[Congressional Record Volume 153, Number 6 (Thursday, January 11, 2007)]
[Senate]
[Pages S407-S409]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                 GOVERNMENT NEGOTIATION OF DRUG PRICES

  Mr. GRASSLEY. Mr. President, I did not come to the floor to talk 
about Iraq. I am not on too many of the committees that deal with 
foreign relations and military issues. I am on the Finance Committee, 
serving as a team player with the capable chairman of that committee, 
Senator Baucus, to deal with health issues, tax issues, and trade 
issues.
  One of the health issues I have been speaking on for the last several 
days is the issue of Medicare and prescription drugs. For 3 days you 
have heard this Senator say why Democratic efforts to ruin the Medicare 
prescription drug program by doing away with the nonintervention clause 
is bad for senior citizens. I will take this fourth day of speaking to 
quote from other experts because I don't presume that any of the other 
99 Senators care what I say. I have said it anyway. But I want to back 
up what I have said over the last 3 days by quoting from other people 
whom other Senators may be listening to in the period of time between 
now and a couple of weeks from now when this issue of prescription 
drugs is going to come up.
  On Monday I spoke about how the benefit uses prescription drug plans 
and competition to keep costs down and how well that is working. I 
backed that up statistically. I said it then, and I say it again: If it 
ain't broke, don't fix it.
  I presented findings from the chief actuary at the Center for 
Medicare Services. And for the benefit of a new Senator chairing, this 
chief actuary is the one people on his side of the aisle were quoting 
so extensively, that there was a much higher figure coming out of the 
administration than what the CBO had, and there was an effort to keep 
that hidden--what the chief actuary said it would cost--from the 
Congress so that we would pass a bill that was more expensive than we 
said it was. And if he could be quoted then, I want people to listen to 
him now.
  I also quoted experts from the Congressional Budget Office, 
explicitly rejecting opponents' claims that giving the Secretary of 
Health and Human Services the authority to negotiate with drug 
companies would produce savings.
  Today I will let the words of others from across the political 
spectrum and from the news media do the talking. I will begin with 
Secretary Michael Leavitt, head of the Department of Health and Human 
Services, who said:

       Government negotiation of prices does not work unless you 
     have a program completely run by the government. Federal 
     price negotiations would unravel the whole structure of the 
     Medicare drug benefit, which relies on competing private 
     plans.

  Just today, the Secretary wrote an op-ed in the Washington Post that 
if the Government was required to negotiate--I am quoting the 
Secretary--``one government official would set more than 4,400 prices 
for different drugs, making decisions that would be better made by 
millions of individual consumers.''
  The Secretary went on to say:

       There are many ways the administration and Congress can 
     work together to make health care more affordable and 
     accessible. But undermining the Medicare prescription drug 
     benefit, which has improved the lives and health of millions 
     of seniors and people with disabilities, is not one of them.

  The next person I would like to quote is Dan Mendelson, a former 
Clinton administration official, who now is president of a health care 
consulting firm that tracks Medicare prescription drug programs. Mr. 
Mendelson, a former Clinton administration official, said:

       From a rhetorical perspective, Democrats may feel like they 
     gain a lot with this issue, but there are many substantive 
     hurdles that the government faces in trying to negotiate 
     prices. If you look historically at the government's 
     experience in trying to regulate prices, it's poor.

  That was an official from the Clinton administration. As supporting 
evidence, a Chicago Tribune editorial said the following:

       Richard S. Foster, the chief actuary for the Centers for 
     Medicare and Medicaid Services, studied whether direct 
     government negotiation would yield bigger discounts. His 
     answer: Not likely.

  One reason, he said, was Medicare's unreassuring record on price 
negotiations, even before this new benefit was passed.
  I made the point the other day that over the last 40 years, we have 
seen CMS, HHS, price health care, wasting a lot of taxpayers' dollars, 
because the Government has overpriced things, overreimbursed things. 
Mobile wheelchairs is just the most recent example I have used in some 
of my hearings in my committee while I was chairing it.
  Medicare has a history, following on what I said, of paying for some 
drugs ``at rates that, in many instances, were substantially greater 
than the prevailing price levels. Translation: The feds got fleeced.''
  That is the chief actuary that people on the other side of the aisle 
were quoting so liberally 3 years ago. I hope they will take his 
analysis of what is going on now in Medicare, working well for seniors, 
into consideration before they screw everything up with an amendment to 
do away with the noninterference clause.
  Now I want to show you a chart. I guess this will be the first chart. 
I

