[Congressional Record Volume 146, Number 100 (Thursday, July 27, 2000)]
[Senate]
[Pages S7855-S7858]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BRYAN (for himself, Mr. Graham, and Mr. Gorton):
  S. 2963. A bill to amend title XIX of the Social Security Act to 
require the Secretary of Health and Human Services to make publicly 
available medicaid drug pricing information; to the Committee on 
Finance.


       consumer awareness of market-based drug prices act of 2000

  Mr. BRYAN. Mr. President, in a very few hours we will, each of us, be 
returning to our respective States for the summer recess. Most of us 
will have town hall meetings or other fora in which we will have a 
chance to interact with our constituents.
  Much that occurs on this floor, although very important, does not 
connect with the American people. Some of it seems pretty esoteric, 
pretty dry stuff. I am going to be discussing this afternoon an issue 
that does connect with the American people. Whether you live in Maine 
or California or Washington State or Florida or, as I do, the great 
State of Nevada--and which I am privileged to represent--people are 
talking about the price of prescription drugs.
  The reason for that is that the marvels of modern medicine have made 
it possible, through prescription drugs, to address a number of the 
maladies that affect all of us as part of humankind. The cost of those 
prescription drugs are literally going through the ceiling. I will 
comment more specifically upon that in a moment.
  For literally millions of people in this country, the cost of 
prescription drugs has been so prohibitive that medications that would 
address a medical problem that those individuals face are simply beyond 
the pale. So for many, it is fair to say, the choice is a Hobson's 
choice.
  Do they eat in the evening, or do they take the prescription 
medication that has been prescribed by their physician? It would be my 
fondest hope and expectation, before this Congress adjourns sine die--
that is, at the end of this legislative year--that we could enact 
prescription drug legislation. That would be my No. 1 priority. But I 
think all of us recognize there are some things we can do as part of 
whatever plan we might subscribe to, and Senator Graham and I this 
afternoon are offering a piece of legislation entitled the Consumer 
Awareness of Market-Based Drug Prices Act of 2000.
  This is a piece of legislation that deals with the price of drugs. We 
know what the cost is, but we are talking about the price. We have a 
lot of information on the cost. We know, for example, that we are 
spending on drugs in this country, prescription medications--in the 
last available year, 1999--almost $122 billion. We also know quite a 
bit about how much we in the Federal Government are spending for 
prescription drugs.
  For example, the States and the Federal Government spent $17 billion 
in fiscal year 1999 for drugs, just under the Medicaid program alone. 
Those costs are going to escalate rather dramatically. What is missing, 
however, is some critically important information--information that 
would be important to consumers and those who negotiate on behalf of 
consumers, because what we don't know, what we don't have much 
information about is drug prices. The reason for that is some statutory 
prohibitions I am going to talk about and which this legislation 
specifically addresses.
  So the questions are: What do consumers know about drug prices today? 
What do employers who purchase prescription drugs on behalf of their 
employees know about prices? What do health plans negotiating on behalf 
of their enrollees know about prices? What do physicians who prescribe 
drugs for their patients know about prices?
  The answer is simply, very, very little; almost nothing. What little 
is known is essentially worthless information. We have the average 
wholesale price, but this is a truly meaningless figure.

[[Page S7856]]

  During the course of my discussion this afternoon on the floor of the 
Senate, we are going to be talking about three kinds of prices: The 
average wholesale price, average manufacturer price, and the best 
price.
  Just talking about the average wholesale price, that is a public list 
price set by manufacturers, the pharmaceutical industry; that is 
neither average nor wholesale and is a price set by the pharmaceutical 
companies. The best analogy I can give you is that it would be 
analogous to the price that appears as the sticker price on the window 
of a new car. Nobody pays that price. It really is not very helpful in 
terms of what you need to know when negotiating to purchase a car. And 
now there are a number of web sites and publications and manuals--a 
whole host of things that tell consumers this is what the manufacturer 
paid, these are the hold-backs by the dealers, these are the discounts 
and the commissions; here is the price on which you want to focus your 
attention. You can get that information if you are purchasing an 
automobile, and you can get that information when you purchase a whole 
host of other things. But that information is not available if you are 
talking about finding out the price of prescription drugs, and that is 
because of some statutory limitations.

