Congressional Record, Volume 153 Issue 8 (Tuesday, January 16, 2007)

[Congressional Record Volume 153, Number 8 (Tuesday, January 16, 2007)]
[Senate]
[Pages S533-S536]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

PRESCRIPTION DRUGS

Mr. GRASSLEY. Mr. President, I am going to proceed in morning
business, but I want to welcome the new Senator from Virginia to the
Senate. I look forward to serving with him. I am sorry that maybe the
Senator's first time being in the chair he has to listen to my speech,
but I am very glad to have the opportunity to speak to you and Members
of the body and the people of the United States about a very important
issue that is going to be coming before us. This is an issue that I
have been speaking about for the last several days on the floor. In
fact, I think 4 days last week I did. I talked about the Medicare
prescription drug benefit and the so-called prohibition on Government
negotiation with drugmakers for low prices. I spent time doing that
because people need to understand that some proposals could have
drastic consequences, not only for Medicare and the beneficiaries of
Medicare but also for anyone else who buys prescription medicine.
I want to make this very clear because when you are talking about
seniors and the disabled on Medicare, and on prescription drugs, you
might get the impression that we make a decision here, and the only
people it is going to affect are those on Medicare. But I hope I made
it very clear last week, and I am going to go over this again today.
In other words, if we change Medicare in this instance dealing with
the prices of prescription drugs, it will increase prices of
prescription drugs for everybody. It is not going to impact just those
on Medicare, the decisions we make. I have said it before, and I say it
again: Having the Government negotiate drug prices for Medicare might
be a good sound bite, but it is not sound policy if it is going to
increase the price of prescription drugs for everybody regardless of
age in the United States.
I think the House bill, which is numbered H.R. 4 and passed the House
last week, very definitely falls into that category. It may be a good
sound bite. It may be very politically beneficial. But a good sound
bite is not good policy. It will be bad for Medicare beneficiaries and
other consumers of prescription drugs.
That outcome was voiced by witnesses just last week when they
appeared before the Senate Finance Committee, chaired by the Senator
from Montana, Senator Baucus.
At that hearing, one of the witnesses, Dr. Fiona Scott Morton, a
professor of economics at Yale University, made a key point about the
size of the Medicare market and when you deal with the price that
Medicare recipients pay for drugs, the fact that it has negative
consequences for everybody else in America.
She pointed out that of course we all want to obtain discounts for
drugs for seniors. But she said:

With close to half of all spending being generated by those
seniors, whatever price they pay will tend to be the average
price in the market.

Her point is, if you are half of the market, the math makes it
virtually impossible for your prices to be below average. Dr. Scott
Morton said that because Medicare is so large, if drugmakers had to
give it the lowest price they give any customer, they would have a
strong incentive to increase their prices for everybody else.
Professor Scott Morton also stated:

This approach to controlling prices harms all other
consumers of pharmaceuticals in the United States and is bad
policy.

[[Page S534]]

I pointed out how Part D has already given seniors, on the 25 drugs
most used by seniors, 35-percent lower prices than we anticipated when
we wrote the bill. While it is great to be doing things for seniors,
there is no free lunch. Everybody, regardless of age, will pay more for
prescription drugs. Do you want that to happen? Do you want those
unintended consequences to happen?
Then we had another witness at the hearing held by Senator Baucus
before the Senate Finance Committee last week. It was a representative
of the Government Accountability Office who talked about its Year 2000
report on this very issue, and echoed Professor Scott Morton's view.
Remember, in 2000 the General Accounting Office concluded:

Mandating that federal prices for outpatient prescription
drugs be extended to a large group of purchasers such as
Medicare beneficiaries could lower the prices they pay, but
raise prices for others.

That is from a nonpartisan Government agency working for the Congress
of the United States called the Government Accountability Office.
One thing we keep hearing is that Medicare should not pay more than
the Veterans' Administration pays. We had another witness, Professor
Richard Frank of Harvard University, who said that if Medicare got the
same prices the Veterans' Administration gets for drug prices--if that
happened--it would likely raise Veterans' Administration prices for our
veterans for all drugs. Do you want to hurt veterans with these
unintended consequences of some of these ideas that are floating around
this new Congress?
Then we had other panelists. As they listened to Dr. Frank's
response, other panelists nodded in agreement. Talk about unintended
consequences, do you know who else agrees with these professors who
have been testifying before our committee? I point to the Military
Order of the Purple Heart. In a letter to Members of Congress, the
Military Order of the Purple Heart expressed its concern about the
impact that extending Veterans' Administration prices to Medicare could
have on veterans. In fact, they stated that several veterans
organizations passed formal resolutions opposing legislation to extend
the Veterans' Administration prices to Medicare because it would
threaten Veterans' Administration's current discounts.
What is the end result? Higher drug prices for those who get their
drugs from the Veterans' Administration.
Another key point made at last week's hearing before the Senate
Finance Committee was that it is not simply about the number of people
for whom you are buying drugs. In response to a question I asked
Professor Scott Morton, the professor said it doesn't matter whether
you negotiate on behalf of 1 million people or 43 million people--which
is the number of senior citizens in this country. What matters is what
leverage you have and how you use that leverage. And if you don't have
a fundamental tool, and that would be the formulary, you have no
leverage over drugmakers. A formulary is a list of drugs that a plan
will cover.
Here is what Professor Scott Morton said would happen if someone
negotiating drug prices couldn't have a formulary:

Each manufacturer would know that, fundamentally, Medicare
must purchase all products. The Medicare ``negotiator'' would
have no bargaining leverage, and therefore, simply allowing
bargaining on its own would not lead to substantially lower
prices.

That is the end of the quote from Professor Scott Morton.
Then we had a Mr. Edmund Haislmaier, a fellow at the Heritage
Foundation, talk about the limits of bulk purchasing power alone. In
his written testimony he said:

. . . volume purchasing encourages manufacturer
discounting, it is not, in and of itself, sufficient to
extract large discounts. Manufacturers will only offer
substantial discounts if the buyer combines the ``carrot'' of
volume with the ``stick'' of being able to substitute one
supplier's goods with those of another.

In drug negotiation, that stick he is talking about--Mr. Haislmaier
is talking about--is the formulary.
Here is what is wrong with the House bill that just passed. It
prohibits the Secretary of Health and Human Services from using a
formulary. Thus the stick that is necessary, that the Veterans'
Administration uses to drive down the price of drugs, is not even in
the bill that passed the House that is supposed to guarantee senior
citizens lower drug prices.

For all of their talk about getting savings from Government
negotiations, the House Democrats took away a key tool to get lower
prices. That was a key lesson we also learned from last week's Finance
Committee hearing that Senator Baucus chaired.
Here is what the Congressional Budget Office said about H.R. 4. Here
I have a chart. The bottom line of it is that it would have negligible
effect on Federal spending. To emphasize that, I want to read it all.
For the benefit of new Members, I point out we will soon find out that
when you refer to the Congressional Budget Office, it is like God on
Capitol Hill. When the Congressional Budget Office says something costs
something--and you might have intellectually honest, good reasons for
disagreeing with it--the Congressional Budget Office is always right.
If there is a point of order against it, then you get 60 votes. The 60-
vote requirement around here almost makes anything or anybody or any
agency a god, because it is difficult to get 60 votes. So CBO generally
stands. Sometimes they are overridden but not very often. So this god
of CBO:

CBO estimates that H.R. 4--

I want to emphasize, that is the bill that just passed the House last
week, a Democratic bill--

would have negligible effect on Federal spending because we
anticipate that the Secretary--

meaning the Secretary of HHS--

would be unable to negotiate prices across a broad range of
covered Part D drugs that are more effective than those
obtained by PDPs under current law.

You heard it during the campaign. You heard it a long time before the
campaign. If we do away with this noninterference clause, we are going
to get drugs cheaper for the citizens. This is supposedly on top of the
35 percent of the average reduction in the price of the 25 drugs most
often used by senior citizens, and the god of Capitol Hill says there
is not going to be the savings. That is not only for the people who pay
out of their pockets some portion for drugs, but also saving the
taxpayers money.
I am going to quote another thing from the Congressional Budget
Office that gets back to this carrot and stick, the stick being the
formulary that is used by the Veterans' Administration to get the low
prices they get--the same pattern that proponents of doing away with
the noninterference clause want to follow, to get lower prices for
senior citizens, and that is the formulary. The Veterans'
Administration has a formulary, but the House bill passed last week
does not have a national formulary, so you do not have a stick to
accomplish the goals.

Without the authority to establish a formulary, we believe
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.

It is pretty clear that what we are being told you are going to get
as a result of the House-passed bill is not happening. So I would quote
another independent actuary--maybe not quite the god that CBO is, but
the actuaries at the Center for Medicare Services, the agency that
oversees the Medicare drug benefit. They said about the same thing
about H.R. 4 not having a formulary.

Although the bill would require the Secretary to negotiate
with drug manufacturers regarding drug prices, the inability
to drive market share via the establishment of a formulary or
development of a preferred tier significantly undermines the
effectiveness of negotiations.