[[Page S408]]

want to start with the Washington Post in November, when they printed a 
quote from Marilyn Moon, director of the health program at the American 
Institutes for Research. She is a former trustee of the Social Security 
and Medicare trust funds, a former senior analyst of the Congressional 
Budget Office, and the new Senator presiding will find out that the 
Congressional Budget Office is God here. If they say something is going 
to cost something, it costs something. If we think it costs less, we go 
by what they say. If you want to overrule them, it takes a 60-vote 
supermajority. Marilyn Moon is currently president of the board of the 
Medicare Rights Center.
  She says:

       This is going to be much more of a morass than people 
     think. Negotiating drug prices is a feel good kind of answer, 
     but it's not one that is easy to imagine how you put it into 
     practice.

  Dr. Alan Enthoven, professor at Stanford University, now emeritus--we 
often read his writings because he is such an expert in health care 
financing--wrote in the Wall Street Journal an opinion piece:

       When the government negotiates its hands are tied because 
     there are few drugs it can exclude without facing political 
     backlash from doctors and the Medicare population, a very 
     influential group.

  Quoting further from Dr. Enthoven:

       Congressional Democrats need to be careful in making the 
     logical leap from market share to bargaining power. 
     Empowering the government to negotiate with pharmaceutical 
     companies is not necessarily equivalent to achieving lower 
     drug prices. In fact, neither economic theory nor historical 
     experience suggests that will be the outcome.

  An editorial in the Dallas Morning News echoed my statement from 
Monday that beneficiaries do not want the Government in their medicine 
cabinet. A quote from the Dallas editorial:

       Giving the feds the power to negotiate drug prices for 
     seniors would effectively cede control of the pharmaceutical 
     industry to Washington. When congressional Democrats press 
     for this change, remember they're pushing for much more than 
     lower prices. They're seeking to move the line where 
     government should stop and the marketplace should start.

  But let's talk about who really matters in this case. Who really 
matters are the beneficiaries, the senior citizens, the disabled people 
on Social Security, and, of course, the taxpayers ought to be given 
equal or more consideration. Once again, to emphasize, if it ain't 
broke, don't fix it.
  In 2006, premiums were 38 percent lower than originally anticipated. 
By ``originally anticipated,'' I mean the work that was done by CMS and 
the Congressional Budget Office to give us information when we wrote 
this bill in 2003. We also find out that the net cost to the Federal 
Government is lower than expected. The 10-year cost of Part D has 
dropped $189 billion, representing a 30-percent drop in the actual cost 
compared to the original projections.
  I ask: How many times do Government programs come in under cost? 
Every day we are reading about cost overruns of Government programs, 
and here is one that is coming in 30 percent under cost, and somebody 
wants to screw it up by offering amendments to change what has worked, 
the one lever that has brought about 35-percent lower prices for the 25 
drugs most used by senior citizens, and that is on top of the 38-
percent lower price for premiums to which I have already referred.
  A poll of the Medicare beneficiaries by J. D. Power & Associates, 
which takes consumer temperatures of all sorts of products, found that 
45 percent of the beneficiaries surveyed were ``delighted'' with the 
Medicare drug benefit. They gave their own drug plan a 10 on a 10-point 
scale, and another 35 percent of those surveyed gave their prescription 
drug plan an 8 or 9 rating on a 10-point scale. And other polls are 
consistent. So that is 80 percent satisfied.
  All of the program's successes have been challenged at various times 
by this program's opponents, and each time these challenges have been 
proven wrong.
  As the plan continues to return positive results, skeptics are 
beginning to change their opinion as well. I want to quote Dr. 
Reischauer, who is former Director of the Congressional Budget Office, 
and has great respect on the Democratic and Republican sides. He is a 
nationally known expert on Medicare. Currently, he is president of the 
Urban Institute and serves as vice chair of the Medicare Payment 
Advisory Commission.
  This is a very candid statement by somebody who had their doubts 
about this program when it was put in place. He says:

       Initially, people were worried no private plans would 
     participate.

  In other words, we were patterning it, as I said, after the Federal 
Employees Health Benefits Program of 50 years. We wanted to transplant 
that for the benefit of senior citizens in Medicare. We didn't know if 
our program would work, even though it worked for Federal employees. As 
he said, there were doubts.
  Continuing to quote:

       Then too many plans came forward.

