow the legislation, whose passage is a priority for President Bush.

Senators Dianne Feinstein of California, Ron Wyden of Oregon, and Kent Conrad of North Dakota, all Democrats, announced on Sunday that they would vote for the bill. Other Democratic senators who have endorsed it include Max Baucus of Montana, John B. Breaux and Mary L. Landrieu of Louisiana, Blanche Lincoln of Arkansas and Ben Nelson of Nebraska.

But Senator Don Nickles, Republican of Oklahoma, said he would vote against the $400 billion bill.

"We are building a new expansion onto a house that's teetering on a cliff," Mr. Nickles said. "We are saddling future generations with enormous liabilities."

No provision has been mentioned more often in Congressional debate than the section that prohibits the government from interfering in negotiations with drug companies.

Democrats have repeatedly asserted that Medicare could provide more generous drug benefits if, like other big buyers, it took advantage of its market power to secure large discounts.

But many Republicans have expressed alarm at the possibility that federal officials might negotiate drug prices. The Medicare program, they say, dwarfs other purchasers, and the government is unlike other customers because it could give itself the power to set prices by statute or regulation, just as it sets the rates paid to doctors and hospitals for treating Medicare patients.

Under the bill, the government would subsidize a new type of insurance policy known as a prescription drug plan.

"In order to promote competition," the bill says, the secretary of health and human services "may not interfere with the negotiations between drug manufacturers and pharmacies and prescription drug plan sponsors, and may not require a particular formulary or institute a price structure for the reimbursement" of drugs.

Tommy G. Thompson, the secretary of health and human services, said Sunday that if Congress wanted to give him the power to negotiate drug prices, it could do so next year. But "that's not a reason to oppose this Medicare bill," said Mr. Thompson, who negotiated with Bayer to obtain a lower price for the company's anthrax medicine, the antibiotic Cipro, in 2001.

Representative Tom Allen, Democrat of Maine, said it struck him as absurd that "the government will not be able to negotiate lower prices" for the drugs on which it plans to spend $400 billion in the next decade.

"The bill will allow the pharmaceutical industry to continue charging America's seniors the highest prices in the world," Mr. Allen said.

Representative Peter A. DeFazio, Democrat of Oregon, said, "We could provide a much more meaningful benefit if we negotiated lower prices as other nations have done."

Representative Rahm Emanuel, Democrat of Illinois, said: "We could bring down drug prices if we allowed the secretary of health and human services to negotiate on behalf of 40 million seniors. That is what Sam's Club does."
Sam's Club, a chain of warehouse stores that is a division of Wal-Mart, acts like a purchasing agent for its members, who can buy low-price goods.

Republicans say that health plans will be able to negotiate lower drug prices for Medicare beneficiaries, just as they do for large groups of employees with private insurance.

The Senate majority leader, Bill Frist, Republican of Tennessee, said: "We tend to use the purchasing power of private entities like individual plans to hold down costs over time. The Democrats tend to emphasize, and thus push for, more government control, government purchasing. We just think that competition through the private sector, through bulk purchasing and negotiation, is a more effective means to hold down prices.;;

Medicare drug plans would be offered by state-licensed insurance companies. They, in turn, could hire pharmacy benefit managers like Express Scripts, Medco Health Solutions and AdvancePCS to negotiate with drug makers, issue discount cards and line up networks of pharmacies.

The bill would also create a benefit: an initial physical examination offered to new beneficiaries as a "welcome to Medicare." this benefit illustrates a shift toward greater coverage for preventive services.

Under the bill, Medicare would cover screenings for heart disease and diabetes and would pay experts to coordinate care for elderly people with chronic illnesses.

Senator John Kerry, Democrat of Massachusetts, took time out from his presidential campaign to join the Senate debate. The Medicare bill, he said, "lines the pockets of powerful moneyed interests and leaves America's seniors out in the cold."

But Senator Susan Collins, Republican of Maine, urged support for the bill. "This historic opportunity may never come again, and we cannot afford to let it pass," she said.

Ms. CANTWELL. In this article, I will read the paragraph:

With Congress poised for final action on a major Medicare bill this week, some of the fiercest debate is focused on a section of the bill that prohibits the government from negotiating lower drug prices for the 40 million people on Medicare.

That particular article goes on to talk about the fact that we are switching over to insurance companies when we could have a benefit under Medicare and when Medicare could provide those cost savings as a big market.

Now, some people say: Gee, we don't want to set price controls because that will somehow artificially impact pharmaceutical companies. Pharmaceutical companies are not the people who need the financing and the access to capital.

It is the biotech industry. Washington State happens to be home to many biotech companies. They need access to capital. It is one of the actual advantages of what I would call economic advantage that the United States has in making pharmaceutical drugs; the fact that our access to the capital system allows these biotech companies to do years and years of research and then maybe 10 to 15 years later actually getting a drug produced. So they need access to the capital market.

