[Congressional Record (Bound Edition), Volume 148 (2002), Part 9]
[House]
[Pages 12099-12102]
[From the U.S. Government Publishing Office, www.gpo.gov]




           DEMOCRATIC PROPOSAL FOR PRESCRIPTION DRUG COVERAGE

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 3, 2001, the gentleman from New Jersey (Mr. Pallone) is 
recognized for 60 minutes as the designee of the minority leader.
  Mr. PALLONE. Mr. Speaker, it is not my intention this evening to use 
the full 60 minutes. I am more likely to use about 20 minutes, but I 
did want to take the opportunity this evening to talk about an issue 
which I think was sort of left dangling when we left here a week ago 
before the July 4th recess.
  My colleagues know that in the middle of the night, I guess it was 
about 2 a.m., we finally voted on the Republican prescription drug 
plan; and I was extremely disappointed, to say the least, over the fact 
that there was no opportunity to debate and bring up the Democratic 
substitute, the Democratic proposal.
  Mr. Speaker, for at least 2 years, if not longer, I have been talking 
about the need for this House to debate the prescription drug issue, 
and I was glad to see that the Republicans finally did bring their bill 
to the floor. Although I do not agree with their bill and I do not 
think it will accomplish the goal of providing a prescription drug 
benefit, I was at least pleased to see that they were willing to bring 
it up.

                              {time}  1930

  But bringing the bill up also means debating the bill and allowing an 
alternative by the minority, the Democrats in the House, to debate and 
argue their alternative as well.
  It is the first time in my memory, and I have been here 14 years, 
that on an important issue like this, that the minority, in this case 
the Democrats, were not allowed to have their alternative, their 
substitute, be considered by the full House. I think it was a grave 
mistake, a major error. I think it portends, clearly, that the 
Republican leadership in this House is not serious about passing a 
prescription drug bill. If they really felt they had the votes and they 
were able to strongly pass their bill and send it over to the other 
body and then eventually send it to the President, they would not have 
had any problem in letting the Democratic alternative come up. And the 
reason they did not allow it to come up, I am firmly convinced, is 
because they felt it would probably pass.
  As it was, I think we had eight Republicans who voted against the 
Republican proposal, we had eight Democrats that I think voted for the 
Republican proposal, so it was clearly the case that the votes were 
very narrow there. And it is very likely if a Democratic substitute had 
been allowed and considered, it would have carried the day and it would 
have been the bill that passed this House.
  I do not want to spend an hour tonight talking about why I think the 
Republican bill is a failure and why the Democratic alternative would 
have been a success. The issue now, of course, goes over to the other 
body, and the other body will be taking up a prescription drug bill 
fairly soon, within the next few weeks before the August break. But I 
will say that the major differences between the Republicans here and 
the Democrats in the House and the way in which the Democratic bill in 
the other body reflects the Democratic bill here, is that the Democrats 
are in favor of expanding Medicare to include a prescription drug 
benefit.
  We have been saying fairly simply that Medicare is a good program; 
that it works. Whether we like it ideologically or not is not the 
issue. It works. It provides hospital care, it provides doctor care, 
and it should provide prescription drug benefits as well. And every 
senior or disabled person who is covered under Medicare should have the 
option as well of having a prescription drug benefit.
  The Democratic proposal is very similar to what we provide now for 
doctor bills. In other words, under part B of Medicare now every senior 
can opt into a Medicare program that covers their doctor bills. They 
pay, I think, about $45 a month for the benefit. Eighty percent of 