Whether you are CBO, responsible to the Congress of the United
States, working for the Congress of the United States, or whether you
are the actuaries downtown at the Center for Medicare Services working
for the President of the United States--and maybe actuaries are fairly
independent--but the point being they came to the same conclusion, that
the tool that is necessary to accomplish what Democrats say they want
to accomplish by doing away with the noninterference clause to
negotiate prices with drug companies isn't going to be effective
because the tool to be effective is not in their legislation.

[[Page S535]]

Let me point out the key downside of having the Secretary establish a
national formulary in my next chart. Fewer drugs would be covered. I
have made a point about keeping the Government bureaucrat out of the
medicine cabinet, not to be the person between the doctor and the
patient. We set up, as a principle in the Medicare bill, to do it
differently than the Veterans' Administration because the Veterans'
Administration did not allow every therapy to be available to a
veteran. A bureaucrat makes a decision that a veteran can have this,
but a veteran cannot have that, the Government will not buy this. We
did not want the senior citizens to be treated that way, so every
therapy has to be available.
This chart shows only 30 percent of the drugs covered by Medicare
will be available to seniors if done the way the Veterans'
Administration does it. Do you want to get the complaints from the
seniors of America, as I sometimes get from veterans? They come to my
town meetings saying: My doctor says I should not take this pill
because there are side effects, I should take this one. Why won't the
Veterans' Administration let me buy this pill? The doctor said I ought
to have it.
I can go to the Veterans' Administration and advocate for this
veteran, but it is not a sure thing. We do not have to worry about that
with seniors.
Let me sum up two important points from the Senate Committee on
Finance hearing we had last week and from the experts from the
Congressional Budget Office and the chief actuary of Medicare.
First, giving Medicare the lowest price a drugmaker gives any
purchaser, whether that is a private plan or the Veterans'
Administration, will increase prices of prescription drugs for everyone
else in America. That means higher prices for working Americans and for
small businesses. Second, in summary, the ability to use a formulary to
negotiate means you have to be able to tell a drugmaker: If you do not
give me a good price, I will pick another drug to put in my formulary.
If you do not believe all the experts, if you do not believe all of the
people that have studied this over a long period of time, whom are you
going to believe?
I remind everyone from where the prohibition on negotiations came. We
have 10 new Members of the Senate, and a lot of them will not be
familiar with the genesis of the noninterference clause. The opponents
of the drug benefits seem to conveniently forget their own bills had
the same language and that they supported a benefit run by private
plans. My next chart demonstrates this better.
The prohibition of Government negotiation--what is referred to as a
noninterference clause--first appeared in Democratic bills; in total,
seven bills introduced and supported by 34 Senate Democrats and more
than 100 House Democrats had the prohibition in these legislation. On
top of that, many of the Members who are now twisting that language
cosponsored that very legislation.
I will not emphasize every Democratic Congressman or Senator who
introduced these seven bills, but I will emphasize President Clinton,
in 1999, when he proposed from the White House a plan for prescription
drugs for seniors. The plan proposed by President Clinton took the same
approach. President Clinton said so many good things that I didn't have
to think up new things, just repeat what President Clinton said about
saving money and the ability of plans to negotiate and save money, and
to make sure there was a wide range of drugs available for our seniors.
We have a good basis for including in our bipartisan bill that passed
in 2003 things that Democrats had in their bills before we passed our
bill. I don't see any of them embarrassed about that fact even while
they go on talking about how bad the provision is now that it's in a
bipartisan bill. Plans are negotiating for seniors, and those
negotiations are reducing the cost of the 25 most often used drugs by
seniors on an average of 35 percent. President Clinton said so many
good things that I don't have to say them. I wish Members would read
some of the things President Clinton said about this.
Continuing to summarize, the Secretary does not need the authority to
negotiate and a national formulary is a bad idea. Competition among
these plans that seniors are now joining--91 percent of the seniors
have prescription drug coverage; the Medicare prescription drug benefit
is a voluntary program; they do not have to get in it if they don't
want to--had led to lower drug prices for beneficiaries and, more
importantly, lower costs for taxpayers and the States. This is saving
taxpayers $189 billion. I will cover that in a minute.
Premiums are lower than they were estimated to be. I talked of lower
drug prices, but now I am talking about the premiums to join the plans.
Before 2006, the Medicare chief actuary estimated the average monthly
premium would be $37. In fact, we struggled to make sure, when we wrote
the Medicare bill, that the premium would be between $35 and $40 a
month because we felt above that there would be resistance to joining,
and we would not have 91 percent of the people in. We planned on $35 to
$40. The chief actuary said $37. But because of competition, it ended
up being only $23 in 2006. In the year 2007, premiums are going to
average $22. Competition is working.
The net cost to the Federal Government is also lower than expected.
This is that $189 billion. Last week, the official Medicare actuary
announced the net 10-year cost has dropped by $189 over the original
budget window used when the Medicare Modernization Act was enacted.
That is a 30-percent drop in the actual costs compared to what was
projected. Competition is working.
I ask any Member how often a Federal program comes in under cost. We
always speak of overruns. Every Federal program is costing more than we
anticipate when we pass it. Overruns do not seem to be the sin they
ought to be. We have a program $189 billion under what we thought it
would cost, so we have an underrun. We never hear of that. We could not
get the lower prices and lower costs unless the prescription drug plans
are, in fact, what we anticipate they would be--strong negotiators with
the drugmakers. Competition is working.
I know the opponents of the drug benefit will likely keep up their
attacks on the program. They have pandered through the last election
and they have to deliver. What are they delivering? They are delivering
a pig in a poke. They may be delivering something very negative for the
seniors of America. I have been working hard this week to give people
important facts that have been left out of the debate on negotiation of
drug prices.
The plain and simple fact is that competition among the plans is
working. The Medicare plans are delivering the benefits to Medicare
beneficiaries. These private sector plans have the experience in
negotiating better drug prices. As I pointed out last week, for 50
years, Federal employees, under the Federal Employee Health Benefit
Program, have been doing it this way. It has successfully worked. That
is why we adopted it for seniors.
These Medicare negotiators have proven their ability to get lower
drug prices. The Medicare plans are negotiating with drug companies
using drug formularies within the rules set by law. These plans have to
be approved by the Centers for Medicare & Medicaid Services. Medicare
beneficiaries have access to the drugs they need and 70 percent of the
drugs that are out there under the Medicare prescription drug benefit
are not offered by the Veterans' Administration to veterans.
I have an example from the ALS Association, better known as the
association dealing with Lou Gehrig's disease. Here is what they said
about repealing the noninterference clause in a January 4 letter to
Members of Congress:

The letter continues to say that individuals with ALS:

. . . will either be forced to forego treatment, or only have
access to less effective treatment options--ones that may add
a few months to their lives but not ones that will add years
to their lives.

Just for the record, drugs to treat ALS are covered under the
Medicare drug benefit right now.
I end with a statement I have so often used in the last week: If it
ain't broke, don't fix it.

[[Page S536]]

I ask unanimous consent to have these letters printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
The Amyotrophic Lateral

Sclerosis Association,

Washington, DC, January 4, 2007.
Dear Member of Congress: I am writing on behalf of the ALS
Association to express our strong opposition to legislation
that would eliminate the noninterference provision of the
Medicare Modernization Act (MMA). Legislation that authorizes
the federal government to negotiate Medicare prescription
drug prices will significantly limit the ability of people
with ALS to access the drugs they need and will seriously
jeopardize the future development of treatments for the
disease--a disease that is always fatal and for which there
currently are no effective treatment options.
The ALS Association is the only national voluntary health
organization dedicated solely to finding a treatment and cure
for amyotrophic lateral sclerosis (ALS). More commonly known
as Lou Gehrig's disease, ALS is a progressive
neurodegenerative disease that erodes a person's ability to
control muscle movement. As the disease advances, people lose
the ability to walk, move their arms, talk and even breathe,
yet their minds remain sharp; aware of the limitations ALS
has imposed on their lives, but powerless to do anything
about it. They become trapped inside a body they no longer
can control.
There is no cure for ALS. In fact, it is fatal within an
average of two to five years from the time of diagnosis.
Moreover, there currently is only one drug available to treat
the disease. Unfortunately, that drug, Rilutek, originally
approved by the FDA in 1995 has shown only limited effects,
prolonging life in some patients by just a few months.
The hopes of people with ALS--those living today and those
yet to be diagnosed--are that medical science will develop
and make available new treatments for the disease; treatments
that will improve and save their lives.
However, The ALS Association is deeply concerned that the
elimination of the MMA's noninterference provision will
dampen these hopes and will result in unintended consequences
for the thousands of Americans fighting this horrific
disease. The potential impacts are significant and include:

Limits on Innovation

While reducing the cost of prescription drugs is an
important goal, it should not be done at the expense of
innovation. Unfortunately, eliminating the MMA's
noninterference provision will limit the resources available
to develop new breakthrough medicines. This is especially
troubling for a disease like ALS, for the development of new
drugs offers patients their best, and likely only, hope for
an effective treatment.
Additionally, by establishing price controls, Congress will
undermine the incentives it has established to encourage drug
development in orphan diseases, like ALS. As resources
available for research and development become more scarce,
there will be even less incentive to invest in orphan drug
development.

