Medicare drug price haggling faces veto

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The White House yesterday threatened a veto of legislation that would require the federal government to negotiate directly with pharmaceutical companies on prices of medications covered under Medicare Part D.

The legislation would repeal a law prohibiting the federal government from interfering in negotiations between Medicare drug plans and pharmaceutical companies. The Bush administration says the proposal would impede competition and limit access to lifesaving drugs.

"This is a policy that looks good on a bumper sticker, but it's not practical," said White House spokesman Tony Fratto. "The evidence is in that the market is working to lower drug costs."

Under current policy, insurers deal with the pharmaceutical industry and receive a federal subsidy for administering a drug plan.

The House is scheduled to vote on the legislation tomorrow, said Jennifer Crider, a spokeswoman for House Speaker Nancy Pelosi, California Democrat.

Sen. Max Baucus, Montana Democrat, said he supports the proposal. As chairman of the Finance Committee, he has jurisdiction over Medicare.

"The total prohibition on negotiation should be eliminated," he said. "I do not buy the argument that the sky will fall on the prescription-drug market if we remove this."

Republicans, led by Sen. Charles E. Grassley of Iowa, are girding for battle.

"It is absolutely not correct to say that there is no negotiation in the Medicare prescription-drug benefit. That's complete nonsense," said Mr. Grassley, former Finance Committee chairman. "Federal price negotiations would unravel the whole structure of the Medicare drug benefit, which relies on competing private plans."

Mr. Grassley said the bill probably has enough votes to pass in the Senate, but he is not sure whether it could sustain a filibuster or presidential veto.

Families USA, a senior advocacy organization, released a study Tuesday that found that prices for the most commonly prescribed medications are an average 58 percent higher under Medicare prescription-drug plans than those paid by the Department of Veterans Affairs, which negotiates directly with pharmaceutical companies.

Democrats say the government can use its formidable buying power to strike a better deal with drug companies.

Rep. Frank Pallone Jr., New Jersey Democrat and chairman of the House Energy and Commerce health subcommittee, called the legislation a "no-brainer."

"It makes absolutely no sense to say that the administration should not be able to negotiate prices for all these seniors," Mr. Pallone said. "There's no way it's not going to save a significant amount of money."

The Congressional Budget Office (CBO) reported Wednesday that the bill could achieve only negligible savings.

"We anticipate the secretary would be unable to negotiate prices across the broad range of covered Part D drugs that are more favorable than those obtained by the plans under current law," CBO acting Director Donald Marron told Rep. John D. Dingell, Michigan Democrat and chairman of the Energy and Commerce Committee.

The CBO letter noted that without authority to establish a formulary drug list, the federal government would lack leverage to obtain significant discounts.

Mr. Dingell was not dissuaded.

"This isn't the first time the Congress and CBO differed on the amount of savings a particular bill would achieve," he said. "Common sense tells you that negotiating with the purchasing power of 43 million Medicare beneficiaries behind you would result in lower drug prices."