their costs are paid for by the Federal Government. The deductible is 
$100, and after they have paid $2,000 out of pocket for the 20 percent 
copay, all their bills are paid for by the Federal Government.
  More than 99 percent of the seniors and those who are eligible for 
Medicare take advantage of the part B benefit and pay the premium and 
get the benefit. As Democrats, we are simply saying do the same thing, 
establish a prescription drug benefit under Medicare. Everyone who is 
in Medicare is eligible for it. They would pay $25 a month for a 
premium, have a $100 deductible, and 80 percent of the cost of their 
drug bills would be paid by the Federal Government. After they paid 
$2,000 out of pocket for the 20 percent copay, all their bills, 100 
percent, would be paid for by the Federal Government. Very simple. Very 
easy to understand.
  The Democrats also are determined to deal with the issue of price, 
because we know that the biggest problem facing seniors is that the 
price of prescription drugs is going up. It is not just for seniors, it 
is for all Americans. So we say, well, bring this prescription drug 
program under the umbrella of Medicare and we will have 30 to 40 
million Americans who now are under the auspices of the Secretary of 
Health and Human Services, who runs the Medicare program, and he or she 
would have the bargaining power of those 30 or 40 million seniors, 
Americans, and would be able to go to the drug companies and say, look, 
I have 30 or 40 million people; if you want me to buy your drugs, you 
have to give me a big discount. That discount might be as much as 30 
percent across the board. That is a huge savings not only for the 
Federal Government, which is paying 80 percent of the cost, but also 
for the seniors who are paying the 20 percent copay.
  The problem is, from what I see, that the Republicans in the House do 
not want any part of this because they do not believe in Medicare. They 
do not like it. It is a government program. But more than anything 
else, they do not want to expand Medicare to provide a prescription 
drug benefit. So what the bill does that passed the House of 
Representatives a week ago, the Republican bill, is really to further 
their goal, I think, the Republican goal, of privatizing the Medicare 
program.
  What the Republican bill does is to create a program of subsidies to 
HMOs and private insurance companies to offer drug-only insurance 
policies to seniors. Some money in the form of a subsidy, a payment, 
goes to private insurance companies in the hope they will provide 
prescription drug coverage, or drug insurance policies, to whatever 
seniors want to buy them. It does not guarantee any benefit plan. There 
are going to be areas of the country, just like with HMOs, where these 
private insurance companies are not going to be offering the 
prescription drug plan. We do not know what the premiums will be. We do 
not know what kind of benefits they will offer. That is all up in the 
air.
  And, of course, the insurers have already said they do not want any 
part of the drug-only policies. In fact, if there was an ability right 
now for insurance companies to offer drug-only policies they would be 
offering them. So it makes no sense, in my opinion, to instead of doing 
what the Democrats do, which is to say we are going to have a Medicare 
program to cover prescription drugs and guarantee a benefit for 
everyone, simply hope that the private insurance companies will somehow 
provide these kinds of policies.
  Now, I do not want to just talk myself, because I think some might 
say, well, okay, here is another Democrat that is saying this will not 
work, the Republican plan will not work, but every one of the major 
newspapers, every major media outlet in the country has come out and 
said this Republican proposal, these drug insurance policies, will not 
work. I just want to go over a few of them tonight and highlight some 
of the things that have been said in the last few weeks, just to point 
out again that there are third-party validators, major newspapers, 
major insurance companies, executives, or insurance company trade 
officials who are saying these drug-only policies will never be 
offered.