Limits on Access

The elimination of the noninterference provision will have
particularly cruel consequences for people with ALS. It means
that even if a new drug is developed to treat ALS, many
patients likely will not have access to it. That's because
price controls can limit access to the latest technologies.
Proponents of government negotiated prices cite the
Department of Veterans Affairs as a model for how the
government should negotiate prices for Medicare prescription
drugs. Yet under that system, patients do not have access to
many of the latest breakthrough treatments. For example, two
of the most recently developed drugs to treat Parkinson's and
Multiple Sclerosis, neurological diseases like ALS, are not
covered by the VA due to the government negotiated price.
Ironically, those drugs currently are covered by Medicare
Part D.
Given this scenario, we are deeply concerned that any new
drug that is developed for ALS will not be available to the
vast majority of patients who need it. Instead they either
will be forced to forgo treatment, or only will have access
to less effective treatment options ones that may add a few
months to their lives, but not ones that will add years or
even save their lives.

People with ALS Rely on Medicare

A significant percentage of people with ALS rely on
Medicare, and the newly established prescription drug
benefit, to obtain their health and prescription coverage. In
fact Congress recognized the importance of Medicare coverage
for people with ALS by passing legislation to eliminate the
24-month Medicare waiting period for people disabled with the
disease. This law helps to ensure patients have timely access
to the health care they need. With the establishment of the
Part D benefit, Congress also has now, helped to ensure that
people with ALS have access to coverage for vital
prescription drugs.
Yet this improved access is threatened by short-sighted and
inappropriately cost driven efforts to remove the
noninterference provision. If Congress makes this change,
they will undo what the MMA sought to ensure: access to
needed prescription drugs.
While The ALS Association appreciates attempts to improve
access to affordable prescription drugs, we believe that
Congress must consider the implications of its actions on
coverage, access and the advancement of medical science. We
fear that in an effort to control costs, Congress may limit
treatment options, discourage innovation, and extinguish the
hopes of thousands of Americans whose lives have been touched
by ALS and who are fighting to find a treatment and cure. On
behalf of your constituents living with Lou Gehrig's disease,
we urge you to oppose legislation to eliminate the
noninterference provisions of the Medicare Modernization Act.
Sincerely,

Steve Gibson,

Vice President, Government Relations
and Public Affairs.
____

Military Order of the Purple Heart,

Springfield, VA, January 10, 2007.
Speaker Nancy Pelosi
Washington, DC.
Dear Madam Speaker: In the coming days the House will take
up legislation that, if enacted will repeal the
noninterference clause of the Medicare Prescription Drug,
Improvement and Modernization Act of 2003. The Medicare
Prescription Drug Price Negotiation Act of 2007, H.R. 4, will
require the Secretary of Health and Human Services to
negotiate lower covered part D drug prices on behalf of
Medicare beneficiaries. While there is no specific mention of
the Department of Veterans Affairs (VA) and the favorable
pricing they receive on pharmaceutical products through the
Federal Supply Schedule (FSS), I would like to share with you
the concerns of The Military Order of the Purple Heart (MOPH)
as you consider H.R. 4.
As you know, Federal law currently enables the Department
of Veterans Affairs (VA) to purchase pharmaceutical products
for veterans through the Federal Supply Schedule (FSS).
Because of the Veterans Health Care Act of 1992, the prices
the VA pays through the FSS are substantially discounted from
the prices private sector purchasers pay. Extending access to
the FSS pharmaceutical discounts to larger groups would cause
FSS prices to rise and would dramatically increase the VA's
pharmaceutical costs. The Government Accounting Office and
the VA have documented the magnitude of this effect in 1995,
1997 and 2000 in response to previous proposals to extend FSS
prices to other entities. The studies estimate that the VA
would incur many hundreds of millions of dollars in
additional expenses.
Our concerns about such proposals were expressed in The
Independent Budget of 2006 sent to every Member of Congress.
Sixty-two veteran and allied organizations endorse The
Independent Budget. Additionally, several veteran
organizations have passed formal Resolutions opposing
legislation extending FSS prices to Medicare or other
programs because it would threaten discounts the VA currently
receives.
MOPH is on record as supporting lower prescription drug
prices for all Americans, but not at the expense of those
veterans enrolled in the VA health care system and the
favorable pricing that the VA receives through the FSS.
Respectfully,
Thomas A. Poulter,
National Commander.

Mr. GRASSLEY. I suggest the absence of a quorum.
The PRESIDING OFFICER (Mr. Sanders). The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. SPECTER. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.

____________________