  Parenthetically, a heck of a lot more plans than we anticipated. We 
even thought at one time there were going to be so few plans, and 
because we wanted people to have some choice, that we were going to 
have to have the Federal Government subsidize an extra plan just for 
people to have choice. But then the complaint was too many plans.
  He goes on to another point:

       Then people said it's going to cost a fortune. And the 
     price came in lower than anybody thought. Then people like 
     me--

Meaning Dr. Reischauer--

     said they're low-balling the prices the first year and 
     they'll jack up the rates down the line.

That is what he thought.

     And, lo and behold, the prices fell again. At some point you 
     have to ask: What are we looking for here?

  Let me tell you what the press is saying.
  First, a Washington Post editorial represented an insightful view, 
saying:

       A switch to government purchasing of Medicare drugs would 
     choke off this experiment before it had a chance to play out, 
     and it would usher in its own problems. For the moment, the 
     Democrats would do better to invest their health care energy 
     elsewhere.

  A USA Today editorial took it a step further, saying:

       A deeper look, however, suggests that the Democrats' 
     proposal was more of a campaign pander than a fully baked 
     plan . . . governing is different than campaigning. The 
     public would be best served if the new Congress conducts 
     indepth oversight to gather the facts, rather than rushing 
     through legislation within 100 hours to fix something that 
     isn't necessarily broken.

  In other words, this Senator says, for a third time, if it ain't 
broke, don't fix it.
  Finally, put simply by the National Review, Government negotiation 
``is a solution in search of a problem and could unnecessarily disrupt 
a benefit that is working well for seniors.''
  I am sure the Presiding Officer doesn't want to disappoint people in 
Montana.
  What compounds the problem is the fact that neither I nor anyone else 
has heard Democrats explain how Government negotiation would work. I 
spoke a great deal about this yesterday. I am not going to go into the 
details of it, but I want my colleagues to hear what the New York Times 
says. How many times do I quote the New York Times? But when it is very 
useful, I like to do it.
  They raise these questions about the Democrats' proposal, H.R. 4, as 
seen by ``many economists and health policy experts . . . as a 
paradox.''
  On the one hand, Democrats want the Government to negotiate lower 
drug prices for Medicare beneficiaries, but, on the other hand, they 
insist that the Government should not decide which drugs are covered. I 
made clear yesterday, if you don't have a formulary, as the House bill 
does not have, you have no lever for the Government to negotiate. That 
is why the Veterans' Administration put in a formulary.

  People say they want to do it like the Veterans' Administration does. 
Then why does the first bill in the House of Representatives take out 
the only tool by which the Veterans' Administration leverages lower 
prices?
  Continuing the paradox issue brought up, and I am quoting from the 
New York Times:

       The bill says the Secretary ``shall negotiate'' lower 
     prices. On the other hand, the drug benefit would still be 
     delivered by private insurers. Each plan would establish its 
     own list of covered drugs, known as a formulary, and the 
     Secretary could not ``establish or require a particular 
     formulary.''

  In the same New York Times article, James R. Lang, former president 
of Anthem Prescription Management--a

[[Page S409]]

drug benefit manager is what he is--said this:

       For this proposal to work, the Government would have to 
     take over price negotiations. It would have to take over 
     formularies. You can't do one without the other.

  But the House bill just introduced says you can. That is a 
parenthetical on my part.
  Continuing to quote:

       Drug manufacturers won't give up something for nothing. 
     They will want a preferred position on the Medicare 
     formulary--some way to increase the market share of their 
     products.

  The only comparison I know of is, of course, the Veterans' 
Administration. I have already referred to that point. So when people 
come up to me and ask why the Government negotiates for veterans and 
not for seniors, I tell them what the Medicare system, modeled after 
the VA, would look like.
  Yesterday I spent some time explaining what Government negotiations 
looked like for the VA and other Federal programs. Again, instead of 
listening to my words, I want my colleagues to hear what other people 
have said.
  As explained in the Washington Post:

       The veterans program keeps prices down partly by 
     maintaining a sparse network of pharmacies and delivering 
     three-quarters of its prescription by mail . . . Moreover, 
     the program for veterans is in a position to negotiate hard 
     with drugmakers because it can credibly threaten not to buy 
     from them. Its plan excludes new medicines.