[[Page 12100]]

  This was in The New York Times. It was an editorial on Saturday, June 
22, and I will read part of it. It says: ``House Republicans, who 
regard traditional Medicare as antiquated, would provide money to 
private insurance companies, a big source of GOP campaign donations, to 
offer prescription drug policies. The idea of relying on private 
companies seems more ideological than practical. The pool of elderly 
Americans who will want the insurance is likely to consist of those who 
have the most need for expensive medicine. Even with Federal subsidies, 
it's unclear that enough insurance companies would be willing to 
participate and provide the economies that come from competition.''
  So The New York Times is saying this will not work; nobody is going 
to offer these policies, essentially. But we have another article in 
The New York Times a week earlier, this was from Sunday, June 16, which 
was giving comments from other insurance people, or people familiar 
with the insurance business, and the title of this article from June 16 
says ``Experts Wary of G.O.P. Drug Plan: Some Say `Drug Only' Coverage 
Isn't Affordable for Insurers.''
  Keep in mind that the Republican proposal is a voluntary proposal. 
Nobody has to offer it. No insurance company has to offer these drug-
only policies. Again, I will just read some of the highlights of this 
article in this Sunday New York Times, June 16.
  ``Under the proposal, Medicare would pay subsidies to private 
entities to offer insurance covering the cost of prescription drugs. 
Such `drug only' insurance does not exist, and many private insurers 
doubt whether they could offer it at an affordable price. `I am very 
skeptical that `drug only' private plans would develop,' said Bill 
Gradison, a former Congressman,'' and I will add Republican 
Congressman, ``who was President of the Health Insurance Association of 
America from 1993 to 1998. Representative Bill Thomas, the California 
Republican who is chairman of the Ways and Means Committee, insisted: 
`We should rely on private sector innovation in delivering the drug 
benefit. The private sector approach offers the most savings per 
prescription.' However, John C. Rother, Public Policy Director of AARP, 
which represents millions of the elderly, said, `There is a risk of 
repeating the H.M.O. experience' with any proposal that relies heavily 
on private entities to provide Medicare drug benefits.''
  I do not want to go on, Mr. Speaker. I just want to point out that in 
the same way that we relied on HMOs to provide medicine coverage for 
seniors and found so many of them basically dropping out of the market, 
offering it maybe for 6 months and then telling seniors that they could 
not provide the coverage any more, and so many areas of the country 
that do not have HMOs offering any kind of HMO, the same problem is 
going to exist with these drug policies that the Republicans are 
proposing. There are going to be huge areas of the country where no 
policies are offered. And if they are offered, they are likely to be so 
expensive in terms of the premium that seniors just will decide it is 
not worth paying for them; not worth buying them.
  So I think the promise or the commitment that the Republicans say 
they are making by passing this bill last week saying they are going to 
provide some prescription drug coverage is really a hollow one. None of 
this is going to be offered. None of this is going to happen.
  There was an article, an op-ed on June 18 in The New York Times, by 
Paul Krugman, and he basically explained why insurance companies would 
not offer these kinds of policies. I think he did it very well, and I 
just wanted to read a little bit from that, if I could.
  He says, ``The House Republican plan has a bigger flaw. Instead of 
providing insurance directly, it will subsidize insurance companies to 
provide the coverage. The theory, apparently, is that competition among 
private insurance providers would somehow lead to lower costs.''
  Some of my Republican colleagues said this during the debate, that 
because of competition between insurance companies, drug prices would 
come down. But the problem is, there will not be any competition 
because nobody is going to offer them.
  What Mr. Krugman says in The New York Times on June 18 is, ``In fact, 
the almost certain result would be an embarrassing fiasco because the 
subsidy would have few, if any, takers. The trouble with drug insurance 
from a private insurance point of view is that some people have much 
higher drug expenses than the average, while others have expenses that 
are much lower, and both sets of people know who they are. This means 
that any company that tries to offer a plan whose premiums reflect 
average drug costs will find the only takers will be those who have 
above-average drug costs.''
  What Krugman is basically saying is that drug insurance is not like 
traditional insurance. If we think of auto insurance, where maybe there 
is 100 people insured and one person has an accident, all the others 
are paying into a pot of money and that one accident is paid for with 
the pot. But the insurance company is making money because they are 
only paying out maybe for one accident out of the hundred people. But 
in the case of a drug insurance or medicine, every senior needs 
medicine. Every senior has an opportunity to have the need for some 
kind of prescription during the course of the year.
  So it is really a benefit. It is not something you are insuring for a 
risk of because everybody is going to take advantage of it. So seniors 
that have very high drug costs, $2,000 or $3,000, they may be willing 
to buy a drug policy that they have to pay $75 or $85 a month premium, 
but someone who does not have a huge drug cost is not going to do that 
and pay that huge cost. So we will have a situation where the insurance 
companies will say why would I want to provide this kind of coverage; I 
cannot make any money.
  Again, I do not want to just rely on what I am saying. There are a 
whole bunch of quotes here, and I can just give some about where 
insurance industry executives are commenting on the Republican plan and 
saying it will not work. We have Mr. Don Young, President of Health 
Insurance Association of America, April 24 this year in Congress Daily. 
He says, ``We caution Congress against relying on drug-only insurance 
as the mechanism to deliver a benefit.'' We have Charles Kahn, 
President of the Health Insurance Association of America in The New 
York Times in February of last year. He says, ``I don't know of an 
insurance company that would offer a drug-only policy like that or even 
consider it.'' We have him again saying, ``We will withhold judgment on 
the House Republican proposal until we see it in details. Nevertheless, 
we continue to believe that the concept of so-called drug-only private 
insurance simply would not work in practice. Private drug-only coverage 
would have to clear insurmountable financial, regulatory, and 
administrative hurdles simply to get to market.''