Once those drugs are created, we need to do something about controlling the costs of those drugs. This section of the bill, again referring to the New York Times article, says:

The provision epitomizes much of the bill, which relies on insurance companies and private health plans to manage the drug benefit. They could negotiate with drug companies, but the government, with much greater purchasing power, would be forbidden to do so.

I have great concerns about what is the basic hamstringing of this proposal as it relates to prescription drug benefits when the key opportunity before us would be to put this benefit under Medicare and capitalize on those savings.

Mr. President, that is why I had supported earlier legislation and find it very difficult to support this legislation. I am going to talk about why, besides this particular provision, we are hampering ourselves from having other price controls in this legislation.

I agree with my colleagues on the other side of the aisle, as we start this new benefit, we must be cognizant of what kind of cost measures we can do to make sure we continue to provide this for our citizens. Before I get to that, I want to mention, I have great concerns about the retiree benefit plans under this proposal. We have about 49,000 retirees in Washington State who might end up losing their coverage under this bill in the future. They have good, solid insurance coverage plans that I don't think are too generous, but under this proposal they might go away.

There is a certain percentage of the population under this proposal that actually will start paying a variety of premiums based on income, and while some people think that might be a good idea, really these people have been in this program-it has been a program based on a payroll tax into the Medicare trust fund-they have paid into the trust fund expecting to get reliable health insurance coverage back. Now they are going to be paying aggressively on their premiums.

About 51,000 residents in Washington State are going to wake up very much surprised to find that as a result of trying to provide a drug benefit package to the country, all of a sudden they are paying more on their Medicare Part B program. I know my phone is ringing very much against this legislation, but I don't know if those 51,000 people realize it is actually their premium rates that are going to go up.

Third, I think the legislation, as it relates to low-income seniors, is another area where we are leaving seniors basically worse off than they are today. My State covers 150 percent of the poverty level under Medicaid with a prescription drug benefit. The lowest income seniors in America are now going to have to pay a copayment.

One of the reasons we created the program at 100 percent of poverty for people on Medicaid is so they can get access to prescription drugs because they couldn't afford a program to pay for prescription drugs. We are taking the poorest of our population and now demanding that they have a copayment, too.

The asset test-I am sure some of my colleagues will talk about that-for those at 150 percent of the poverty level, which is basically incomes of about $13,000 per individual or $18,000 for a family of two, that the asset test is going to be $6,000 for the individual or $9,000 for a couple, that means after that, you are not going to benefit from the program in the same way.

Basically, you are limiting the opportunity for this section of low-income individuals to benefit from what would be a more profitable way of dealing with a prescription drug benefit and giving them, not hampering them, saying you qualify but limiting them on the asset test.

In Washington State, for those individuals below 150 percent of poverty level, they are going to be worse off under this legislation.

I hope this legislation is not a death knell for those who are living with cancer because according to the CBO estimates, this bill could basically cut $11.5 billion over the next 10 years for cancer care communities because of the reimbursement rate for cancer care. Basically, we are making cuts to programs, and I have heard from facilities, oncologists, and cancer patients all across the State that they are very upset with this legislation and the reduction in reimbursements for cancer patients. This is another group of people who will be worse off if this legislation passes.

As I said, my primary concern with this legislation is it does very little to rein in the cost of prescription drugs. Talking to my constituents, yes, they would like to see a prescription drug benefit, but they don't want to be worse off than they are today. Even without the benefit, they expect the Senate to do something about controlling prescription drug costs.

What have we done? I see my colleague from Michigan on the Senate floor. She had a great proposal that we failed to execute that basically said: Why not cap the advertising dollars of the pharmaceutical companies to the dollars that are involved in research and development; that way, they are doing research and development on new drugs. They are not overspending, overadvertising to America, or at least not getting a tax benefit for overadvertising and trying to drive up the consumption of drugs.

We have done nothing about that. My colleague from New York and others have tried to address the issue of what has become evergreening of patents where drug companies actually change the name or some feature of the product just so they can continue to have a patent control and generic drugs, cheaper drugs, cannot come to the market.

This bill actually deals with some aspect of that, but the aspect I was very concerned about is oftentimes you have big pharmaceutical companies buying a generic drug company right before the generic drug company produces the product. That ought to be investigated by the Department of Justice as an antitrust violation and to make sure we are not allowing such collusive activities to happen, thereby raising the overall price of prescription drugs.

A provision that would have benefited us the most and was critically important-again, as we see insurance companies, basically, in charge of prescription drug benefits-is we had a great opportunity in an amendment I offered with several of my colleagues to control the costs as it was put forth by pharmacy benefit managers.

