[Congressional Record (Bound Edition), Volume 153 (2007), Part 7]
[Senate]
[Pages 9098-9099]
[From the U.S. Government Publishing Office, www.gpo.gov]




                 PRESERVING COMPETITION WITHIN MEDICARE

  Mr. KYL. Mr. President, I would like to speak for a few minutes on 
the bill on which we will be voting in approximately an hour, as the 
majority leader just said. I would like to speak directly to the point 
he attempted to make, which was why should there be a problem with 
allowing the Federal Government to negotiate for drug prices for 
Medicare by repealing Medicare's so-called noninterference provision?
  Nobody doesn't support negotiation. Negotiation is at the heart of 
the Medicare prescription drug benefit. I was there when it was written 
in the conference committee and there was a conscientious decision to 
ensure that there would be competition for lowering prices by 
specifically designating pharmacy benefit managers to do negotiating 
with the drug companies to bring the prices down. So the first myth is 
that Medicare somehow does not involve negotiations. It involves 
extensive negotiations. What it does not do is allow the Federal 
Government to interfere in those negotiations and, in effect, put 
itself in between patients and doctors and the drugs.
  The Medicare Fair Prescription Drug Price Act of 2007, on which we 
will be voting cloture, turns this law upside-down and basically 
inserts the Government into this process under these decisions. The 
purpose may sound simple--the Government, using its negotiating clout, 
forcing drug companies to give seniors deep discounts--but if you take 
a closer look and peel away the layers, you realize it is nothing more 
than a promise running on empty, void of details and muddled by 
political rhetoric rather than sustained by the facts. Let's look at 
the facts.
  First of all, Medicare Part D is working. When Congress crafted the 
bill, we heard from our constituents loudly and clearly. They wanted a 
prescription drug benefit that guaranteed access to affordable drugs 
and offered a choice of plans. They didn't want to be packed into a 
one-size-fits-all, Government-run plan that didn't fit their needs, and 
in fact they asked us to model the benefit after the plan that is 
available to Members of Congress. We did that. We chose access over 
restrictions, choice over Government control, and competition over 
price control. As a result, Medicare Part D is exceeding everyone's 
expectations. Approximately 90 percent of Medicare beneficiaries have 
some form of prescription drug coverage. The average premium was $22, 
in 2007, which is 42 percent lower than the Government projected 
initially. On average, seniors saved $1,200 on their prescription drug 
costs last year.
  Eight out of ten Part D enrollees report they are satisfied with 
their current coverage, and the Congressional Budget Office estimates 
that the drug benefit will cost the taxpayers 30 percent less, $265 
billion in savings over the next 10 years.
  To sum it up, we have 90 percent Medicare beneficiaries with 
coverage, 80 percent satisfaction rate, and it costs 30 percent less 
than originally estimated. If it ``ain't'' broke, don't fix it.
  The second fact, drug negotiation is at the heart of the Medicare 
bill. For the first time in history, health insurance plans and 
pharmaceutical companies and these benefit managers whom I mentioned 
are required to negotiate better prices for seniors, just like they do 
for Members of Congress. The noninterference provision, which first 
appeared in democratically sponsored legislation, prevents the Federal 
Government from interfering in those negotiations. It is a basic 
economic principle. In competitive markets, supply and demand interact, 
determining the price of the good or service. How do you get a good 
price? These pharmacy benefit managers I mentioned have significant 
market power.
  Consider this fact: The three largest PBMs have nearly 200 million 
members, compared to Medicare's 44 million. So when you talk about the 
Government using its considerable bargaining clout because it would 
represent 44 million, appreciate that these pharmacy benefit managers 
represent 200 million. They insure all of these people--Americans in 
the private sector, as well as Americans who have Government insurance. 
So the private drug negotiators already enjoy a significant competitive 
advantage. They use that power to negotiate lower prices and, as I 
pointed out, that negotiation has worked.
  Third, the secretarial negotiation cannot achieve any lower price 
without rationing choice in access. That was the testimony before the 
Senate Finance Committee, and I think every one of us appreciates that 
we should be very careful about anything which could restrict access to 
care for our seniors. When the Finance Committee marked up this bill 
last week, I looked forward to getting some clarity on exactly how 
Members contemplated this secretarial negotiation, how it would work.
  To my disappointment, no one could explain exactly how it would work. 
In fact, my colleagues openly and candidly admitted they had no plan or 
any specifics. What they said was that the Secretary would have to use 
his imagination and that it could take a number of different forms.
  So what we are buying, in effect, is a pig in a poke. Nobody knows 
what the Secretary would or could do in order to try to bring prices 
down; he would have to use his imagination.
  I think it is appropriate for us to ask this kind of question before 
we buy into legislation that could so dramatically and negatively 
impact health

[[Page 9099]]

care for our seniors. Restricting access could theoretically reduce 
lower prices if they were raised with some other program. That is the 
other downside to this legislation.
  During the Finance Committee noninterference hearing, we heard 
testimony from Dr. Fiona Scott Morton, who is a Professor of Economics 
at the Yale School of Management. She made a couple of critical points. 
Individuals eligible to participate in Medicare Part D generate 
approximately 40 percent of prescription drug spending in the United 
States. The Secretary cannot negotiate a lower average price for such a 
large population; Medicare is the average.
  So if it were somehow theoretically possible to reduce prices, they 
would have to go up somewhere else. That is the other point we 
established as well. There are many different organizations, including 
veterans organizations, that urged us to oppose this legislation 
because they understand that if you are somehow able to lower the 
prices for Medicare, they necessarily, arithmetically, have to go up 
somewhere else. The Veterans' Administration is one of those areas.
  Let me quote from two letters, one received from the American Legion, 
which asks us to consider, and I quote:

        . . . the serious collateral damage that would result from 
     repealing the noninterference provision.
       The VA is a health care provider, whereas Medicare is a 
     health insurer. Any possible Medicare savings would likely 
     result in a reciprocal cost to the VA. Compromising the 
     noninterference provision by striking this section is not in 
     the best interest of America's veterans and their families.