                              {time}  1945

  Mary Lehnhard, senior vice president, Blue Cross and Blue Shield 
says, ``It is exceedingly unlikely that any of our plans would offer a 
stand-alone prescription drug policy in their service areas. The reason 
is affordability. The absolute cost of an annual rate of increase in 
the cost of prescription drugs would make a drug-only benefit package 
so expensive that only those who expect to have very high use of the 
benefit would initially buy a policy. The package would not appeal to 
the majority of seniors that have relatively low drug costs. Plans 
would experience tremendous adverse selection, which would escalate 
premiums.''
  I could go on, but I am not going to. It is clear that every major 
insurance executive and trade association is saying the same thing, 
that these drug policies will never be offered.
  Mr. Speaker, we might ask, the Republican leadership is not badly 
motivated. They are not bad people. Why are they going in this 
direction? What is the reason why they would try to pass something in 
the House on a strictly partisan vote, pretty much,

[[Page 12101]]

that has no chance of passing the other body; or even if it did become 
law, have any real impact on seniors in terms of something that they 
would actually be able to buy or would want to buy.
  I think one of the answers is that the real goal behind the 
Republican bill is not to offer a prescription drug coverage, but 
rather to take one more step towards privatizing Medicare. I do not 
know what other conclusion I can come to.
  The other conclusion is, somehow they feel it is necessary to come up 
with something before Election Day so they can say that they passed 
something, and they will simply go out on the hustings and say we tried 
to pass something, and hope that Americans do not pay attention to what 
it is.
  Of course, some of my colleagues on the Democratic side, including 
myself, have cited the fact that the Republican Party in the House is 
getting huge campaign contributions from the prescription drug 
industry, and so maybe they want to do something like this bill in 
order to pretend that they are providing a prescription drug benefit, 
but do not want to alienate the insurance company by actually doing 
something that might make a difference. I will go back to that when I 
talk about the price issue.
  I want to talk a little bit about why I think the Republican bill is 
a bad bill even if it was available. In other words, I do not think 
anybody is going to sell these policies. I do not think that they are 
going to be offered anywhere where the premium is going to be 
affordable; but let us assume for 1 minute that I am Mr. Smith, a 
senior in New Jersey, and somehow this bill passes and there is an 
insurance company in my area that offers a drug-only insurance policy.
  Think about the reasons why I would not want to buy it, even if it 
was available, and there are many. First of all, if we look at the 
Republican proposal, it is basically going to cover less than 20 
percent of prescription drug costs. The Democratic proposal guarantees 
that 80 percent of your costs are paid for by the Federal Government. 
The Republican proposal, even if it was available, and I do not think 
it will be, will probably cover less than 20 percent of the costs. Why 
would I say that?
  Well, first of all, there is a huge hole or gap in coverage. Let us 
say you pay the premium, whatever it is. For the first $1,000, they 
estimate that the insurance company would probably offer to pay 80 
percent of the cost, and for the second $1,000, they estimate the 
insurance company would pay 50 percent. They estimate that, they do not 
guarantee it.
  From the $2,000 out of pocket to $3,700 out of pocket, they estimate 
that the Republican plan will pay no part of the cost. The average 
senior citizen, 47 percent of the seniors end up with prescription drug 
bills that fall into that gap, between $2,000 and $3,700 out of pocket.
  Again, I would ask, even if this coverage was available, and it will 
not be, but even if it was, why would seniors want to pay a premium 
that for a good percentage of their cost is going to pay absolutely 
nothing by the Republicans' own calculations? We can look at the bill 
in many ways, but the most ridiculous thing about it at all, frankly, 
is that there is this gaping hole where there is no coverage at all for 
47 percent of the seniors who incur costs over $2,000 a year.
  I have already talked about the Democratic proposal and what it would 
do, so I am not going to go into that anymore this evening. But I did 
want to spend a little time on the issue of price because I think it is 