  It is somewhat analogous to the statement Sir Winston Churchill made 
in 1939 in describing the Soviet Union. He went on to say: ``A riddle, 
wrapped up in a mystery, inside an enigma.'' That is a pretty fair 
characterization of what we know about the prices of prescription 
medications as sold by the manufacturer.
  There are many different approaches as we deal with this prescription 
drug issue and want to extend it as either part of Medicare or some 
alternative approach. I have been privileged to serve on the Finance 
Committee, which has been the vortex for this debate and discussion. I 
listened closely to my colleagues wax eloquently on the subject of 
prescription drugs, and, whether you are to the left or to the right of 
the political spectrum, or whether you consider yourself in the 
mainstream, a moderate, all of us worship at the shrine of competition. 
Everybody says what we need to do is to inject more competition into 
the system. I happen to subscribe to that because I do believe that by 
allowing the synergy of the free marketplace to work, it will be the 
most efficient and the most cost-effective way to deliver services. But 
there is an impediment to the operation of the free marketplace.
  What does the free marketplace need to work? How do we ensure 
competition? Well, some of you may recall that course from school, 
Econ. 201; that is what it was called at the University of Nevada where 
I was enrolled. Basic economic theory dictates that the availability of 
real market-based information is critical to a free market and that 
price transparency is necessary. That is precisely what we do not have 
in this system we have created today.
  The market today lacks market-based price information. A market 
simply cannot work without the availability of that price information. 
I emphasize the availability of that information. The information that 
is available to the public verges on the absurd. There is a complete 
void of useful information about prices. So, in effect, the employers 
and health plans negotiating on behalf of consumers are negotiating in 
the dark. They are at a serious disadvantage. It is as if they are 
blindfolded going into that negotiating arena. They don't know where 
the end of the tunnel is. They do not know what the real prices are. So 
one can fairly ask, how can even the most conscientious, effective 
employer or health plan operator negotiate good prices on behalf of 
consumers if they don't have the most basic information about market 
prices? They undoubtedly pay higher prices than they otherwise would, 
and ultimately these higher prices are translated into higher prices to 
the consumers; they are passed on. That is the nature of the system.
  So what type of price information would be available, or should be 
available, that would be useful and helpful information? The average 
manufacturer price for a drug would be a useful thing for purchasers to 
know; that is, the average price at which a manufacturer sold a 
particular drug. That is what is actually paid for retail drugs. By 
law, by act of Congress, that is kept confidential, and that is one of 
the changes this legislation seeks to accomplish. That is confidential. 
You can't get that information.
  The average price actually paid to a manufacturer by a wholesaler is 
supposed to be similar to the average manufacturer's price, but, in 
point of fact, it diverges widely. The average wholesale price, to 
refresh your memory, is a list price that is meaningless, a price 
assigned by the pharmaceutical industry. In theory, these prices should 
be tracking; in point of fact, they widely diverge. So it is the 
average manufactured price, the price that is actually paid, that is 
what we really want to know, and that is what we don't know.
  The other price we don't know, and also by law is kept confidential, 
is the best price. That is the lowest price available to the private 
sector for a particular medication--whether it be Mevacor, Claritin, or 
any one of the other medications so many of us use today. That 
information is not available. So the average wholesale price--an 
utterly meaningless number, a fiction, if you will--is available. The 
average manufacturer price is not; nor is the best price.
  Knowledge about the average manufacturer price and the best price 
would certainly enable us to have lower prices for health plans, lower 
prices for employers, and lower prices for the consumers. But the 
public is denied this information.
  Let me emphasize--because a number of you might be thinking: There we 
go again with a vast new bureaucracy to collect this data with all of 
the burdens that are imposed upon the free market and the limitations 
that would be generated.
  My friends, that is not the case because under the law, the Secretary 
of Health and Human Services currently collects the average 
manufacturer price and the best price.
  In other words, we have this information. It is not something we 
don't know about, or we have to create some new mechanism to gather. We 
have that information. It is there. But we are precluded by law from 
sharing that information with those who negotiate with the 
pharmaceutical industry to negotiate the best possible price for 
employees, members of health plans, or other organizations that provide 
prescription drugs to their clients, patient customer base--however you 
characterize it. There is good information. All purchasers could use it 
to benefit those for whom they negotiate.
  It is clear that we need to increase the level of knowledge consumers 
have about drug prices in today's marketplace. Transparency--that is 
the ability to see what these prices are and promote the fair market--
will lower prices.
  That is why my colleague, Senator Graham, and I are introducing this 
legislation. We are not talking about mandating negotiated prices. We 
are simply talking about making the data that is collected available to 
those who are negotiating for prescription drugs. It would simply 
require the Secretary, who already collects this information, to 
provide the average manufacturer price of drugs and the best price 
available in the market.
  These prices are collected to implement the Medicare prescription 
drug rebate system. The rebates are based on those prices. But because 
Medicaid is prohibited by law from disclosing the average manufacturer 
price, or the best price, the market doesn't get the advantage of this 
information, and we are prohibited from knowing the price that Medicaid 
pays for each drug.
  Let me say say parenthetically that it is generally agreed that the 
price Medicaid pays is in point of fact the best price. So this would 
be a very relevant piece of information. We can't say for sure even 
with respect to a federally funded program what we are spending on a 
particular drug. We don't know what Medicaid pays for Claritin, 
Mevacor, or Prilosec. We just do not know that. We know the total price 
we are paying for drugs generally, and what we are spending for drugs. 
But we do not know what we are paying for them separately. This 
information needs to be made available because making price information 
available will help purchasers and consumers alike.
  Today, anyone can get on the Internet to find the lowest price 
available