  The American Legion is not alone. The Military Order of the Purple 
Heart sent a similar letter to the Hill. Bottom line here: Cost savings 
are the result of true efficiencies. Repealing the noninterference 
provision is just another way to shift costs at the expense of other 
consumers.
  In conclusion, during this markup of this bill in the committee, I 
offered three amendments, each of which ensured important safeguards: 
No. 1, to prohibit cost shifting, as I mentioned, to entities such as 
Medicaid or veterans or the uninsured; No. 2, to require a 
certification of cost savings to Medicare beneficiaries if these 
negotiations were to occur; No. 3, a certification of four beneficiary 
protections: One, individual choice of a prescription drug plan; two, 
access to prescription drugs by prohibiting a government formulary or 
other tool to restrict drug access; three, guaranteed access to local 
pharmacies; and, four, no cost shifting to other payors, such as 
Medicaid, veterans or the uninsured. All three of these amendments were 
rejected. In fact, somebody called them a red herring. Well, 
restricting seniors' access to prescription drugs and increasing drug 
prices for all consumers are not red herrings, they are important 
issues which have not been adequately addressed in this legislation.
  Repealing this noninterference provision would put the Government, 
not the individual in charge, and put seniors one step closer to a 
single Government-run designed formulary.
  I appreciate and respect the goals of my colleagues. We all want to 
improve access to affordable health coverage. But with all due respect, 
they are wrong. A great deal of expert testimony and experience with 
Medicare Part D by millions of Americans has demonstrated they are 
wrong. So I urge my colleagues, when considering how to vote on this 
motion for cloture, to appreciate the fact that, first of all, there is 
a great benefit that is producing savings and is well appreciated by 
the American people; that there are organizations that are very much 
opposed to this, such as the VA, and that we would be very foolish, it 
seems to me, to adopt a piece of legislation such as this about which 
there is no consensus as to how the Secretary would utilize his 
authority to negotiate.
  Mr. President, I ask unanimous consent to have printed at this point 
in the Record an editorial from the Wall Street Journal of today, April 
18, 2007, which further amplifies the points I have made this morning.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

             [From the Wall Street Journal, Apr. 18, 2007]

                              Bitter Pills

       The Senate is scheduled to vote today on legislation to 
     allow the government to negotiate drug prices under the 2003 
     Medicare prescription drug bill. Democrats and such liberal 
     interest groups as AARP claim this would save money for 
     seniors and taxpayers, but the more likely result is that 
     seniors would find that fewer of their therapies are covered.
       We opposed the prescription drug bill as a vast new 
     entitlement, but there's no denying the program's innovation 
     of using private-sector competition has worked far better 
     than critics predicted. In the first year alone, the cost of 
     Medicare Part D came in 30 percent below projections. The 
     Congressional Budget Office calculates the 10-year cost of 
     Medicare Part D will be a whopping $265 billion below 
     original estimates.
       Seniors are also saving money under this private 
     competition model. Premiums for the drug benefit were 
     expected to average $37 a month. Instead, premiums this year 
     are averaging $22 a month--a more than 40 percent saving. 
     Democrats don't like to be reminded that many of them wanted 
     to lock in premiums at $35 a month back in 2003. No wonder 
     recent polls find that about 80 percent of seniors say 
     they're satisfied with their new Medicare drug benefits.
       Democrats who opposed all of this private competition now 
     say that government-negotiated prices will do even better. 
     They must have missed the new study by the Lewin Group, the 
     health policy consulting firm, which found that federal 
     insurance programs that impose price controls typically hold 
     down costs by refusing to cover some of the most routinely 
     prescribed medicines for seniors. These include treatments 
     for high cholesterol, arthritis, heartburn and glaucoma.
       Supporters of federal price ``negotiations''--really, an 
     imposed price--also like to point to the example of the 
     Veterans Health Administration, which negotiates prices 
     directly with drug companies. But it turns out that the 
     vaunted VHA drug program has a few holes of its own. The 
     Lewin study examined the availability of the 300 drugs most 
     commonly prescribed for seniors. It found that one in three--
     including such popular medicines as Lipitor, Crestor, Nexium 
     and Celebrex--are not covered under VHA. However, 94 percent 
     are covered under the private competition model of Medicare 
     Part D. Fewer than one of five new drugs approved by the FDA 
     since 2000 are available under VHA.
       Here's the real kicker: Statistics released March 22 by the 
     VHA and Department of Health and Human Services show that 
     1.16 million seniors who are already enrolled in the VHA drug 
     program have nonetheless signed up for Medicare Part D. 
     That's about one-third of the entire VHA case load. Why? 
     Because these seniors have figured out that Medicare Part D 
     offers more convenience, often lower prices, and better 
     insurance coverage for their prescription drugs. In short, 
     seniors are voting with their feet against the very price 
     control system that Democratic leaders Harry Reid and Nancy 
     Pelosi want to push them into.
       Of course, the greatest threat from drug price controls is 
     not to our wallets, but to public health. Price controls 
     reduce the incentive for biotech and pharmaceutical companies 
     to invest the $500 million to $1 billion that is often now 
     required to bring a new drug to market. If government price 
     controls erode the profits these companies can earn to 
     produce these often life-saving medications, the pace of new 
     drug development will almost certainly delay treatments for 
     AIDS, cancer, heart disease and the like. Congress is 
     proposing dangerous medicine, and if it becomes law seniors 
     may be the first victims.

  Mr. KYL. I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Michigan is 
recognized.

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