so important. We know, and we do not need statistics, because 
constituents have come up to Members over the past year and said the 
price of prescription drugs just keeps soaring, I cannot afford it.
  The week before last when we were meeting and we finally voted on the 
bill, Families U.S.A., which is a health care consumer group, came out 
with a report on prices for prescription drugs. They basically pointed 
out very dramatically that for the most popular prescription drug 
medicines, prices rose three times the rate of inflation last year. I 
am going to go over some of the highlights from their press release of 
June 24.
  It says, ``The prices of the 50 most prescribed drugs for senior 
citizens rose on average by nearly three times the rate of inflation 
last year according to a new report released today by Families U.S.A. 
The study analyzed price increases for the 50 most commonly prescribed 
drugs for seniors for the last year, January 2001 through January 2002, 
and then for the past 5 years and the past 10 years.''
  The report found that last year nearly 36 out of 50 of these drugs 
rose at least one-and-a-half times the rate of inflation while over 
one-third, 18 out of 50, rose three or more times the rate of 
inflation.
  Then they go into the specific drugs. It shows dramatically in the 
report how bad the price situation is and why these prescription drugs 
are increasingly not affordable.
  Well, what is the Republican House leadership's answer to that?
  I have discussed the problem of the basic bill, and the gaping hole 
where almost 50 percent of the seniors would not get any benefit above 
a certain amount of money that they would have to put out of pocket. 
But just to ensure in the Republican bill that the price issue could 
not be addressed in any way by the Federal Government, by the Secretary 
of Health and Human Services, by the administrator of the program which 
the Republicans put forward, the Republicans put in the bill a clause 
that they call the noninterference clause, based on published reports 
in Congress Daily; and this was put in by the CATS, the Conservative 
Action Team, a group of conservative Republican Members in the House.
  And this noninterference clause, and this is in the bill that passed 
a week ago, it says that the administrator of the Republican program 
may not require or institute a price structure for the reimbursement of 
covered outpatient drugs, and the administrator may not interfere in 
any way with negotiations between PDP sponsors and Medicare+Choice 
organizations and drug manufacturers, wholesalers or other suppliers of 
covered outpatient drugs. What this noninterference clause essentially 
says is that we do not want the administrator of this prescription drug 
program, the Federal program, to in any way try to negotiate or 
interfere with any pricing. Now, how outrageous can this be?
  I mentioned before the whole goal of the Democratic alternative was 
not only to put prescription drugs under Medicare and guarantee that 
every senior and every disabled person under Medicare had a 
prescription drug benefit, and the same benefit throughout the country, 
but that because of the fact that now 30 or 40 million Americans were 
now under the auspices of Medicare for their prescription drugs, that 
the Secretary of Health and Human Services would have the power to 
negotiate price reductions because he represented all those seniors and 
disabled people.
  The Democrats actually put in the bill, in their alternative, a 
clause that mandates that the Secretary negotiate price reductions on 
behalf of those 30-40 million Americans. And we know it can be done. It 
is done by the Veterans Administration, by the military. It is done by 
other branches of the Federal Government in order to achieve major 
price reductions, 30-40 percent.
  Not only do the Republicans not put their program under Medicare and 
do all of the other things that I have mentioned, but they specifically 
put in the bill that there cannot be any negotiations on price by the 
administrator of their program. Again, people say why would they do 
this? Why would well-meaning people insist that there be no 
negotiations over price in whatever program they are trying to set up?
  I have no other answer than to say it is because they are essentially 
in the pockets of the pharmaceutical industry. The pharmaceutical 
industry insists that the Republican leadership not address the issue 
of price because they do not want to see any loss of profits.
  I do not think that they would lose any profits because the bottom 
line is, all of a sudden now the prescription drug industry, the brand 
name pharmaceutical industry, is going to have all

[[Page 12102]]