[[Page S7857]]

for a given airline flight. I think the question needs to be asked: Why 
shouldn't the public have access to price information on something that 
is so critical and that may be necessary to save one's life, or to 
prevent the onset of some debilitating disease, or to ameliorate its 
impact, the information with respect to the average manufacturer price 
and the best price?
  The bottom line is today there are no sources of good price 
information for consumers and purchasers, thus keeping prices 
artificially higher than they would otherwise be.
  The legislation which we introduce today would be extremely helpful 
in correcting this. The market-based price information this bill would 
provide would help all purchasers, employers, and pharmacy benefit 
managers who are at a disadvantage without true price information.
  Employers are struggling with increasing premiums. In large part, 
premiums are increasing because of rising drug expenditures. And, yet, 
employers don't have the information they need to assess whether the 
premium increases are appropriate. The answer to that is because 
without knowing the prices and the rebates that the pharmacy benefit 
managers are negotiating, they are not able to determine if the 
pharmacy benefit managers are passing along the rebates to them in the 
form of lower costs and lower premiums.
  Further, neither the PBMs nor the employers know if the drug 
companies are being candid with them. When they try to negotiate lower 
prices with the manufacturer, they are told, no, we can't give you that 
price because it is lower than the best price. The employers and the 
PBMs have no way of knowing in point of fact whether it is true. The 
battleground is really a negotiation of what these prices are. That is 
the information we don't know. In effect, those who negotiate with the 
pharmaceutical industry go into that combat with one arm tied behind 
their backs and blindfolded as to what the average manufacturer price 
and the best price is.
  Let me say that this piece of legislation is going to provoke an 
outcry. You don't have to have a degree from Oxford. You don't have to 
have a Ph.D. from some of our most distinguished institutions in 
America. Who would one think would dislike this information? My 
friends, the pharmaceutical industry doesn't want you to know.
  Undoubtedly, the provision that is in the law today was crafted for 
their benefit. It certainly was not crafted for the benefit of employer 
groups, or health care providers who negotiate pharmaceutical benefits. 
It certainly was not put in to protect consumers. It is not in their 
best interests.
  I am sure we are going to have a predictable outcry that some 
horrendous draconian thing will occur if we make these prices 
available.
  My view is that transparency is essential. Make the prices available, 
and let this free marketplace that we all talk about that has produced 
such an extraordinary standard of living for us be the envy of the 
world. Nobody is suggesting that the free market could not, nor would, 
in my judgment, provide some of the dynamics that would help to keep 
the costs down. Let an honest negotiating process occur.
  The lack of market-based information has an effect on the Federal 
budget--not only for consumers in terms of the medications they pay for 
but all taxpayers.
  Whether in Congress--and I profoundly hope we will in fact--makes 
that prescription drug benefit a part of Medicare, or a subsequent 
Congress, this is an idea whose time has come. It will occur. It may 
not occur in my time. I leave at the end of this year. But it is going 
to occur. There are dramatic cost implications. Without the benefit of 
this information, it will be very difficult indeed.
  Let's just talk for a moment in terms of prices, information that is 
made available, and the generic formulas that we use for reimbursement.

  Although the average wholesale price is not a true market measure 
price--this is set by the industry--it is used to determine Medicare 
reimbursement for the few drugs that are currently covered by Medicare.
  The prescription Medicare benefit is very limited. I would like to 
see the Medicare prescription benefit extended through Medicare as an 
option, as we have a voluntary option under Part B. I don't want 
anybody to be confused, but there are some drugs that are covered in 
concert with the physician's prescriptions.
  The average wholesale price minus 5 percent--what is wrong with that? 
What is wrong with that is this average wholesale price is a fix. It 
means nothing. It is the price that the drug companies get together and 
tell us is the average wholesale price. Yet that is the reimbursement 
mechanism that is used for Medicare.
  Medicaid, which is a program, as we all know, that involves 
participation by the Federal and the State governments and made 
available to the poorest of our citizens, represents a rather 
substantial cost to the taxpayer. My recollection is that cost is in 
the neighborhood of about $17 billion a year.

