[Congressional Record (Bound Edition), Volume 153 (2007), Part 1]
[Senate]
[Pages 1191-1194]
[From the U.S. 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.

  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?

[[Page 1192]]

  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.
  Let me point out the key downside of having the Secretary establish a 
national formulary in my next chart.

[[Page 1193]]

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 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.

  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.


[[Page 1194]]


  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.
  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.

                          ____________________