these seniors who they would be selling prescription medicine to that 
are not getting it now. The volume of their sales would skyrocket, but 
they are so afraid that there is going to be some negotiation over 
price that would reduce prices and somehow they would be negatively 
impacted, that they insist that there be a noninterference clause on 
price.
  Mr. Speaker, Members do not have to believe me. I have backup 
information. The Washington Post, the day that the Republican bill was 
being considered in the Committee on Energy and the Commerce, of which 
I am a member, we had to break early at 5 p.m. and not finish the bill 
until the next day because the Republican National Committee was having 
a major fund-raiser; and a big part of it was being financed by the 
pharmaceutical industry. This was an article that appeared the next day 
in the Washington Post. It says, ``Drug Firms Among Big Donors at GOP 
Event. Pharmaceutical companies are among 21 donors paying $250,000 
each for red-carpet treatment at tonight's GOP fund-raising gala 
starring President Bush, 2 days after Republicans unveiled a 
prescription drug plan the industry is backing, according to GOP 
officials.''
  Skipping down in the article, ``Drug companies, in particular, have 
made a rich investment into tonight's gala. Robert Ingram, 
GlaxoSmithKline PLC's chief operating officer, is the chief corporate 
fund-raiser for the gala. His company gave at least $250,000. 
Pharmaceutical Research and Manufacturers of America, a trade group 
funded by the drug companies, kicked in $250,000, too. PhRMA, as it is 
best known inside the Beltway, is also helping underwrite a television 
ad campaign touting the GOP's prescription drug plan.
  Pfizer, Inc., contributed at least $100,000 to the event, enough to 
earn the company the status of a vice chairman for the dinner. Eli 
Lilly, Bayer AG and Merck & Company each paid up to $50,000 to sponsor 
a table. Republican officials said other drug companies donated money 
as part of the fund-raising extravaganza.
  ``Every company giving money to the event has business before 
Congress. But the juxtaposition of the prescription drug debate on 
Capitol Hill and drug companies helping underwrite a major fund-raiser 
highlights the tight relationship lawmakers have with groups seeking to 
influence the work before them.
  ``A senior House GOP leadership aide said yesterday that Republicans 
are working hard behind the scenes on behalf of PhRMA to make sure that 
the party's prescription drug plan for the elderly suits drug 
companies.''
  I am not going to continue to read. But in conjunction with all of 
this, what is the Republican leadership hoping for? They passed the 
bill. They are going to go over now to the other body and the other 
body is going to start the debate, and I hope that the other body comes 
up with a Medicare plan. But what we are going to see over the next few 
months, and it has already started, is a huge ad campaign financed 
primarily by the pharmaceutical industry, to try to convince the 
American public through TV and other media outlets that the Republican 
plan is the best bill.
  It has already started. The United Seniors Association which is 
basically a senior group that is put together by PhRMA, the 
pharmaceutical trade group, they launched a $3 million ad campaign 
before the debate touting the House GOP prescription drug plan which is 
based on, as I said, private insurers offering prescription drug 
coverage.

                              {time}  2000

  PhRMA spokeswoman Jackie Cottrell admitted they had recently given 
United Seniors Association an unrestricted grant. According to the 
Associated Press, several Republican officials speaking under condition 
of anonymity said they understood that the Pharmaceutical Research and 
Manufacturers of America have provided the funds for the commercials.
  Again, this is all in black and white. This is all easily documented. 
And I just think it is very sad. I think it is very sad that we ended 
up passing a Republican bill that is nothing more than a sham, 
something put out by the prescription drug industry so that the 
Republican leadership can say they have done something. We are talking 
about a Republican bill that will not work. Even if it did, the benefit 
is clearly inadequate, and I just think it is very sad that we are here 
now; and after 2 years of myself and other Democrats talking about the 
need for a prescription drug plan that all we ended up with was 
something that is basically a bone for the prescription drug industry 
and which is probably going nowhere because it will not be taken 
seriously by the other House and never become law.
  But I think we have to continue to speak out; we have to continue to 
point out that this is a major issue, that the price of prescription 
drugs will continue to rise, that more and more seniors will not be 
able to buy their prescription drug medicine and that something needs 
to be done that is real that is going to make a difference for them. 
And I would hate to see this just become a campaign issue. I would much 
rather that this were an issue that was resolved and that actually 
ended up with a benefit that passed both Houses and that went to the 
President and was signed into law. But I do not see that happening.
  So, Mr. Speaker, I will conclude tonight, but I do intend to continue 
to bring this up over the next few weeks or the next few months because 
I think it is important that my colleagues understand that those of us 
on the Democratic side have not given up in trying to provide a real 
prescription drug benefit for seniors under Medicare and that as much 
as there may be ads and paid advertisements telling the American public 
that the Republican plan will accomplish something, that there needs to 
be voices here in the House of Representatives that say it will not and 
that it is just paid-for ads for a meaningless proposal and that at 
some point we will get together on a bipartisan basis and pass a 
meaningful prescription drug benefit that will actually provide a 
difference for America's seniors.

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