  Here is how that formula worked. This is the Medicaid benefit: The 
average wholesale price minus 10 percent. Remember, this is a price set 
by the pharmaceutical industry; it is not a market-driven price. 
Multiply that times the units--whatever the number of prescriptions, 
say an allergy drug or a drug for elevated cholesterol level--times 
15.1 percent of the average manufacturer price. This is the one we are 
precluded from knowing. Or take the average manufacturer price, minus 
the best price. This information we don't know, and we should be able 
to get this information.
  What can happen with respect to the Medicare reimbursements--because 
the physicians who prescribe this medication get the average wholesale 
price minus 5 percent, we do not know what the physicians are actually 
paying the pharmaceutical industry for the drugs. According to the 
Justice Department, the Health and Human Services Office of the 
Inspector General, and our colleague in the other body who chairs the 
Commerce Committee, the average wholesale price has been manipulated in 
order to reap greater Medicare reimbursements.
  The way that works, the doctor prescribes something covered by 
Medicare and reimburses the average wholesale price minus 5 percent. In 
point of fact, your physician may be paying much, much less to the 
pharmaceutical industry. So the spread is the physician's profit, and 
there is potential for abuse.
  I am not suggesting in any way that a physician should not be 
compensated for his care. I am proud to say my son is a physician, a 
cardiologist. But you ought not to be able to manipulate the wholesale 
price--which is this fiction we have talked about--and then allow the 
physician to seek payment from the pharmaceutical industry at a price 
that is substantially less than what Medicare is paying. That gouges 
the American taxpayer. That is the issue that concerns us.
  As I have indicated, drug companies have artificially inflated this 
average wholesale price, which results in these inflated Medicare 
reimbursements to physicians, and the manufacturer then in turn 
provides the discounts, and the physicians can keep the difference. If 
the average wholesale price of the drug is $100, minus 5 percent would 
be $95, and if the physician actually only pays $50, the physician is 
getting $45 as part of that spread. That is much less than he is 
actually paying. Medicare, conversely, is reimbursing the physician at 
a far greater price than the physician is actually paying for that 
medication.
  The need for better information has never been greater. Medicare drug 
benefit is critical and should be enacted this year. I truly hope it 
will be. Accurate market-based price information will ensure the best 
use of the taxpayer dollars financing this benefit and the lowest 
possible beneficiary coinsurance; that is, the amount, the coinsurance, 
the beneficiary has to pay.
  This should be an easy call. Transparency promotes a fair market. We 
are all for that, I believe. Price information leads to price 
competition. I think we are all for that. That competition leads to 
lower prices for employers, for health plans, and for consumers. I 
think we are all for that.

  So at a time when drug prices are increasing at two to three times 
the rate of the overall rate of inflation, referred to as the Consumer 
Price Index, at a time when the same drugs prescribed by veterinarians, 
for use by pets--the identical medication--are priced lower than the 
same drug prescribed by prescriptions for doctors' use for people,

[[Page S7858]]

at a time when the primary information consumers have about 
prescription drugs is through the $2 billion annually spent by the 
industry on direct-to-consumer advertising, and those ads never mention 
price --these are the things we are bombarded with on television; we 
see full pages in the leading newspapers in the country--at a time when 
Americans are traveling to foreign countries--to Canada and Mexico, in 
particular--to obtain lower prices, why shouldn't we be doing whatever 
we can to encourage competition in the United States and to lower the 
price of drugs sold in this country?
  I think it is a no-brainer. I think we should set the market forces 
in action. We simply need to allow the public to have access to readily 
available market-based information. This is commonsense, easy-to-
understand, easy-to-implement legislation. We should pass it this year. 
There is no new bureaucracy created. We can have the information at 
HHS. All this legislation would do is require it be made available. The 
potential benefits are enormous.
  It will be interesting to see how this debate unfolds on this 
legislation because my colleagues have not heard the last of me on this 
issue. This makes a lot of sense, whether we do or do not succeed this 
year in extending a prescription benefit as part of Medicare. We ought 
to do it. We can do it. We should do it. I hope my colleagues will join 
me in a bipartisan effort to do so.
  I yield the floor.
                                 ______