  Why would any person on the other side of the aisle, or even a 
Republican who might want to consider doing this, want to deny any drug 
to a senior citizen? But the VA program excludes 70 percent of the 
drugs that senior citizens can get under Part D. And why would anybody 
backing these plans want to follow the Veterans' Administration and 
deliver three-quarters of the prescription drugs by mail? Do they want 
to ruin their community pharmacist? I don't think anybody does.
  The Los Angeles Times continues the discussion, stating:

       Applying the VA approach to Medicare may prove difficult. 
     For one thing, Medicare is much larger and more diverse. VA 
     officials can negotiate major price discounts because they 
     restrict the number of drugs on their coverage list. Instead 
     of seven or eight drugs for a given medical problem, the VA 
     list may contain three or four. If a drug company fails to 
     offer a hefty discount, its product may not make the cut.

  Mr. President, the final thoughts I will leave with you today come 
from a letter sent by the nonpartisan Congressional Budget Office. I 
want to make clear to the new Senators that the Congressional Budget 
Office is ``god'' around here because when ``god'' speaks up and says 
something costs something and you disagree with them, your disagreement 
doesn't mean anything unless you have 60 votes to override them, a 
supermajority.
  The Congressional Budget Office, after reviewing the Democratic bill 
in the House of Representatives at the request of Chairman Dingell, the 
chairman of the Committee on Energy and Commerce, concluded the 
following, and here I am quoting again and I have a chart on this 
quote:

       H.R. 4--

That is the Democratic bill in the House--

     would have negligible effect on federal spending because we 
     anticipate that 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 PDPs under current 
     law.

  The letter continues to say:

       . . . [W]ithout the authority to establish a formulary, we 
     believe that the Secretary would not be able to encourage the 
     use of particular drugs by Part D beneficiaries, and as a 
     result would lack the leverage to obtain significant 
     discounts in his negotiations with drug manufacturers.

  In conclusion, the CBO's letter to Mr. Dingell says:

       . . . [T]he PDPs have both the incentives and the tools to 
     negotiate drug prices that the government, under the 
     legislation, would not have.

  I think that pretty much sums it up. I can think of nothing more to 
say than what the CBO says in regard to the Democratic bill in the 
House of Representatives. But maybe to quantify all this, I have 
already said that the 25 drugs used by seniors most often--the way we 
price drugs now through plans negotiating for their members to drive 
down the price of drugs--the average price of those 25 drugs is down 35 
percent. If it ain't broke, don't fix it.
  As I said earlier this week, I hope we can put politics aside and 
focus on some of the real improvements we could be making in the drug 
benefit. I wrote it. There are items that need to be changed, and I 
mentioned some of those items on Monday. This is what we should be 
focusing on instead of trying to fix something that ain't broke. I 
still hope that reason will prevail around here.
  I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Texas is 
recognized.
  Mr. CORNYN. Mr. President, I ask unanimous consent that each side's 
period of morning business be extended by an additional 15 minutes.
  Ms. MIKULSKI. Mr. President, reserving the right to object, in the 
spirit of comity and accommodation, to clarify with the Senator, how 
much time does the Senator from Texas and the Republican minority have?
  The ACTING PRESIDENT pro tempore. Twelve minutes remain.
  Ms. MIKULSKI. Is the Senator saying another 15 minutes after that 12 
minutes?
  Mr. CORNYN. Mr. President, responding to the distinguished Senator 
from Maryland, I need 10 minutes, and my colleague from Colorado is 
asking for some time to speak as in morning business as well. If we can 
try to work that out----
  Ms. MIKULSKI. Mr. President, may I offer an accommodating suggestion, 
that after the Senator from Texas speaks, I be allowed to speak--I need 
about 10 minutes--and then the Senator from Colorado can speak. But if 
you have your 12 and another 15, it really will cause havoc over here.
  Mr. ALLARD. Mr. President, can we work out maybe an agreement for 10 
minutes for Senator Cornyn, the Senator from Maryland uses her 10, and 
then I would like to have 15 minutes. I ask unanimous consent for that.
  Ms. MIKULSKI. I have no objection to that.
  Mr. CORNYN. I have no objection.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  Mr. CORNYN. I thank the Senators.
  The ACTING PRESIDENT pro tempore. The Senator from Texas is 
recognized.

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