In traveling around Washington State, actually a summer ago, it became very clear to me that a great deal of purchasing of pharmaceutical drugs for individual plans were done by pharmacy benefit managers. They are the middlemen in this process, and pharmacy benefit managers often negotiate huge savings for various employee groups, companies, and organizations. Yet it is unclear what happens to the negotiated discount. Is it passed on to the individuals within the beneficiaries of that plan? Is it basically profit by the pharmacy benefit managers? What happens to that money? In fact, we have had instances in this country where pharmaceutical companies and the pharmacy benefit managing company are owned by the same entity. Thereby the middleman is basically helping to negotiate and sell a higher price for the pharmaceutical company.

Most of those companies have gotten out of that. Certainly my amendment would have prohibited pharmaceutical companies and benefit managers from working together under the same ownership. But a recent September 9, 2003 study by Loyola University Chicago Law School found that the cost to taxpayers for this inherent conflict of pharmacy benefit managers is in the range of somewhere between $14 billion and $29 billion over the next 10 years. I think that is quite considerable.

To me, putting HMOs in charge of the prescription drug benefit is like putting Enron in charge of our energy policy. Thank God we were able to make some comment and statements that we are not going to have that energy policy of the free market without rules and transparency which basically drove up the cost of energy pricing. But that is what we have here because basically we are saying Government can't do anything to control the prices.

But now we are going to throw this into the private sector, and it is unclear what rules they are going to use to control the prices. The one amendment that was in this legislation saying that pharmacy benefit managers had to come clean about the drug benefits they negotiated with pharmaceutical companies, and what percentage of those dollars they were passing on to consumers-that got thrown out of the legislation.

So a key aspect of this bill, which would have said let's provide transparency, let's give money back to seniors, let's make sure consumers are getting the savings that are being passed on by being in a big market and having market leverage-those things are gone.

I believe our Attorney General of the United States ought to investigate. I don't see why the manufacturers of pharmaceuticals, that then sell through a PBM, can't list the top volume of 50 drugs they have sold and the difference between the prices they received at the pharmacy level and what discounts were realized. They don't have to give all of their pricing information. They don't have to overexpose what I think would be private corporate information that allows them to be competitive. But the Department of Justice ought to be able to investigate collusive activity that is ripping off seniors in America, when somebody negotiates huge discounts based on volume but then doesn't pass those discounts on to consumers.

So, as I said, this is a key part of the legislation that was left out. I hope whatever happens with the outcome of this legislation, that my colleagues will think about how we need to rein in pharmacy benefit managers in the future and make sure they are passing on savings to consumers.

As I said, I think this private delivery model we are talking about for Medicare gives too much control over to the insurance agencies and other organizations and doesn't give a guarantee to seniors. This bill provides no limits on the premiums that drug-only plans can charge.

Seniors need a comprehensive benefit that covers their total prescription benefit needs. Why tease them with a program that we are somehow going to cover their prescription benefits and then not control the price, have it in the private sector, and then have the private sector dictate to them: Here is the very limited number of drugs that are going to be provided.

Thirty percent of Washington State seniors enrolled in the prescription drug benefit under this program would fall into what is the donut hole. Easily some 122,000 people in my State could fall into the donut hole. Again, another percentage of the population that I don't think are-you might not say they are better off. It depends on whether they have a drug benefit now. But they are certainly not going to get anything from this legislation and they are going to be far more confused about why this cliff starts at a certain level.

Again, my colleagues, I am sure, have talked about the economic impact of this legislation. I would go back, saying we should start with a prescription drug benefit.

When my colleague, the Senator from Michigan, and I first came into this Congress, when we had a huge surplus, that was the time we should have put forth a prescription drug benefit that would have been a more comprehensive package and started this process. But we didn't do that.

So what my constituents are telling me, and these are even constituents living in the rural part of Washington State who might think their physicians will get a higher reimbursement rate or their hospitals will get a higher rate, they will know Washington will still fall behind on the overall Medicare reimbursement rate, falling from 41 in the Nation in reimbursement rate to 45. They will know either the lowest-income seniors who are going to fall out of the program and have to have copayments-that is, they are already under a plan that they don't have copayments on-or there will be some of these seniors who basically end up having to pay more than they are paying today.

As we debate this legislation and look forward to whether, as I said, the vote is tonight or tomorrow, I think we need to talk about whether we are going to trust the American people in their trust of Medicare; whether we are going to say we are going to let the Medicare market carry the weight that it has already carried. Actually, even if we said, Here is the limit of how much we could provide given our budget deficit, I would say: Fine, continue to let Medicare provide for those individuals. As we give more resources as a nation, let's build that up.

But don't fool America by somehow thinking you are going to turn this over to private insurance companies and HMOs and somehow they are magically going to come up with the money to make this benefit program work.

What Americans want is security in their prescription drug benefits. They don't think that privatization will work. They don't think we are doing enough to control costs. I suggest to my colleagues that we need to go back and work this bill to provide both-the certainty to seniors, in a program that they have believed in for many years, and a Congress that will stand up and fight the ever increasing cost of prescription drugs.

I yield the floor to my colleague from Michigan.

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