Reporting Resources

Current Concerns

Here is where we will post links to help reporters cover the most current hot-button issues.

Can Democrats' Medicare bill bring lower drug prices? It's doubtful

"Democrats are overselling their Medicare prescription drug bill," says Brooks Jackson of Annenberg Political Fact Check. "They claim it will bring about big price cuts for medication while Medicare experts say it won't. Republicans have been equally misleading, describing the bill as a system of severe price controls, which it isn't. The fact is that the bill would do little more than require the Secretary of Health and Human Services to talk to drug companies about granting discounts. It specifically denies him the bargaining leverage of paying only for some drugs and not others."

Here's the analysis by Jackson, formerly of CNN and the Wall Street Journal: "Ever since Congress passed President Bush's new prescription drug benefit for Medicare recipients, Democrats have been attacking it as a giveaway to drug companies. In the 2006 House and Senate campaigns, several TV ads attacked GOP lawmakers for supporting a law that forbids the federal government from negotiating directly with drug companies for lower prices. Democrats promised they would repeal that ban.

"Now Democrats are advancing such a bill, H.R. 4 , which passed the House last week by a vote of 255 to 170. Prospects in the Senate are unclear. . . . Both sides are blowing hot air. A number of experts, including the Congressional Budget Office and the chief actuary of the Medicare system, say the bill won't bring the lower prices Democrats promise. And contrary to the Republican claim, the actual language of the bill grants no price-setting authority to federal officials."

The bill says, "The Secretary [of Health and Human Services] shall negotiate with pharmaceutical manufacturers the prices (including discounts, rebates, and other price concessions) that may be charged" for drugs covered by Medicare. But the next line says the bill does not give the secretary the authority to set up a preferred drug list. "Without such a list, or the threat of keeping some drugs off the formulary, drug companies would have no particular incentive to cut their prices," Jackson writes.

CBO's acting director, Donald Marron, said in a letter, "CBO estimates that H.R. 4 would have a negligible effect on federal spending because we anticipate that the Secretary would be unable to negotiate prices across the broad range of covered Part D drugs that are more favorable than those obtained by PDPs [private 'prescription drug plans'] under current law. Since the legislation specifically directs the Secretary to negotiate only about the prices that could be charged to PDPs, and explicitly indicates that the Secretary would not have authority to negotiate about some other factors that may influence the prescription drug market, we assume that the negotiations would be limited solely to a discussion about the prices to be charged to PDPs. In that context, the Secretary’s ability to influence the outcome of those negotiations would be limited. For example, without the authority to establish a formulary, we believe that the Secretary would not be able to encourage the use of particular drugs by Part D beneficiaries, and as a result would lack the leverage to obtain significant discounts in his negotiations with drug manufacturers."

Jackson writes that actuaries for Medicare "reached a similar conclusion." He notes that The New York Times said in an editorial that "The secretary does have the bully pulpit, which he can use to try to bring down the cost of overpriced drugs," but also notes that a Washington Post editorial called the bill "misguided" and said predictions of price cuts are "too optimistic." It said the drug discounts enjoyed by the Department of Veterans Affairs, cited by Democrats, result from a restricted formulary covering 3,000 fewer medications than Medicare, and asked, "If drugmakers know that Medicare must buy their pills, why would they grant a discount?"

Jackson concludes, "Prospects for Senate passage are uncertain, and President Bush has promised to veto the measure should it pass. Furthermore, the margin in the House was well short of the two-thirds majority that would be required to override a veto." (Read more)

The Institute for Rural Journalism and Community Issues helps non-metropolitan media define the public agenda in their communities, through strong reporting and commentary on local issues and on broader issues that have local impact. Its initial focus area is Central Appalachia, but as an arm of the University of Kentucky it has a statewide mission, and it has national scope. Cooperating institutions include Appalachian State University, East Tennesee State University, Eastern Kentucky University, Marshall University, the University of North Carolina-Chapel Hill, the University of Tennessee-Knoxville and West Virginia University. To get notices of Rural Blog postings and other Institute news, click here.


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Last Updated: Jan. 17, 2007