[Congressional Record Volume 151, Number 8 (Tuesday, February 1, 2005)]
[Senate]
[Pages S745-S747]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. SNOWE (for herself, Mr. Wyden, Mr. McCain, Mrs. Feinstein, 
        and Mr. Feingold):
  S. 239. A bill to reduce the costs of prescription drugs for medicare 
beneficiaries, and for other purposes; to the Committee on Finance.
  Ms. SNOWE. Mr. President, Senator Wyden and I broke new ground 
together when we introduced the first bipartisan Medicare Prescription 
drug bill known as SPICE back in 1999. And after Congress passed the 
historic Medicare Modernization Act of 2003, Senator Wyden and I 
authored legislation aimed at ensuring long term value of the drug 
benefit to seniors. Today we are joined again by Senator Feinstein, who 
has been committed with us to forging a bipartisan effort to do what we 
must today--to move beyond offering a benefit and ensure that we meet 
our obligation to address affordability.
  When we consider both a recent ten year cost estimate of over $534 
billion for the prescription drug benefit, and drug price increases 
which have rapidly outpaced inflation and earnings, we could see the 
benefit to seniors depreciated--and the cost to the Federal Government 
increased. So today we introduce The Medicare Enhancements for Needed 
Drugs Act of 2005, MEND, today to manage costs, and assure seniors will 
receive better value for their dollar.
  This bill provides both better consumer information to help 
beneficiaries and the negotiation power to assure that the power of 
millions of seniors will result in competitive pricing. That is why two 
of our colleagues--Senators McCain and Feingold--have now joined us in 
this effort.
  Ours is a simple approach informed by a ``healthy dosage'' of common 
sense. It simply makes no sense to cut off the ability of the HHS 
Secretary--the individual who is responsible for the success of this 
benefit--from negotiating on behalf of beneficiaries. That's why our 
legislation repeals the ``noninterference provision'' of the 
prescription drug bill and authorizes the Secretary of Health and Human 
Services to participate in negotiations on drug prices. Last month when 
Secretary Thompson announced his departure from HHS, he described 
several issues of critical concern--one of these was that he had been 
barred from negotiating on behalf of beneficiaries. He noted, ``I would 
like to have had the opportunity to negotiate''. And for good reason! 
The Congressional Budget

[[Page S746]]

Office has confirmed that this negotiation authority can help us 
realize savings, particularly for drugs that lack significant 
competition.
  When Senator Gregg recently queried Secretary Leavitt about keeping 
the cost of the Part D program within the original $400 billion budget, 
and the Secretary asserted that ``It's my practice as a manager to act 
within my budget''. That will require competition, so I ask why 
wouldn't we employ negotiation to do what it does best--drive costs 
down? I asked Secretary Leavitt about negotiation at his confirmation 
hearing in the Finance Committee and he told me, ``I know little about 
negotiation authority, but there are times when the national government 
should play a role''. Well, that time is now. Senator Wyden and I have 
received our first report on drug price trends from the GAO, and the 
news isn't good. Since 2000, the increase in prescription drug prices 
has increase at two to three times the rate of inflation. And worse, we 
found the rate spiked in 2002, just as we were working to create a 
prescription drug benefit. It's no wonder that the Congressional Budget 
Office projects an annual increase of about 8.5 percent in costs, most 
of which can be attributed to the rise in prices. But we can address 
this problem, and avoid depreciating the value of this long sought 
benefit.
  To do so you must do more than simply end the prohibition on the 
Secretary negotiating, you must do more than simply granting permissive 
authority, you must actually ensure that when needed, the Secretary 
will negotiate.
  So our legislation will not only empower the HHS Secretary to 
negotiate but, under two circumstances, requires it. For those 
beneficiaries who do not have access to two prescription drug plans, 
the Secretary steps in with a fallback plan, and this plan must be 
competitive--so the Secretary must assure that he negotiates on behalf 
of those beneficiaries. In addition, the Secretary must be responsive 
to the needs of the plan providers. When a manufacturer simply is not 
inclined to negotiate--as may occur when competition for a drug is 
lacking--then the Secretary must respond when plans request his 
assistance in negotiations.
  Some will say this will compel excessive involvement by the 
Secretary, but the truth is quite to the contrary. Plans will compete 
to gain advantage, and it is when they are stymied and cannot achieve 
reasonable discounts that they will call upon the Secretary. CBO 
foresaw one such situation--when a drug lacks significant competition--
and those are among our most expensive drugs!
  The buying power of millions of seniors should produce substantial 
savings, but at the same time, competitive plans won't help if seniors 
cannot identify which plan is right for them.
  Senator Wyden and I believe we must arm beneficiaries with 
information. Our bill requires GAO to track not only the price of drugs 
under the Medicare program, but calls for that price to be compared to 
the price negotiated by the VA, DOD and other privately run systems. We 
will have a measure of how well the seniors are being served.
  This bill will also help seniors determine which Medicare plan offers 
the most savings by requiring that beginning in 2007 the Centers for 
Medicare and Medicaid Services will determine the savings received from 
each plan by the average Medicare beneficiary, using a market basket of 
commonly-used drugs. This will allow seniors to make the proverbial 
``apples to apples'' comparison. This information will be shared with 
all beneficiaries during the annual enrollment period each fall, and 
will be a great help as a starting point for seniors to compare plans.
  Our legislation will make annual the report Senator Wyden and I first 
requested following passage of the prescription drug bill in 2003. We 
asked the GAO to review changes in drug prices from 2000 through 2003, 
focusing on the drugs most likely to be used by seniors, and the 
results are in: Prescription drug prices have increased at two to three 
times the rate of inflation.
  Finally, many advocates and seniors alike have raised questions about 
the restriction of Medigap policies under the new Part D benefit. The 
prohibition of the sale of new Medigap policies which include 
prescription drug coverage has prompted the need for a re-examination 
of the role of Medigap plans. So we have directed the Secretary to work 
with the National Association of Insurance Commissioners to conduct a 
review of the changes to the Medigap policies and to evaluate the 
impact on Medicare beneficiaries. It is an important step in looking at 
the future of Medigap plans. With this report in hand, we will have the 
information necessary to make wise adjustments.
  Some say we don't need to act now. But we have seen drug price 
increases which are driving costs upwards--contributing to the 
estimated 8.5 percent annual increases in costs projected by CBO. We 
simply cannot wait until 2006 to address the issue of drug prices. This 
bill provides beneficiaries and our government with the information and 
tools necessary to achieve access to low-cost prescription drugs. I 
urge my colleagues to join me in support of this bill so that we can 
pass it quickly.
  Mr. WYDEN. Mr. President, Senator Snowe and I are once again teaming 
up to work on a bipartisan commonsense proposal to help America's 
seniors receive affordable prescription drugs. Our bill, ``The Medicare 
Enhancement for Needed Drugs Act'' or ``MEND Act'' focuses on cost 
containment.
  At our request, the U.S. Government Accountability Office (GAO) 
recently reviewed drug cost trends. For 77 prescription drugs 
frequently used by seniors on Medicare the usual and customary price 
increased 21.8 percent from January 2000 through June 2004, a 4.6 
percent average annual rate of increase. They also found that the 
process for the brand drugs increased 26.4 percent for that same time 
period whereas prices for generic drugs increased 8.3 percent. We need 
to make sure that Medicare has every weapon in its arsenal to assure 
seniors and Medicare get the best deal possible on prescription drug 
prices.
  One of the most important tools for Medicare to use to assure better 
prescription drug prices for seniors is bargaining power. That tool is 
missing from the legislation Congress passed in 2003. The legislation 
that Senator Snowe and I are introducing today, the MEND Act, would 
provide the Secretary of Health and Human Services that tool. As 
responsible stewards of the taxpayers' money, Congress must provide 
Medicare all the tools, including bargaining power, in its cost 
containment arsenal.
  This concept was endorsed by the outgoing Secretary of Health and 
Human Services, Tommy Thompson. The Congressional Budget Office in a 
letter to me last March stated that striking the so-called ``non 
interference'' provision in the Medicare Prescription Drug Improvement 
and Modernization Act could provide opportunities for savings.
  In addition to providing the Secretary with bargaining power, the 
MEND Act will require the Secretary to negotiate on behalf of what are 
known as ``fall back'' plans, those plans that are provided when there 
is no choice of a drug plan and the company administering the benefit 
is not at risk. In addition, if any plan asks the Secretary for 
assistance in negotiations for any covered drug, the Secretary must 
assist the plan. Lower drug prices should mean lower premiums; lower 
out of pocket costs and a better benefit.
  America's seniors are savvy and they will shop around for a plan that 
is going to provide them the best deal on prescriptions. That is why 
the MEND Act also requires Medicare to provide a comparison of how much 
a plan is saving seniors on the cost of the most commonly used drugs. 
Giving seniors more control over their health care and health care 
dollars will also help keep costs down.
  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.

[[Page S747]]

  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.
                                 ______